What is a Special Assessment and Why Does it Matter?

Reblogger Michelle Carr-Crowe-Top 1% Diamond Certified Real Estate Team Sells Cupertino San Jose Homes-Just Call 408-252-8900
Real Estate Agent with Get Results Team...Just Call (408) 252-8900! CalBRE# 00901962 Lic.1985

Most people, including agents, don't even think to ask about special assessments-ones in place or even any that are under discussion. It's not a pleasant topic, but one buyers need to know about so they can make educated decisions.

Even well-run complexes can end up with special assessments. I know of one in San Jose where they replaced the roofs but the "guaranteed for life" roofing product performed poorly, the company making it was sued til there was nothing left and the homeowners had to get new roofs via special assessment.

Original content by Vickie Nagy CA BRE#01363932

What is a Special Assessment and Why Does it Matter? is a question I am commonly asked by first time home buyers. A special assessment occurs when the home owner's association's obligations / needs exceed cash on hand / cash reserves.

A homeowner's association has established guidelines outlining responsibilities which the HOA is responsible for. HOA dues often cover exterior maintenance, common area maintenance (walkways, pool, tennis, greenbelts), building insurance and other fees.

Some special assessments can be caused by an unforseen event, such an earthquake. It could be the extent of the deductible on a very large claim, such as when a whole building or entire complex is destroyed by fire.

More commonly, however, special assessments are the direct result of insufficient cash reserves to pay for needed upgrades and replacements.  A well-run HOA will set aside cash reserves for replacment components. A roof, for example, has a limited life expectancy. The roof is an important building component and must be replaced at intervals. If the HOA does not have the funds for the repairs, a special assessment will most likely be the outcome.

Many special assessments cost each owner thousands of dollars. There's one coming soon at a San Ramon complex, rumored to be in the $10,000 to $13,000 range. There has been no announcement as yet whether there will be an option to add to the HOA dues, or if it will be lump sum.

When shopping for a home, look around. Does the exterior of the condos look well kept, or does the wood siding need paint? When a building obviously needs paint, the wood is unprotected and this can cause the wood to rot, shortening the life span of the wood siding.

Pay close attention to the financial section of the HOA documents. There are firms who will review HOA financials for a fee if you need help.

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Vickie Nagy: (925) 407-7987 or email: Vickie@VickieSellsHomes.com

Steve Nagy: (925) 407-7853 or email Steve@BestTriValleyHomes.com

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