Condo owners - Reserve Study question

[klpca]

We are in escrow on a condo. We just received the HOA docs and after a quick perusal, I am concerned about the HOA reserves. They are only 15% funded which seems extremely low to me. (I checked the HOA docs on our other condo and of course it's a total outlier as it is 102% funded because there was a construction defect settlement which resulted in a large influx of cash).

This unit is for one of our kids to live in and is otherwise the perfect fit in terms of size, condition, and location. We could absorb a special assessment but if she were to take it over from us and become the actual owner, I don't think that she could absorb the hit. If any of you own condos, what is the normal funding range for the reserves? This building is about 40 years old, looks ok from the outside (dated but well maintained) and I don't have any way of telling if they did some major projects recently. I have read through the past years minutes and it seems to be normal stuff, not major repairs/replacements.

Any thoughts?

 

[bizaro86]

Does the report say the age of the major building components? I've worked on condo reserve fund studies, and that is included in the reports here.

At least where I live, the biggest cost items tend to be (in order):

Windows/patio doors, elevator (if applicable), roof, interior (carpet/flooring/decor), boiler.

That excludes any deficiency type items, because if you have a building envelope issue all bets are off.

If the windows and roof are new, I'd consider it. Otherwise I would build in an assumption for a special assessment and factor that into the purchase price.

Note this isnt professional advice and I am not providing an engineering opinion.

 

[klpca]

Does the report say the age of the major building components? I've worked on condo reserve fund studies, and that is included in the reports here.

At least where I live, the biggest cost items tend to be (in order):

Windows/patio doors, elevator (if applicable), roof, interior (carpet/flooring/decor), boiler.

That excludes any deficiency type items, because if you have a building envelope issue all bets are off.

If the windows and roof are new, I'd consider it. Otherwise I would build in an assumption for a special assessment and factor that into the purchase price.

Note this isnt professional advice and I am not providing an engineering opinion.

The study doesn't give the age of the components but the remaining useful life on some of the big ticket items (boilers, roof) is zero, so I am sure that the HOA is just hanging on to things as long as possible and replacing them as they fail. Like a lot of people do I suppose. Windows are done by the homeowners so that's the only thing not on the HOA's list.

The reserve study shows the next five years having a high pucker factor, but in about five years the financial health is projected to turn around, and be 75% funded within 10 years. I am not sure how high of a correlation there is between the study projections and real life though. I agree that we are most likely going to enter into some additional negotiations with the seller but we are prepared to walk away. I was hoping for a relatively healthy HOA and didn't expect to find one on life support.

Thanks for the input.