Condo buying basics
When you buy a condo you're buying two things: your unit, and a share of a small organization with its own budget, rules, and problems. Here's what to look at before you commit.
HOA dues
Monthly dues cover shared costs: building insurance, common-area maintenance, water and trash in many buildings, landscaping, management, and contributions to the reserve fund. In the Valley and greater LA, dues on a typical first condo commonly run a few hundred dollars a month and can be considerably more in buildings with elevators, pools, or security. Dues count in your loan qualification, so a lower price with high dues can cost more per month than a higher price with low dues.
Reserves and the reserve study
The reserve fund is the HOA's savings for big-ticket items: roof, plumbing, elevators, paving, exterior paint. California requires HOAs to complete a reserve study at least every three years and disclose the percent funded. Well-run associations are often 70% funded or better; under 30% is a warning sign that a special assessment or a dues jump is coming.
Special assessments
When reserves don't cover a repair, the HOA can bill owners a one-time special assessment, sometimes thousands of dollars per unit. Before you buy, you're entitled to see the budget, reserve study, meeting minutes, and any pending or approved assessments. Read the minutes; that's where problems show up first.
CC&Rs and rules
The covenants, conditions, and restrictions govern what you can do with your unit. Pay attention to:
- Working from home. Many CC&Rs allow home offices but restrict businesses with client traffic, signage, employees, or inventory. If you plan to see clients at home (styling, tattooing, tutoring, consulting), check this before you fall in love with a unit. City zoning rules on home occupations also apply.
- Pets. Size, number, and breed limits are common.
- Parking and storage. Confirm your deeded or assigned spaces and guest parking rules.
- Renovations. Flooring, plumbing, and anything touching a shared wall usually needs approval.
- Leasing. Rental caps or minimum lease terms affect your options if your plans change later and can affect financing.
Financing: warrantable and FHA-approved
Lenders evaluate the building, not just you. A condo is "warrantable" for conventional financing when it meets Fannie Mae and Freddie Mac guidelines on owner-occupancy ratios, reserve contributions, insurance, litigation, and commercial space. FHA loans require the building to be on HUD's approved list or to qualify for a single-unit approval. Buildings with active litigation, low reserves, or one owner holding many units can fall outside these rules, which limits you to pricier loans or blocks assistance programs. We check this early so you don't waste time on a building you can't finance.
Insurance
The HOA's master policy covers the structure and common areas. You'll need an HO-6 policy for the interior of your unit, your belongings, and liability. Ask whether the master policy is "bare walls" or "all-in," because that decides how much interior coverage you need. Earthquake coverage is separate and worth pricing.
Litigation
Construction-defect and other lawsuits are not rare in LA condos. Litigation can make a building unfinanceable for conventional and FHA loans until it resolves. The HOA must disclose pending litigation; ask for the details, not just the yes or no.
The document package
Under California law the seller must provide the HOA documents to you during escrow, and you'll have a contingency period to review them. The package usually includes CC&Rs, bylaws, rules, budget, reserve study, 12 months of minutes, insurance summary, and the assessment history. It's long. We go through it with you and flag what matters.
Questions to ask about any building
- What are current dues, and how much have they gone up in the last three years?
- What percent funded are the reserves, and when was the last reserve study?
- Any special assessments in the last five years, or any planned?
- Any pending litigation involving the HOA?
- What percentage of units are owner-occupied?
- What are the rules on working from home, pets, and parking?
- Is the building FHA-approved or conventionally warrantable?
Where we come in. Condo due diligence is where first-time buyers most often get surprised after closing. We build these checks into the search so the building you choose is one you can finance, afford, and actually use the way you plan to. Get started.
This guide is general education, not legal, tax, or financial advice. HOA rules, lender guidelines, and California disclosure requirements vary and change; review your specific documents with the appropriate professionals.