Most people look at a home purchase as an investment – probably the biggest of their lifetime – and it’s an appropriate perspective. But for condo buyers, it’s not like a single-family home, where the purchaser is taking on all the risk and responsibility. When you purchase a condo, you’re becoming a cog in a collective, trusting both your neighbors to maintain shared spaces and your association to be forthcoming will all pertinent information.
Unfortunately, the trust is often misplaced.
Sara Benson, the president and CEO of Association Evaluation, a private association rating company, is an expert on assessing the health of condo associations, and through her company’s PARScore system, has helped preserve the reputation of brokers and agents, while also protecting buyers from incurring thousands of dollars in hidden fees and unexpected “special assessments” that fall on them after closing.
“We look at 140 data points, which include everything from the number of lawsuits pending against an association to the amount in reserves, and whether that amount is sufficient for traditional financing,” Benson says. “We also look at the owner occupancy rate and things as small as whether pets are allowed, and if there are any restrictions on them.”
In her experience, Benson says that a lot of associations are middle of the road in terms of financial strength.
“Condos are very susceptible to market swings,” she says. “So, when the crash occurred, condos and their associations were hit hardest. Right now, 50 percent of associations nationwide are in financial trouble, and 72 percent of associations are under funded.”
Using PARScore, Benson and her staff are able to diagnose the issues with an association that other professionals and buyers might have overlooked. With the score in hand, brokers may limit their own liability, and listing agents are able to confidently market the association as healthy and financially stable – if such is the case.
“We save them risk,” she says. “We save them money.”