By Frederick Blum, Broker/Owner of Blum Realty Group
A condo you like has a special assessment. The seller offers to pay it. Problem solved?
Sometimes that addresses the main financial concern. Other times it answers only one of several questions. You still need to know what the assessment funds, whether the work is complete, whether more money may be needed and whether the building qualifies for your financing.
For a San Diego condo buyer, I would separate the assessment into three decisions: the cash obligation you would inherit, the condition of the property you would own, and the effect on your loan. That makes it easier to evaluate a Downtown high-rise or a Mission Valley complex without dismissing every assessment—or accepting a seller’s payment as the end of the investigation.
Start with the reason for the assessment
The dollar amount gets your attention. The reason tells you what to investigate.
A planned roof replacement with a defined scope, signed contract and adequate funding is different from a developing water-intrusion problem with unfinished investigation. An assessment for an insurance expense raises different questions from one funding structural repairs. Start by identifying which situation you are dealing with.
I would ask for the assessment notice, approval record, allocation to the specific unit, payment schedule and supporting description of the project. Then ask:
- Is the work proposed, under contract, underway or completed?
- Is the amount based on an estimate or an executed contract?
- Does the budget include a contingency for additional work?
- What remains unfunded, and how would an overrun be handled?
- Who can provide the engineering, inspection or completion records?
The assessment amount should lead you to the underlying records. A verbal summary is useful for orientation, but I would want the documents before making the purchase decision.
Get the unit’s obligation, not just the association’s total
A $1 million association project does not tell you your share. Allocation can depend on the governing documents rather than equal division among the homes. Confirm the amount assigned to the unit you are buying.
California’s transfer-disclosure requirements include information about current assessments, unpaid amounts and approved changes that are not yet due. Buyers can also request approved non-executive board minutes for the preceding 12 months. California Civil Code section 4525
Ask for current information close enough to the transaction to capture recent decisions. If a meeting is scheduled during escrow to discuss the project, find out how you will receive the outcome.
Useful figures include the original assessment, the amount already paid for the unit, the remaining balance, any installment charges, and whether a payoff amount differs from the sum of future payments. Give the written information to escrow and the lender so they can address their respective requirements.
A seller payoff and completed repairs solve different problems
Here is the distinction I would make before negotiating: paying an assessment can change who bears the expense; it does not perform the repair.
Under Fannie Mae’s project standards, lenders review current and planned special assessments to determine whether they address critical repairs. When an assessment is associated with a critical repair and the underlying issue remains unremediated, the project is ineligible under those standards. The lender needs appropriate completion evidence, not simply proof that one owner paid. Fannie Mae critical-repair and special-assessment requirements
That rule does not mean every assessment prevents financing. Have your lender identify the requirements for your particular loan and the specific issue, if any. If it needs an engineer’s completion report, establish whether that report exists and when it can be supplied.
I would do this before relying on a seller credit or payoff to make the transaction work. Our condo mortgage project-approval guide explains the broader building review.
Compare the cash choices in actual dollars
Suppose a unit has a hypothetical $24,000 remaining assessment, payable in 48 monthly installments of $500 with no interest or additional charges. Assume ordinary dues are $650 a month.
During those four years, the combined dues and assessment would be $1,150 a month, before the mortgage, property taxes, individual insurance and other expenses. If the seller pays the entire remaining obligation at closing and that payment fully discharges it, the buyer’s obligation to pay that assessment is handled. Confirm that outcome in the association’s records.
A $24,000 price reduction works differently. It reduces the agreed purchase price but does not itself pay the assessment. Depending on the financing, much of the price reduction may reduce borrowing rather than create cash available for installments. A closing-cost credit is different again and must fit the lender’s rules.
Have escrow show how the negotiated arrangement would be handled, and have the lender calculate the resulting cash to close and payment. If you want the broader comparison, see our guide to seller credits and price reductions.
These are invented figures to explain the choices. Actual payment obligations, payoff terms and allocation between buyer and seller depend on the records and agreement.
Read the reserve plan for what comes next
An assessment can fund a needed project while leaving other major expenses ahead. That is why I would read it alongside the reserve study, budget and meeting minutes.
California’s annual budget-report requirements address reserves, deferred major-component work, anticipated special assessments and certain association borrowing. Those are useful places to look for the next obligation rather than stopping at the one already disclosed. California Civil Code section 5300
Ask what remains after this project: another roof section, elevators, exterior work, insurance renewal or repayment of an association loan. A low monthly dues figure can be less reassuring if the records show substantial expenses without a clear funding plan.
I would also look for consistency. Do the minutes, budget and reserve plan describe the same work and timing? If they do not, ask management to reconcile the difference. It may be a document-date issue, a changed plan or an unresolved cost. You need to know which.
Consider what the work will be like to live through
Even a properly funded project can affect daily life. Ask about construction hours, parking access, elevator closures, balcony restrictions, scaffolding and any expected interruption to utilities or use of the unit.
For a buyer working from home, several months of exterior work may matter more than it does to someone who will renovate before moving in. For a buyer with a firm move-in date, access and habitability questions belong near the top of the list.
Get the current project schedule and ask who communicates changes. Evaluate the inconvenience alongside the long-term benefit of the work. A maintained building and a predictable project can be worth paying for; an undefined obligation deserves a different conversation.
Questions about buying with a special assessment
Does a special assessment automatically make a condo a bad purchase?
No. Evaluate what it funds, the unit’s remaining obligation, the work’s status, the association’s finances and your loan requirements. A defined, adequately funded project is different from an unresolved condition with an uncertain cost.
If the seller pays the assessment, will the lender approve the building?
Payment alone does not establish project eligibility. The lender must review the underlying issue under the applicable loan standards, including whether any required repairs have been completed and documented.
Is a price reduction the same as having the assessment paid?
No. A price reduction changes the purchase price. It does not itself discharge the assessment. Compare the actual cash to close, loan payment, remaining assessment and written allocation of responsibility.
Get the records before settling on the deal
A special assessment is something to understand and price thoughtfully. I would want the unit’s obligation, project status and financing answer in hand before deciding what terms make sense.
For the rest of the association review, use our San Diego condo HOA checklist.
General real estate education, not legal, engineering or insurance advice. Association obligations, contract terms and loan eligibility require review of the specific property and documents.