HOA Budgeting & Finance

Buying a Condo: A Reserve Health Checklist

Condo buyer reviewing reserve health checklist before purchase

When you buy a condo, you're not just buying a unit — you're buying into an association's finances, including its reserves. A unit in a building with weak reserves comes with a hidden liability: the special assessments you'll help pay when underfunded components fail. Smart buyers check reserve health before closing, not after. Here's a practical checklist.

Why Reserves Matter to Buyers

The reserve fund is the association's savings for replacing major components — roofs, elevators, structure, mechanical systems. If it's underfunded, the gap doesn't disappear when you buy; it becomes your problem as a new owner, payable through future special assessments or dues increases. Two identical units can carry very different hidden liabilities depending on their associations' reserve health. Checking reserves is how you avoid buying a future assessment. (The true cost of underfunding.)

This matters more than ever: the GSE rules are tightening (reserve minimums rising to 15%), so weak reserves can also affect your ability to finance the unit and your future resale.

The Reserve Health Checklist

1. Get and read the reserve study. Request the association's current reserve study — most states entitle buyers to association financial documents. If there's no study, or it's years old, that's itself a warning sign. (How to read it.)

2. Check percent funded. The single most important number. Percent funded summarizes reserve health: above ~70% is healthy, 30–70% is fair, below ~30% is weak and risky. Find this number first.

3. Look at the funding trajectory. Is the association contributing enough to keep reserves healthy, or are they declining? A study showing reserves heading toward zero is a red flag.

4. Ask about pending or recent special assessments. Has the association levied assessments recently, or is one planned? Recent or looming assessments signal underfunding and mean immediate cost to you. (Assessments and home sales.)

5. Review the budget and reserve contribution. What share of dues goes to reserves? A tiny reserve contribution suggests the association isn't saving adequately (reserve percent of budget).

6. Check for deferred maintenance. Visible neglect — worn roofs, deteriorating common areas — suggests deferred maintenance that reserves may not cover.

7. Review meeting minutes. Board minutes often reveal looming projects, funding debates, and problems not obvious from the financials alone.

8. Check major-component timing. When are big items (roof, elevator, structure) due for replacement? A major component due soon with insufficient reserves means an assessment is likely on your watch.

9. For older/coastal buildings, check structural status. Milestone inspections, SB 326 reports, or structural assessments — and whether their findings are funded — matter enormously in older and coastal condos.

10. Understand the disclosure documents. Many states require a resale certificate or disclosure package with financial and reserve information — read it carefully.

Red Flags That Should Give You Pause

Any one of these warrants questions; several together suggest serious underfunding risk. (More red flags before buying.)

What Good Looks Like

A healthy reserve picture: a current reserve study, percent funded comfortably above 70%, a funding trajectory that stays healthy, a meaningful reserve contribution in the budget, no recent or looming special assessments, well-maintained common areas, and (for older/coastal buildings) completed inspections with funded findings. A unit in such a building carries far less hidden liability.

The Bottom Line

Buying a condo means buying into the association's reserves, and an underfunded reserve fund is a hidden liability you inherit as future assessments. Before closing, get and read the reserve study, check percent funded (above 70% is healthy), ask about pending assessments, review the budget's reserve contribution, and watch for deferred maintenance and unfunded structural findings. The buyers who check reserve health avoid the surprise of inheriting someone else's underfunding. For the questions to ask, see Questions to Ask About HOA Reserves Before Buying.