What is a Reserve Report (and why you want to review it)

Hey Homebuyer, Let's chat about Reserve Reports.

When you’re buying a condo (or other home with an HOA) you should be getting a stack of documents about the property and homeowners association, including the Reserve Report.  

This Report is a detailed plan of how the COA/HOA will spend money to maintain, repair, and replace major common area components over the long term.  This helps to ensure the financial stability and property value preservation for all members.  

Among other things, it contains:

•  a schedule of common elements that the HOA maintains, 

• when the elements were last replaced, 

• how long the elements are projected to last until they are replaced again, 

• how much it is projected to cost to replace the elements, and 

• then figures out how much to save over time to be able to afford that replacement.  

Taking all of those individual dollar amounts in to consideration, the report projects how much money a HOA/COA will need to have in their piggy bank for repairs (called “the Reserve Fund/Reserves”) to be able to afford those projects without having to charge the homeowners extra money  (a “special assessment”) when the projects need to be done.

The numbers in the Reserve Report help the HOA/COA decide how much to charge for the monthly dues (monthly assessment) so that there’s enough money in the piggy bank Reserve Fund when needed.  Many mortgage lender wants a minimum of 10% (at the time of this writing) but more and more are requiring a minimum of 20-25% of the monthly dues to be put into the Reserve Fund for future repairs.