What First-Time
Condo and Townhome Buyers
Get Wrong About HOAs

Here's the reality. Almost every first-time condo buyer we tour with asks the same question at the same moment, usually standing about six feet from the pool: "What are the HOA dues?"

Fair question. Looked at by itself, it is also the least useful number in the entire disclosure packet.

The dues tell you what the association is collecting this year. They say nothing about what the building actually needs, what the board has been deferring, or whether your lender will finance a unit in that community at all. That last piece changed on August 3, 2026, and most buyers touring condos right now have no idea.

One of our agents, Kimberly Bogan, spent a good part of this week on the phone with a buyer working through exactly this: a set of CC&Rs, a reserve study, and a fee schedule that all looked fine on the surface. Once you know what to read first, the picture gets clear fast.

Let's break this down.

What Your HOA Fee Is Actually Paying For

Your monthly assessment splits into two buckets, and the split matters more than the total.

The operating budget covers this year's expenses. Master insurance on the buildings and common areas. Landscaping. Trash. Often water and sewer. Common area electricity. Management company fees. Pool service, gate maintenance, and elevator contracts if the building has them.

The reserve contribution covers the things that will fail on a schedule. Roofs. Asphalt. Exterior paint. Plumbing. Balconies and stair systems. These have known useful lives, and the association is supposed to be setting money aside for them every single month.

A community with a $290 fee and almost nothing going to reserves is more expensive to own than a community with a $475 fee that is funding its roof replacement on schedule. The first one sends you a special assessment. The second one already collected it, twenty dollars at a time.

According to 2026 HOA research, California's median monthly fee sits near $278, with statewide figures ranging from a low double-digit assessment in a small planned development to several thousand dollars in a full-service building. That spread tracks building age, amenity load, insurance exposure, and how honestly the association has been funding its reserves.

The One Number Most Buyers Never Look At

California requires more financial transparency from associations than almost any state in the country, and almost nobody reads the document that matters most.

Under Davis-Stirling, Civil Code Section 5550 requires an association to complete a reserve study at least every three years, including a visual inspection of the major components it is responsible for maintaining. The study lists each component, estimates remaining useful life, estimates replacement cost, and lays out a funding plan.

Civil Code Section 5570 then requires the board to send every member an Assessment and Reserve Funding Disclosure Summary as part of the annual budget report. Buried in that one-page form is a figure called percent funded.

Percent funded compares what the association has in the bank against what it should have accumulated by now for the components it owns. A community that should be holding $800,000 and is holding $240,000 is 30% funded.

The benchmark most reserve analysts use looks roughly like this. Under 30% funded is considered weak, with elevated risk of a special assessment or a deferred repair. Between 30% and 70% is fair. Above 70% is strong.

That single percentage will tell you more about your next five years of ownership costs than the monthly fee ever will.

Read the Minutes Before You Read the Amenities List

The CC&Rs get all the attention because they contain the rules everyone worries about. Pets. Rentals. Parking. Whether you can change your front door.

Read them. Then go find the documents nobody asks for.

Twelve months of board meeting minutes. This is where the truth lives. Minutes will show you a board debating a roof bid, arguing about an insurance renewal, or tabling a plumbing project for the third straight meeting. Deferred maintenance shows up in minutes long before it shows up in a fee increase.

Special assessment history. Ask how many the association has levied in the last ten years, what each one was for, and how much per unit. A community with three assessments in eight years has a pattern.

Pending litigation. Civil Code Section 4525 requires the seller to disclose it. Construction defect litigation in particular can affect both your insurance and your financing.

The last three years of fee increases. Steady annual increases in the 3% to 5% range usually signal a board doing its job. A fee that has been frozen for six years signals a board avoiding a hard conversation, and you will be an owner when that conversation finally happens.

California's Balcony Law Now Shows Up in Your Disclosure Packet

This is the newest piece, and it caught a lot of Orange County buyers off guard this year.

SB 326, codified as Civil Code Section 5551, requires condominium associations with three or more attached units to inspect their exterior elevated elements on a nine-year cycle. Balconies, decks, stairways, walkways, and railings that sit more than six feet above ground and are supported by wood. The first statewide deadline was January 1, 2025.

Then SB 410 took effect January 1, 2026. It amended Civil Code Sections 4525, 4528, 5200, 5210, and 5551 to place the most recent inspection report directly into the resale disclosure package sellers must deliver to buyers. Balcony and structural condition is now standard escrow reading in every California condo sale.

Two things to do with that report.

If it exists, read the urgency categories. Inspectors classify findings as an immediate safety hazard, a repair needed within a defined window, or satisfactory. Industry repair estimates commonly run $10,000 to $25,000 per balcony, and larger reconstruction projects in coastal California have produced assessments well into five figures per unit.

If it does not exist, that absence is itself material and disclosable. An association that is more than a year past a statutory inspection deadline is telling you something about how it operates.

Condo Financing Got Stricter This Summer

Here is the part that is timely enough that it belongs in every buyer conversation happening right now.

On March 18, 2026, Fannie Mae issued Lender Letter LL-2026-03, coordinated with Freddie Mac and the FHFA. It is the most significant rewrite of condo project standards in years, and it phases in on staggered dates.

August 3, 2026. Fannie Mae retires the Limited Review process for established projects. Limited Review was the streamlined path that let a well-qualified buyer with 10% or more down skip the deep dive into association finances. Starting with loan applications dated on or after August 3, projects with more than ten units go through Full Review, which examines the budget, reserve funding, delinquency rates, insurance, litigation, special assessments, and inspection reports. Fannie Mae also expanded the waiver of project review to cover projects with ten or fewer units.

January 4, 2027. The minimum reserve allocation rises from 10% to 15% of annual budgeted assessment income. Associations that fall below that line, without a compliant professional reserve study adopting the highest recommended funding level, risk being marked unavailable in Fannie Mae's Condo Project Manager system. That designation freezes conventional financing across the entire community.

Read that last sentence again, because it cuts both ways. The association's financial health is now underwritten alongside your income and credit. And if you buy into an underfunded community, the same rules can limit your buyer pool when you sell.

Practical takeaway: get the HOA questionnaire, budget, and reserve study into your lender's hands in week one of escrow. We work with Joe Soto at CrossCountry Mortgage and Solomon Chong at The Mortgage Hub, and both of them will tell you the same thing. A Full Review problem found on day five is a solvable problem. The same problem found on day twenty is a renegotiation or a cancellation.

What This Looks Like Across North Orange County Right Now

Local context matters here, because condo and townhome inventory is where a lot of first-time buyers in our market are actually shopping.

Per Steven Thomas's Reports on Housing, as of July 20, 2026 Orange County had 5,020 active listings, up 7% in two weeks. Buyer demand, measured as pending sales over the prior month, fell 6% to 1,472. Countywide expected market time rose from 90 to 102 days, the highest reading since April 2020.

Zoom into the tier where most attached homes in Stanton, Buena Park, Anaheim, La Palma, and parts of Cypress trade. Homes priced below $750,000 moved to a 96-day expected market time, up from 88. That range represents 20% of active inventory and 22% of demand.

Freddie Mac put the 30-year fixed at 6.58% as of July 23, 2026.

Put those two together and you get the useful conclusion. Buyers in the entry-level attached market have real time to do diligence right now. Ninety-six days of expected market time means you are generally not being forced to waive an HOA document review to stay competitive. Use that room.

Seal Beach deserves its own note, since Kim handles most of our Leisure World inquiries. Leisure World is a stock cooperative in an age-restricted community, which means the ownership structure, the monthly carrying charge, and the financing options all work differently from a standard condominium. Different documents, different questions, different lender conversation.

The Questions to Ask Before You Fall for the Pool

Bring this list to every attached property you tour.

1. What is the current percent funded on the most recent reserve study, and what year was the study completed?
2. How much of the monthly assessment goes to reserves?
3. What has the fee been each of the last three years?
4. Has the association levied a special assessment in the last ten years? For what, and how much per unit?
5. Is there any pending litigation?
6. What does the master insurance policy cover, what is the deductible, and what am I responsible for insuring inside the walls?
7. Has the SB 326 exterior elevated element inspection been completed, and what did it find?
8. What is the current owner delinquency rate on assessments?
9. What percentage of units are owner-occupied versus rented?
10. Is the project currently approved for conventional financing, and does the lender see any Full Review issues?

Number ten used to be a formality for a strong borrower. As of this month, it is a real question.

Where We Come In

We have been doing this in Cypress and across North Orange County since 1996, through 650 closings and nearly $400 million in volume, and the condo transactions are consistently the ones where the documents matter most.

If you are looking at a condo or townhome anywhere from Cypress to Stanton to Buena Park to Seal Beach, send us the address before you write. We will pull the association documents and read the reserve study and the minutes with you. We will also get the project in front of Joe Soto at CrossCountry Mortgage or Solomon Chong at The Mortgage Hub early enough that a Full Review issue surfaces in week one instead of week four.

No pressure to move on anything. Just a clear picture of what you would actually be buying.

The Bottom Line

The pool and the clubhouse are the easiest things to evaluate and the least predictive of what ownership will cost you. The reserve study, the meeting minutes, the inspection report, and the fee history are harder reading and far more honest.

California gives you access to all of it by statute, and as of 2026 the disclosure packet includes more than it ever has. The buyers who use that access end up with a monthly payment they can actually forecast. The ones who skip it find out what the roof costs on someone else's timeline.

If you are thinking about buying a condo or townhome in Cypress or anywhere across Orange County, reach out. We would love to help you read the paperwork before you fall for the amenities.