Buying a condo in San Diego: 11 questions to ask before you offer.

Buying a condo isn't really buying a unit — it's buying a unit plus a fractional share in the financial health, governance, and physical condition of the entire building. The financial decisions of an HOA board you'll never meet can determine whether you can even get a mortgage on your unit, what your monthly payment will be, and whether your home is sellable when you eventually want to move. The 2026 Fannie Mae rule changes (Lender Letter LL-2026-03, effective March 2026) tightened condo warrantability standards substantially.¹ San Diego's high condo concentration in Mission Beach, Pacific Beach, downtown, La Jolla, and Hillcrest makes this knowledge particularly important locally. Here are 11 questions to ask before you make an offer — most of which most agents skip.

Why condo due diligence is different

Single-family home buyers worry about their property. Condo buyers also have to worry about:

• The HOA's financial health (reserves, special assessment risk)
• Building condition (roof, plumbing, structural)
• Governance quality (board competence, litigation history)
• Mortgage warrantability (whether conventional financing is available)
• Insurance status (a 2026-specific concern in California)
• Owner-occupancy ratios and rental restrictions

Any of these can derail a transaction or a financial outcome years down the road. Each of the 11 questions below is designed to surface red flags before you're under contract.

Question 1: What percentage of the HOA's annual budget goes to reserves?

Reserves are the savings account the HOA maintains for major capital expenditures: roof replacement, plumbing repipes, exterior painting, parking lot resurfacing, elevator modernization, etc. Underfunded reserves are the most common cause of special assessments — surprise bills passed to homeowners when major repairs are needed and there's no money to pay for them.

What to look for:

• 10% minimum (current): Fannie Mae has historically required at least 10% of annual operating budget allocated to reserves for warrantable status
• 15% minimum (effective January 4, 2027): Fannie Mae's LL-2026-03 raised this threshold to 15% on Full Review files²
• "Highest recommended" alternative (effective August 3, 2026): If the HOA has a recent reserve study, the budget must reflect the highest recommended funding level from that study³

An HOA contributing 5-8% of budget to reserves is a major red flag. The unit may be unfinanceable through conventional lenders today and almost certainly will be unfinanceable in 2027 when the new rules fully take effect.

Question 2: When was the last reserve study, and what did it say?

A reserve study is an independent professional analysis of the building's expected capital expenses over a 30-year horizon and the funding level needed to meet them. California Civil Code § 5550 requires HOAs to update their reserve studies at least every 3 years.⁵

What to ask for:

• The most recent reserve study (must be within 3 years to satisfy lender review)
• The funding ratio — how well-funded reserves are relative to the study's recommendation. 70%+ is healthy, 30-70% is concerning, under 30% indicates serious underfunding
• The "highest recommended" annual contribution figure — this is the new 2026 lender benchmark

An HOA without a current reserve study, or one with a study showing a 20% funding ratio, is essentially announcing that special assessments are coming. The only question is when and how large.

Question 3: Have there been any special assessments in the last 5 years, and is one currently being discussed?

Special assessments are charges levied on top of regular HOA dues to cover specific projects or shortfalls. A building with three special assessments in five years is signaling chronic underfunding. A building currently discussing a special assessment for a known repair (roof, plumbing, balconies) tells you that bill is coming and roughly when.

Sources for this information:

• HOA disclosure documents (required to disclose pending special assessments)
• Recent board meeting minutes (look for committee reports on capital projects)
• Question to the property manager about any "items being studied"

In California, sellers must disclose any known pending special assessments — but "known" is interpreted narrowly. An assessment being discussed at the board level may not yet be "known" formally. Reading meeting minutes catches what disclosure forms miss.

Question 4: What's the building's litigation status?

Active litigation involving the HOA is one of the most common reasons buildings become non-warrantable. The categories that matter:¹

• Construction defect litigation: Common in 2010s-built San Diego condos; can render the building non-warrantable for years
• Slip-and-fall or other liability litigation: Usually doesn't affect warrantability if covered by insurance
• Owner vs. HOA disputes: Usually doesn't affect warrantability
• HOA vs. developer or contractor disputes: Often does affect warrantability

Fannie Mae specifically excludes buildings where the HOA is involved in litigation that could affect the financial stability of the project. Even slip-and-fall cases can technically trigger this — though most lenders have judgment thresholds.

Question 5: What's the owner-occupancy ratio?

Lenders care about how many units are owner-occupied vs. rented because it affects building stability and risk profile. Fannie Mae generally requires at least 50% owner-occupancy for warrantable status (with exceptions). Some buildings — particularly those near beaches or downtown — fall below this threshold and lose conventional financing access.

San Diego context: Downtown high-rises, Pacific Beach buildings, and Mission Beach properties often have rental ratios above 50%. Those buildings either need to qualify under specific exceptions or accept that buyers must use FHA, VA, or portfolio lenders — narrowing the buyer pool and depressing resale values.

Question 6: Are there rental restrictions?

Even if you don't plan to rent, the HOA's rental rules affect your future flexibility and the building's marketability:

• Minimum lease terms: Many buildings prohibit rentals under 30 days. Some require 6+ months. Some prohibit rentals entirely.
• Rental caps: Some buildings cap the number of units that can be rented at any time (e.g., 25%). If the cap is met, you may not be able to rent for years.
• Owner-occupancy waiting periods: Some buildings require you to live in the unit for 12-24 months before renting.
• Short-term rental (Airbnb) status: Critical question — many San Diego HOAs prohibit STRs entirely.

The City of San Diego also has its own STR licensing rules (Tier 4 license required for whole-home short-term rentals). HOA rules are separate and typically more restrictive. If you're buying with rental income as part of the financial plan, verify both layers before offering.

Question 7: What does the master insurance policy cover, and what gaps require HO-6 coverage?

The HOA carries a master policy covering common areas and (usually) the building's exterior. Owners need a separate HO-6 ("walls-in") policy covering the unit's interior, personal property, liability, and the gap between master policy and your unit.

Critical questions:

• "Bare walls" vs. "all-in" master policy: Bare walls covers structure only; all-in covers original fixtures. The difference determines how much HO-6 coverage you need.
• Master policy deductible: Often $25,000-$100,000+. If a covered claim occurs, the HOA may pass the deductible to owners through a special assessment. Your HO-6 should include "loss assessment coverage" to handle this.
• Earthquake coverage: Most master policies exclude earthquake. If the building is damaged in a quake, repairs may come from special assessments. More on earthquake insurance.
• Wind/hail/water damage limits: Coastal San Diego buildings may have limited or excluded coverage.

Question 8: How financially healthy is the HOA?

Beyond reserves, look at the HOA's overall financial picture:

• Delinquency rate: What percentage of owners are behind on dues? Above 15% is concerning; above 25% may make the building non-warrantable
• Operating budget vs. expenses: Does the HOA consistently spend within budget, or does it run deficits requiring assessment increases?
• Recent dues increases: A history of small annual increases (2-4%) is normal. Large jumps (10%+) signal financial stress
• HOA bank balance: Operating account should have 2-3 months of expenses; reserve account should match the funding study recommendations

Most HOA disclosure packages include audited financial statements. If they don't, ask for the most recent CPA audit or "review."

Question 9: What are the upcoming capital projects, and how will they be funded?

Building components have predictable lifespans. Items to ask about:

• Roof age and remaining life
• Exterior paint/stucco condition and last painting date
• Plumbing system (especially in pre-1990 buildings — copper pinhole leaks and cast iron drain failure are common)
• Electrical panels and capacity
• Elevators (in mid-rise/high-rise buildings)
• Parking lot, garage, decks, balconies
• HVAC central systems
• Pool, fitness center, common amenities

For each major component, the question is the same: when does it need replacement, what will it cost, and is the money in reserves?

Question 10: What's the history of board governance?

Governance is harder to evaluate but matters enormously. Reading 12 months of board meeting minutes tells you:

• How responsive the board is to homeowner concerns
• Whether decisions are documented and rational, or rushed and contentious
• Whether vendor selection follows competitive bidding processes
• Whether owner conflicts are escalating or being resolved
• Whether financial decisions are conservative or aggressive

Boards that meet rarely, document poorly, or have high turnover are red flags. Boards that meet monthly with detailed minutes, make budget decisions transparently, and have continuity over multiple years are signals of healthy governance.

Question 11: What's the building's age, construction type, and known defect history?

Some construction profiles carry known risks:

• Buildings constructed 2000-2010 in San Diego: Construction defect litigation peaked here; many buildings went through 10-year SB 800 statute of limitations claims. Verify whether the building completed all defect litigation.
• Pre-1980 buildings: May have outdated electrical (Federal Pacific or Zinsco panels with safety issues), galvanized plumbing (corrosion failures), or asbestos in popcorn ceilings
• Wood-frame construction with stucco exterior: Sometimes susceptible to wall envelope failures (water intrusion behind stucco)
• Buildings near the coast: Salt air corrosion is real — affects exterior metals, decks, balconies, plumbing

A building inspection for the unit itself catches some issues, but building-level concerns (roof, structural, common plumbing) require either an HOA-commissioned engineering report or careful review of past board minutes documenting any structural concerns.

The lender warrantability checklist most agents skip

Beyond the buyer's due diligence, lenders run their own warrantability review. Items the lender will check:¹

Warrantability item	Threshold
Reserve allocation	10% min (15% from Jan 4, 2027)
Owner-occupancy	≥50% typical
Single-entity ownership concentration	≤20% (one entity owning units)
HOA delinquency rate	≤15% (preferably ≤5%)
Commercial space	≤35% of total square footage
HOA litigation	No material litigation
Building completion	≥75% sold and closed
Master insurance	Adequate hazard, liability, fidelity coverage
Special assessments	No undisclosed pending

Failing any single item can render the building non-warrantable for conventional financing. The 2026 changes also retired the "Limited Review" path — meaning every condo loan now goes through Full Review, with more documentation and longer underwriting timelines.²

Where to find the answers

Three primary sources during your inspection contingency period:

1. HOA disclosure package (also called Resale Certificate or Section 4525 Disclosure in California). Contains CC&Rs, bylaws, financial statements, reserve study, insurance policies, recent meeting minutes, and pending litigation disclosures. Required to be provided to buyers in California.
2. Property manager interviews — call the property management company directly with specific questions. They're often more candid than written disclosures.
3. Lender's HOA questionnaire — your lender will send this to the HOA during underwriting. Get a copy of the responses; they'll surface issues that other documents miss.

California HOAs have 10 business days from request to provide the disclosure package. Build adequate time into your inspection contingency to receive and review it carefully.

Common mistakes

• Skipping the reserve study review. Most buyers read the financial statements but skip the reserve study itself — which is where the future special assessment risk actually shows up.
• Trusting "no pending special assessment" disclosures. "Pending" has a specific narrow meaning. A board actively discussing a $5M roof repair that hasn't yet been formally voted on is not "pending" — but it's coming.
• Ignoring the 2026 timeline. If you're buying in 2026, the building's compliance with January 2027 rules matters for your eventual resale. Buildings that don't meet the 15% threshold by 2027 face buyer pool contraction.
• Not factoring HOA dues into qualification math. Lenders include HOA dues in DTI calculation. More on rising HOA fees.

The honest read

Condo due diligence is harder than single-family due diligence — but skipping it doesn't make problems go away; it just defers them to the moment when you discover them, usually at a special assessment notice or when you try to sell. The 2026 Fannie Mae changes (LL-2026-03) make this more important than at any time in the past two decades. Buildings that pass the 11-question test today are likely to remain financeable, marketable, and sound through 2030+. Buildings that fail multiple items are probably entering a decade of declining warrantability and resale challenges. For buyers with strong professional help (agent, lender, attorney) and a willingness to read 200+ pages of disclosure documents during the inspection period, the condo market still has good values — particularly in well-managed mid-size buildings in Hillcrest, Mission Hills, and parts of downtown. For buyers who skip the homework and trust that "the inspector will catch anything," the condo market is becoming a minefield.

Condo financing rules and HOA practices vary widely. Always work with a licensed real estate attorney for individual situations involving complex HOA issues. Educational content only — not legal, tax, or financial advice.

References

1. Fannie Mae. (n.d.). Selling Guide B4-2: Project standards. Retrieved April 28, 2026, from https://selling-guide.fanniemae.com/sel/b4-2.1-01/general-information-project-standards
2. Fannie Mae. (2026, March 18). Lender Letter LL-2026-03: Updates to project standards and property insurance requirements. Retrieved April 28, 2026.
3. Pacific Crest Reserves. (2026, April). 2026 lending changes: What HOA and condo boards need to know about reserve funding. Retrieved April 28, 2026, from https://www.paccrestreserves.com/2026-lending-changes-what-hoa-and-condo-boards-need-to-know-about-reserve-funding/
4. Bennett Capital Partners Mortgage. (2026, April). Fannie Mae condo guidelines 2026: New 15% reserve and review rules. Retrieved April 28, 2026, from https://www.bcpmortgage.com/post/fannie-mae-condo-guidelines-2026
5. California Civil Code § 5550. Reserve studies. State of California.