HOA Financials, Warrantability, Special Assessments & Everything You Need to Know Before You Buy a Condo in the Phoenix Metro
Buying a condominium in Arizona is fundamentally different from purchasing a single-family home, and this distinction goes far deeper than the obvious differences in square footage or shared walls. When you buy a condo, you are not simply purchasing a unit within a building — you are becoming a co-owner of an entire shared ownership structure alongside every other buyer who has ever purchased a unit in that development. The health of your investment is inextricably tied to the decisions made by the homeowners association, the financial management of the collective property, the legal history of the building, and the behavioral patterns of your neighbors as a collective ownership group. Get the individual unit right but miss the HOA picture, and you can still make a very expensive mistake.
Arizona is home to more than 5,000 condominium associations, all governed by the Arizona Condominium Act, which spans ARS §33-1201 through ARS §33-1270. This statute defines the legal structure of condominium ownership in Arizona, establishes the rights and obligations of unit owners and associations, governs how assessments are levied and collected, and outlines the disclosures that sellers and HOAs must provide to buyers. Understanding this legal framework — or working with an agent who does — is the foundation of a successful condo purchase.
With a single-family home, your primary due diligence focuses on the physical condition of the property: the roof, HVAC systems, foundation, plumbing, electrical, and so on. With a condo, you must perform that same physical inspection of your individual unit AND conduct an entirely separate layer of investigation into the financial and operational health of the homeowners association that governs everything outside your walls. The HOA is responsible for maintaining all common elements — roofs, exterior walls, hallways, elevators, swimming pools, fitness centers, parking structures, landscaping, and utility infrastructure — and the cost of maintaining all of those systems falls collectively on all unit owners through HOA dues and, when reserves run short, special assessments.
A buyer who falls in love with a beautifully renovated Old Town Scottsdale condo, offers full price, and closes within 30 days — without ever reviewing the HOA's reserve study, meeting minutes, or financials — may discover three years later that the building's reserve fund is critically underfunded, a major roof replacement is imminent, and every owner has been levied a $22,000 special assessment. That scenario is not a hypothetical. It plays out in Arizona condo buildings every year, particularly in developments constructed in the 1980s and 1990s that have experienced deferred maintenance and inconsistent HOA financial management.
One of the most frustrating experiences in real estate is getting under contract on a condo, progressing through inspection and appraisal, and then learning from your lender that the project is not eligible for the type of financing you applied for. This happens far more often with condos than with single-family homes, because lenders — and specifically the government-sponsored enterprises Fannie Mae and Freddie Mac — have strict standards for which condo projects are eligible for conventional loans. Projects with high investor concentration, litigation against the HOA, insufficient reserves, or condo-hotel structures may be deemed non-warrantable, making conventional, FHA, and VA financing impossible and forcing buyers to either use expensive portfolio financing or walk away.
The solution is to check warrantability status early — ideally before you fall in love with a unit, and certainly before you make an offer. A good buyer's agent will flag known non-warrantable buildings in your target area. Your lender should run the project through Fannie Mae's Condo/Co-op Project Review system (PERS) as early as possible in the process. And your purchase contract should include appropriate contingencies for HOA document review and financing so you have an exit if problems emerge.
The Phoenix metro condo market in 2026 offers a wide range of product types, price points, and investment profiles. The highest-demand condo submarket is Old Town Scottsdale, where urban walkability, proximity to restaurants and nightlife, and strong short-term rental demand from snowbirds and Airbnb guests combine to drive prices for well-positioned condos from $350,000 to well above $1 million. Tempe's Town Lake corridor — home to high-rise developments including Skywater at Town Lake and The Mark — attracts young professionals and university-adjacent buyers in the $300,000-$900,000 range. Downtown Phoenix is seeing continued development around CityScape and the stadium district. The West Valley (Peoria, Glendale) and East Valley (Chandler, Gilbert, Mesa) tend to offer more affordable townhome-style condo product in the $250,000-$550,000 range, often in master-planned communities with HOA amenities and lower-density footprints.
Arizona condo buyers represent a remarkably diverse mix of motivations and profiles. Snowbirds — primarily from cold-weather states like Minnesota, Wisconsin, Illinois, and Michigan, as well as Canada — flock to Scottsdale, Sun Lakes, Sun City, and Chandler area condos to escape northern winters. These buyers want a lock-and-leave property: minimal maintenance, secure access, community amenities, and proximity to golf, restaurants, and healthcare. They often pay cash or use portfolio financing and spend four to seven months per year in Arizona.
STR (short-term rental) investors target Scottsdale, Old Town, and Tempe with Airbnb and VRBO in mind. Arizona's preemption of local STR bans under ARS §9-500.39 makes the state favorable for this strategy — but HOA CC&Rs can restrict short-term rentals even where the city cannot, and many Phoenix metro condo buildings have amended their CC&Rs to do exactly that. Investor concentration in STR-heavy buildings frequently triggers non-warrantability, which limits financing options and future resale markets.
First-time homebuyers use condos as entry points into homeownership, particularly in areas where single-family home prices have moved out of reach. A condo in Chandler or Gilbert in the $300,000-$400,000 range may be attainable where a comparable SFR would be $500,000-$600,000. Downsizers — empty nesters and retirees who no longer need a large single-family home — seek condos for reduced maintenance burden, often paying cash from SFR equity. Corporate relocatees, especially those tied to TSMC's Fab 21 in north Phoenix or Intel's Chandler campus, often enter the Phoenix market through condos while they evaluate longer-term neighborhoods.
The classic condo ownership model involves purchasing airspace — the interior of your unit from wall surface to wall surface, floor to ceiling — along with an undivided fractional interest in all common elements of the project. Common elements include everything outside your unit walls: corridors, stairwells, lobbies, roof, exterior walls, landscaped grounds, amenity facilities, parking structures, and mechanical/utility systems that serve the building. Your undivided interest in those common elements is proportional and cannot be separated from your unit ownership — you cannot sell your common interest separately from your unit.
From an insurance perspective, the dividing line between what you own and what the HOA owns — and therefore what your HO-6 policy covers versus what the HOA master policy covers — depends on whether the HOA has an "all-in" or "bare walls-in" policy. Understanding this distinction is critical and is discussed in detail in Section 8. Voting rights in the HOA are typically proportional to ownership interest (which may be tied to square footage or may be one-vote-per-unit depending on the CC&Rs), giving you a voice in major decisions including budget approvals, special assessments, and board elections.
Townhome condos look and feel much more like single-family homes than traditional stack-flat condos. They are typically two or three stories, attached laterally to neighboring units rather than stacked vertically, and often include a small private patio or yard area. The legal structure, however, is still that of a condominium — you own airspace and hold an undivided interest in common elements rather than owning the land under your unit outright. This means that the same warrantability rules apply, HOA documents must be reviewed, and special assessment risk is present just as with any other condo structure.
In daily life, townhome condos frequently feel more like owning a detached home — you do not share ceilings with neighbors above or below, you may have a private entry directly from a garage, and the HOA may maintain only the exterior and amenities rather than everything right outside your walls. Many buyers prefer townhome condos as a stepping stone between apartment life and full single-family homeownership. In the Phoenix metro, townhome-style condo communities are most prevalent in Gilbert, Chandler, Peoria, Glendale, and the outer East Valley, often priced in the $280,000-$500,000 range depending on the community and finish level.
A Planned Unit Development is often confused with a condo community but is legally distinct in an important way: in a PUD, you own the land under your unit individually, along with the structure itself. The HOA owns and maintains common areas like pools, parks, and amenities, but your individual lot and home are yours outright. This distinction matters tremendously for financing. Fannie Mae and Freddie Mac treat PUDs much more favorably than condos — a PUD unit is typically reviewed under the same process as a single-family home, without the extensive condo project review requirements that can trip up warrantability.
PUDs are common in Arizona's master-planned communities — think Vistancia in Peoria, Estrella Mountain Ranch in Goodyear, and many of the Gilbert and Chandler master plans. Attached units in these communities that look like condos or townhomes from the outside may actually be PUDs from a legal and financing perspective. Your lender and title company will identify the legal classification early in the transaction. If a community is classified as a PUD, your financing options are significantly broader and the due diligence burden shifts more toward the physical property and less toward the HOA's financial health (though HOA dues and CC&Rs still apply and should be reviewed).
High-rise condominiums — typically defined as buildings five stories or taller — represent a distinct product category with unique operational characteristics, lifestyle benefits, and financial considerations. Phoenix metro's high-rise inventory is concentrated in a handful of submarkets: Old Town Scottsdale, downtown Scottsdale, Tempe Town Lake, downtown Phoenix, and to a lesser extent Camelback Road and Biltmore corridors. Notable examples include Optima Camelview in Scottsdale's Old Town (a landmark mid-rise/high-rise hybrid known for its distinctive vertical garden architecture), 44 Monroe in downtown Phoenix, Skywater at Town Lake in Tempe, and Watermark Tempe on Town Lake.
High-rise living in Arizona comes with HOA fees that often surprise buyers accustomed to single-family home or low-rise condo ownership. Monthly HOA fees of $400 to $1,500 are not uncommon in Phoenix metro high-rises, reflecting the intensive maintenance required for elevator systems, underground parking structures, high-volume HVAC, rooftop amenities, concierge services, security, and shared mechanical infrastructure. Elevators alone — a single high-rise elevator can cost $80,000 to $300,000 to replace — represent a substantial reserve fund obligation. Buildings with aging elevator systems (15+ years old) that have not been adequately funding their reserves face significant special assessment exposure.
For high-rise buyers, the reserve study (discussed in Section 4) is especially critical. High-rise buildings have far more complex mechanical systems than low-rise condos or townhomes, and the cost of major capital replacements is correspondingly higher. A well-run high-rise HOA will commission a Level I full reserve study every 3-5 years and fund reserves aggressively. A poorly run high-rise HOA may keep dues artificially low for years while deferring major maintenance — until the day a failed elevator or deteriorating parking structure forces an emergency special assessment that can run $20,000 to $50,000 per unit.
A condotel (condominium-hotel) is a hybrid structure in which individual units are owned by private buyers but placed in a hotel rental pool managed by a hospitality company. Owners typically receive a portion of rental revenue from their unit and may use the unit personally for a limited number of days per year. Condotels are found in resort areas — some Scottsdale resort properties and Sedona properties are structured this way — and they are specifically designed to function as investment vehicles within a hospitality management framework.
Financing a condotel is extremely difficult. Fannie Mae and Freddie Mac explicitly exclude condotels from conventional financing. FHA and VA loans are also unavailable. Most buyers must pay cash or use specialized portfolio lending or commercial financing, typically at higher rates and with larger down payment requirements. If you are considering a property that appears to be marketed as a "condo" within a hotel property, with hotel-style amenities, a front desk, and revenue-sharing arrangements, ask your lender immediately to evaluate whether the project is classified as a condotel — before you make an offer. The presence of mandatory rental pool participation, hotel-brand management agreements, or rental revenue sharing structures are red flags for condotel classification.
Of all the concepts in this guide, understanding warrantability may be the most important for condo buyers using financing. Warrantability determines whether a condo project is eligible for conventional loans backed by Fannie Mae or Freddie Mac — the government-sponsored enterprises that purchase the vast majority of conventional mortgages from lenders. If a condo project is non-warrantable, you cannot use a standard conventional loan, FHA loan, or VA loan to purchase a unit. You are limited to cash or portfolio lending, which typically means higher interest rates, higher down payment requirements, and a significantly more restricted buyer pool when you eventually sell.
Fannie Mae and Freddie Mac apply the following primary criteria when evaluating whether a condo project qualifies for conventional financing. Meeting all of these standards makes the project "warrantable" — eligible for standard loan products at standard rates.
Owner-Occupancy Ratio: At least 51% of the total units in the project must be owner-occupied. Fannie Mae applies a 50% threshold for certain larger projects, but 51% is the general standard buyers should assume. This criterion is designed to ensure that the building has a stable base of resident owners rather than being dominated by investors who may be less engaged in HOA governance and who may create higher turnover and maintenance demands. In neighborhoods with strong Airbnb and VRBO activity — particularly Old Town Scottsdale — investor concentration can push buildings below the owner-occupancy threshold, triggering non-warrantable status.
Single-Entity Ownership Cap: No single entity — whether an individual investor, corporate entity, LLC, trust, or developer — may own more than 10% of the total units in the project. In a 40-unit building, that means one entity cannot own more than 4 units. In a 20-unit building, 2 units is the maximum for a single owner. This rule is specifically targeted at preventing investor landlords from dominating HOA governance and creating a situation where the HOA's financial decisions are driven by the interests of a single large owner rather than the broader community. In Phoenix, this criterion is regularly tripped in small-building STR-heavy developments where one Airbnb operator has acquired multiple adjacent units.
HOA Financial Health: The homeowners association must be financially sound. While "financially sound" is not defined by a single metric, lenders evaluating warrantability look at whether the HOA has sufficient operating reserves, whether the delinquency rate on HOA dues is below 15% (15% or more delinquency triggers non-warrantable status), and whether the HOA's operating budget is balanced or surplus-generating. An HOA operating in a deficit — spending more than it collects in dues — is a significant red flag.
No Disqualifying Litigation: The condo project must not be involved in pending litigation that could threaten the project's financial stability or physical integrity. Construction defect litigation — by far the most common type of HOA lawsuit in Arizona — is particularly problematic for warrantability. When an HOA sues a developer for defects in construction (water intrusion, structural issues, defective roofing systems, etc.), the project typically becomes non-warrantable until the litigation is resolved. This can take years. Buyers should always ask specifically about pending or ongoing litigation in HOA documents and disclosure forms.
Project Completion: The condominium project must be complete — no active construction in progress, no portions of the building or common elements still under development. This typically means that the developer has transferred control of the HOA to the owners (a milestone known as "turnover") and that the project is operating as a fully established community. New construction condos may require that a minimum percentage of units — typically 70% — have been sold and closed before conventional financing becomes available for remaining units.
Commercial Space Limitation: No more than 35% of the project's total floor area may be dedicated to commercial use. This rule applies primarily to mixed-use developments where residential condos sit above ground-floor retail, restaurant, or office space. In urban markets like downtown Phoenix and Old Town Scottsdale, where mixed-use development is prevalent, buyers should verify the commercial-to-residential ratio. Projects with more than 35% commercial space become non-warrantable regardless of other factors.
FHA Project Status: While FHA status is technically separate from Fannie/Freddie warrantability, the two are often evaluated together. FHA-approved condo projects may be eligible for FHA loans (3.5% down) even if they are not fully warrantable for conventional loans under all criteria. The FHA approval process and spot loan approval option are discussed in Section 7.
Non-warrantable status can arise from any of the criteria above being unmet, but in the Phoenix metro there are specific patterns that most commonly create non-warrantable buildings:
STR Investor Concentration in Old Town Scottsdale: Buildings in the 85250 and 85251 zip codes that have attracted heavy short-term rental investment frequently fail both the owner-occupancy ratio and the single-entity ownership cap tests. When a dozen units in a 40-unit building are all operated as Airbnb properties by investors who do not personally reside there, and some of those investors have acquired two or three units each, the combination of factors pushes the project into non-warrantable territory. This is increasingly common in Old Town Scottsdale, where some buildings are effectively operating as informal short-term rental hotels with owner-residents in the minority.
Construction Defect Litigation: Arizona experienced a significant wave of construction defect litigation in the 2000s and 2010s as buildings constructed during the boom years of the early-to-mid 2000s developed problems. Many of those cases have been resolved, but new litigation continues to emerge — particularly in buildings constructed during the post-2010 building boom as those properties age and issues surface. Any time you see mention of construction defect litigation — or any HOA litigation — in HOA documents or meeting minutes, flag it immediately for your lender to evaluate the impact on warrantability.
High Delinquency Rates: Economic stress on unit owners — job loss, retirement income disruption, investor cash flow problems — can drive up HOA dues delinquencies, particularly in investment-heavy buildings where owners may not be living locally and may be slower to respond to financial difficulty. When delinquency rates on HOA dues exceed 15% of total units, conventional lenders must treat the project as non-warrantable. Check the HOA financial statements for the accounts receivable aging schedule, which will show how many units are past due and by how much.
Condo-Hotel and Hotel-Adjacent Structures: Any project with hotel management agreements, mandatory rental pool participation, hotel-brand branding within a residential condo structure, or lobby/front desk services that comingle with hotel operations is likely to be classified as a condotel, which is categorically excluded from conventional financing.
If you fall in love with a unit in a non-warrantable condo building in Arizona, you have options — but they come with significant financial implications that should be carefully considered before proceeding.
Portfolio Loans: Community banks, credit unions, and certain mortgage companies hold portfolio loans on their own balance sheets rather than selling them to Fannie Mae or Freddie Mac, which means they are not bound by warrantability standards. Portfolio lenders can offer mortgages on non-warrantable condo projects, but at a price. Interest rates on portfolio condo loans typically run 0.5% to 1.5% higher than comparable conventional rates. On a $400,000 loan at a 1% rate premium, that difference compounds to approximately $3,600 in additional interest annually, or roughly $108,000 over the life of a 30-year loan. Down payment requirements are also higher — portfolio lenders typically require 25% to 30% down on non-warrantable condos.
Reduced Future Buyer Pool: When you eventually sell your non-warrantable condo, your buyer pool is limited to cash buyers and portfolio loan borrowers — which is a small fraction of all buyers in the market. This restriction on future financing can significantly suppress resale values and extend days-on-market when you sell. In a market downturn, the combination of limited financing options and elevated rates makes it difficult to move a non-warrantable unit at a reasonable price. This is a long-term investment consideration that should weigh heavily in your decision-making.
No FHA or VA Options: First-time buyers using FHA financing and veterans using VA loans are completely excluded from non-warrantable projects. This further narrows the pool of future buyers and affects the overall demand dynamics for units in non-warrantable buildings.
The most reliable way to check warrantability is to engage your lender early and specifically ask them to run a condo project review. Fannie Mae's Condo/Co-op Project Review (PERS) system allows approved lenders to look up project approval status and submit projects for review. Lenders who specialize in condos — and not all lenders are equally experienced with condo project review — will know how to navigate this process efficiently. Key steps:
Many condo buildings in the 85250 and 85251 zip codes around Old Town Scottsdale are non-warrantable due to high STR investor concentration. If you are shopping this market with conventional financing, verify warrantability status before making any offer. Your agent should be familiar with which specific buildings are known non-warrantable in this submarket.
Under ARS §33-1260, Arizona law requires homeowners associations to provide a comprehensive package of documents to buyers upon request. This is one of the most buyer-protective provisions in the Arizona Condominium Act, and taking full advantage of it is non-negotiable for any serious condo buyer. The standard HOA document package includes CC&Rs, bylaws, financial statements, reserve study, meeting minutes, current budget, and disclosure of pending assessments and litigation. You have 10 days from the date you receive these documents to review them under Arizona's BINSR process, and discovering a red flag within that period entitles you to cancel the contract without penalty.
The Covenants, Conditions, and Restrictions (CC&Rs) are the foundational legal document of the condominium association. Think of them as the constitution of your building community — they define what you can and cannot do with your unit, what the HOA can and cannot do, how assessments are levied, and how disputes are resolved. Arizona condo CC&Rs are often lengthy documents — 50 to 100 pages is common — and reading them in full is genuinely important even if it takes time.
When reviewing CC&Rs, focus on these specific provisions: Rental restrictions — Does the CC&Rs prohibit short-term rentals? Define a minimum lease term? Require HOA approval of tenants? This is critical if you plan to rent or Airbnb the unit. Many Arizona condo buildings have amended CC&Rs in recent years to prohibit rentals of less than 30 days in response to the proliferation of short-term rental platforms. Pet rules — Weight limits, species restrictions, number limits, and leash requirements vary widely. Modification rules — Can you update your kitchen, add flooring, or modify plumbing without HOA approval? Most CC&Rs require HOA board approval for any structural or exterior modification. Assessment caps — Some CC&Rs limit how much the HOA can raise dues without an owner vote, which provides protection against runaway fee increases but can also constrain the HOA's ability to fund necessary maintenance. Dispute resolution — How are owner-HOA disputes resolved? Mediation, arbitration, and court options vary by CC&Rs.
The bylaws govern the internal operations of the homeowners association as a legal entity. While less likely to affect your daily life as a unit owner than the CC&Rs, the bylaws matter because they define: how the board of directors is elected; what quorum is required for meetings and votes; the term lengths and powers of board members; the frequency of required owner meetings; how special meetings can be called; and the procedures for levying assessments and making major decisions. A well-structured set of bylaws with clear procedures and owner protection provisions is a good sign of a professionally managed association. Bylaws with excessive board discretion, minimal owner approval requirements for major expenditures, or provisions that make it difficult for owners to remove ineffective board members are cautionary signs.
The most recent HOA financial statements are your window into the association's financial health. Request at minimum the last 12 months of financial statements, and ideally the last two to three years for trend analysis. Key metrics to analyze:
Operating Income vs. Expense Ratio: Is the HOA collecting enough in regular dues to cover operating expenses? An operating surplus (income exceeds expenses) is a positive sign. An operating deficit — where expenses regularly exceed dues revenue — suggests dues are too low relative to actual costs, and an increase or special assessment is likely on the horizon.
Reserve Funding Percentage: How much of the monthly dues collected is being directed to the reserve fund? The Community Associations Institute (CAI) recommends that HOAs fund reserves at a rate sufficient to achieve and maintain a 70%+ fully funded reserve ratio. If only 5-10% of monthly dues are going to reserves while 90%+ is being spent on operating expenses, the reserve fund is likely being underfunded.
Management Fee Percentage: Professional property management typically costs 8-15% of gross monthly income for most condo associations. Unusually high management fees may warrant inquiry into what services are included; unusually low fees may indicate cost-cutting that results in deferred maintenance or poor financial management.
Delinquency Rate: Review the accounts receivable aging schedule to identify how many units are past due on HOA dues and by how much. As noted, a delinquency rate above 15% of units triggers non-warrantable status for conventional financing. Even below that threshold, high delinquency creates cash flow problems for the HOA that can force maintenance deferrals or emergency assessments.
Insurance Cost Trends: Arizona HOA insurance premiums have been rising, consistent with national trends driven by increased property insurance costs, climate-related loss events, and reduced insurer competition in many markets. Examine the insurance line item and its year-over-year trajectory. Rapidly rising insurance costs may signal that HOA dues will need to increase substantially to keep pace.
The reserve study is arguably the single most important document in your HOA due diligence package. It is a professional assessment of the physical condition of all common elements in the project, the estimated remaining useful life of each major component, the projected cost of future replacement or repair, and a recommended annual reserve funding level to accumulate funds for those future expenses before they come due. Think of it as a long-range financial forecast for the building's capital needs.
There are three levels of reserve study, defined by the Community Associations Institute: Level I — Full Study with Site Visit: The most comprehensive. A professional reserve analyst (ideally a Reserve Specialist designation from CAI) physically inspects all common element components, documents their current condition and estimated remaining life, and prepares a 30-year funding projection. This is the gold standard. Level II — Update with Site Visit: Updates a previously conducted full study with a new site inspection and refreshed cost and timeline estimates. Less expensive than a Level I but still physically comprehensive. Level III — Update without Site Visit: Updates a prior study using existing data without a new physical inspection. Least comprehensive; useful only when a recent full study exists and conditions are unlikely to have changed significantly.
When evaluating a reserve study, the key output number is the percent funded ratio: the ratio of the current reserve fund balance to the fully funded reserve balance that would be required if all reserve components were funded in proportion to their age and remaining life. A ratio of 70% or higher is generally considered healthy. 50-70% warrants careful review of the funding plan and any upcoming major expenditures. 30-50% is concerning and suggests the association has been underfunding reserves. Below 30% is a significant red flag — buildings at this funding level are at high risk of needing special assessments for major capital replacement projects that are likely coming within the next 5-10 years.
Board meeting minutes are a goldmine of intelligence about the real day-to-day operational health of a condo association. Request minutes from the last 12-24 months and read them carefully. Look for: Recurring maintenance problems — the same roof leak, plumbing issue, or elevator problem appearing across multiple months of minutes suggests an ongoing problem that is not being fully resolved. Owner complaints — repeated complaints about the same issues (noise, parking, pet rules, common area maintenance) reveal community dynamics and governance problems. Special assessment discussions — any mention of a potential special assessment, major capital project, or reserve funding shortfall is critical. Vendor disputes — fights with landscapers, management companies, or contractors suggest operational instability. Recent management changes — a property management company change can signal governance problems or financial disputes. Boards that change management companies frequently sometimes do so to avoid accountability for poor financial practices.
70% or above: Healthy — HOA is well-funded for future capital needs. Low special assessment risk.
50–70%: Acceptable but watch carefully. Review upcoming major expenditures and the funding plan trajectory.
30–50%: Concerning. HOA is underfunded. Medium-to-high risk of special assessment within 5-10 years.
Below 30%: High risk. Significant deferred maintenance likely. Special assessment risk is elevated. Proceed with caution or negotiate a price reduction to account for future liability.
Ask any experienced Arizona condo owner what their biggest financial shock in condo ownership has been, and more often than not the answer involves a special assessment. A special assessment is a one-time charge levied on all unit owners in a condominium development to fund a major expense that the HOA's regular reserve fund cannot cover. Unlike monthly HOA dues — which you budget for in advance and pay on a predictable schedule — special assessments arrive suddenly, are often non-negotiable, and can be substantial enough to require financing arrangements of their own.
The most frequent triggers for special assessments in Arizona condominium developments include:
Roof Replacement: Commercial-grade flat roofing systems on Arizona condo buildings — the type used on most low-rise and mid-rise structures — have a typical lifespan of 15 to 25 years. When replacement time arrives, the cost can be staggering. A 40-unit mid-rise building with a 20,000 square foot roof might face a replacement cost of $150,000 to $350,000 depending on roofing material, slope complexity, and accessibility. Divided equally among 40 units, that's $3,750 to $8,750 per unit — plus interest if the HOA had to borrow to fund the replacement before collecting assessments from owners.
Elevator Systems: High-rise and mid-rise condos with elevators face one of the largest single line items in any reserve study: elevator modernization or full replacement. A single elevator modernization (cab refurbishment, controls upgrade, safety systems) typically costs $80,000 to $150,000. Full shaft and hoist replacement runs $200,000 to $400,000 per elevator. Buildings with multiple elevators — typical in high-rises — face compounding costs. An underfunded reserve in a 10-elevator high-rise with aging cab systems could require a special assessment of $30,000 to $60,000 per unit to complete a full modernization program.
Pool and Spa Resurfacing: Arizona's intense UV exposure and mineral-rich water supplies accelerate pool finish degradation. A complete pool resurfacing — plaster, aggregate, or pebble finish — typically costs $15,000 to $40,000 for a medium-sized community pool, plus additional costs for coping replacement, equipment upgrades, and temporary fill-in amenities while the pool is out of service. Buildings with multiple pools face multiple line items.
Parking Structure Repairs: Concrete parking structures in Arizona — particularly in urban high-rise and mid-rise developments — face delamination and spalling driven by temperature cycling and rebar corrosion. Repair and waterproofing of an aging parking structure can cost $2 million or more for a large building, translating to $20,000-$50,000 per unit in a special assessment scenario.
Window and Balcony Replacement: In high-rises and older mid-rises, original windows and sliding glass doors from the 1970s, 1980s, and 1990s are reaching or past their end of serviceable life. Full window replacement across an entire high-rise building is one of the most expensive capital projects an HOA can face, often running into the millions of dollars. Balcony surface resurfacing and balcony railing replacement programs are similarly costly in multi-story buildings.
Plumbing System Overhauls: Galvanized steel and early copper plumbing systems in buildings constructed through the 1980s are failing in increasing numbers. A full building plumbing riser replacement — requiring unit access in every home to replace in-wall and in-floor piping — can cost $500,000 to $2 million for a large building and is among the most disruptive capital projects for residents.
The June 2021 collapse of the Champlain Towers South condominium in Surfside, Florida — which killed 98 people and was linked in part to decades of deferred maintenance and underfunded reserves in a beachfront high-rise — triggered a national conversation about condo reserve funding that has directly affected the Arizona market. In the years following Surfside, major lenders including Fannie Mae and Freddie Mac tightened their project review standards for condos, requiring additional documentation about building condition, deferred maintenance, and reserve funding ratios. These changes were largely implemented in 2022 and have been maintained and refined through 2026.
What this means practically for Arizona condo buyers in 2026: lenders are more diligent than ever about identifying buildings with significant deferred maintenance, structural concerns, or critical safety issues. Questionnaires sent to HOAs as part of condo project review now specifically ask whether the board is aware of any deferred maintenance, deterioration, or physical conditions affecting the safety of the building. A truthful answer to that question — about aging infrastructure, leaking roofs, failing elevators, or deteriorating parking structures — can trigger additional lender scrutiny or even loan denial for the project. This is another reason why reviewing HOA documents personally, not just relying on lender approval, is so critical.
Certain building characteristics strongly correlate with elevated special assessment risk. Learn to recognize these patterns before you invest in a condo community:
If you discover during HOA document review that a special assessment has already been levied — meaning the HOA has voted to charge all unit owners a specific amount — the question of who pays the outstanding assessment (buyer or seller) becomes an important negotiation point that should be addressed explicitly in your purchase contract or a contract addendum.
Under Arizona contract law, the default is generally that any assessment levied and collected before closing is the seller's obligation, and any assessment levied but not yet collected at the time of closing is negotiable. However, this default can be overridden by contract language, and Arizona purchase contracts do not always address pending assessments explicitly. Your buyer's agent should include specific language in the contract or addendum clarifying: (1) whether the seller represents there are no pending or approved assessments; (2) if a special assessment exists, who is responsible for paying it (buyer or seller, or split); and (3) what remedies exist if a material undisclosed assessment is discovered before or after closing.
Always include a clause requiring the seller to disclose in writing, at or before the time of the purchase contract, any special assessments that have been levied, approved by the board, or discussed as a formal agenda item in the last 24 months. If the seller cannot represent that no such assessments exist, price the risk into your offer or negotiate a closing credit to cover your share of the known future obligation.
Arizona's condominium law provides a strong framework of protections and obligations for both unit owners and associations. Understanding the key statutes is not about becoming a legal expert — it's about knowing your rights, knowing what the HOA is obligated to do, and knowing where to look when something feels wrong.
ARS §33-1202 — Definitions: Establishes the legal definitions used throughout the Act, including "common elements" (all portions of the condominium other than units), "limited common elements" (portions assigned for the exclusive use of specific units, such as a designated parking space or private balcony), and "unit" (the physical boundaries of the air space you own). Understanding whether a disputed element — a parking space, storage unit, balcony — is a common element, a limited common element, or part of the unit boundary has significant implications for who is responsible for maintenance and repair costs.
ARS §33-1228 — Meetings and Voting: Governs owner meetings, notice requirements, quorum rules, and voting procedures. Unit owners are entitled to notice of all regular and special meetings. Certain major decisions — including large special assessments beyond board authority, amendments to CC&Rs, and other significant actions — require owner votes with defined approval thresholds. Understanding these provisions helps you evaluate whether the HOA's governance is procedurally legitimate.
ARS §33-1243 — Board of Directors Powers: Defines what powers the board can exercise on its own authority versus what requires owner approval. Boards have significant discretionary authority to manage day-to-day operations, but certain major decisions require owner ratification. If a board is making major financial decisions — including substantial special assessments — that may exceed its authority without an owner vote, this can create legal exposure for the association and is a red flag in meeting minutes.
ARS §33-1257 — Assessments: Governs how assessments (both regular monthly dues and special assessments) are levied and collected. Regular assessments must be determined in the annual budget process. Special assessments may be levied by the board for common expenses not anticipated in the annual budget. The statute also establishes lien rights — the HOA has a lien on each unit for unpaid assessments, which has priority over many other liens in specified circumstances. This means HOA debt can threaten your ownership of the unit if you fall behind on dues.
ARS §33-1258 — Reserve Funding: Requires HOAs to establish and maintain a reserve fund for the repair, replacement, and restoration of major components. This is the statutory basis for the reserve study requirement. The statute does not mandate a specific minimum funding ratio, but it does require that the HOA engage in reserve planning and maintain a fund adequate to meet anticipated future obligations.
ARS §33-1260 — Resale Disclosures: This is the buyer-protective provision that requires the HOA to provide comprehensive documents to a buyer or the buyer's agent upon request. The required documents include: the current declaration (CC&Rs), bylaws, and rules; the most recent financial statements; the current operating budget; the reserve study; meeting minutes from the last 12 months; a statement of any outstanding judgments, pending lawsuits, or pending special assessments; and the current HOA dues amount. The buyer has a right to cancel the purchase contract within 5 days of receiving these documents if any of them are unsatisfactory.
ARS §33-1261 — Resale Certificate: The seller is required to provide a resale certificate issued by the HOA that certifies: the current monthly assessment; any outstanding assessments on the specific unit being sold; whether the HOA is aware of any violations of the CC&Rs affecting the unit; and whether the HOA has been informed of any modifications to the unit. The resale certificate is a key document — review it alongside the broader HOA package.
Arizona's Short-Term Rental (STR) preemption statute prohibits cities and municipalities from banning short-term rentals outright. This means that cities like Scottsdale, Phoenix, Tempe, and Chandler cannot prohibit owners from listing their properties on Airbnb or VRBO — regardless of local political opposition. This is a significant distinction from many other states where cities have successfully prohibited STR activity through local ordinance.
However — and this is critical — HOA CC&Rs are contracts between private parties and are not subject to the same preemption. The city cannot ban STRs, but your HOA can include in its CC&Rs a prohibition on rentals shorter than 30 days, 60 days, or any minimum term they choose. This means that in the Phoenix metro, whether you can legally Airbnb a condo unit depends entirely on what the CC&Rs say, not on what the city says. If short-term rental income is central to your investment thesis for buying a condo, reading the CC&Rs for rental restriction language is among the very first steps you should take — before you spend time or money on the property.
Arizona's standard real estate purchase contracts include a 10-day inspection period during which the buyer has the right to inspect the property and cancel for any reason. The BINSR (Buyer's Inspection Notice and Seller's Response) is the formal document through which the buyer communicates inspection findings and requests repairs or concessions. The seller then has 5 business days to respond — agreeing to repairs, offering cash credits, or declining — and the buyer can accept the response, cancel, or continue negotiating.
For condo purchases, the BINSR inspection period is where HOA document review happens. When you receive HOA documents from the seller or HOA, the clock starts on your review window. If you discover during this period that the reserve fund is critically underfunded, a special assessment is pending, or the building has significant undisclosed litigation, you can cancel your contract under the inspection period contingency and receive your earnest money deposit back. This 10-day window is your most valuable protection as a condo buyer, and you should begin requesting HOA documents immediately upon going under contract so you have maximum time to review them.
Arizona's homestead exemption protects up to $400,000 in equity in your primary residence from judgment creditors. This exemption applies to condominiums just as it does to single-family homes — your primary residence condo is homesteaded. This protection does not apply to investor-owned condos where you are not the primary resident.
Financing a condo in Arizona involves navigating a set of rules and project approval requirements that simply do not exist for single-family home purchases. Before choosing a loan type, your lender must verify that the condo project meets the eligibility requirements for that specific loan program. Understanding your financing options — and their respective requirements — is fundamental to structuring a successful condo purchase.
Conventional loans are the most widely used financing option for warrantable condo projects. For 2026, the conforming loan limit in Maricopa and Pinal Counties is $806,500, meaning loans up to this amount qualify for standard Fannie Mae/Freddie Mac conventional terms. Down payment requirements start at 5% for primary residence purchases (though lower down payments exist under certain programs) and 15-25% for investment properties. Interest rates on warrantable condo conventional loans are typically close to comparable SFR rates, though lenders may apply a small loan-level price adjustment (LLPA) for condo properties.
FHA loans — insured by the Federal Housing Administration — require only 3.5% down for buyers with credit scores of 580 or above, or 10% down for scores between 500 and 579. These low down payment requirements make FHA financing appealing for first-time condo buyers. However, FHA has its own condo project approval requirements that are separate from and in some ways stricter than Fannie Mae's warrantability standards.
For a condo to be eligible for FHA financing, it must either be in an FHA-approved project (meaning the entire development has gone through HUD's approval process and is listed on the FHA Approved Condominium List at hud.gov) or qualify for an FHA Single-Unit Approval (spot approval). The spot approval process, reinstated in 2019, allows individual units in non-FHA-approved projects to receive FHA financing if: the project is at least 51% owner-occupied; no more than 10% of units are FHA-insured; the HOA is financially sound; and other criteria are met.
FHA loans carry Mortgage Insurance Premium (MIP) in two parts: an upfront MIP of 1.75% of the loan amount (added to the loan at closing) and an annual MIP that for most buyers in 2026 runs 0.55% to 1.05% of the outstanding balance, paid monthly. Unlike conventional PMI, FHA annual MIP on loans with less than 10% down cannot be cancelled — it remains for the life of the loan unless refinanced. On a $350,000 FHA condo loan, the upfront MIP adds $6,125 to the loan balance; the annual MIP at 0.55% adds approximately $160 per month to the payment.
VA loans provide extraordinary benefits to eligible veterans and active-duty military: no down payment requirement, no private mortgage insurance, competitive interest rates, and the ability to finance up to the conforming loan limit without a down payment. However, VA loans for condos have one of the most restrictive project approval processes of any loan type. Unlike FHA, which offers spot approval for individual units, VA requires that the entire condo project be VA-approved — there is no VA spot approval process. The VA-approved condo list is maintained at benefits.va.gov and is searchable by state and county.
Arizona has a significant veteran population connected to Luke Air Force Base in the West Valley, multiple Army installations, and the large retiree military community across the metro. For veterans shopping the condo market, the first step is to verify VA approval status for any project under consideration. If the project is not VA-approved, the veteran must seek HOA cooperation to pursue VA project approval — a process that can take weeks and is not always successful — or pivot to a different project or loan type.
For buyers purchasing in non-warrantable condo buildings — common in Old Town Scottsdale's STR-heavy market and in some urban Phoenix developments — portfolio loans offered by credit unions, community banks, and specialty mortgage lenders are the primary financing vehicle. Portfolio lenders hold these loans on their own balance sheets, which frees them from Fannie Mae and Freddie Mac's warrantability restrictions but also means they set their own pricing and credit standards.
Expect portfolio condo loans in 2026 to carry interest rates 0.5% to 1.5% above conventional rates, down payment requirements of 25% to 30%, and potentially shorter loan terms or balloon payment provisions. Credit score requirements vary by lender but are typically 680-720+. The rate premium on a $400,000 non-warrantable condo loan at 1% above conventional rates adds approximately $250 to $300 per month to the payment — a meaningful ongoing cost that should factor into your return calculations if the unit is an investment.
Debt Service Coverage Ratio (DSCR) loans have become popular with real estate investors, including condo investors in Arizona's STR markets, because they qualify borrowers based on the property's rental income rather than the borrower's personal income. No personal tax returns, W-2s, or pay stubs are required — the lender simply looks at whether the property's projected rental income (from lease or Airbnb comps) covers the debt service at or above a specified ratio (typically 1.0x or higher). DSCR loans for condos typically require 20-25% down and are priced at a premium above conventional investor rates. They work best for investors who have strong property income potential but complex personal income documentation (self-employed, high earners with many deductions, etc.).
For luxury condo purchases above the 2026 conforming loan limit of $806,500 in Maricopa and Pinal Counties, buyers need jumbo financing. Jumbo condo loans typically require 10-20% down, strong credit scores (720+), significant reserves (often 12 months of housing payments in verified liquid assets), and full income documentation. Jumbo lenders have their own project approval processes and may be more flexible or more restrictive than agency guidelines depending on the lender. If you are purchasing a high-end condo in Scottsdale or Phoenix above the conforming limit, work with a lender who has specific experience and a track record with jumbo condo transactions in the Arizona market.
Insurance for condo owners in Arizona is a two-layer system: the HOA master policy covers the building, common elements, and structure; and your individual HO-6 policy covers your unit's interior, personal property, and personal liability. Understanding exactly what each layer covers — and where the critical gaps can exist — is essential to protecting your investment.
An HO-6 policy is specifically designed for condominium unit owners. It covers the interior of your unit (walls in, fixtures, built-in appliances, flooring, cabinets), your personal property (furniture, electronics, clothing, jewelry), personal liability (if someone is injured in your unit and sues you), and loss of use (additional living expenses if a covered loss makes your unit uninhabitable). In Arizona, HO-6 policies for a typical condo unit typically cost $150 to $400 per year — quite affordable given the coverage provided.
One of the most critical and often overlooked components of an HO-6 policy is loss assessment coverage. This provision pays your share of a special assessment levied by the HOA to cover a loss that falls under a covered peril (fire, water damage from a pipe burst, etc.) but that exceeds the HOA's master policy coverage limits. Loss assessment coverage limits of $50,000 to $100,000 are available as endorsements on many HO-6 policies at minimal additional premium, and given the potential magnitude of condo special assessments, maximizing this coverage is strongly recommended.
The HOA master policy covers the structure and common elements of the entire condominium project. The critical distinction that every condo buyer must understand is whether the HOA carries an "all-in" (also called "all-inclusive" or "single-entity") policy versus a "bare walls-in" policy — and this distinction determines what your HO-6 policy needs to cover.
Bare Walls-In (Basic Form): The HOA master policy covers only the building shell — walls, roof, structural elements, and common area fixtures. All interior elements of the individual units — flooring, cabinetry, built-in appliances, fixtures, improvements made by prior owners — are the unit owner's responsibility to insure. In a bare walls-in building, your HO-6 policy must cover everything inside your unit walls including all original fixtures, because the HOA master policy will not respond to interior damage.
All-In (All-Inclusive Form): The HOA master policy covers the entire building including original interior fixtures, built-in appliances, flooring, and cabinets as originally installed in each unit. Your HO-6 policy then covers your personal property, upgrades you have made beyond original specifications, and your personal liability. This is the more favorable arrangement for unit owners because it reduces the risk of coverage gaps in the event of a loss.
Before closing on any Arizona condo, request the HOA master policy declarations page (not just a summary — the actual declarations page) and determine whether the policy is bare walls-in or all-in. Share this information with the insurance agent quoting your HO-6 policy so they can structure the appropriate coverage. Failing to properly understand the master policy form has resulted in painful coverage gaps for Arizona condo owners who suffered losses and discovered that neither the HOA's policy nor their own HO-6 covered certain elements of the damage.
Arizona's favorable short-term rental regulatory environment — built on the ARS §9-500.39 preemption that blocks cities from banning STRs — has made the Phoenix metro one of the country's most active STR investment markets. Scottsdale in particular consistently ranks among the top Airbnb markets in the United States, driven by warm-weather tourism, spring training baseball (Cactus League games draw hundreds of thousands of visitors from February through March), the Waste Management Phoenix Open (the largest-attended PGA Tour event in history with 200,000+ spectators per week), and the general appeal of the Old Town Scottsdale entertainment district.
Despite Arizona's preemption of local STR bans, HOA CC&Rs can and frequently do restrict or prohibit short-term rentals in condo developments. The HOA's authority to restrict rental activity within its community is grounded in contract law — every unit buyer agrees to abide by the CC&Rs when they purchase, and those CC&Rs are a valid contract between private parties that is not subject to state preemption of municipal ordinances.
Common CC&R rental restriction provisions in Arizona condo buildings include: minimum lease terms of 30 days, 60 days, or 6 months; prohibitions on "transient occupancy," "hotel-like use," or "vacation rentals"; requirements for HOA approval of all tenants or leases; prohibitions on more than a specified number of leases per year; and outright bans on any rental activity. When reviewing CC&Rs for a condo you intend to use as an STR, look for any language referencing "short-term rental," "transient use," "vacation rental," "minimum lease term," "hotel-like," or any number restriction on lease frequency. If the language is ambiguous, ask the HOA manager for clarification in writing before you close.
If your condo allows STRs and you intend to list on Airbnb or VRBO, you are required to register for and collect Arizona Transaction Privilege Tax (TPT) — Arizona's equivalent of a sales tax. STR operators must collect 5.6% state TPT plus applicable county and city rates, which typically bring the total to 8% to 11% of gross rental revenue depending on the municipality. You must register for a TPT license with the Arizona Department of Revenue and remit taxes quarterly or monthly. Airbnb collects and remits some of these taxes automatically on behalf of hosts in Arizona, but VRBO and direct booking arrangements may require the host to collect and remit independently. Failure to register and collect TPT is a compliance issue that can result in back taxes, penalties, and interest.
Here is the fundamental tension in the Arizona STR condo market: the very activity that makes a condo development attractive to STR investors — high Airbnb occupancy, multiple units operated as STRs by non-resident investors — is precisely what triggers non-warrantable status under Fannie Mae and Freddie Mac guidelines. As investor concentration rises in a building (more units owned by non-owner-occupants) and as a single entity acquires multiple units for STR operation, the building crosses warrantability thresholds. Once non-warrantable, the building can only be financed through cash or portfolio loans — which limits future resale to a smaller buyer pool, depresses prices relative to comparable warrantable buildings, and creates a self-reinforcing cycle where the remaining buyer pool is even more investor-heavy.
STR investors who purchase wisely understand this dynamic and factor it into their long-term exit strategy. If you intend to hold a Scottsdale condo as an Airbnb for five years and then sell, who will buy it? If the building is non-warrantable at the time of your sale, your buyer must be a cash buyer or portfolio loan borrower — a much smaller universe than the full conventional buyer market. Price your entry accordingly.
The Old Town Scottsdale and Scottsdale Road submarket is the crown jewel of the Phoenix metro condo market, offering the highest concentration of luxury condo inventory, the strongest short-term rental fundamentals, and the most walkable urban lifestyle in the entire valley. The neighborhood is anchored by the Old Town entertainment district — hundreds of restaurants, bars, art galleries, boutique shops, and nightclubs within walking distance — and benefits from proximity to the Scottsdale Fashion Square mall, the Scottsdale Museum of Contemporary Art, and world-class resort hotels including the Phoenician and Camelback Inn.
Price ranges in Old Town Scottsdale condos span an enormous spectrum: entry-level studio and one-bedroom units in older low-rise buildings start around $300,000-$400,000, while luxury high-rise and boutique mid-rise units in premier buildings like Optima Camelview can reach $1 million to $3 million or more. HOA fees in Old Town run $300-$800 per month for most communities, with high-rises at the upper end or beyond. The critical caveat for buyers in this submarket: many buildings are non-warrantable due to STR investor concentration. Work with an agent who knows which buildings are warrantable and which are not before you begin touring units.
Tempe has transformed over the past decade from a college town defined by Arizona State University into one of the most vibrant urban neighborhoods in the Phoenix metro. Tempe Town Lake — a 2-mile urban reservoir in the heart of the city — has become the anchor of a high-rise residential development corridor that includes Skywater at Town Lake, The Mark at Tempe, and several other major projects. The lake-adjacent lifestyle, with paddleboarding, kayaking, and waterfront walking paths, appeals to young professionals and downsizers alike.
Condo prices in Tempe range from approximately $300,000 for older, smaller units in the ASU-adjacent neighborhoods to $800,000-$900,000 for premium lake-view units in newer high-rises. HOA fees range from $250-$600 per month for most communities. Tempe is arguably the best-positioned submarket for long-term rental demand, given the permanent presence of ASU's 70,000+ student and faculty community and the strong employment base from the continuing expansion of companies drawn to the Tempe market.
Downtown Phoenix condo inventory is growing but remains more limited than Scottsdale or Tempe. The market benefits from proximity to Chase Field (Arizona Diamondbacks), Footprint Center (Phoenix Suns and Mercury), the Convention Center, and the Roosevelt Row arts district, which has become one of Phoenix's most distinctive cultural neighborhoods. Pricing in downtown Phoenix condos ranges from $250,000 to $700,000+ for most units, with HOA fees of $200-$500 per month in most buildings. The downtown market attracts urban professionals, young couples, and buyers who value nightlife and cultural amenities over suburban quiet.
The East Valley communities of Chandler and Gilbert represent a very different condo product type — primarily townhome-style attached units in new construction master-planned communities rather than high-rise or mid-rise urban buildings. These communities benefit from proximity to Intel's massive Fab 52/62 campus in Chandler and the broader East Valley technology employment base. They appeal to young professionals, dual-income households without children, and first-time buyers who want new construction quality, community amenities, and lower maintenance than single-family homes.
Townhome condo pricing in Chandler and Gilbert typically runs $300,000 to $600,000 depending on size, finish level, and community. HOA fees are generally lower than urban condos — $150-$400 per month is common — because the shared infrastructure is less intensive than a high-rise. Many of these communities classify legally as PUDs (individual land ownership) rather than true condos, which can mean more favorable financing terms; your lender will determine the classification during project review.
The West Valley condo market is the most affordable segment of the Phoenix metro, with townhome and low-rise condo product primarily in the $250,000-$450,000 range and HOA fees of $150-$350 per month. Demand is supported by the significant military community surrounding Luke Air Force Base in Glendale, proximity to State Farm Stadium (Arizona Cardinals), employment growth in logistics, healthcare, and manufacturing along the Loop 303 corridor, and continued population expansion in communities like Surprise and Peoria. The West Valley condo buyer profile skews toward young families, military personnel and veterans, and value-conscious buyers priced out of East Valley and Scottsdale markets.
Not all mortgage lenders are equally experienced with condo project review, and the difference between an experienced condo lender and one who is not can mean the difference between a smooth closing and a last-minute financing failure. When selecting a lender, specifically ask about their experience with condo project review in Arizona, whether they can perform Fannie Mae CPM (Condo Project Manager) lookups in-house, and how they handle non-warrantable scenarios. Get your pre-approval letter and understand your loan amount, rate range, and down payment requirements before you begin shopping.
Before you invest time touring units or become emotionally attached to a specific building, share your target communities with your lender and ask them to do preliminary warrantability research. If you are targeting Old Town Scottsdale, your agent should be able to tell you which buildings are known to be non-warrantable in that submarket. If you identify a specific building you like, your lender can pull initial project data from available databases. This step can save significant time and emotional energy by filtering out projects that are incompatible with your financing.
Arizona's Residential Purchase Contract (the AAR form) includes inspection and financing contingencies that provide buyer protection. For condo purchases, make sure your contract specifically addresses: (1) the right to review HOA documents during the inspection period; (2) a financing contingency that explicitly covers condo project approval (not just credit and income); and (3) clear language about who bears responsibility for any special assessments disclosed during the HOA document review period. Your buyer's agent should be well-versed in structuring these contingencies to maximize your protection.
The moment you are under contract, request HOA documents immediately — do not wait. HOAs have up to 10 days to respond to a document request under ARS §33-1260, which means if you wait until day 3 to request documents, you may not receive them until day 13 of your inspection period, leaving you no time to review before the inspection period expires. Initiate the document request on the same day you go under contract, or ideally before you make the offer if the listing agent can facilitate early document production.
During the inspection period, simultaneously: (1) schedule a professional physical inspection of your unit by a licensed home inspector (Arizona does not license home inspectors, so use inspectors credentialed by ASHI or InterNACHI); (2) review all HOA documents in detail (or have your attorney review them); (3) have your lender run the condo project through formal approval; and (4) verify STR rules if applicable. If you find issues — underfunded reserves, pending litigation, non-warrantable status you cannot finance — you have until the end of the inspection period to cancel without penalty.
Within the HOA document package, prioritize the reserve study and financial statements for careful analysis. Calculate the reserve funding ratio. Review the list of components in the reserve study and their estimated remaining life — anything with less than 5 years of remaining life is a near-term capital expenditure risk. Compare the current reserve fund balance against the fully funded balance in the reserve study. Ask your real estate agent to help you interpret the numbers, or consult with a CPA who has experience with HOA financial analysis.
Read the last 12 to 24 months of board meeting minutes thoroughly. Flag any mention of: major capital projects; special assessment discussions; litigation; recurring maintenance problems; management company concerns; insurance disputes; or significant owner complaints. Minutes are unfiltered — they capture what the board actually discussed, which may include information not reflected in official HOA disclosure forms.
Confirm in writing from the HOA manager that no pending special assessments have been approved or are under active discussion by the board. Obtain and review the HOA master policy declarations page to determine all-in vs. bare walls-in coverage. Get quotes for your HO-6 policy with appropriate loss assessment coverage. Complete a final walkthrough of the unit within 24 hours of closing to verify condition. At closing, Arizona's dry funding and simultaneous recording protocol means that closing day = recording day = keys day — you receive your keys the same day you sign closing documents and the deed is recorded, with no gap period between funding and recording as exists in some other states.
Skipping the Reserve Study: The single most common major mistake Arizona condo buyers make is accepting HOA documents without reading or understanding the reserve study. The reserve study is the predictor of special assessment risk — a building with a 25% funded ratio is not just a curiosity, it is a financial time bomb. Every condo buyer should understand what the reserve funding ratio means and whether the specific building they are purchasing falls in the safe zone.
Not Checking Warrantability Before Falling in Love: Emotional investment in a specific unit before understanding its financing eligibility is a recipe for heartbreak and wasted due diligence costs. Verify warrantability status as early as possible — ideally before you ever set foot in a unit, by asking your agent or lender to do preliminary research on the building. This single step can save months of wasted effort and thousands of dollars in inspection fees, appraisals, and opportunity costs.
Buying in a Litigation-Heavy Building: Construction defect litigation may be the most common HOA lawsuit type in Arizona, and while it sometimes results in significant settlements for the association (meaning owners eventually receive funds), the period during which litigation is active creates non-warrantable status, complicates resale, and introduces uncertainty about outcomes. If a building is in active construction defect litigation, understand the scope of the alleged defects, the estimated timeline to resolution, and the potential outcomes before proceeding.
Assuming HOA Covers Everything: Buyers who do not distinguish between bare walls-in and all-in HOA master policies discover coverage gaps at the worst possible time — when a water heater fails and floods three floors, and they learn that neither the HOA's policy nor their minimal HO-6 policy covers the resulting damage to their unit's original flooring and cabinetry. Request the master policy declarations page before closing, share it with your HO-6 insurer, and structure your HO-6 coverage to eliminate gaps.
Not Checking STR Rules Before Purchasing with Airbnb Intent: Many Arizona condo buyers — especially those purchasing in Old Town Scottsdale with income projections based on Airbnb revenue — have discovered too late that the CC&Rs of their building prohibit short-term rentals. This is a fatal error if your investment thesis depends on STR income. Read the CC&Rs before you make an offer. If the language is ambiguous, get a written clarification from the HOA manager before proceeding.
Ignoring Delinquency Rates: An HOA with a 20% dues delinquency rate is in serious financial distress. That delinquency creates cash flow pressure, forces the HOA to borrow or defer maintenance, and signals that a significant portion of owners are unable or unwilling to pay their share of community expenses. High delinquency is both a warrantability trigger and an independent red flag about the building's financial health and community dynamics.
Underestimating HOA Fee Trajectory: Arizona HOA fees — particularly in older buildings — have been rising consistently as insurance costs increase, deferred maintenance is addressed, and building systems age. A $350/month HOA fee today may be $450/month in five years if reserves are underfunded and operating costs rise. Build realistic HOA fee escalation into your affordability calculations and long-term investment projections.
Failing to Account for HOA Fees in Affordability Calculations: Lenders include HOA fees in your debt-to-income ratio calculation. A $400/month HOA fee on a condo you plan to buy with a $2,800/month mortgage payment is the effective equivalent of adding $400/month to your housing cost — and it reduces the mortgage amount you qualify for accordingly. Factor HOA fees into your pre-approval discussion from day one so you are shopping at the right price point.
| # | Due Diligence Item | Risk if Skipped | How to Check |
|---|---|---|---|
| 1 | HOA Documents Requested (per ARS §33-1260) | High — No basis for informed decision | Request from seller or HOA at contract signing; HOA has 10 days to respond |
| 2 | CC&Rs Reviewed for Rental Restrictions, Pet Rules, Modification Rules | High — STR plans may be prohibited; lifestyle conflicts | Read CC&Rs in full; flag any rental minimum term, transient use, or STR language |
| 3 | Reserve Study Obtained and Reserve Funding Ratio Calculated | High — Special assessment risk unknown | Locate current reserve study; divide current reserve balance by fully funded balance |
| 4 | Reserve Funding Ratio Evaluated (70%+ healthy; below 30% = high risk) | High — Future special assessment exposure quantified | Calculate from reserve study; review 30-year projection for upcoming major expenses |
| 5 | Meeting Minutes Reviewed (Last 12–24 Months) | Medium-High — Hidden issues, recurring problems missed | Request minutes from HOA manager; read for recurring maintenance, litigation mentions, assessment discussions |
| 6 | HOA Delinquency Rate Confirmed Below 15% | High — Non-warrantable status and HOA financial stress | Review accounts receivable aging in HOA financial statements; ask HOA manager directly |
| 7 | Litigation Status Confirmed (No Pending or Active HOA Lawsuits) | High — Construction defect litigation triggers non-warrantable; financial risk | Review HOA disclosure statement; ask HOA manager; review meeting minutes |
| 8 | Warrantability Confirmed with Lender (Fannie Mae CPM Check) | High — Conventional, FHA, VA financing unavailable if non-warrantable | Ask lender to run project through Fannie Mae Condo Project Manager (CPM) lookup; verify owner-occupancy ratio |
| 9 | Physical Inspection of Unit Completed (ASHI/InterNACHI Inspector) | Medium — Unit defects, deferred maintenance, safety issues missed | Hire credentialed inspector (Arizona has no state licensing); inspect during 10-day BINSR period |
| 10 | Utility Billing Structure Confirmed (Individual Meters vs. HOA-Paid) | Low — Budget impact not fully understood | Ask HOA manager what utilities are individually metered vs. included in HOA dues (water, electric, gas, trash, cable) |
| 11 | STR Rules Verified in CC&Rs (If Airbnb/VRBO Intended) | High — STR income plan may be prohibited; violating CC&Rs creates HOA enforcement risk | Read CC&Rs for minimum lease terms, transient use prohibitions; confirm with HOA manager in writing |
| 12 | Written Confirmation of No Pending Special Assessments | High — Undisclosed special assessment could be inherited at closing | Request written statement from HOA manager confirming no approved or pending assessments; include in purchase contract representations |
| Condo Type | Who Owns the Land | Typical HOA (Monthly) | Warrantable Likelihood | FHA Eligible | STR Flexibility | Financing Options | Best For |
|---|---|---|---|---|---|---|---|
| Standard Condo | HOA (common elements) | $200–$600 | Moderate — depends on occupancy ratio & investor concentration | Yes — if project or spot approved | CC&R-dependent; check carefully | Conventional, FHA, VA (if approved), Portfolio | First-time buyers, snowbirds, investors, downsizers |
| Townhome Condo | HOA (common elements); owner may share street-level access | $150–$400 | High — typically lower investor concentration | Yes — project or spot approval common | CC&R-dependent; often more permissive than high-rises | Conventional, FHA, VA, Portfolio | Families, young professionals, first-time buyers |
| PUD (Planned Unit Development) | Individual owner owns land under their unit | $100–$350 | Very High — treated like SFR by Fannie/Freddie | Yes — typically no special condo project review needed | HOA CC&R-dependent; often similar to SFR rules | Conventional, FHA, VA, Jumbo — full range | Buyers wanting SFR-equivalent financing; master-planned communities |
| High-Rise Condo | HOA (common elements, structure, land) | $400–$1,500+ | Variable — luxury buildings often warrantable; STR-heavy or litigation buildings not | Possible — many luxury high-rises seek FHA approval | Building-specific; many restrict STR | Conventional (if warrantable), Jumbo, Portfolio | Urban professionals, luxury buyers, lock-and-leave buyers |
| Condotel | HOA (common elements, hotel infrastructure) | $500–$2,000+ | Non-Warrantable — excluded by Fannie/Freddie by definition | No | High — STR built into structure; mandatory rental pool often required | Cash only or specialized commercial/portfolio financing | Resort investors seeking hospitality income; cash buyers only |
Common questions about buying a condo in Arizona in 2026
A warrantable condo is one that meets Fannie Mae and Freddie Mac's underwriting standards, making it eligible for conventional financing. Key criteria include: no single entity owning more than 10% of units in the project, at least 51% of units being owner-occupied, the HOA being financially sound with no disqualifying litigation, the project being complete with no active construction defect issues, no more than 35% commercial space in the development, and the HOA not having more than 25% of units delinquent on dues. Non-warrantable condos in Arizona — common in Old Town Scottsdale's STR-heavy buildings and in developments with active HOA litigation — cannot be financed with conventional, FHA, or VA loans. Buyers must use cash or portfolio lenders, which typically means interest rates 0.5–1.5% higher and down payment requirements of 25–30%. Always check warrantability with your lender before falling in love with a unit.
When reviewing Arizona condo HOA documents — which the association must provide under ARS §33-1260 — focus on five key areas: (1) Reserve study funding ratio: 70%+ is healthy, under 30% is high risk for an impending special assessment; (2) Delinquency rate on HOA dues: should be below 15% for conventional financing eligibility; (3) Pending or active litigation: construction defect suits trigger non-warrantable status and signal potential financial and structural problems; (4) Special assessments: check for any levied, approved, or under active discussion by the board; (5) CC&R rental restrictions: look for language about short-term rentals, minimum lease terms, transient use prohibitions, and tenant approval requirements if STR income is part of your plan. Meeting minutes from the last 12 months are also essential reading — they reveal recurring maintenance problems, management disputes, and upcoming capital expenditure discussions that may not appear in official disclosure documents.
A special assessment is a one-time charge levied on all condo unit owners to fund a major capital expense that the HOA's reserve fund cannot cover. Common causes include roof replacement, elevator overhaul ($80,000–$300,000 per elevator), pool resurfacing, parking structure repair, exterior painting, balcony resurfacing, HVAC system replacement, and major plumbing repairs. Amounts per unit can range from a few thousand dollars to $30,000 or more depending on the project's scope and the number of units sharing the cost. To protect yourself: request and analyze the reserve study (focus on the percent funded ratio), review meeting minutes for mentions of upcoming major projects, ask the HOA manager directly about deferred maintenance and reserve adequacy, and request written confirmation from the HOA at closing that no special assessments are pending or approved. Buildings constructed in the 1970s through 1990s with underfunded reserves carry the highest risk. Consider this risk in your offer price — a price reduction to account for anticipated future assessments is a legitimate negotiation strategy.
Yes — FHA loans are available for Arizona condos through two pathways. The first and most common is FHA Project Approval: the entire condominium development has been approved by HUD and appears on the FHA Approved Condominium List, searchable at hud.gov. Many Arizona condo communities have sought and maintain FHA approval to attract the widest possible buyer pool. The second pathway is FHA Single-Unit Approval (spot loan): introduced in 2019, this allows a single unit within a non-FHA-approved project to receive FHA financing if the project meets specified criteria, including 51%+ owner occupancy and no more than 10% of units already FHA-insured. FHA requires a minimum 3.5% down payment with a 580+ credit score, or 10% down with scores between 500 and 579. FHA loans carry mortgage insurance premiums — an upfront MIP of 1.75% of the loan amount (added to the loan balance) plus an annual MIP of 0.55–1.05% of the balance. For loans with less than 10% down, annual MIP remains for the life of the loan. Ask your lender to verify FHA status for any Arizona condo project early in your search — before you spend time or money on due diligence for a project that may not qualify.
Ryan Moxley is a top 1% REALTOR® in the Phoenix metro with deep expertise in condo warrantability, HOA due diligence, and the Scottsdale, Tempe, and East Valley condo markets. Let's find the right building for your goals.
Phone / Text: (480) 227-9143
Email: moxleysellsaz@gmail.com
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Serving all Phoenix metro condo markets including Old Town Scottsdale, Tempe Town Lake, Downtown Phoenix, Chandler, Gilbert, Peoria, Glendale, and the entire valley.