A family looking for a condo in Rapid City was caught off guard when they were asked for unexpected documents at the loan approval stage just before signing the contract. They thought they only needed to pass the appraisal and income verification, but the lender suddenly required the HOA's financial statements and delinquency status, delaying the closing schedule. The first concern is likely why such documents are necessary, which is because condo loan assessments consider not only an individual's credit but also the overall financial condition of the building.

South Dakota is one of the states with the lowest HOA fees in the nation, with about 10 percent of households statewide paying HOA or condo management fees, and the median amount is around $86 per month. This is significantly lower compared to the national average, which ranges from $200 to $400 per month, reflecting the fact that the local condo market, including Rapid City, is primarily composed of smaller complexes rather than large resort-style developments.

However, having low management fees is not necessarily an advantageous condition. South Dakota does not have specific state laws mandating reserve studies or reserve fund contributions for condo associations, so some complexes with low fees may not have sufficient reserve funds. If major repairs such as roofing, plumbing, or heating systems are needed while the reserve fund is lacking, all residents may face a special assessment at once, and this history of special assessments can become a hurdle in the loan approval process.

Lenders assess the HOA's delinquency rate, reserve fund status, ongoing litigation, and commercial space ratio based on Fannie Mae and Freddie Mac standards. Buildings that do not meet these criteria are classified as non-warrantable condos, making loan conditions stricter or even resulting in loan denial. When considering two condos in the same price range, it is more appropriate to compare the reserve fund status and delinquency rates side by side rather than just looking at the sale price or management fee numbers.

• Recent HOA budget and financial statement review
• Reserve fund balance and contribution plan
• Delinquency rate and litigation status
• Recent history of special assessments
• Rental restrictions and pet policies

In Rapid City, the school districts that Korean families are interested in are mainly located in the southern part of the city and nearby areas. While school district ratings can be referenced through GreatSchools or Niche, the boundaries change frequently, so it is advisable to verify the actual assigned school before signing a contract. For investors looking at condos for rental income, areas with lower management fees may seem favorable for initial cash flow, but buildings with thin reserve funds should be considered carefully, as special assessments during the holding period can affect returns. If you are newly relocating from Korea and looking for your first settlement, it may be worth considering renting first to familiarize yourself with the area before transitioning to a purchase. When comparing two condos in the same price range, it is helpful to consider not only the sale price or management fee numbers but also the loan approval history of each building.

It is also worth checking the management company's operating history. Given the prevalence of small complexes in the area, some may be self-managed, which can lead to longer document request times. Requesting recent board meeting minutes to see if there were discussions regarding special assessments and confirming whether the reserve fund account is managed separately from the operating budget is advisable.

If there have been special assessments in the last three years, it is important to determine whether the reasons were for one-time repairs or if there are structural issues that may recur. In areas with many small complexes, it is safer to scrutinize this aspect more closely. Families relocating from other states to Rapid City should also consider that property tax and insurance calculation methods may differ from their previous residence. This article is not investment or legal advice, and it is recommended to consult with real estate professionals and accountants before making any actual contracts.