HOAs

[don]

I've always been a single family house owner with property taxes only as my never-ending debt servitude Now we're considering living in a house that's part of a HOA. I'm aware of the shared debt burden nature of these hombres but inexperienced in the pitfalls and important questions to be asking. These are all free-standing single family homes in the HOA.

[ax]

Re: HOAs

I've always been a single family house owner with property taxes only as my never-ending debt servitude Now we're considering living in a house that's part of a HOA. I'm aware of the shared debt burden nature of these hombres but inexperienced in the pitfalls and important questions to be asking. These are all free-standing single family homes in the HOA.

Don, some things you might want to ask:

1. Is this a newer community that is still run by a management company even though you are paying an HOA fee? If so, when is the community turned over (80% occupancy)?
2. What are the HOA reserves if any?
3. Have there been any large assessments for renovations/projects and are there any pending assessments?
4. Are there any delinquent owners and how are they being handled?

I'm sure I could offer another 10 or 15 questions...feel free to IM me if you like.

[Munger]

Re: HOAs

I've always been a single family house owner with property taxes only as my never-ending debt servitude Now we're considering living in a house that's part of a HOA. I'm aware of the shared debt burden nature of these hombres but inexperienced in the pitfalls and important questions to be asking. These are all free-standing single family homes in the HOA.

A huge factor is how and when the HOAs may be raised. I've known of a few developments in which the management doubled the HOAs over a just few years. The management may be forced to do this if occupancy goes down or if major repairs need to be made.

For example, on one of the buildings I know of in which HOAs have gone up, management has nearly doubled the dues in the last 3 years. Now, for units selling for approximately $200,000, the HOAs are almost $1000 per month. Needless to say, this has been killing the selling price (i.e., that unit sold for almost $400,000 4 years ago in a city where house prices have dropped about 20% from peak).

[karim0028]

Re: HOAs

I would say avoid HOA's like the plague.... If you end up in a community that has a high rate of foreclosure or loss of residents for any reason; you may find you have a hard time sitting down from the reaming you will take.

As mentioned above their fees in some ways dictate your property value, as its simply another tax. The higher they charge in fees the lower your prop value drops, as it becomes another expense to handle in your monthly property expense list like your mortgage... And it never goes away; hell at least the mortgage can be paid off.... Not to mention that in alot of cases HOA's can even put a lien on your property and initiate foreclosure for non payment....

Honestly, i see no purpose what so ever to HOA's, when a nice house will be just as comfortable and all you will have to pay is your feudal lord his dues.... With HOA's you just got two masters; and one of those could just end up being your annoying ass neighbor....

[don]

Re: HOAs

I would say avoid HOA's like the plague.... If you end up in a community that has a high rate of foreclosure or loss of residents for any reason; you may find you have a hard time sitting down from the reaming you will take.

As mentioned above their fees in some ways dictate your property value, as its simply another tax. The higher they charge in fees the lower your prop value drops, as it becomes another expense to handle in your monthly property expense list like your mortgage... And it never goes away; hell at least the mortgage can be paid off.... Not to mention that in alot of cases HOA's can even put a lien on your property and initiate foreclosure for non payment....

Honestly, i see no purpose what so ever to HOA's, when a nice house will be just as comfortable and all you will have to pay is your feudal lord his dues.... With HOA's you just got two masters; and one of those could just end up being your annoying ass neighbor....

We do like the idea of a 55+ housing development- if I have to go nose-to-nose with an asshole neighbor I prefer he not have a 30 year age advantage- but the rest sounds like a lose-lose all around. Unfortunately all the 55+ are HOA I've seen and in the area we prefer, HOAs are over 50% of the entire housing stock :eek:.

[fliped42]

Re: HOAs

Things to look for:

1) Percent Owner Occupied try and get into an established building with as close to 100% owner occupied units.
2) Budget make sure you get a hold of the audited HOA returns. Focus on costs for Labor, Insurance, Fuel/Utility/Water & Sewer. As these are typically your most expensive fixed costs.
3) Make sure the HOA has a replacement reserve study and a fully funded replacement reserve. This can be found in the offering plan in most cases. But you would like to get into a HOA that has a been operating for 2 plus years so the managment and the board has had enought time to refine the yearly budgets to the reality of the communities needs.
4) Look into the budget and see how many special services the HOA manages away from building upkeep and maintenance. For example do they pay a amenity company to run certain programs. Do they pay for a shuttle service for transportation. These are costly services that might require an increase or may be cut when finances get bad.
5) Look at the HOA rules and requlations especially admendments and meeting minutes. You will get a good idea of how the HOA thinks potential budget problems as well as the mind set of the community. Things to look for is pet policies( if you have a pet these might be restrictive) as well as other restrictive covenants that might not suit your needs. If you sense a active HOA that passes many restrictions you may want to consider that as well.

Those are the some of the things I would look for.

[karim0028]

Re: HOAs

We do like the idea of a 55+ housing development- if I have to go nose-to-nose with an asshole neighbor I prefer he not have a 30 year age advantage- but the rest sounds like a lose-lose all around. Unfortunately all the 55+ are HOA I've seen and in the area we prefer, HOAs are over 50% of the entire housing stock :eek:.

Yeah, i understand, unfortunately for me though, the pitfalls outweigh the benefits by a long shot... Your neighbor might have a 30 year advantage, but i doubt anyone will live next to you for 30+ years, just doesn't happen, people die, change jobs, get divorced or married, or just plain get bored and leave...

The killer for me with regard to HOA's is the never ending payment.... As CharlesMunger mentioned the price for that HOA, why in the world would i pay a 1K HOA? Add a couple hundred more dollars and im sure i could rent a nice place with less hassle for that amount...

Plain and simple the HOA is an extra mortgage/lien that you cant extinguish and for the services they provide (what do they do? they mow the lawn and keep the pool clean) i think its just not worth it... There is always the other 50% non HOA and if your worried about the age difference, for a one time expenditure of the extra 2-$500 you just saved monthly; get a dog or a gun ;)

[we_are_toast]

Re: HOAs

I've always been a single family house owner with property taxes only as my never-ending debt servitude Now we're considering living in a house that's part of a HOA. I'm aware of the shared debt burden nature of these hombres but inexperienced in the pitfalls and important questions to be asking. These are all free-standing single family homes in the HOA.

I'm on the board of directors for our HOA. There are good and bad points.
The HOA can protect you from a neighbor who wants to sell car parts out of his garage and put his 73 chevy up on blocks in the driveway. Or the neighbor who wants to paint zebra stripes on his house.

But there are bad points too. Right now the president of our association is one of the most unethical, pathological liers I've ever met. He is writing fake expense reports to skim money from the Association. $3,000 went missing from our old accounts recievable account and when I asked to see a report on what happened and what we did to correct any mistakes, I was almost voted off the board. The collectable accounts we had at the collection agency was closed by the president without the boards knowledge. Unfortunately, most of the board are friends socially and will not challenge anything the president does. So you might want to talk to a few board members before you commit, and try to get a feel for how things are done.

[karim0028]

Re: HOAs

I'm on the board of directors for our HOA. There are good and bad points.
The HOA can protect you from a neighbor who wants to sell car parts out of his garage and put his 73 chevy up on blocks in the driveway. Or the neighbor who wants to paint zebra stripes on his house.

But there are bad points too. Right now the president of our association is one of the most unethical, pathological liers I've ever met. He is writing fake expense reports to skim money from the Association. $3,000 went missing from our old accounts recievable account and when I asked to see a report on what happened and what we did to correct any mistakes, I was almost voted off the board. The collectable accounts we had at the collection agency was closed by the president without the boards knowledge. Unfortunately, most of the board are friends socially and will not challenge anything the president does. So you might want to talk to a few board members before you commit, and try to get a feel for how things are done.

Again, if you pick a decent neighborhood you wont have cars sitting on the lawn or much else to worry about...

HOA's are a pain in the a@@; and just another entity to have to deal with... In We are toast's case, any money not available most likely will simply raise fees to cover it... Too many loopholes and too much authority for my taste....

[flintlock]

Re: HOAs

Again, if you pick a decent neighborhood you wont have cars sitting on the lawn or much else to worry about...

HOA's are a pain in the a@@; and just another entity to have to deal with... In We are toast's case, any money not available most likely will simply raise fees to cover it... Too many loopholes and too much authority for my taste....

Not always true about picking a decent neighborhood . I've seen streets with multi million dollar homes but no HOA and some real nightmares. My last neighborhood of 13 homes didn't have one. It was nice six years ago when I moved, but was starting to go downhill. Now it looks like a trailer park. I'd only buy in a non HOA if the lots were big. Otherwise, one jerk can destroy the home values and absolutely kill a sale. But HOAs can be a real pain and they go against my general independent nature. Necessary evil perhaps?

We had a sociopath HOA president too. Collecting kickbacks, that kind of thing. 80% Neighbors voted to oust him and he still didn't want to quit. Who the hell volunteers for something where nobody wants you? He moved, lived somewhere else and still didn't want to step down! He wanted to be president of a HOA that he didn't live in!!! Needless to say we are having our bylaws rewritten to avoid this crap in the future

[don]

Re: HOAs

Great stuff guys!

Some of what I've learned:

Regulations. Do you like them? Are they effective?

Superstructure liabilities. Does the HOA own the streets? Sidewalks? Streetlights? Are all the grounds HOA maintained? Do private dwellings come under HOA maintenance? (I saw power washing exteriors included, along with painting, in my in-laws development)

How elaborate are the swimming/gym/club house facility. How many full time employees? What security is included? Front gate? Guard? etc.

When are the big ticket items scheduled for repair?

What's the reserve $$ status? Are there bonds now or planned in the future?

What's the last 10-year history of HOA dues? Flat? Climbing like a rocket?

How many vacancies? Repos? Deadbeats?

Answers to the above, and more that I missed, begin to give an answer if its a decision worth taking... or just continue renting

[karim0028]

Re: HOAs

Not always true about picking a decent neighborhood . I've seen streets with multi million dollar homes but no HOA and some real nightmares. My last neighborhood of 13 homes didn't have one. It was nice six years ago when I moved, but was starting to go downhill. Now it looks like a trailer park. I'd only buy in a non HOA if the lots were big. Otherwise, one jerk can destroy the home values and absolutely kill a sale. But HOAs can be a real pain and they go against my general independent nature. Necessary evil perhaps?

We had a sociopath HOA president too. Collecting kickbacks, that kind of thing. 80% Neighbors voted to oust him and he still didn't want to quit. Who the hell volunteers for something where nobody wants you? He moved, lived somewhere else and still didn't want to step down! He wanted to be president of a HOA that he didn't live in!!! Needless to say we are having our bylaws rewritten to avoid this crap in the future

i definitely understand what your saying... But, i also have an independent nature, anyway i cut it; i cant get past the fact that its essentially an inextinguishable debt. If i pay my house off (good thing to do if your close to retirement); i need to feel like i dont owe anyone anything aside from my inevitable "death and taxes". HOA's run ~200-1K add to that prop taxes and you still have a monthly nut to crack.

HOA does not go away. Think of it this way, if we have a currency crisis and the dollar devalues, whats to stop the HOA from hiking rates? I highly doubt the dumb ass and usually corrupt HOA management will keep them as is..... And if they DO CUT/NOT RAISE; guess what, your "services" just went down the toilet, bc they will no longer be able to provide more than basic services.... Unless of course you're in a very high end (read RICH) neighborhood, in that case HOA or "monthly nut" is not gonna matter to you and the point is moot anyway.

HOA is like having an ARM mortgage where you really have no say in the terms bc you agreed to that when you signed on the dotted line.... What happened before we had HOA's? Not every neighborhood turns into a dump...

OTOH, Nothing is forever, neighborhoods come and go wether they have HOA or not.... Need to look no further than high end neighborhoods in CA, AZ and FL, where alot of those highend props are in foreclosure and they most likely had HOA dues and guess what the people that are left are gonna get the shaft....

[vanvaley1]

Re: HOAs

Lots of good advice mentioned above. Some folks have been known to take off with the HOAs funds...talking six digits here. If somebody gets injured at the tract and insurance coverage runs out are the individual members of the HOA liable for additional monies on an individual basis? For how long? What if the injured party is now a paraplegic?

No doubt there's a lot of nice HOA developments out there. Ya might wanta check with an attorney to understand the limits of your liability...if there are any.

[SeanO]

Re: HOAs

The most important thing to remember is that no two HOA's are alike, and that at the core of the HOA is convenants, conditions and restrictions, or CC&R's. Developers put CC&R's in place to help insure your investment will remain valuable (not to mention theirs while they continue to sell homes after people start moving in). These can range from simple things like restricting fence height or house color, to complex structures for sharing expenses associated with community property (which not all HOA's include).

You should always read the CC&R's before you buy a home. These are what give the HOA their power.

Unfortunately HOA's are often poorly managed once the developer steps away and leaves it to the homeowners and an outside management company. There are just too many opportunities for a few busy bodies to exert their will on a neighborhood, and some management companies tend to find them to be nice little profit centers for ripping off unwitting homeowners who complain but rarely take the time to research their rights.

But that does not mean all CC&R's or HOA's are bad. Some are fabulously run by tireless volunteers who add a great deal to the community. Others have unethical owners that work to get themselves appointed as the management company and rip everyone off. It is truly all over the board.

So my advice:

1. Do your due diligence. Read the CC&R's. Get copies of the financials. Review reserves and expense projections. Ask other owners about their experiences. Call a board member and ask questions.

2. Know what makes you happy. If you like order and care how your neighbors keep their homes, or want the benefit of shared amenities an HOA can be great. If you prefer not to have anyone tell you what to do, don't care what your neighbors do, and don't want the burden of paying for amenities or services you may not use, then avoid HOA's.

[flintlock]

Re: HOAs

I see HOAs as a necessary evil in my area. Any neighborhood without one almost always ends up looking junked up. Something about Georgia rednecks means they have to have a boat, an RV, and several junk cars parked in their front yard at all times, regardless of income level.

That said, I find most HOAs difficult to deal with and I now refuse to do business with them in my electrical contracting business. Sorry, but most of the people running them are certified kooks or even criminals. I've worked for dozens of them over the years. It's rare when I don't get asked to do work on their personal homes for free as a condition of getting more work from the HOA. They treat even the most mundane repair as if its a matter of national security. They generally have an overinflated idea of their self importance and seem to think people actually give a shit about their lofty position. A lot of other contractors I know feel the same way.