HOAs

[fliped42]

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.

The HOA shoud have property coverage for the full replacement value of the HOA owned property as well as liability coverage and they should have an umbrella policy with a very large limit say 10 million in the case of a catastropic injury. Typical liability coverage is 1 million - 2million plus a 10 million umbrella. The insurance requirements should be spelled out in the offering statment and the policy declaration and coverage page should be reviewed. If the HOA has a small insurance budget it may be under insured.

Also regarding fraud some states require a fidelity bond be posted when the sponsor is in control to insure for loss due to theft. The management company might also have to post a fidelity bond as well. Check to see if the HOA has a fidelity bond. Also their are some pretty typical fraud protections in management agreements and the HOA by-law regarding check signing and it is a better if you need to have more then one person signing checks. It is also good to have control on the amount managment can spend without HOA board approval this should be a very small number and only cover expected operational costs approved in the budget. Other protections include the rquirement of a board meeting and a vote to expend larger sums of money. Not to say these will prevent fraud or theft it is just that the structure is there to make it more difficult to commit fraud and theft as well as the ability to recover losses.

[karim0028]

Re: HOAs

Here's an article on HOA's....

http://theaffordablemortgagedepressi...ef=patrick.net

"Doomsday Scenarios: Could Condo Prices Fall to Zero?
Why not? Certainly condo prices aren’t going to approach $0 in most markets or on a national basis. But given the right set of local conditions, it is entirely possible that some condo prices could fall to a nominal value functionally equivalent to nothing.

Free condos huh? Does it sound too good to be true? That’s because it is. Costless condo purchases would be far from free, which is exactly what creates the possibility that prices could fall so low.

The first myth of homeownership in the United States is that you actually “own” your house or condo. U.S. homeowners have residual rights to their properties as long as the more senior claimants receive their recurring pound of flesh.

This concept is an obvious one for mortgage holders. “Owners” borrow a sum of money from a lender and are allowed to continue to “own” their property as long as the mortgage debt is serviced and repaid according to the terms of the borrowing agreement. We presently see large numbers of people losing houses that they supposedly “owned” because they can’t pay their mortgages. The question is why these people with little, no or negative equity actually believed that they “owned” the houses in which they lived?

Now let’s assume that a homeowner paid off his mortgage or bought his house with cash. That homeowner would truly “own” his house right? True, except that most houses are subject to property taxes. In such markets, homeowners supposedly own their houses, yet are required to cut a check to the government for the right to stay in it. And unlike a mortgage payment, this is a perpetual liability. Even worse, fickle governments can decide to increase your perpetual homeowner liability at their leisure. (As an aside, how safe is the residual equity value of your home if a government can raise taxes to a confiscatory level at their discretion?)

One of many disadvantages that condo owners have to home owners is that they are also junior in ownership rights to their condo owner associations. Condo owners must pay monthly dues for maintenance, insurance, security, etc… These fees are perpetual and contractually required."

[don]

Re: HOAs

Here's an article on HOA's....

http://theaffordablemortgagedepressi...ef=patrick.net

"Doomsday Scenarios: Could Condo Prices Fall to Zero?
Why not? Certainly condo prices aren’t going to approach $0 in most markets or on a national basis. But given the right set of local conditions, it is entirely possible that some condo prices could fall to a nominal value functionally equivalent to nothing.

Free condos huh? Does it sound too good to be true? That’s because it is. Costless condo purchases would be far from free, which is exactly what creates the possibility that prices could fall so low.

The first myth of homeownership in the United States is that you actually “own” your house or condo. U.S. homeowners have residual rights to their properties as long as the more senior claimants receive their recurring pound of flesh.

This concept is an obvious one for mortgage holders. “Owners” borrow a sum of money from a lender and are allowed to continue to “own” their property as long as the mortgage debt is serviced and repaid according to the terms of the borrowing agreement. We presently see large numbers of people losing houses that they supposedly “owned” because they can’t pay their mortgages. The question is why these people with little, no or negative equity actually believed that they “owned” the houses in which they lived?

Now let’s assume that a homeowner paid off his mortgage or bought his house with cash. That homeowner would truly “own” his house right? True, except that most houses are subject to property taxes. In such markets, homeowners supposedly own their houses, yet are required to cut a check to the government for the right to stay in it. And unlike a mortgage payment, this is a perpetual liability. Even worse, fickle governments can decide to increase your perpetual homeowner liability at their leisure. (As an aside, how safe is the residual equity value of your home if a government can raise taxes to a confiscatory level at their discretion?)

One of many disadvantages that condo owners have to home owners is that they are also junior in ownership rights to their condo owner associations. Condo owners must pay monthly dues for maintenance, insurance, security, etc… These fees are perpetual and contractually required."

With the way prices are dropping, I can pay cash for a place. This, however, is the Doomsday Scenario. I'll rent...some more :cool: