Archive for the ‘HOA issues’ Category
Thursday, January 18th, 2018
Many home buyers considering attached home purchases – condos, townhomes or twin homes – often discover that HOA payments could alter monthly payments quite a bit more than anticipated, and may mean the difference between whether a purchase makes sense and if a loan will be approved.
HOA communities can often come with high monthly payments, especially in areas that are desirable such as those close to the beach, town centers, etc. Here are the things buyers should look into when deciding whether to buy a property with a high HOA:
1. What do the fees cover? Most cover exterior building maintenance and insurance, as well as the common areas (landscaping, pool and spa if they exist, gates and parking facilities). Home owners are responsible for insurance that covers the interior of the home, including all personal items. Make sure you understand exactly what is covered in the fee so you are not surprised.
2. CC&Rs. Usually a buyer cannot get copies of these until a contract has been negotiated and escrow opened. Once the documents are received make sure to read them thoroughly to understand owner responsibility and coverage. If you are thinking about making an offer and have specific questions, your agent can try to get the answers from the HOA or the listing agent/sellers. But if numbers work out for your loan and you love the home, make an offer and then you can get your hands on all the documents. You have a contingency period in which to review them so if you discover anything that concerns you, you have time to cancel the contract.
3. Assessments. The seller will be able to tell you if there are any upcoming assessments, but you will also be able to get an idea of what may pop up in the near future from the age and location of the complex. Make sure to take this into consideration – for example, if the complex is 25 years old you may surmise that in the next 5-10 years the roof will need to be replaced. Usually the HOA will assess homeowners to cover such a large expense. Payments will usually go up for a period of time until the money is collected. Some associations give a choice so the owner can break down the payments over time or pay a lump sum.
4. Dues increase. Note that HOA dues are subject to increase on an annual basis, or whenever the board feels it is needed in order to cover increased expenses. As a potential homeowner in the complex it is important to keep this in mind, especially if the price of the dues is already stretching your budget. Make sure to talk this over with your real estate and mortgage professionals.
5. HOA strength. One of the most important things to find out is just how strong the HOA reserves are – this will obviously carry it far if an unexpected expense does arise. If the reserves are low they would have to raise the dues a lot in order to cover unanticipated expenses. One great way to make sure the board is doing thing correctly is to get on the board! I have a friend with an accountant background who got on her board when she moved into the community – she found it many ways to save money and helped bring it back to a healthier place, reserve-wise.
6. Lawsuits. Check to see if there are any lawsuits against the HOA, as this could effect your purchase. Discuss with your mortgage professional.
No matter what type of home you purchase the bottom line is that you will have to be comfortable with expenses, including any that may not be forseeable. It is important to scrutinize HOA documentation so you are familiar with where the money is spent.
Thursday, November 12th, 2015
Home owner associations (also called HOAs) can become a big part of the buying decision for home buyers – some love them, some despise them. If you live in an area where there are many neighborhoods that have HOAs, or if you are thinking of moving to one, you may wonder whether they are positive or negative.
Let’s take a look at the pros and cons of HOAs, so that you can decide for yourself.
– Expenses keep the neighborhood and any common areas (streets, landscape, lighting) looking their best, which keeps property values higher. Without a governing body things could get sticky if neighbor participation is needed to fix problems.
– They protect you from having to live with unattractive decisions made by your neighbors (putting a car engine back together in the driveway, painting a garage or front door an unsightly color, dead landscape, neglected painting, siding, trim, etc.). Noise abatement, fire setback landscape maintenance rules, and other rules help keep you sane and protected
– Pet restrictions may save your hearing if your neighbors have dogs that bark a lot or use your yard as a toilet
– HOAs mediate disputes amongst neighbors. If your neighbor’s dog barking wakes you up, or if they over-water landscape and it runs into your yard – or many other types of problems that may arise – the HOA is there to reach out to the neighbor and try to resolve the issue for you. This can save your sanity and prevent strained relations with your neighbors.
– They can be expensive
– They dictate what you can and cannot do on your property (e.g landscape plans, paint choices, structural changes)
– There may be pet policies that restrict types or numbers of pets one is allowed to have on the property
– HOAs can place a lien on your property, or even force a foreclosure in some cases, if you do not pay your dues on time, which can create problems if you decide to sell your home. It can also affect your credit.
– Dues can be increased at any time, especially if there is a big ticket item that needs to be repaired (e.g. if there is a community pool and it needs to be resurfaced, or a clubhouse that needs a new roof).
The bottom line is that HOAs have both good and bad points. You have to give up some freedom to live in an HOA community, but you also can rest assured that neighbors won’t do crazy things to their properties (or at least won’t be able to get away with it) that can affect the value of your home. Also, not all HOAs are equal – some may be very good at management while others may not.
Before you consider buying a home in an HOA community you should do the following:
- Ask the neighbors how they feel about the HOA, and call them with any questions you may have.
- Make sure to read through all the HOA material you will receive from escrow, so you understand the rules and regulations you will be subject to as a homeowner – this caused one escrow to be cancelled in my years working as a real estate agent.
Monday, August 10th, 2015
I have seen a lot of HOA rules in my time as a real estate agent that I thought were pointless, some even downright ridiculous…but until last week I have never had a sale cancel because of one, despite efforts from all parties to garner an exception. After a board member insinuated it was my fault for not knowing the regulations (see below * to understand why this is not the agent’s responsibility), and after many attempts and conflicting information received, the parties were all left exasperated and very upset when the sale had to cancel at the last minute.
HOA regulations can be beneficial, and in most instances I am all for them – I myself live in an HOA regulated neighborhood. I like the fact that my neighbor can’t paint his garage Pepto Bismol pink or leave a front yard full of weeds (although with current water restrictions most yards are looking that way anyway, but that’s a story for another blog). I understand the need for stricter regulations in condominium developments as well, since there are shared walls and many common areas. But in this particular case the home is a detached home in a small neighborhood of homes with small yards.
The regulation in this case was a pet restriction that postulates all pets, with the exception of fish, must not be more than 25 pounds total (so a cat and a dog together cannot weigh more than 25 pounds). The problem in my sellers’ case started when the HOA took 17 days to get the regulations out to the buyers – a week longer than is required under the standard California Residential Purchase Contract. Keep in mind that day 17 is the day (unless altered in the contract) when the buyers have to remove their contingencies (except for the loan contingency).
The buyers got the HOA docs on day 17 and immediately started reading through them so that they could remove contingencies. Lo and behold they discovered the pet weight restriction. They wrote a letter to the HOA asking if an exception could be made, as their dog weighed 15 pounds over the limit. For the next several days the buyers and their agent, and the sellers and I, all tried to appeal to the HOA and/or board members, but in the end we were given different stories – it was a unanimous vote against, it was a majority vote against, and that they couldn’t/wouldn’t vote on any exceptions.
Â After spending money on an appraisal, home inspection, and lots of time negotiating repairs and other issues, the buyers decided to cancel – they love their dog and could not imagine moving into a neighborhood where she was not welcome. It was a frustrating day for all involved.
* A note on agent “responsibility” involving HOA regulations and disclosure: I think it is important to note here that it is not the listing agent’s responsibility to investigate and disclose any HOA regulations. The reasons for this are obvious – these regulations can change at any time, and if agents had to keep up with what goes on at every HOA meeting for every property they list, they wouldn’t have time to do their jobs effectively; not to mention they could subject themselves to liability in doing so.
Now, if an agent happens to know of a regulation that might be a sticking point for buyers, s/he can use discretion as to whether to post it in the MLS listing under confidential agent remarks (I did that in this case after we went back on the MLS). The whole purpose of escrow officers charging sellers to order HOA documents, and the reason they are supposed to be delivered to buyers in 10 days, is to provide the buyers an opportunity to review them and make those decisions for themselves – one person’s frustration over a particular regulation may not be that of another.
The moral of this unhappy story is that the buyers lost their “dream home,” and the sellers had to go back to market, having lost the other buyers (it was a multiple offer situation). Had the buyers moved in and fought the regulation they may have lost, which could have cost them their dog. As a dog lover I understand why they made their decision, and as a human being I question the ability of a governing body to limit the weight of a dog – in my opinion it really is no one’s business and if a dog owner is a good one and makes sure their pets get enough love and exercise, it shouldn’t matter if the dog is 10 pounds or 80.
I plan to write another segment on this story from a legal perspective. If you find yourself in a similar situation there is some case law that may or may not help you on the subject, and some ways to determine whether such rules are actually enforced – if they are not your case could be even stronger…stay tuned.
Friday, August 1st, 2014
If you live in an HOA community in California, you’d better start collecting your change. California Assembly Bill 698 could take responsibility for exclusive use common areas away from home owner associations, and place it in the laps of homeowners. It is imperative to understand the proposed changes, as it looks like they may soon take effect.
The bill rewritesÂ Civil Code section 4775, which specifies who pays to maintain, repair and replace identified areas of residential developments governed by homeowner associations called exclusive use common areas. Under the new rules HOAs will be able to redefine the maintenance requirements for these areas, and homeowners will have to comply -Â the HOA will be able to bring action against the homeowner for failure to do so. This will give much power to HOA boards and could lead to abuse.
Here is how certain areas are defined under current rules (check your HOA documents to see if you have exclusive use common areas):
Common areas – the associations are liable for maintaining these areas, which typically include areas that server the entire development such as pools, grassy areas,Â play areas or parks, and roofs if the development is a condo or townhome.
Separate interest areas – these areas are usually the responsibility of the homeowner, and include the interior of townhomes or condominiums.
Exclusive use common areas – such areas are considered “appurtenant to” to the property (meaning they are attached or considered to go along with the property), and these areas tend to be maintained by the HOAs currently. They usually include areas that are useable by some owners, but not all, such as a deck or patio.
Homeowners who do not comply under the new rules will be subject to assessments or fines by the HOAs. They may also be able to place liens on the properties and force sales where there is no compliance with maintenance requirements. If homeowners are unable to pay, this could lead to foreclosure (worse case scenario).
How to prevent new changes in your HOA policy: The only way you can prevent such changes from occurring in your HOA community is to get involved and vote against any changes that will give broad power to your HOA. You need to be very aware and very involved – you cannot rely on others to deal with this problem because you will need a majority vote and there is strength in numbers.
You also should learn as much as you can about common area and exclusive use common areas boundaries defined in property surveys of your home and development, including any government definitions. The more you know, the better empowered you will be to make a difference in your community and your wallet. To see the bill, click here.