Condo blues

[Kim451]

Hi, was just wondering if I could get a 2nd/3rd/4th/etc opinion on my latest problem...

I've had my condo two years now and have already had two HOA increases and now I'm told there may be one each year for the next couple of years! The HOA fees have gone from medium to high already so I'd like to sell and salvage as much of the equity as possible. Problem is that there are 4 units for sale in my building now, and they're not selling; the other owners have lowered their asking prices, so I was thinking I'd wait until next Spring to sell but now that I hear there may be a 10% increase in HOA fees at the end of this year (to VERY high), and I'm getting a little panicky about it. Especially since the Fed is talking about 3 more rate increases coming up and raising mortgage costs for buyers. And, yes, I know, I really didn't do enough due diligence on the viability of the housing association and its finances.

I hate to sell so soon - I'd planned to live here at least 2 to 3 years and enjoy Hawaii while I could, and once I sell, I won't be able to afford to buy another place in Honolulu. I retired in Dec so won't qualify for another mortgage without that income. My original plan was to live here for a few years, then move back to cheaper area on the mainland (no home town, no kids/family, so no place in particular in mind...) Besides, I owned a house in FL for 8 years (sold just before Irma hit) and never had a year of repairs there (new roof, replaced privacy fence, pool pump) add up to the cost of one year of HOA dues here so house is cheaper.

What do you guys think - am I panicking? Pulling the plug too soon? I'd been contemplating moving ANYway due to very limited space here and no yard for a dog, but wasn't quite ready to go just yet, but I need as much of the equity back as possible to buy another place. I'm planning to rent for a while while I contemplate future homes...

 

[pb4uski]

How much as a percentage have your HOA fees increased. I expect my HOA fees to increase about with inflation each year as the underlying expenses tend to increase with inflation.

Our assoication can't increase HOA fees more than 15% annually.... but our actual increase have been modest... 1.6% in 2017 and nil in 2018.

 

[COcheesehead]

Have you reviewed the reserve study? That will give you a clue about any upcoming HOA time bombs.

 

[Souschef]

Have you reviewed the reserve study? That will give you a clue about any upcoming HOA time bombs.

I was treasurer of my HOA. Every year we sent out the proposed budget and reserve study.
You should have a copy of next year's budget to see what is going up.

 

[imoldernu]

No advice on the decision, but having been in this kind of $$$ situation in the past, my decision was based on putting a pencil to the possibilities.

I used spread sheets, and spent lots of time putting in all of the variables. Dollars... Worst case... Best case.... a Timeline... and the "what if's".

All in writing, so there was something to refer to and change when necessary.

Looked at plan to accept potential losses. Pleasure versus dollars.

Mistakes? Sure! but balanced with the feeling of confidence that there was reason behind the decision. On matters of importance to the future, DW and I do this when facing major decisions.

 

[COcheesehead]

I was treasurer of my HOA. Every year we sent out the proposed budget and reserve study.
You should have a copy of next year's budget to see what is going up.

The reserve study will give you a bigger picture than a one year budget and will also give you an idea if the board is managing the fees correctly.

 

[Kim451]

So far, HOA increased 15% for 2017, 13% for 2018 and I've heard 10% for 2019. No info from association (I was overseas last year and working so no contact with board) but the other owner I talked to the other day told me that the spalling repairs (that I was told had been all taken care of before I purchased) were done with a loan (inadequate reserves) and now we're paying for it.

 

[pb4uski]

Those are outrageous increases. I'm surprised about no info from the association... you might check to see what Hawaii state law requires and whether they are complying.

 

[Kim451]

"Budget" is on the minutes listed for next board meeting. At this point, I just want to escape with as little fiscal damage as I can possibly manage and buy a house later on. No little old lady stumping around over my head at 4:30 every morning! She may be small but she does land heavy...

 

[Spock]

based on your timeline (selling in a couple of years anyway)
and my personal prognostication of the rates going up until the economy goes down
I'd list it for sale now and get out of it what you can. Leaner years are coming. IF the re-inflated housing bubble re-pops during your 2-3 year window, you'll be stuck with it until it recovers or selling at a bigger loss.

 

[Ronstar]

Have you asked for the reason for the increases? Maybe the HOA needs to stockpile some $ quickly to pay for some one time expenses, etc.

Our rates jumped because the HOA needed to start replacing roofs sooner than expected. Then the rate increases should decrease.

Maybe your situation is similar.

 

[SheitlQueen]

Our condo fees just went up 40%. They have been really low for years, and the condo has not been putting much money into reserves. There are expenses coming up that are not normal (mostly to do with the pool) and we are hoping in two years the rate can go down, although it will need to stay higher than before in order to add money into reserves. Check to see if your rate will go down after the loan is paid off.

I guess one thing to ask yourself is how much will it cost for you to live there vs selling and moving somewhere else? Is it worth it to pay more and possibly take a loss selling later in order to continue to live in Hawaii?

 

[CaliKid]

I would consider it a cost of doing business. You live in Hawaii. Enjoy it!

 

[Kim451]

The reserve study will give you a bigger picture than a one year budget and will also give you an idea if the board is managing the fees correctly.

Thanks. I'll talk to them. At this point I'm leaning towards just cutting my losses and selling, then maybe renting on the Big Island for a while.

 

[Fedup]

That’s ridiculous increase. I would sell and move on.

 

[Sunset]

So far, HOA increased 15% for 2017, 13% for 2018 and I've heard 10% for 2019. No info from association (I was overseas last year and working so no contact with board) but the other owner I talked to the other day told me that the spalling repairs (that I was told had been all taken care of before I purchased) were done with a loan (inadequate reserves) and now we're paying for it.

Certainly sounds like the condo had little to no reserves, which is stupid, and illegal in many places.
Are they now building up the reserves with these massive increases, because if that is what is happening, then in the future, once the reserve amount has been reached, the annual fee should actually drop.

 

[Bamaman]

Remember that you and other dissatisfied owners can always choose to run for election on the HOA board and put the present officers out of office.

Then you can make the decisions.

 

[Scuba]

Certainly sounds like the condo had little to no reserves, which is stupid, and illegal in many places.
Are they now building up the reserves with these massive increases, because if that is what is happening, then in the future, once the reserve amount has been reached, the annual fee should actually drop.

Yes these are much higher than normal increases. If it were me, I’d want to better understand the reasons for this so you can assess if this is an ongoing trend or something temporary to fix past mismanagement. If you like your place and it’s only temporary, that might motivate you to stay for a while.

You mentioned that other places in the building aren’t selling. If you did sell, do you have a realistic idea of the price it would take to move your unit, and are you ok with that?

 

[ivinsfan]

Honestly it sounds as if you don't like anything about the place besides the fact it's in Hawaii..

Did you buy that particular condo because the maintence fees were lower then over developments, perhaps now they are just doing catchup for delayed increases.

Did you check the HOA numbers before you bought? Have you checked similar properties to try and find out what their fees are at this time.

Panicking I don't know but slow down a little, from the things you have us about buying this condo you most likely made a impulsive move when you bought the thing. Buying an expensive condo with a 2 or 3 year horizon doesn't usually work out in the best of conditions and with rising interest and rising HOA fees this in not ideal.

Slow down and figure out what you really want before you do anything. Try and look at the 4 units for sale either in person or online and try to figure out why they might not be selling.

 

[Luvdogs]

I'm on the Board of Directors for a condo rental I have. Just got on the board several months ago. I've owned the place for about five years and the increases have been very small--but we have no money in reserves! I mean last year they increased them by $5.00 per month!! Really--so what is that going to do??

We have a 30 year old roof that needs replacing. Condo has spent 25K in the past couple of years for repairs of leaks. Now we want to add a special assessment of 5-7K each for new roofs (small 40-unit complex). The dogfight begins--some want nicer roof/some the cheapest/some want to bury their head in the sand and say "h*ll no." (especially the owners on the ground floor).

As for regular condo fees--ours has a cap of 15% per year without member approval. I don't know if that is a state law or a condo rule but if I have it my way it's going up 15% per year for a few years to get some $ in reserves--and that's in addition to the special assessment.

For our condo, we cannot commingle the regular fees and the special assessment.

Your fees may have been exceptionally low and they may be bringing them up to current levels--or like us--no one cared/paid attention and we don't have the $ for a major repair.

 

[ivinsfan]

The owners on the ground floor don't think the building needs a decent roof.. LMAO and this is why I would only buy into a condo development if absolutely necessary.

 

[pb4uski]

One of the things that drives me nuts about our Association is that the Board doesn't fully fund reserves. Full funding is the default under Florida law but and Association can fund less if approved by a majority of the members. Our Board could chose to not offer less than full funding since it is the default option.

They know that in ~5 years they will need to replace the roofs and that they wont have enough money and that a special assessment will be needed... but t keep saying that they can't increase HOA fees because people can't "afford it"... well, if they can't afford an additional $60/month now how will they afford the $3,600 special assessment in 5 years?

I think that the Treasurer prefers it that way so she can keep her money "invested" since the reserve funds only earn about 1.5% or so.

 

[Texas Proud]

So far, HOA increased 15% for 2017, 13% for 2018 and I've heard 10% for 2019. No info from association (I was overseas last year and working so no contact with board) but the other owner I talked to the other day told me that the spalling repairs (that I was told had been all taken care of before I purchased) were done with a loan (inadequate reserves) and now we're paying for it.

I will keep reading, but one thing to remember is that there is no increase without the vote of the owners...


Probably when the repair was needed it was voted to go with a loan instead of a special assessment as that means anybody who sells passes along the costs to the new owner... that is what happened in my mom's condo... they took out a 10 year loan and now have a special assessment of $59 a month more just for the repairs...


However, the repairs are needed as it is a 19 story building that has had flooding in the lowest level parking garage a few times...


As for you question... how much in real dollars are you talking about? And how much lower will you have to sell?


If you wanted to live there for 3 years then do so... in the end the price will probably go up enough to cover the extra costs.... or close enough that you would not care...

 

[bloom2708]

How much will the HOA fees be compared to the expenses of selling low and paying the realtor fees?

Are we talking $1,000 per year, $2,000 per year? More?

Getting below market and paying the realtor fees would be reasons to stay put.

 

[SheitlQueen]

I'm on the Board of Directors for a condo rental I have. Just got on the board several months ago. I've owned the place for about five years and the increases have been very small--but we have no money in reserves! I mean last year they increased them by $5.00 per month!! Really--so what is that going to do??

We have a 30 year old roof that needs replacing. Condo has spent 25K in the past couple of years for repairs of leaks. Now we want to add a special assessment of 5-7K each for new roofs (small 40-unit complex). The dogfight begins--some want nicer roof/some the cheapest/some want to bury their head in the sand and say "h*ll no." (especially the owners on the ground floor).

As for regular condo fees--ours has a cap of 15% per year without member approval. I don't know if that is a state law or a condo rule but if I have it my way it's going up 15% per year for a few years to get some $ in reserves--and that's in addition to the special assessment.

For our condo, we cannot commingle the regular fees and the special assessment.

Your fees may have been exceptionally low and they may be bringing them up to current levels--or like us--no one cared/paid attention and we don't have the $ for a major repair.

Your situation sound exactly like mine. Which is why the fees just went up 40%, with the approval of the owners. Keeping fees cheap and putting nothing to little into reserves is a mistake and means big assessments whenever major repairs are needed.