My HOA situation

[Zoocat]

I am considering selling and moving from my townhome for financial reasons but the HOA situation is also a concern. I'm wondering what folks think about these facts.

My HOA did not raise the fee in the past 2 years to a sustainable level because a small group of owners protested. Most of them sold, took their profits, and moved. So now the HOA must raise the fee 39%, from $141 to $197.

It's a new community of 55 units, only 5 yrs old, but already some detrioration is evident. Some balconies need repair, paint is chipping, concrete is cracking on porches and disintegrating on the sidewalks.

The total budget is $124K and at the end of 2009 the reserve is project to only be $37K.

I'd appreciate any input on this. Do you think this looks like a bad situation?

 

[jazz4cash]

If it were me, this situation would make me more anxious to move. The physical deterioration you mentioned is very likely to accelerate in the next few yrs....Maintainance items will require major repair/replacement. A good friend was on the board of his HOA and they had to put liens several properties that never paid thier fees. Hopefully, the market where you are is not to bad.

 

[W2R]

I have never lived anywhere that had an HOA, so maybe I am not qualified to comment. So bear that in mind as you read my uninformed opinion below!

Personally I would expect that the HOA fees on a nearly brand new complex like yours would rise about that much. The developer would want to keep the fees artificially low at the beginning in order to sell the majority of the units, and during the first five years or so very little maintenance would probably be needed (and it sounds like little has been done). So that is why I would expect the HOA fees to be lower during the first few years than later.

I wouldn't move, unless you want to for other reasons. What would upset me a whole lot more than that, is a HUGE assessment of several thousand dollars for new common facilities or other reasons. That would make it almost impossible to sell. But then, probably most HOA's have limitations that make such huge assessments impossible.

 

[OAG]

Ours is 80 units in 20 buildings (ranch style). We have raised the HOA (Condo) fees about 10-12% for the past 3 years (starting when the builder left). We earmark certain amounts for the repair/maintenance reserve fund. They respond quickly and have an ongoing program to repaint and repair the wood portions of the buildings - they do it by section (oldest units first). Development is abut 8 years old (our particular building is 4 years old).

 

[ziggy29]

The total budget is $124K and at the end of 2009 the reserve is project to only be $37K.

I'd appreciate any input on this. Do you think this looks like a bad situation?

The phrase "special assessment" comes to mind.

I think it's a good thing that an HOA has checks on it to prevent it from spending and raising dues out of control, but if a vocal tightwad minority allows the complex to get run down, I'd be concerned about dilapidated conditions and saleability of the property in the future. The worst thing is the timing and size of this increase.

 

[FUEGO]

Sounds like fairly minor issues that might require a smallish special assessment. Maybe $1000 or less depending on extent of deterioration.

Just watch out for constantly recurring "one-time special assessments". Bottom line is that you're going to pay it one way or the other. Maintenance isn't free.

 

[Zoocat]

All of you have echoed my concerns. At HOA meetings, some of my neighbors, as well as myself, have raised the concern about special assessments. We pushed for greater increases for three years without any results. Now they give us a big raise. Yes, I am concerned that down the road a special assessment might be needed!

Also, tonight I'm going to my HOA meeting. Here's what I'm expecting. Since there's a fee increase all kinds of neighbors and landlords who never come to meetings will be there. They will raise all kinds of objections.
Some of the more memorable ones from the meeting two years ago:

"But if these fees keep going up I'm not going to be able to continue to rent out my place. I'll have to sell!" (A landlord complaining about her profits)

"But why keep a big reserve. It's just money sitting around doing nothing!" (Thirty-something massuse)

"I've looked into a line of credit. That will keep our HOA afloat." (Board member who was also a realtor).

I've brought up the need for a larger reserve for 3 years. I will need to feel really good after this meeting. Otherwise, I think I'm outta here.

 

[FIRE'd@51]

I suppose it's not a great time to be selling real estate. On the other hand, it's a great time to trade up, since presumably a more expensive place has dropped by more $ than yours.

 

[tangomonster]

Old Babe, I understand completely! Here at my two year old 76-unit condo community which was marketed for over 55+ (but not restricted, so there are a handful of us who are 55 and younger), all people focus on is the lowest possible monthly fee and don't have the foresight to pad the reserve fund for future maintenance and repairs.

Add this to your list of idiotic things people say about not raising the fees:

An 80 yo who is on the Board of Directors: "Us older folk aren't worried about what's going to happen ten years from now because we won't be around!"

 

[Westernskies]

I am on the BOD of a HOA for a community of (primarily) second homes. Volunteer elected position, in my second term.) We try to maintain a year-to-year balance of ~25% of our yearly dues as a cushion against unforeseen maintenance expenses, and adjust our dues structure to ensure that we don't get into the situation you describe. This has worked for the previous three or four boards. A few folks complain, (surprisingly an equal number want higher reserves, along with the usual crowd who think HOA dues should be 50 cents/ month...but all in all, it works pretty well. We have maintained our community, kept up the common areas, and funded some significant infrastructure projects- lodge/paving/picnic facilities/communications, etc over the years without having to resort to a special assessment. We get a lot of volunteer labor and good turnout on community workdays- that helps to keep our costs down, and lets everyone know how their money is and is not being spent.

 

[Zoocat]

OMG. Just returned from HOA meeting. Looks like I am outta here.

 

[Zoocat]

Westernskies, I am conflicted by the whole idea of volunteer work days,. My complex is 50% home owner occupied, so landlords do not participate in volunteer work days. When I contributed on a landscaping project I really felt a little resentful. In addition some of the units are "affordable," in that they are subsidized by the builder and the city. None of those residents contributed work on that particular day either. At some point, when I have paid market rate for my townhome and am contributing my labor for upkeep, I have to wonder whether I am being a fool.

 

[SteveL]

Given that it may be hard to move, you may want to consider the following:
1) The BOD is obligated by state law (most states) to maintain the property.
2) A reserve study should be done to determine what level of reserves is necessary to pay for future paint, roofs etc.
3) Failure of the BOD to maintain the property, can make them personally liable for the deterioration of the property.

I suggest you do a little research on condo law in your state to see what duties are required of the BOD. Then, take a copy to each member of the board and explain that they must maintain the property. In many cases, this alone is enough to unblock the members.

 

[ziggy29]

3) Failure of the BOD to maintain the property, can make them personally liable for the deterioration of the property.

While this is a nice piece of homeowner protection on one hand, on the other it may speak to why a lot of people who would be otherwise great board members refuse to run for the positions. No pay and additional personal liability? No thanks.

My wife served on an HOA board in '05 and '06 in our home association in Houston. Never again. Talk about a thankless job where people are out to ruin and discredit you...

 

[Brat]

Some states require reserve studies. Frankly I would never buy a condo that didn't have a reserve study and reserves to fund anticipated maintenance needs. That is why I would never buy a new condo.

IMHO, sell as quickly as possible as the building will only go down from here.

There are very good, well managed, condos in my former home town, Portland. However, you don't buy in one of those buildings because you are looking for cheap housing. My brother recently purchased a studio in one of those buildings, it has the nick name "Mother may I", and although the building is about 50 years old it is pristine.

 

[Zoocat]

My condo community has a new reserve study and that is why my fee went up 40% for 2009. I hesitate to give details online for fear that someone may recognize my community but let's just say "construction default suit" is coming down the line.

A gangbuster realtor is coming over tomorrow to plan my selling strategy.

I'm not the only HOA owner in trouble these days.
Here's a post from a housing bubble blog today:

"My HOA just lowered the boom. Thanks to unpaid commons charges by nitwits who bought places they couldn’t afford we all get to enjoy another 7% increase in our fees. I have two empty units in my section alone, the one that moved out recently was hard to miss as I thought they were way too young for the prices when they bought a year ago and had a small child. The other one tried having a moving sale but ended up leaving furniture behind in the unit that can be seen in the MLS listing."

In my community five people did not pay their dues in November. (It's a small complex.) Yuck. I hate this recession.

Oh and more idiotic things people said at the meeting

Summary: "I know why fees are going up, I understand perfectly, but I really don't want to pay that much. It's too much. and if my fee goes up next year I'm going to be knocking on your doors,not happy at all (to board members.)" (from guy who showed up after the meeting was half over.)

About the landscaping crew fee: "Why do the lawn care people have to blow the leaves around with those little machines? Think of all the emmisions! It is such a waste!" (from dingbat ex-hippie chick living in an "affordable" unit).

I really don't want to be an owner at any place with a HOA ever again.

 

[Moemg]

I lived in a community that had a HOA . The difference was it was 100% owner occcupied . My SO's son lives in a rented condo and the place is not well kept . The community was built during the real estate boom and the units were purchased by investors . These investors rented to anybody and the units are detiorating swiftly .

 

[Ronstar]

I just got a message that my condo HOA is not raising the monthly assessment for 2009. But I also got a letter stating that all owners have to replace interior plastic water supply lines and valves with chrome plated metal ones. Seems that a line sprung a leak while an owner was away and created a mess that the HOA insurance had to pay for. So tomorrow I'm playing Ron the plumber.

 

[Zoocat]

IThe community was built during the real estate boom and the units were purchased by investors . These investors rented to anybody and the units are detiorating swiftly .

BINGO! Probably she lives in my community.

 

[Brat]

Oldbabe, if I were in your shoes I would sell as fast as I could. This will not get better for too many years.

It isn't the fact that you are living in a condo that is the problem, it is the fact that the other owners aren't willing to invest money to maintain their homes. The units were sold to folks who should have been renters.

Condo living CAN be nice and cost effective BUT you need to (as my brother puts it) "class" the other owners. If the other owners are cheap, not value, folks then don't stay.

I have seen a lot of poor construction over the last 8 years, about now is when it starts to show.

 

[chinaco]

The place needs to be kept in good shape because that will affect the property value.

IMO - The benefits of condos and shared property are also their downside.

But it still comes down to the cost. What is the cost of a similar alternative? Identify your alternatives and crunch the numbers. In the end, you have a certain square footage in a location with features and upkeep. The alternatives may be slightly different, but you will find out if your current situation costs more than you should be paying.

In the end... you will have to pay for up keep (or do it yourself).

 

[OAG]

While this is a nice piece of homeowner protection on one hand, on the other it may speak to why a lot of people who would be otherwise great board members refuse to run for the positions. No pay and additional personal liability? No thanks.

My wife served on an HOA board in '05 and '06 in our home association in Houston. Never again. Talk about a thankless job where people are out to ruin and discredit you...

I served on a BOD for 7 years for a pretty large HOA (650 homes). I volunteered; no pay, etc., however, I verified that the E&O Insurance was in place and kept current and covered board member AND committees appointed by the BOD. Worked out fine - but I left because the board was getting to liberal; slack in imposing fines and enforcing covenants.

 

[JOHNNIE36]

Read a lot of the threads thoroughly and scanned a lot of the rest and I see one thing that is confusing. Seems like y'all started out talking about HOA and then condo associations got thrown into the mix. Two different animals but with the same purpose in mind--protect the value of the associations through maintenance. If your board doesn't do this, you must elect a board that will. Recall the present board if necessary. Tougher in a HOA because the Association doesnt own the "buildings". The maintenance of those is only controlled by the documents, rules and regulations. Ya'all need a good management company and a good attorney. Nothing is better than home or condo owners that want to be involved in maintaining to value of their property.

 

[Nords]

Read a lot of the threads thoroughly and scanned a lot of the rest and I see one thing that is confusing. Seems like y'all started out talking about HOA and then condo associations got thrown into the mix. Two different animals but with the same purpose in mind--protect the value of the associations through maintenance. If your board doesn't do this, you must elect a board that will. Recall the present board if necessary. Tougher in a HOA because the Association doesnt own the "buildings". The maintenance of those is only controlled by the documents, rules and regulations. Ya'all need a good management company and a good attorney. Nothing is better than home or condo owners that want to be involved in maintaining to value of their property.

Gosh, that makes it all sound so simple.

I've served my time in a HOA with only 60 units, and I think that the board's talent gene pool is pretty shallow for anything under 500. We were lucky to have a manager who had the credibility to tell his clients what worked, what didn't, and what lawsuits could be expected. Just the neighborhood's repainting and a developer lawsuit were painful enough without the added distraction of bad reserves and an incompetent board. The "best" solution isn't "you must elect a board that will"-- the best solution is to sell and get the heck out of that situation.

The concept of HOAs is workable with sufficient size & funding. Today we're living in a community of 15,000 homes with one of the state's largest HOAs. Management is professionally run (for the most part) and the largest part of the payroll is grounds maintenance of the common areas. The newsletter attracts enough ad revenue to pay for itself and they even have their own plant nursery to cut down on costs. The board is populated with residents who've lived here for decades-- 30 years or more-- and in some cases their kids & grandkids are in the same community. The "rules" book is pretty thick but it's wielded effectively and the talent pool of serving/prospective board members keeps egos pretty much in check. Enforcement is pretty consistent and the processes are reasonably transparent. At this scale of population, it's pretty easy to slap a lien on a homeowner.

Our rental home is in a smaller community where HOA participation is so low that the board was able ram through a rules change allowing initiatives to pass when "yes" votes outnumber "no" and are at least 35% of the total. No simple majority system here, no anarchy, just apathy. In fact I think some of the board seats would go vacant if the incumbents didn't rotate the presidency among themselves. The only thing saving this HOA from disaster was being able to sell off some extremely valuable land to fund the reserves nearly in perpetuity.

The best validation of our residence's HOA is the higher prices of our larger community compared to adjacent (non-HOA) neighborhoods. Even the crappy HOA at our rental neighborhood is keeping home values above those in the adjacent non-HOA communities.

No, I've never served on the boards or committees of either of our current homes, and I doubt that I ever will.

 

[mews]

Nords, you are right about the available talent pool.

I became part of a coup, taking control of our small (under 30 unit) coop. Lots of unaddressed problems, major repairs not done, etc...

I like living here, and I had to do it to protect my investment. Johnnie36 truly underestimates what a person is letting themselves in for. I was lucky - 4 smart, like-minded people walked into 2 years of construction-project & reorganization hell with me.

Roof -facade - water tanks - plumbing - {waiting for something else}

Would I do it again - yes. Has it been funfunfun? No.

ta,
mews