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Downsizing-Townhome? HOA?
Old 06-29-2013, 01:05 AM   #1
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Downsizing-Townhome? HOA?

We made the decision to sell our single family home next spring, and downsize to a patio home or townhome, since we spend most of the time at the lake home anyway.

Would relocate closer to only child.

While we understand there are no guarantees anywhere, what should we be considering when we start looking for our new place?

Are townhomes more expensive to insure? What have been your experiences?
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Old 06-29-2013, 04:59 AM   #2
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A lot of the answers to your questions will depend on the form of ownership. We live in a townhome, but it is part of a condominium, so a lot of the considerations and experiences are specific to that form of ownership. (For example, I will never have to worry about evaluating roof repair contractors, but I'll also never be able to consider adding a bay window in the kitchenette.) So my comments will be of most use to you only if you do seek out of townhome in a condominium.

In terms of our experience with insurance, we pay about $1000 a year (and we know that that's probably 25% more than we should pay - we'll remedy that soon) for what is essentially renter's insurance with a condominium rider. This type of insurance covers our personal belongings and the fixtures, as well as that portion of the inside of our home that we, as unit owners, are responsible for (i.e., the plasterboard). It doesn't cover insurance on the structure or grounds, because that's covered by a master policy held by the condominium.

My father recently moved from a single family home to a unit in a condominium and the switch from essentially living on your own land, separated from your neighbors' homes, to living in a community where homes are butted up against each other, is a big change. My father has adjusted well, but he was smart: He foresaw the challenges and we've actually talked with him many times over many years about our experiences, so he was prepared for the change.

The change is mostly in the form of trading control for convenience and the benefits of economies of scale. My father had to adjust to the idea that the community determines what could and couldn't be visible from the street on his porch, instead of just making his own decision in that regard. He had to adjust to the idea that there were standards he had to abide by with regard to how his window treatments appeared from the outside of his home. And so on. The process of adjustment, for him, never involved substantial compromise - he has no problem with the idea of keeping the neighborhood looking neat and tidy - but rather just involved reconciling himself to the way things were.

However, he would have had a more difficult time adjusting a few years ago: My father loved to work in the yard. I think he would have been relatively unhappy with the fact that (a) he doesn't have much yard anymore, and (b) even if he did, there are a lot of rules that limit what he would be able to do. The unfortunate reality is that my father aged into this aspect of the adjustment: He's physically unable to work in the yard anymore, so the fact that he's no longer allowed to do what he used to do, from the condo's standpoint, meshes very well with his new physical limitations.

So what do you need to worry about that you didn't worry about when looking for a single family home? First and foremost, you need to assess the financial condition of the condo itself. It should be solvent, of course, with a healthy reserve fund proportional to the size of the condominium. We're a 25 unit townhome condo community with almost $100k in reserve; that's pretty good I believe. Size does matter though: I wouldn't move into a 25 unit condo ever again. Not that we're having any big problems, but we've been lucky, I think. The financial condition of smaller condos can go south faster than large condos. Also, the cost of managing the condo is so high that smaller condos often try to self-manage. We're self-managed and again I think we've been lucky. There are definitely some problems with it, but the fact that one of the members of the board owns a construction company and another is a skilled carpenter - and the fact that they have never had a problem running over a copy of the master insurance policy the night before someone needed to close on a refi - has really made a difference for us.

I'm sure more will come to mind, but again it won't be useful unless you're actually considering a townhome condominium.
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Old 06-29-2013, 09:02 AM   #3
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Originally Posted by bizlady View Post
We made the decision to sell our single family home next spring, and downsize to a patio home or townhome, since we spend most of the time at the lake home anyway.

Would relocate closer to only child.

While we understand there are no guarantees anywhere, what should we be considering when we start looking for our new place?

Are townhomes more expensive to insure? What have been your experiences?
Insurance is not more expensive in my experience. You need to inspect the HOA financial statements to ensure the reserves are adequate and see if there are any issues with delinquent homeowners. You also need to fully understand what the HOA assessment covers and what is an owner responsibility. Well run associations tend to have low turnover, experienced and dedicated board members that are also a bit tyrannical, or they completely outsource HOA administration to management companies (for a stiff fee).
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Old 06-29-2013, 09:08 AM   #4
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Thanks you both for your time and response. I think we will be fine with the rules. We are considering looking a units that would not be attached with more than 3 other units, though the complex certainly might be larger.

Where I worry is if someone in the unit does not insure and has a catastrophe- then we pay? What is a healthy reserve- so many months of expenses plus what? The sewer backs up- who pays for that and cleanup?

DD lives with HOA so a little familiar with how these work. Do understand the importance of knowing what is covered.

Look forward to hearing more from others!
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Old 06-29-2013, 09:29 AM   #5
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You have been given some good advice. My insurance is about $300 a year for my personal property inside the townhome. The Homeowners Association (HOA) insures the structure itself.

One thing to keep in mind is that you will be part of the HOA. That means you can't always do what you want to do, change things the way you want to change them, and sometimes your views may not fly with the rest of the HOA. Want to screen in your patio area? The HA may not let you do that. Want to paint your front door purple with large pink polka-dots (you're the artistic type, aren't you?), the HOA may not let you do that. Want to let your dog or cat wander about outside unleashed. You can bet the HOA rules won't allow it. You have to be able to live with these restrictions.

The HOA is usually elected by the owners and it represents them. Some people seem to think it is the enemy. It is not. It is how the owners govern their property, much of which is owned in common.

And do check the financial conditions. People who are planning to live in their home just a short while love to have very low monthly dues which result in underfunded reserve accounts. (Sort of like the infamous Illinois pension system.) In this way they pass on their cost of maintaining the units to the next owner. She gets hit with higher dues, a big dollar special assessment or both, when the times comes to pay for a new roof, repainting, fixing the broken fence, etc. Don't fall into the trap of arbitrarily keeping the dues low. It's about controlling expenses, that's the way to keep the dues low and the special assessments at a minimum.
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Old 06-29-2013, 09:29 AM   #6
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A well run HOA will have a reserve study that is not more than 3 years old, funding should be at least 75%, and future funding needs should be spelled out. This is important because it helps identify avoidable future large "one-time"assessments.

The homeowners insurance policy should name the association as a second beneficiary and the HOA board or management company should have a copy of each policy on file. Who insures what can be different among HOAs.
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Old 06-29-2013, 09:57 AM   #7
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We have always lived in a single family home but have owned three townhouses. What I would like to add to the above is to also check on any special assessments the HOA has had.
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Old 06-29-2013, 10:16 AM   #8
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Also, keep in mind things like rental caps. Many Condominium associations have added a rental cap as a response to the high number of rentals. Most owners want to live in a community of owners, not a community of renters. Many board members do not like the idea of working for free for another person's business (the rental condo business).

Investors sometimes purchase repos or short sale condos thinking they will rent them out, only to find that a rental cap has been imposed. Due diligence is required.
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Old 06-29-2013, 11:32 AM   #9
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In the case of our rental, both apply! The management company is beholden to the board members, who patrol the development and have the management company - and the lawyer we pay for in our dues - send complaint letters to the owners. The person I deal with at the management company says they send out several hundred complaint letters after every quarterly patrol walk-through.

We always get our share, including a maddening go-round where we were threatened with a fine for not getting permission to build a fence - which, after we did our own research, turned out to be an old "party fence" erected by the builder.

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[QUOTE=MichaelB;1333850 board members that are also a bit tyrannical, or they completely outsource HOA administration to management companies (for a stiff fee).[/QUOTE]
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Old 06-29-2013, 12:50 PM   #10
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We've lived in five condominiums over thirty five years and we've never encountered a tyrannical condo board.
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Old 06-29-2013, 02:56 PM   #11
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We were nervous about the HOA thing but our condo board is great. If you do consider buying into a place with an HOA, ask to see the last 3-6 months worth of meeting minutes. They can be illustrative of the tone/issues in the building.

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Old 06-29-2013, 03:12 PM   #12
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Great advice from all and we thank you.

Another question we thought of...could the sale of our existing home count as cash and exclude us from the upcoming healthcare subsidies

We think we will be eligible for these for 2014 an 2015, after that we start tapping our tax deferred accounts and probably will not be eligible. We would not make our decision on that, but it is a consideration as we pay over $1000 a month now for medical and have 500k annual caps besides. And if we were to run into a catastrophe....
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Old 06-29-2013, 03:17 PM   #13
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Since the homeowners usually elect the members of the condo board, it should pretty much represent what the homeowners want. Unless, few people want to be involved and leave it up to those who thrive on exercising power over others.
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Old 06-29-2013, 04:53 PM   #14
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I am the Treasurer of our HOA board, and have been involved in the financial aspects for serveral HOA's over the last 20 years. Our current HOA is all detached patio homes, so we do not have to deal with structural building issues (the homeowner must do that). We just do the landscaping, irrigation and covenant control (which is plenty!). Much easier than a condo.

As others have said, look for past special assesments, review the financial statements to see where the money goes. Ask to see the last couple of years of the annual budget. Look at the reserve funds and any reserve studies that have been done compared to how the reserve funds are used. Talking to a board member that is also a resident is invaluable. I'm amazed that people moving into our HOA never do that.

Regarding the sale of your present home as counting against ACA subsidies - if you have realized taxable capital gains, it would count as income in the year of the sale. There are many tax rules in the computation of taxable gains on homes. You'll have to see a tax accountant or do some research if you are not sure.
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Old 06-30-2013, 12:02 AM   #15
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Since the homeowners usually elect the members of the condo board, it should pretty much represent what the homeowners want. Unless, few people want to be involved and leave it up to those who thrive on exercising power over others.
Agreed. I am sure that most people have experienced the tyrannical board members who think it is an executive position and license to try to control everything. We saw this in our last town home with two retired members that delighted in finding fault, citing visitors for parking more than one day, etc.

Greater risk of loss are lawsuits. There is a period of time in the age of a development in which the threat of lawsuits against the builder for any number of reasons is at its height. There are also lawyers that know this and specialize in encouraging filing of those actions. In our case the board succumbed to this call and continually pushed the issue. We all ended up with a $1700 special assessment and many were unable to sell for three years. All of our properties since have been single family - no HOA!
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Old 06-30-2013, 02:05 AM   #16
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How is the noise between units? Can you generally hear your neighbors?
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Old 06-30-2013, 11:19 AM   #17
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The HOA is usually elected by the owners and it represents them. Some people seem to think it is the enemy. It is not. It is how the owners govern their property, much of which is owned in common.
That's how it SHOULD work, but plenty of cases out their where HOA's have run rough shod over the owners (e.g. violating bylaws, incurring exorbitant foolish expenses, etc.), or were grossly incompetent or negligent (e.g. regularly missing payments for insurance. maintenance, etc.). These unfortunate situations can take a toll in your time, emotional upset, and sometimes even expense court fights.

If you don't want a single-family home, might also consider a finding a stable well-run rental. Something to be said for freedom to either stay or move on at lease renewal time.
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Old 06-30-2013, 12:04 PM   #18
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How is the noise between units? Can you generally hear your neighbors?
Many people on this board seem quite concerned about noise from neighbors. Choose a good building in a good area, and in my experience noise is a non-factor. I've lived in 4 SFHs during my life, 2 before I left high school, and two when I was married. My parents homes were in older, settled neighborhoods, and were quiet. Ditto with one SFH that I rented, it was quiet and in a quiet neighborhood. But today, after the real estate fall, this ~90 year old house just sold for $850,000. So these type places are not cheap. My only owned house was out in the country- and barking dogs, chainsaws, loud music played by teenagers were fairly common.

In many rented apartments in 6 different cities, east and west coasts, I only had one where noise was a factor. I needed to be close in, and needed an inexpensive rental. So I wound up with a place with thin walls and an apartment next door with 4 students-much noise. So I broke the lease, which wound up costing me very little.

However, in 2 years in my present home and first condo I've had one lady with a little barker, who started taking the pooch with her to work when I asked about it, and then moved. Also the guy over me dropped something once. That's it-and most of the people here are young.

I have never heard a conversation from anyone in the building other than someone who is not yet in his or her unit, though late at night I can sometimes hear people walking past on the street coming from clubs. I have never heard a telephone or an alarm clock ringing or a toilet flushing. I can sometimes hear water running in the pipes that go past my unit.

Perhaps someone who is very sensitive to any sounds, or a psychological feeling that he is not all alone, that there is someone above him and below him, might be troubled. Many times you can find units with no apartments adjacent. With town homes here, it appears to me that the major noise is the sound of the neighbors driving out of their level one garages in the am. I would think that this is likely somewhat worse than the typical west coast suburb with small lots and SFHs.

As to town home party walls, you can look at the plans. Before I decided that I wanted condo I visited some town home sales. My price range was not available in the area where I wanted to live, so I eventually quit looking, But before that, I looked at some plans, and I even had one guy let me stay in one unit while he and my friend turned a tv way up next door. No sound at all came through the wall. In the more expensive developments a lot of thought and money is put into low sound transmission between units.

Ha
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Old 06-30-2013, 12:28 PM   #19
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I've lived in condos or townhouses much of my adult life. Many more sound issues from above than from the side. In side-by-side units with 3 levels (basement, ground, 2nd story), neighbor noise was most evident at the top level and not the ground level.

Mr. Ha makes an important point. Many more issues come from the neighborhood. Choosing the right location and property will probably make the most difference.
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Old 07-01-2013, 07:03 AM   #20
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Mr. Ha makes an important point. Many more issues come from the neighborhood. Choosing the right location and property will probably make the most difference.
+1. The worst apartment I ever lived in, for 18 months, was one that faced the intersection of two major highways. The noise was constant. As a result of that experience when looking for a home my first response has always been "no main roads".

The HOA where we are now has been a non-issue, run by people who have an interest in the community and by all accounts seem to be trying hard to do a good job of it.
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