Wednesday, May 18, 2011

HOA Information

I was too tired this morning to write a post and, to my joy, my brother provided me with a giant email and suggested that I post it so YAY!  Today's post re: HOA concerns and precautions is brought to you by my brother.  Enjoy!

     When people buy their first HOA-property often they are more concerned about HOA-*RULES* than HOA-*SOLVENCY* and HOA-*ORGANIZATION* which in my opinion is a pretty big mistake (I've owned in 2 now).  The other common problem not considered enough is *SHARED-WALLS* (obviously doesn't apply if you'll be buying in an HOA with actual independent homes).
     Rules are a concern, for sure.  But from what I've experienced HOA rules are not usually as big of a concern as most people make them out to be.  We all want our property-values to stay high and we want to be able to enjoy the comfort of our homes in relative peace and quiet.  Most rules are there only to help ensure those factors.  To be sure, if a person doesn't care about the peace and quiet or safety of their neighbors or of their home-value, and HOA isn't for them.  But outside of that, I have found HOA-rules to be mostly-palatable.
     The bigger problem is HOA-solvency and HOA-organization.  If you have an HOA with a Board that is difficult to staff with volunteers, your HOA is going to have to fund more outside-experts to help run and manage things; that means higher-dues.  It also means it's tougher to resolve problems or improve things because there is less owner-managers to help the process.  A poorly-organized HOA can degrade into a place you don't really want to live and can't really sell.
     HOA-solvency is just as big a problem, and *extremely*-common.  It's caused by the fact that most HOAs are pressured by their members to keep dues as low as possible but most members don't realize (and many just don't care) that that's not fair to the future owners because they are currently slowly wearing-out the buildings (over time, things like roofs wear out) but in order to keep dues as low as possible they aren't putting any (or much, anyways) money aside into savings in order to fund these future repairs.  So, instead of accepting an extra $25/month over the next 10 years to make those types of big property-improvements that occur, most owners want the $25/mth to stay in their pocket and let whoever is living there 10 years later to deal with the problem.  What happens when something big like a new roof is needed, and the HOA didn't save for it, is that the repair-bill is estimated and then divided evenly in some way among all of the current owners.  The pre-determined amount is then "assessed" to each homeowner, giving each of them a term to pay it... which can vary anywhere from 30days to 1 year.  In our current HOA we usually do it on a per-quarter basis.  The amounts can be pretty large; ours has had to assess every quarter for the last 2 years in order to repair damaged stucco, mold inside exterior-walls, leaking patios, old rain-gutters, damaged concrete, and a few other things.  The quarterly-assessments have been $250 (on top of our normal-dues), $1000/year.  That's money a lot of people don't plan for when they buy, and simply don't have.  More than 1 unit in the last 2 years has been foreclosed on and though surely not the only problem, the assessments were certainly part of the pressure.  But, homes wear out, repairs can be costly, and a prudent-HOA will be saving for the future not doing everything they can to just keep dues as low as possible.  SO I STRONGLY ADVISE YOU ASK THE HOA-BOARD/MANAGEMENT-COMPANY (BEFORE YOU BUY) FOR A COPY OF THEIR MOST-RECENT "RESERVE STUDY" AS WELL AS A COPY OF THEIR FINANCIALS (they should provide that to you, or at least show it to you, it's pretty well public-info, it's not a person's private-info).  The Reserve Study highlights every major piece of property owned by the HOA in a detailed break-down, estimating how long each piece should last and how much it should cost to repair/replace that item at the end of it's life.  The study then uses those numbers to arrive at an amount the HOA should be setting-aside in savings every month/year.  Take that number and compare it to the HOA's financials and make sure they are setting (at a bare-minimum) at least 50% of that amount aside into savings each month (and have been doing so consistently from month to month).  The study should also have a number estimating how much total savings the HOA should have before they can stop saving (or throttle-back significantly) -- compare that the HOA's savings-account and make sure the HOA actual has a reasonable amount in savings as compared to what the study says they should have -- don't settle for anything less than 25%.  This is very important, if you don't do this and buy blindly, you could walk into a home today expecting $750/mth payments and $150 HOA dues and end up 6 months later paying an additional $250/mth assessments for unplanned-repairs.
     Don't say I didn't warn you.  Our first HOA, 9 months from us selling, discovered our roofs were totally shot and had to be fully-replaced.  At the same time, a large crack in the foundation fully gave-way and caused massive flooding inside our garages; massive amounts of mold was discovered growing in our grass and up our northern-wall and into people's windows.  Additionally, there were a number of unattractive eye-sores on the property that were deterring new buyers and threatening our property-values (old worn-out parking surface with some potholes, huge watering bills trying to maintain our grass in a desert, a ruptured water-line that was repaired but not properly re-surfaced, exposed utility meters constantly being damaged by "unknown" kids, etc.).  Suddenly the HOA realized pretty hefty repair-bills over the course of about a year, all while we were trying to prepare to sell.  Total savings: $25K.  Just the roofs cost us that.  At which point we were totally insolvent and had to assess each unit $1K with 60days notice.  We had to pay that ourselves because it's illegal to not disclose a known assessment and the market had just started to turn so we knew that the extra $1K price-tag would be a big deterrent.  Right after we sold and moved out the HOA had to drastically raise dues to cover the final ongoing repairs and start putting money back into their depleted account.  When we sold dues were around $150/mth, the new owner was probably surprised to see them jump to (as I recall) $225/mth after just living there 2 or 3 months.
     Finally, give due consideration to any shared walls you may have.  If your unit is immediately-adjacent to another, go next door and ask the neighbor if one of you can come in while another person goes into the unit you are interested in and then coordinate (via cell) to make moderately loud noise along the common wall and see what the perceived noise-levels are inside the unit you are wanting to buy.  Depending on the neighbor, they may or may not be kewl with that -- if not, just ask them (or other neighbors you see out and about) about the issue based on their own experience.  Most people living in properties with shared-walls hate it; unless they have neighbors who realize it's a problem and keep their entertainment-volumes down and keep their loud-talk down during sleeping-hours.
     Also ask about parties; some communities are strict on large parties (which in my opinion is a good thing in such close-quarters), others aren't.  There's nothing worse than a 4th of July when you have to get up early to work but your neighbors don't and they throw an all-night keg party.
     Finally, consider other sources of nearby interference.  In our current condo we didn't consider that we bought a unit right next to the main road, across from which is a huge county ballpark.  The road often experiences very heavy and very noisy early-morning traffic which can wake you up 30-60min. earlier than you like; wake up like that every morning and see how quickly that can drive you a bit insane.  The park can have screaming-fans until at least 11pm, making it difficult to fall asleep -- do that, followed by the early traffic, and see how utterly depressing it can be.  The park-staff can then leave their (literally) LasVegas-style lights shining in the park (through our bedroom window) until past 12am while they clean and maintain the grounds.  You literally can only sleep between 1a and 4a.  Try that on for size.  It sucks. 
     (fortunately, we resolved most of the park-problem by purchasing "blocking" blinds and then covering them with heavy suede dark curtains.  All light is blocked and a good amount of the noise is blocked.  But that requires we close the door to our master-bath at night and that we can't have the bedroom window open on cool nights, we have to continue to pay for A/C-costs and breath indoor-air, even at night)

8 glasses of water
1 cup of coffee w/creamer
1/2 serving sunflower seeds
1/2 serving leftover pizza
1 baja fresh bowl
Daily Caloric Intake: 992

4 flights of stairs
House Hunting: 1 hour (made an offer)
Appliance shopping: 1 hour


  1. We don't have an HOA, and it is one of the best things ever. All of our friends have an HOA and they have caused nothing but trouble. If you can find a home with no HOA I strongly recommend it!
    Also one a side note I did my measurements and body fat analysis with my trainer today and I lost 3.5 inches around my waist and am now at 29% BMI (I started at like 34% or 36%). Keep up with the working out and eating right. It is a pain but it pays off.

  2. Goodness. I have long hated even the idea of an HOA, but now I think it's confirmed.

  3. Honestly, I really don't think that all HOA's are bad. There are a lot of horror stories out there but good HOA's with active communities can be really good too. They can keep a community cleaner and safer over a longer period of time which increases a homeowner's chance of maintaining or increasing their resale value. All too often you hear about older people who have lived in the same home for 20 years and they talk about how it was "such a nice neighborhood" when they moved in but it went to crap around them as the homes became older and then riff-raff started to move in and everything went downhill. A well formed, active HOA can prevent that type of situation if it is run well and if the community members take interest. It is a matter of finding a good HOA that just wants a healthy community and isn't run by people who have nothing better to do with their time than meddle and be nosy.