Homeowner’s Associations (HOA’s) The Good and Bad

A San Antonio HOA is threatening to foreclose on 84 homes on April 7th.  Many homeowners are upset with the HOA for not living up to their obligations.  As is always the case, refusing to pay usually backfires on the the person trying to get a change or revenge.   So what is the point of an HOA? 

Have you seen the homes that are painted black with purple trim? Can you imagine the difficulty selling that home nearby? It is tough and the sales price will be reflected by the condition of your neighbors exterior. The job of an HOA is to keep the homes, yards, and landscaping in good condition through the rules and bylaws.  The San Antonio HOA is accused of not using the money to the benefit of the communtiy.

That job has become tougher with less revenue due to job losses and foreclosure.  One of the first bills people will ignore is their association dues.  The HOA’s that give the most in amenities will be the hardest hit.  In subdivisions where they have a club house, pool, landscaping, internet, etc., they will have to figure out their own cuts.  Associations are the quickest to put a lien on your house for non-payment.

Actually condos and high-rise condos will feel it this downturn the most.  In the high-rise condos they have elevator maintenance, hallways, lights, exterior care, and so much more.  I have see foreclosures take 11 months to finalize and have heard of them taking longer.  

THE GOOD

• Enforcement of rules to keep the neighborhood in good condition
• Typically higher prices than nearby neighborhoods with an HOA
• You don’t have to talk to your neighbor about his car on blocks

THE BAD

• Rules you don’t like
• Fines for breaking the rules.
• Assessments when their is a budget shortfall for maintenance (roofs, siding)
• HOA lawsuits will hinder sales in the development as lenders don’t want to be effected by the unknown
• Paying for amenities that you don’t use
• Rule of thumb, for every $70 to an HOA, that would be $10,000 more of a house payment you could afford.
• HOA’s may foreclose if you don’t pay.

The bad can be very bad.  I have had several deals that were killed or held up because of HOA issues.  In one case my seller was selling below market because the HOA was suing the second builder over issues that were created by the first builder.  It was a mess and he had to pay $5000 in HOA fees just to sell his house.  (Here is another example of assessments).  There have been lawsuits due to EIFS, fake stucco, that failed, foundation settling issues, and builder negligence.   

When I first got started in real estate I often heard of assessments for roofs and siding.  At some point Oregon changed the rules for HOA’s to budget their expenses and I haven’t heard of that happening in a while.  When purchasing, read your HOA’s rules as well as the budget.  Understand the benefits and drawbacks for your future HOA.

Photo via http://www.flickr.com/photos/collinanderson