Association Property Values

Frank,

What is your basis for this understanding?

Is it in news articles (please provide), assessment guidelines (please provide a link), statutes (please cite) or word of mouth (where did they get the info)?

Tim, this comes from a conversation I had with a vice president of a bank. I do not have anything in writing concerning his statement.

Fred, I am treasurer of our homeowners association by virtue of owning a property in our association and volunteering for the responsibility.

This information, if true, concerns me about my property value if I were to sell it, but also concerns me as to whether we could do more in the way of supplying information which could make a difference in the eyes of those who appraise property values and approve mortgage apps.

There have been similar posts on whether a home in a HOA has higher or lower property values that one that isn't, and at the end of the day I think it depends on who's looking at the home and why. You may have two bankers looking at the same house and one may become more concerned over the lack of a reerve fund while another isn't as concerned about that as the community's delinquency rate. It's an interesting question - perhaps talking to several bankers to get an idea on how they view all this stuff would be enlightening. I also suspect that you'd find some who don't have the first clue what a HOA is or how it works - which may also come into play when it comes to mortgages and refinances (maybe they wouldn't care about the HOA at all - just the person living in the house and how well he/she is paying other bills)

I haven't heard the future assessment argument before - personally, I think it's a little ridiculous because as a house gets older, the maintenance and replacement costs will increase no matter where you live. It's just a question whether you pay all those expenses yourself or share in the maintenance/replacement costs of a HOA's common areas.

What I have heard is the delinquency rate of the HOA as well as its reserve study can come into play when it comes to approving a mortgage or home equity loan for current homeowners. If the HOA doesn't have reserves or a recent study, that could mean it's setting itself up for a special assessment (or several) which homeowners may not be able to pay. I know I'd find it virtually impossible to pay my mortgage, HOA monthly assessment AND a special assessment of several thousand dollars or more.

However, if the repairs aren't done, the neighborhood becomes more run down, no one will buy a home there and when the house finally sells, it'll be at a much lower price which will bring down everyone's property values This is even more critical when you live in a condo or townhouse community where everyone shares common walls.

And this is why Fannie Mae, Freddie Mac, FHA - hell, most mortgage companies and banks these days - are taking a closer look at HOA finances. It's not so much the possibility of future assessments as it is the ability of the HOA members to manage those assessments properly, which includes keeping delinquencies in check, getting reserve studies at least every five years and using the findings to help prepare the budget, etc.

Frank,

We looked at comps of a number of similar homes in our area, both in HOA's and not. Overall, the homes in HOA's seemed to have higher asking prices. There are many variables, the effectiveness of the HOA enforcing their Governing Documents being very important, in my opinion. It is pretty easy to drive through an area and ask yourself
"do I want to buy or live here?"

Paul T

Hoa's in some cases bring amenities and those vary....swimming pools, clubhouses, lake views, etc., offer additional value for a person buying a home and sometimes can increase the asking price

I guess it's a stretch to broadly state that property values are affected by any association activity with or without the possibility of large assessments and other factors which are present in some association situations. As the linked article above states, it's the loan closure rate and points which really make the difference between non-association real estate and association-related real estate. My apologies for starting this discussion focusing on property values instead of mortgage approval delays and points.

Yet it still seems like sellers need to bend more in the association related homes than others when the closure is a problem because of association unknowns and may result in lowering selling prices to make the deal go through. I'll continuing believing that property values and closure rates are related and will be more satisfactory if the association has a good track record, a high percentage rate for the reserves funding, a low dues-delinquency-payment rate, conscientious fellow-owners, and sufficient budgets and management to maintain the property and amenities as first-rate.