Condo Dues Blues

Started by RickW • 9 replies • 1193 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

RickW (Illinois)
Posts: 169

Posted:

Below is a link to an article in the Chicagot Tribune.

http://www.chicagotribune.com/classified/realestate/chi-restate-condo-reserves_0823aug23,0,7815109.story?FORM=ZZNR3

It warns potential buyes of condos and townhomes to be careful. If any association has many foreclosures and/or delinquent owners, behind on their assessments, it could result in a large assessment down the line.

Two comments:

1) What are the circumstances in your association? Do you see this happening in your future? What precautions are you taking to help prevent large assessments down the road?

2) Thinking of the larger picture, is this article not detrimental to the already fragile housing market? Will this article scare some potential buyers away?

GlenL (Ohio)
Posts: 5,491

Posted:

#1 - 132 units in a suburb of Cincinnati and the BOD just raised assessments 5% the first increase in 4-5 years, our foreclosure rate is historically 1-2 units per year. Reserves are funded and Ohio law prohibits special assessments unless a majority of homeowners vote each year to allow it. The law also mandates at least 10% of gross revenues goes towards reserves we do 22%. If you don't try to artificially keep the assessments low to benefit the now, the long term looks better and better. Unfortunately this requires people on the BOD who are willing to do what is right for the majority rather than what is good for their own interests. I've seen people get on the BOD of communities and fight to keep the assessments low and minimal reserves because they plan to be gone before the piper asks for his payment.

#2 - In the long run no, the buyers who perform their due diligence would stay away anyway and the ones who look at the community and say "Aw pretty" don't have the brains to stay away. Thank god the lenders are tightening the restrictions for people too stupid to come in out of the rain. Will this hurt the unprepared Association in the short run, most defiantly but in the long run I think it will make things better and prevent the problems we're having now.

Excuse me while I climb up on my soapbox:

Times are tough and I feel sorry for anyone who has lost their home or their job but contrary to the pundits screaming about the recession I would suggest you remember back 36 years. Nixon was in office, the economy tanked and times were bleak; remember his wage - price controls? Then we had the years of Carter and some truly bleak economic times, anyone else remember when a good rate on a 30 year fixed was 14%? Inflation and interest rates both toped 18%.
The point I'm trying to make is while times are tough, they've been tougher in the past but they will get better.

Studies show that 5 out of 4 people have problems with fractions

SheliaH (Indiana)
Posts: 6,964

Posted:

In our case, we've already increased assessments - we went to the maximum of 5% for 2009 (that's the most the Board can increase the fee without getting authorization for a higher one from the homeowners). In the meantime, we've cut as much as possible and will probably trim a little more (Im thinking there are places that really need cutting in our administrative category).

Regarding the larger picture, the article could scare potential buyers away, but that's not necessarily a bad thing. When I look at many of the threads on this website, it seems to me a common theme is the lack of knowlege. People don't know what governing documents are and they sure as hell don't read them - and then get mad when they're told something's against the rules. Homeowners (and this includes board members) don't always realize how much money it takes to pay for maintenance and repairs in a HOA community - especially if you live in a condo or townhouse community like mine.

The main problem with today's market is that people bought without truly understanding what they were getting into - anything that encourages people to stop and read, ask questions and think is better for everyone in the long run. Buying any home is a major investment and you don't want to jump into a HOA with jacked up finances.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

RobertR1 (South Carolina)
Posts: 5,164

Posted:

I suspect in at least a significant number of Condos. special assessments are pretty much the norm. For starters, as common property ages it requires more maintainence, especially around the water. Condos tend to have, in some areas, large absentee owners numbers, and high rental % units. This can result in spotty management practices and property degradation because of rental units.

So the article I am sure has relevance in some places, there are other things to examine when purchasing a condo.

The above is another reason for the owners of condos to be very aware of the management changes over the years and to pay attention to the financial picture as the years pass.

To answer your question, we have 65 units and in 20 years I have seen maybe 3 foreclosures. In present economic conditions we have had 1 foreclosure and I am not sure that could be contributed to the current situation.

RickW (Illinois)
Posts: 169

Posted:

Thanks everyone for your comments and information regarding your specific complexes. While we have only 3 of 56 units severly behind in assessments or in foreclosure, we are seeing a budget crunch this year. Without incresing our assessments significantly, something will have to give.

Its the give and take that I find interesting. Board members need to keep the complex running, make sure money is there now and in the future for big ticket items, capital expenditures, maintain property values and keep assessments in line to attract future buyers!

I agree that the article is not necessarily detrimental. It does give useful information or at least suggest potential buyers should ask many questions. It's interesting that when I moved into our townhouse, I came from a single family home. I knew very little about association living. Looking back on it, if I do this again, I'll do more research on the finances of an association. While ours is in relatively good shape, I easy could have moved into one and been hit with a special assessment.

MicheleD (Kentucky)
Posts: 4,491

Posted:

And, Rick, keep in mind, single-family detached homes have associations too.

In fact, if the development was constructed in the past 10 years, in MOST places, that development will have an association.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Rick,

Michele is right on the money about the rise in HOAs. In fact, here in the PHX metro area most of the cities have adopted a policy requiring HOAs for all new s/d's. In Glendale (where I live) this policy was adopted a number of years ago and applies to all new s/d's that have water retention areas (about 99% do), in fact, in most s/d's the water retention area IS the only common area and in most single family home s/d's there are no other amenities. In the majority of single family home (planned) communities, there would be no need for an HOA if the cities would maintain these water retention areas like they used to!

DJ1 (Ontario)
Posts: 798

Posted:

Interesting perspective Glen re:stats.

Do you think as many people were 'underwater' on their home values in terms of amount owed on mortgages in the 70's? The number I've seen reported and pending is HUGE!!!! Kind of reminds me of the sound the toilet makes when you flush!!

GlenL (Ohio)
Posts: 5,491

Posted:

DJ, no in the 70's you actually had to jump through hoops and prove you could afford to pay a mortgage before the banks gave you one, not to mention having a down-payment. This is evidently where the "draconian regulations" that the FHA and others are imposing seems to be going.

Studies show that 5 out of 4 people have problems with fractions

MaryA1 (Arizona)
Posts: 7,043

Posted:

DJ & Glen,

Just heard on the news the other day that a bigger wave of foreclosures is on the horizon. It ain't over yet!!! And, unemployment is now up to (or will soon be) at 10%!!! Oh, happy days.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here