Supposed to close on a spec this week. Need advice fast! (Phoenix: condo, home builder)

[CheyDee]

Originally Posted by Captain Bill

I serve on two HOA boards; one is my sub association and the other is our master association, so I have a lot of experience with HOA boards. I don't have experience with builder transition to the new HOA although I'm basically familiar with the process. However, I do know that sometimes ithe transition is a real nightmare and home owners get the raw end of the deal.

With only 16-26 homes, and the builder having a difficult time, they may end up underfunding your HOA prior to turning it over to the community. If they underfund for the reserves then your HOA will be in big trouble. Prior to them turning it over, they control the HOA and can do just about what they want. It will be difficult to have any input, or get any changes to the way they choose to operate.

It is extremely difficult to get good community volunteers to serve on a board of directors, so if the builder closes the doors, with the HOA underfunded, and with this small amount of homes it will be even more challenging.

My personal choice, based on the situation you describe would be to opt out. That's because I would want a strong builder that will adequately fund the reserves and have a sufficient number of homes built and sold that can support the community when they make the transition.

I really can't say what would be the best choice for your decision.

The advice that I will give you is IF you cancel this contract, then get a good realtor to work with you on your next purchase of a new home. The realtor represents you, with the builder paying their fee, whereas the new home sales person represents the buider, and not you.

Then you have someone to look to who can provide you with guidance and advice when you begin to have issues with the builder.

The realtor will have to accompany you on your first visit to a builder, or they will not recognize the realtor.

Good luck, I hope everything works out the best for you.

Bill

I have lurked on this board for quite some time and while I do not always agree with you, I very much respect your opinions and know you give sage advise. I sincerely appreciate your input on this. I am a bit unclear on a you wrote in your post though.


Who would underfund the HOA? The investor when he resells or builds on the land, the builder as he is turning the land over to the investor, or both? What might be a reasonable amount to expect the HOA to have in reserves at this point?


I don't even want to talk about getting a good real estate agent. I knew better, but OF COURSE my husband's boss' wife is a real estate agent and OF COURSE we "had" to use her. OF COURSE, I have found her to be less than even remotely helpful...

[CheyDee]

Originally Posted by chicagocarol

I have to agree with Captain Bill because WE ended up in a situation where the builder underfunded before turning it over to the HOA. Might be a different situation, but I recall that the builder was pretty much able to anything he wanted to with the money until it was turned over. We ended up with up virtually NO reserves, many increases in the monthly association fees, and a laundry list off problems that are still being dealt with. I realize i am no where near you, but wanted to share what happened to us. If it were me, I would get out now, while you can. The best of luck to you.

Would you mind sharing some of the details? What types of problems did you have that are still being dealt with? I am trying to think of all the possibilities.

Thanks!

[Ponderosa]

I was in a similar situation years ago. I had just moved to a new part of town called Ahwatukee. A recession hit (Carter admin) and the builder called it quits leaving most of the subdivision unfinished. We liked it. For a couple years we had vacant lots (and weeds) for neighbors, unobstructed views, quiet at night, and peace in the daytime, no traffic lights. the HOA was both non-existent and unneeded. It all came to an end, of course, and Ahwatukee became an unlivable mess that I eventually had to flee.

Same thing happended when I got to Estrella Mountain Ranch. The developer got thrown in jail and the federal government took over the place. Few new homes, great views, little traffic, less noise, limited HOA, the lakes to a handful of us. That, sadly, came to an end as well. Now we have people like ants at a picnic and dues that rise at five times the cost of living.

I like failed developments.

[Captain Bill]

Originally Posted by CheyDee

I have lurked on this board for quite some time and while I do not always agree with you, I very much respect your opinions and know you give sage advise. I sincerely appreciate your input on this. I am a bit unclear on a you wrote in your post though.


Who would underfund the HOA? The investor when he resells or builds on the land, the builder as he is turning the land over to the investor, or both? What might be a reasonable amount to expect the HOA to have in reserves at this point?


I don't even want to talk about getting a good real estate agent. I knew better, but OF COURSE my husband's boss' wife is a real estate agent and OF COURSE we "had" to use her. OF COURSE, I have found her to be less than even remotely helpful...

CheyDee, the builder is responsible for funding the reserves of the HOA. There is no set amount, however, 30% funded is a healthy reserve fund. Reserve funding is a complex subject and takes some study to fully understand. Also there are varying opinions on the amount and method of funding the reserves.

Here are a couple of urls that may help to explain some of it. You can google and find some more HOA Seven Things You Must Know (http://www.hoareserves.com/new_hoa/seven_things.htm - broken link)
Kipcon, Inc. - Community Association Services (http://www.kipcon.com/services/community.htm - broken link)

I don't know what type of arrangements the builder may have made in their sale of the land to a new developer. You would need to find that out from the builder and the current board of directors (which is the builder) and that may be difficult to do.

However, with the little information that you have available, and with the small amount of homes in the community, I would be afraid of what the future may bring. If this were to end up with a law suit against the builder (the board of directors of the community) for underfunding, then you may have a very difficult, if not impossible, time selling the home later.

That's why I personally would opt out. There are too many other homes for sale on the market where you don't have to deal with the uncertainty, and be involved in what appears could be a very dangerous financial situation.

What I tell people who have friends, relatives, fellow workers, and aquaintance that are real estate agents, is that you may owe them the "opportunity to compete" for your business. You do not owe them the business. You owe it to yourself and your family to select the person who demonstrates to you that they will do the best job for you.

When I selected an agent to sell my home in California a few months ago, I called three agents whom I thought I owed the opportunity to compete. One was an agent that farmed our area there for over 20 years. The other was an agent who works for the same company as I do. The other was the broker who works with the Property management company that leased my home out for 3 years.

They had a relationship with me and I gave them the opportunity to compete for the listing. I interviewed 4 agents and selected the one that I had not known previously because I felt that he would do the best job for me. If the others were upset with me for selecting someone else, then I consider that to be their problem. They were all given an equal opportunity and I had to choose what was best for my family.

I hope this has been helpful to you,

Bill

[londonbarcelona]

Originally Posted by sheena

OMG! Take the money and hurry.

Another reason not to buy now.

Buying now is not the problem. WHERE she bought IS. There are lots of deals out there to be had. I think if one stays in an established neighborhood and plans on living there for 5 years or more, they will be fine. However, all the areas on the outskirts of Phoenix, THOSE are poor places to buy at this time. Way too many investors feeding on the little people out there.

[sheena]

Originally Posted by londonbarcelona

Buying now is not the problem. WHERE she bought IS. There are lots of deals out there to be had. I think if one stays in an established neighborhood and plans on living there for 5 years or more, they will be fine. However, all the areas on the outskirts of Phoenix, THOSE are poor places to buy at this time. Way too many investors feeding on the little people out there.

I agree I was just vague

[azjack]

"Buying now is not the problem. WHERE she bought IS. There are lots of deals out there to be had."

If by deal, you mean a house that is worth much less than 2005, but will be worth far less next year and the year after that, then yes, there are lots of deals to be had. The OP should avoid this QC ghost town subdivision, but also the other falling knives for sale now.

[AZ91]

If only communities were allowed to be build with no HOA, then most of you worry would be gone.

[CheyDee]

Originally Posted by Captain Bill

What I tell people who have friends, relatives, fellow workers, and aquaintance that are real estate agents, is that you may owe them the "opportunity to compete" for your business. You do not owe them the business. You owe it to yourself and your family to select the person who demonstrates to you that they will do the best job for you.

When I selected an agent to sell my home in California a few months ago, I called three agents whom I thought I owed the opportunity to compete. One was an agent that farmed our area there for over 20 years. The other was an agent who works for the same company as I do. The other was the broker who works with the Property management company that leased my home out for 3 years.

They had a relationship with me and I gave them the opportunity to compete for the listing. I interviewed 4 agents and selected the one that I had not known previously because I felt that he would do the best job for me. If the others were upset with me for selecting someone else, then I consider that to be their problem. They were all given an equal opportunity and I had to choose what was best for my family.

I agree with you. I work for a large corporation and if my boss' spouse was a RE agent, I would have treated it similarly for the exact reason you gave. However, all bets are off when we are referring to a small company and the boss, (whose wife is the RE agent), OWNS it. In this case what is best for my family is that my husband does not build a brick wall between himself and his boss over this.

[CheyDee]

Originally Posted by Ponderosa

I was in a similar situation years ago. I had just moved to a new part of town called Ahwatukee. A recession hit (Carter admin) and the builder called it quits leaving most of the subdivision unfinished. We liked it. For a couple years we had vacant lots (and weeds) for neighbors, unobstructed views, quiet at night, and peace in the daytime, no traffic lights. the HOA was both non-existent and unneeded. It all came to an end, of course, and Ahwatukee became an unlivable mess that I eventually had to flee.

Same thing happended when I got to Estrella Mountain Ranch. The developer got thrown in jail and the federal government took over the place. Few new homes, great views, little traffic, less noise, limited HOA, the lakes to a handful of us. That, sadly, came to an end as well. Now we have people like ants at a picnic and dues that rise at five times the cost of living.

I like failed developments.

Thank you for your unique perspective on this.