HOA's going bankrupt (contingency, gated community, documentation, foreclosed)

[Serena123]

Does anyone know what happens when an HOA goes bankrupt. What impllications re homeowners?? I hear this is starting to happen in various cities.

[gagaliya]

this has happened extensively in the high rises in miami/florida. It really varies, but the general outcome is the building stop getting maintained, for example noone is cutting the grass anymore, or taking out the trash, or fixing the boiler, the pool is without water, gym with broken equipments etc..

The building deteriorates quickly, and if financing cannot be secured, electrical to the common areas will get cut eventually. So even if you are a perfect owner paying mortgage/fees, you will bascially lose the unit as it's unlivable anymore. That's the risk of a condo.

But speaking from ny metro area, these cases are nonexistent or very rare. It only happens in highly speculative markets in bad areas where for example 80%+ of the owners are flippers.

[texdav]

In condo and owned apratments this can be a really problem now and in the near future.

[MMichelle]

The property becomes worthless.

[whydoucare?]

I read about this in an article, they were saying that there are so many foreclosed condos and the owners are still living in them and not paying homeowners assoc. fees. Its like what can they do, they cant foreclose because its already under foreclosure!

[gagaliya]

yeah sometime the bank let the owner live in there, just so to prevent the unit/building from deteriorate too fast vs an empty broaded up building.

but do you guys see this happening elsehwere? the only places i am aware of are florida, detroit, some parts of neveda. Because usually there is NO WAY the bank will refuse to pay a few hundred bucks of condo fees a month to walk away from the unit, unless the whole area went to sht like in detroit.

So although this sounds bad, it really isnt a big concern to buy a condo. Just make sure the location is solid and do some dd on the building itself.

[Serena123]

Hi, Thanks for the info on condos. I was thinking of buying a house in AZ, and found out the HOAs are going bankrupt. Can someone let me know if this is an issue for a house owner, not a condo owner? Thanks ~

[loves2read]

I really don't think this is an issue for SFR HOAs because they basically don't have that much in expenditures unless it is a gated community with a payroll--like a senior citizen neighborhood with staff--and they may not be called HOA fees but something else--like monthly maintenance

most of the time in TX any land owned in common is minimal and pays minimal tax--dues go to pay for things like water useage for sprinkers on common land, maintenance (more if there is community pool involved), fencing upkeep/replacement, postage for newsletters although many are going to e-mail, maybe some type of blanket insurance liability policy if there is some type of park/swimming pool

[middle-aged mom]

Anyone anticipating writing a contract on any sort of property within an HOA should request all the necessary documentation, including rules, audited financial statements for the past 2 years, budget and YTD P/L, before making an offer and/or make an attorney review/approval of these documents a contingency.

[jbgarlin]

Any common areas owned by the HOA are subject to sale by the bankruptcy trustee. Needless to say this would be devastating to a development.