CDD's - Can someone please explain what they are? (foreclosures, HOA)

[mnareyes]

Hey all, can you please explain what the CDD's are. One of the realtors we've been in touch w/ said they are a good thing. Yes? No? thanks!

[Mike Peterson]

It is just the buyers paying back the developers bond over time.

The Community Development Districts were created to help developers put in roads, utilities, clubhouse etc. Just about everything but the actual homes. It is a tax free municipal bond that is paid back by the home owners as an additional tax.

They are a good thing, for the developer.

[Keeper]

I agree with Mike.. they are a good thing for the developer.

[BucFan]

Are CDD indefinite or is there an end-point to homeowners having to pay them. It seems that once the developer recoups his costs, the CDD fees shouldn't be collected.

[sange77]

CDD vs. HOA

CDD Fees are made up of two portions:
1) Operations and Maintenance which is the cost to maintain the clubhouse, pool, streets, street lights, street signs, tennis courts, playground, common areas, payroll for clubhouse staff and payment to the management company etc. This O & M portion of your CDD fees will never go away and will most likely increase every year, for inflation or new amenities the community decides to add.

2) The A Bond - The Bond is a government bond that was taken out by the developer to build the community, the streets and amenities. The bond portion usually has a term life of 30 years, once it is paid off you will still pay the O & M portion of your CDD fees. There is also a B Bond Portion but that is paid by the builder at closing. CDD's are also tax exempt.

What to remember about CDD Communities is since the bond is a government bond and was technically paid for by tax payers...the communities cannot be 100 % private. They're streets are not private neither are the facilities. You cannot really stop anyone from coming in. Plus on top of the CDD you still have to pay HOA which has a management company of their own. so now you're paying 2 management companies, 1 to manage the CDD and one to manage to HOA. It may be the same company for both but you're paying each of them separately.

HOA's are a different story since the developer most likely used their own money to build the community they do tend to be more private. HOA communities own their streets and amenities and all the money you pay is going towards operations and maintenance you're not paying the bond back. HOA's are in charge of the problems for individual homes like someone is not maintaining their lawn or you want to get permission to put in a pool. They drive around and look for covenants violations. The covenants is the book you get at closing with all the community rules. If your community does not have a CDD your HOA is also in charge of the common areas, gates, streets, ammenities, etc.

PROS OF A CDD: CDD Fees are paid throught that tax roll....therefore, it usually has a pretty good collection rate as opposed to an HOA...with all of the foreclosures going on HOA's are hurting and running up large attorney bills but they will eventually collect the $$. CDD's are tax exempt. The meetings are run similar to a county commisioners meeting and they follow the same rules.

CONS: The developers get away with it all. They do not have to lay out their own money, build a community off a bond that the builders and homeowners pay back but make a killing in profit when they sell their land to the builders. And guess what...if all the bond money is not used in a certain period of time, the developer gets the left over money.

Good Luck.

[mnareyes]

wow, great explanation! thanks so much