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We are right to question the finances, though, right? Though perhaps not intentionally, every one involved is making me feel as though I'm on a pointless crusade against the HOA when all I really want is clear and definitive answers to my questions,
Yeah, the unpaid dues is huge for me too and I have a pointed question (pending an answer from the HOA) about it. They did tell us that a relatively small number of the owners (24) are chronically delinquent (more than one month), but they didn't say how delinquent or how many total units these 24 owners actually own. In this complex people may own entire blocks, it seems.
So I'm assuming there would be a way to go back and revise (reduce) our offer at this point? What happens at that point to all of the loan work (including the appraisal) that has been done. We haven't seen the appraisal yet, but are pretty sure it will match our offer.
Speaking of that, I am wondering why the bank would not consider the HOA's financial health and long-term viability in their loan approval process. We asked our broker straight up, and she did not have an answer beyond "we're just appraising the property you're buying." It seems that if there was a good chance that a big special assessment were coming and it might affect a buyer's ability to pay back his/her loan that the bank would want to prepare for that contingency in the loan approval process. At least to me that would seem prudent, but who am I, eh?
thanks.
The bank doesn't give a $!## about the financial health and long-term viability of the HOA. They're not on the hook for that condo, you are. Any special assessment is your problem, not theirs.
Well-managed HOAs have a process in place to keep dues current. In our HOA if you don't pay on time you get a notice and a late fee, next month a letter from the lawyer, after that we start the foreclosure process. Usually, people snap to by then.
We've had a number of homes that have gone into bank foreclosure. The process can drag on for years and neither the homeowner nor the bank pay the dues during this whole time. When the HOA forecloses, we sometimes have the property for 6 months to a year while the bank gets in gear. Meanwhile, we rent it out to recover the dues and the legal fees.
In some HOAs, people live rent free in their homes while the bank takes years to process the paperwork. Or else they move out and the home suffers damage from busted water pipes, etc. When it is finally sold, the fixer-upper price hurts the comps for everyone else selling.
When a bank forecloses, any liens including an HOA lien for back dues, is discharged in the foreclosure process. i.e. HOA gets nothing but gets stuck with the bill for maintenance, landscaping, pool etc.
Lots of people behind on their dues means poor management.
Could also mean lots of places in foreclosure. Worth checking out.
Last edited by GotHereQuickAsICould; 07-27-2014 at 03:41 PM..
I would ask if they have an automatic collection process that kicks in after a certain time or dollar amount. If they do it may not be soon enough. The delinquencies bother me.
I would ask if they have an automatic collection process that kicks in after a certain time or dollar amount. If they do it may not be soon enough. The delinquencies bother me.
The delinquencies bother me more than the low reserves.
Some HOAs fix things as they come up based on the dues coming in. The theory being if there is much in the reserve bank account, the board starts spending on foolish things. So they have a "reserve study," a plan of what needs to be done when and base their dues coming in on what projects are coming up.
But how do you plan for that if a lot of homeowners are delinquent on their dues?
The review of the HOA documentation is part of our disclosure contingency, so we have a right to review the documents and pass if they are not to our liking. We are currently filing for a contingency extension as we await the HOA's responses to our questions. Our agent has informed us that until we remove our contingencies, our earnest money is not at risk.
You hit some of my biggest concerns on the head.
Maybe they're hiring? Just kidding. The lack of communication from HOA has certainly not made anything better. So an HOA is not bound by anything not to discuss the HOA's business with prospective homebuyers? I guess that makes sense since they had to provide me with disclosures in the first place, right?
Yeah, I get the feeling they're dragging their feet. In our request for an extension (waiting for HOA response), I tried to get my real estate agent to make the extension date relative to the date that the HOA responds (in other words, if they responded on Monday, we'd have until Thursday; on Tuesday, Friday; etc) but she said the date we're requesting has to be set in stone. So I settled on submitting a formal request to have the sellers respond to the extension by the end of the day on Monday, so if they do not grant the request (or simply do not respond) we can walk while still within our financing contingency period (which, without and extension, ends on Tuesday).
I do not know what can of worms opens up if we let the original contingency period lapse without an extension, and I do not want to find out.
The HOA changed management in 2008, but said in their initial verbal response essentially that they were left with a very poor situation by the previous management and that they're still recovering.
Thanks again for your replies.
Some of you may ask, "why are you still talking about this?" and the answer is that we truly do like the home and I truly hope that the HOA is able to give me confidence in their community sufficient to convince me to purchase the home. Furthermore, this process has been a drag through the mud not only for me and my wife but, I'm assuming, for the sellers and if there is a good resolution then we'll take it.
The seller has leverage you don't have. He's the owner of the unit and member of the HOA.
The amount of unpaid dues is a huge red flag for me. That's a sign of a poorly managed HOA. .
This says more about the owners than the HOA management.
In my state the HOA can pursue a court order for eviction with the intent to lease out the unit and apply rental income to the unpaid assessment balance. The court may or may not issue a court order to do so, depending on the individual circumstances.
The HOA may file a civil suit against the owner, including but not limited to wage garnishment. It is very costly to do so and a favorable judgment is not the same thing as getting paid.
Even more fun is when the unit owner does not occupy the unit and instead leases it to a third party.
In my state, banks become responsible for assessment in the month following the public auction. Banks typically do not pay the assessment until the unit closes at resale which could be 6 months or years later.
Many states allow an HOA to file for foreclosure when assessments are unpaid. In reality this practice tends to be more of an internet old wives tale than reality. Most units are subject to a first mortgage which trumps all other liens.
I don't know the specific rights California law gives HOAs as it relates to what it can and cannot do, in the event of a unit owner's failure to pay his assessment.
Dues are the lifeblood of a HOA. It's essential to have them of the system does not function.
Next is the board and the management. They can be like an aneurysm or blood clot and the lifeblood is pointless. Or they can be wonderful and all flows well.
This says more about the owners than the HOA management.
In my state the HOA can pursue a court order for eviction with the intent to lease out the unit and apply rental income to the unpaid assessment balance. The court may or may not issue a court order to do so, depending on the individual circumstances.
The HOA may file a civil suit against the owner, including but not limited to wage garnishment. It is very costly to do so and a favorable judgment is not the same thing as getting paid.
Even more fun is when the unit owner does not occupy the unit and instead leases it to a third party.
In my state, banks become responsible for assessment in the month following the public auction. Banks typically do not pay the assessment until the unit closes at resale which could be 6 months or years later.
Many states allow an HOA to file for foreclosure when assessments are unpaid. In reality this practice tends to be more of an internet old wives tale than reality. Most units are subject to a first mortgage which trumps all other liens.
I don't know the specific rights California law gives HOAs as it relates to what it can and cannot do, in the event of a unit owner's failure to pay his assessment.
Do you?
If the HOA management doesn't keep on top of dues collection, paying dues moves down the priority list for homeowners. If homeowners know nothing will happen, then they become more complacent.
HOA filing for foreclosure is not an internet wives tale. Our HOA has done it successfully. I understand others in the area have done so as well.
As I wrote, 6 months to a year later when the bank forecloses, they get the property. Meanwhile, we rent it out. It was a win-win, as the place wasn't sitting empty and back dues were covered. You'd be surprised how many people are looking for a month-to-month lease.
In our state, once the auction is held and the bank officially owns the property, they are responsible for the dues from there on out. Our HOA never gets dues on property that is "in foreclosure," that long period when the homeowner quits paying and the bank officially takes possession of the title. But once the bank has foreclosed and owns the property, the dues accrue. Typically, the home sells within a month or two and dues for those couple months are paid out at closing.
HOAs started in our area about 40 years ago. Many are starting to face the same situation as this development. Sloppy management over the years has resulted in poorly done repairs and deferred maintenance with many big ticket items coming due and little money in the bank.
Homeowners get slack about paying their dues. People start suing the HOA for not providing the promised upkeep or amenities.
I would be leery about buying in any older community until I had checked out their management approach. Lot of homeowners delinquent on dues would be a huge red flag.
Go a board meeting. Are homeowners complaining about repairs not being made?
There are older, sound HOA communities. Typically, these are ones where the board members have been responsible about taking care of business.
The board could be a bunch of busy bodies passing rules about who can park where while leaving the actual oversight and management of the HOA to a management company that is paid tens of thousands of dollars and who may be doing a slap a## job.
There are HOAs that are self-managed. I only know of a few, but all of them are doing well. Homeowners on the board are dedicated to seeing that their community and their home values don't go down the tube.
Self-management needs competent board members and the support of involved homeowners who are willing to volunteer to do various jobs and serve on committees. Maintenance, repairs, accounting, etc. is usually contracted out, but volunteers are necessary for oversight and project management. It is not always easy to find competent people willing to volunteer this much time and energy.
The bank doesn't give a $!## about the financial health and long-term viability of the HOA. They're not on the hook for that condo, you are. Any special assessment is your problem, not theirs.
I wonder where you get your information? FHA, Fannie Mae, VA, and Freddie all have a review of the condo association's health. Pending litigation is one reason to deny financing, as are high delinquencies, or inadequate reserves. The review may be waived when the buyer has 20% or more down (on a conventional loan). FHA sees a high number of non occupied units a as a sign a neighborhood is no longer desirable. Anyone buying a condo should ask their lender about the review requirements And even ask to see the required questionnaires. The OP's dilemma may be moot, as their lender may not even go along with the property under contract.
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