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I once owned a condo that had an HOA with monthly fees and had no problem with it. The monthly fee was reasonable and the funds were well spent on repairs and maintenance. The best part about it was that it completely freed me from having to do anything outside of the four walls of my unit. All the landscaping, gardening, repairs, painting, etc., were handled by the HOA. So, for me it worked out very well. I even got on the Board for about nine months before I moved away, and although it was a short period of time, it seemed to be well run.
Condo HOA fees are not really as complicated as people tend to make them. There are typically two budgets to which fees are applied: Operating expenses (landscaping, trash, water, general maintenance and repairs, pool maintenance, etc); and Reserves (Pro-rated savings set aside for major service/repairs such as building roof, driveway resurface, building paint, elevator, etc).
One can generally calculate how much these covered expenses cost for a comparable SFH and compare that with HOA fees. I've generally found the difference to be pretty nominal -- and consider any difference to be a worthwhile investment in having someone else worry about and arrange for all the services I would otherwise have to do.
The notion that HOA boards are "greedy" is silly, since board members are unpaid, elected volunteers. Also, any significant expenditure must be approved by the owners IAW condo bylaws. While there can be 'bad or inefficient' HOA boards, individual members can typically be voted out by a simple owner vote.
Frankly, most of the complaining about HOA's on the CD forum is either by people who have "heard" they are bad ... or have never bothered to find-out how their HOA board works -- and instead, simply sit back and complain.
Thank you. This definitely gives me some optimism. I do like the idea behind them but I guess I don't have a lot of trust in other to always do the right thing. After looking at many of these condos, the monthly HOA fees seem very reasonable though.
HOAs can be a blessing or a curse. I have an investment property SFH with an HOA of $16/mo. They basically just make sure people's homes/yards are maintained. They can be a little overzealous at time and it can be annoying, but overall I like it. I have no HOA on my primary residence, but it would be nice if we did have one that forced the absentee landlords to maintain their lawns.
On the other end of the spectrum, my wife's friend lives in a condo in Pasadena. Right after their purchase, they were hit with a $20,000 assessment for repairs that affected everyone in the community. It was added it to their monthly HOA bill which brought it to about $900/mo for several years.
Yikes. $900 a month? I'll assume its gone down by now though.
I own a condo with very high HOA fees because it's an old historic building and its upkeep must be provided for just like an old historic home. People make a big deal about HOA dues as if it's something evil. Study the HOA's budget and you'll see how the money is being spent. You'll also find that a chunk goes into a reserve fund so that when the day comes to replace common area items, like roof, etc., hopefully enough will be there to get the job done.
The best advice I can give you if you're contemplating buying a a condo is to study the HOA's most recent and year-to-date financial statements but, more importantly, study carefully, the last reserve study done because the information there is valuable of what you're getting yourself into.
Pay particular attention to the ratio of reserve funds divided by the present value of common area replacement cost items. If this ratio is lower than 30%, it's an indication that significant deferred maintenance exists and/or a higher likelihood of special assessments in the years ahead.
I repeat, study the most recent reserve study carefully.
HOAs can be a blessing or a curse. I have an investment property SFH with an HOA of $16/mo. They basically just make sure people's homes/yards are maintained. They can be a little overzealous at time and it can be annoying, but overall I like it. I have no HOA on my primary residence, but it would be nice if we did have one that forced the absentee landlords to maintain their lawns.
On the other end of the spectrum, my wife's friend lives in a condo in Pasadena. Right after their purchase, they were hit with a $20,000 assessment for repairs that affected everyone in the community. It was added it to their monthly HOA bill which brought it to about $900/mo for several years.
Your wife's friend is at fault for not checking the finances before she bought. When we have a unit for sale I am always asked by the listing agent if there are any special assessments coming up. We also require a meeting with the buyer before closing and they can ask whatever they want. We don't hide our financials.
If you are looking for a condo and find a building that has ZERO condo fee....RUN.
When you own a condo, you only own the boundary walls of your unit, and everything within it. The association owns the lobby, the hallway, the stairs, the elevators, the storage and utility rooms, the roof, the foundation, the exterior wall and the structural columns, the yard, and the parking lot. Those things need to be maintained and insured....which is done with the dues.
So if there are no dues, that means the association is neglecting these things, which leaves you as an owner very exposed (to both liability and declining property value). You don't own the structure, so if they are damaged in an earthquake and the association hasn't insured them, then your condo value may suddenly be $0, with no recourse to recoup it.
Of course, there are varying degrees of association dues. For a one-bedroom condo, around $200/mo is about as little as I've seen in the past few years. But I've seen them as high as $1500 for a similar sized property in a building that has full services (professionally managed, concierge, pool, dog park, lounge, gym, underground parking, etc.). So you have to weigh what you want out of your community versus what you are willing to pay.
Keep in mind that association dues are not tax deductible or tax credits, and they are pretty much always assessed on a per-square-foot basis. So the larger the unit the more you will pay, and if you aren't going to use the amenities a property offers, then you are throwing money away.
Last edited by MarianRavenwood; 09-12-2017 at 06:54 PM..
Your wife's friend is at fault for not checking the finances before she bought. When we have a unit for sale I am always asked by the listing agent if there are any special assessments coming up. We also require a meeting with the buyer before closing and they can ask whatever they want. We don't hide our financials.
Well, I would just like to weigh in and say something similar happened to me. Literally a month after I moved in, an email discussion started about how the association had known for years that the roof needed to be replaced.
I DID check the association's finances, and read all of the bylaws and meeting minutes from the past few years. Unfortunately our president isn't a very good record keeper and her 'meeting minutes' are very sparse...little more than a few words added to the agenda that we started with. And if something was tabled, like the roof, she omitted the discussion entirely. I know that now, but I had no way of knowing that when I was just reading the documents sent to me by my lawyer.
Of course as soon as I heard this, I was on the phone to my attorney. The association is required to disclose this, not just in meeting minutes but there is an actual form they are required to complete itemizing any anticipated capital expenditures for the next two years.
Unfortunately, I could fight the association on it, but any legal fees incurred by the association will be passed on to its members....which includes me. Since the situation hasn't arisen from any real malicious intent by the association, but merely an amatueurish association of mostly first-time homeowners, I doubt any 'win' on my part would result in more than a slap on the wrist. If it did, the monies would come out of association coffers, so again it would still hurt me.
I'm just relating this to point out that you don't know that the other poster neglected to do anything in their home purchase.
Frankly, most of the complaining about HOA's on the CD forum is either by people who have "heard" they are bad ... or have never bothered to find-out how their HOA board works -- and instead, simply sit back and complain.
Please. I was a board member of my own board. The moment I left. The next board members ignored everything we did and spent money like it was going out of style. We had some normal members get back on... fix the damage, and leave, and then, another group got on and ruined all that. That group currently won't leave and have enough "friends" to support them. These friends get their maintenance requests handled quickly. Not to mention that board members have terms. 3 years is a LOOONNNGGGG time with a bad trustee(s).
It is more like HOAs are bad when people who don't care how they work get on the board and are ignorant and use it for the petty little games. Which includes about 60% of people. Also for most people it is an opportunity to control and go on a power trip that they don't really have any other opportunity to get.
The simple fact is that there is no legal consequences (except in Florida) for condo boards. They can follow their own rules.. or not. What exactly are you going to do if they don't follow their own rules? Sue? Well if you are made of money and they know it.
My condo got around the "special assessment" vote by simply calling it something else. A special fee. Again, if you don't like it, what exactly are you going to do about it? Sue? Not pay? If you don't pay they can take your condo and will.
I keep hearing different things in regards to HOA fees. Some say I should never go for a place that has it and others say its a good thing and covers many maintenance and utilities.
I'd like to gather more opinions on them, especially those of you that have experience with them. What do you think?
Condo associations don't "own" anything. Condo owners own the common elements and the association manages it on behalf of the owners. Sometimes directly, including via the board, in many cases they also hire a management company to take care of the routine operations. As others have said, the main thing is to thoroughly check out the finances of any place you are interested in. You should also ask for a copy of the reserve study. You want to make sure the monthly fee matches the monthly operating expenses and the monthly reserves based on the study. It's not really an different than owning a house in many ways - you have to pay your utility bills each month, so does the condo association. Chances are you'll pay electricity, gas, cable individually but most condos pay for water and trash collection out of the fees. And you have to save up because at some point, you need to replace the roof, repaint the outside, pay for monthly landscaping, etc. It's the same for a condo, except that it's done on a larger scale and they are making you do forced savings by paying ahead each month to put into reserves, rather than saying oops, we need to replace the roof this month, everyone needs to kick in $7,500 right now.
I'm also curious about the maintenance requests one person mentioned because the associations I've owned in didn't do any maintenance to individual units, just to the common property. So I might notice that the carpet in the hallway in the floor I lived on was dirty and shoot an email to the management company telling them that, but there were no maintenance requests that were specific to my unit.
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