San Diego Housing Bubble News and Analysis

Get involved with your HOA is the best way :)

How about if you're going to buy a place and you want to know the state of the HOAs finances beforehand?

The property management companies have been pretty upfront with information regarding HOA's status. I believe you can also order a copy of the minutes from HOA meetings. A good inspection of the condition of the condo before you buy will help. You may want to ask how many owners are paying their dues? Are there any unpaid bills/services/loans/mechanical liens owed by the HOA? Are there any current maintenance issues? Are there any special assessments coming in the near future?

HOA usually issues some kind of document for the seller to the purchaser. I have a brain fart right now and forgot its name. It is a required document for sellers in Washington state, but I guess it is not required here.

How about if you're going to buy a place and you want to know the state of the HOAs finances beforehand?

Well in that case, read the reserve studies. That's the best indicator of the financial pulse of the HOA. Never buy into a complex with less than 50% funded.

Thumb through all the HOA's meeting notes and get a copy of the fiscal statement before  purchasing.

The HOA meeting notes usually gives a  pretty good indication of what sort of crap might be going on in your development (things breaking, crime,etc).

selfportrait

----- Sour grapes for everyone!

What to request from the HOA:

1. Request a copy of the CCR's and By-Laws and read them at least twice. Every potential buyer is required to be given these when asked.

2. Request a copy of the Reserve Study. It should tell you the estimated replacement cost of all major maintenance items owned by the HOA and how long before it will need to be replaced, and how much is saved towards that replacement. If you don’t understand the Reserve Study information, have an accountant or CPA review it with you.

3. Request to review all financial statements at least for the last 3 years. They are required to make this available at the HOA office or Property Management office during regular business hours. You will not be able to see foreclosure and penalty assessments for individual units or persons. But, you should be able to see the summary data. Again, if you don’t understand this information, have an accountant or CPA review it with you.

4. Request a list of past Special Assessments by the HOA.

5. Request to review all meeting minutes for the last 3 years.

6. Knock on doors in the complex and talk to 10 owners. 8 of 10 will have no clue what is going on with the HOA. 1 of 10 will true fully tell you everything that’s going on. The last one will be a present board member. Don’t believe a word he says.

My brother and I lived in a 120 unit PUD built in the ‘70s with very low dues and low reserves. He was on the Board as secretary. The board was insistent to keep everything from the owners. We created an unofficial news letter to pass out in the Complex. The other board members hated it (us) for informing the other owners.

But just like our state and federal government, it requires and informed Citizenry for it to work.

And thank God it will never work well.

Lucky In OC

Lucky - thanks for that invaluable information. We are not so desperate to do a condo. There's been times we've considered it, but the HOAs are too much. The CCRs are ridiculous, and now hearing about the special assessments and other horror stories, we continue to be thankful to have dodged buying one.

I remember hubby pushing Savannah Terrace. I was very against it. I see places losing so much equity there now. My dad would tell me to steer clear of condos. He never fully explained all the reasons why. I guess too many to enumerate. But many are becoming obvious now.

I am not necessarily against HOA's. My wife and I are considering buying a 2Bd/2Ba in RB as a second home, possibly for retirement. We would like something with low maintenance and a pool for our kids. This is difficult with part-time residency. I just think it is buyer beware. Newer PUDs (1990-2002) may not have these problems. Very new PUDs may have issues as indicated as initially stated.

However, I believe increase over 10% per year are required to be approved by the owners. High increases in dues after special assessments doesn't make sense. The special assessment will cover the current shortfall. The additional dues required to cover the same roof should be spread over 30+ years.

Example:
Roof for each unit: $10,000.
No. of year life: 30 years

$10,000 / 30 years / 12 months = $27.78 per month.

This is without accrual of interest. There has to be other major issues for the dues to go from $150 to $350 per month.
The board may have just hired a very expensive Property Management Company.

Lucky In OC

The theory of HOAs are like the road to hell paved w/good intentions. Few are managed properly - especially financially. But having rented in complexes w/HOAs, I find the homeowners are problematic, enforcing rules with dictatorship mentality. I don't find it a friendly community but more like a prison police state.

I have seen many lawsuits involving HOAs suing over the most petty things that I am amazed don't get settled but actually go to trial. One in particular was over a palm tree.

I understand one who is maybe going to retire would want a maintenance-free, simple and easy living. But my experience is quite the opposite.

I bought a condo for my mom in a 55 over community and all they do is raise the HOAs and don't maintain the premises as well as they should, cutting corners often.

I am disappointed and am discouraged from ever going that route. More and more information emerges to convince me not to buy a condo.

jp,

Unfortunately, HOA's are not only for 'Condos'. Condos, Townhouses, SFR, & Timeshares (all PUDs or CIDs) all can fall under HOA's. In fact, it is rather difficult to find new homes without HOA's. Likewise for Mello-Roos.

But you won't get the bright pink house with purple trim next door...

Everyone who owns or plans to own a PUD/CID should be read the following at least twice:

California Civil Code
Division 2 Property
Part 4 Acquisition of Property
Title 6 Common Interest Developments

Correction:

Regular Assessments over 20% requires quorum (50%) of owners.

Special Assessments over 5% of the current fiscal year budget requires quorum of owners.

California Civil Code
Division 2 Property
Part 4 Acquisition of Property
Title 6 Common Interest Developments
Chapter 5 Operations
Article 4 Assessments - 1366 (b)

http://www.leginfo.ca.gov/cgi-bin/displa...

Lucky In OC

Thank you Lucky, FLU and cv2 for the specifics on checking the state of the HOA.