condos, HOA’s, North Park, questions

[bzribee]

I am looking at buying at La Boheme in North Park. I am lucky enough to be getting in with some help frmo the city, but I have BIG questions about the very high HOA fees ($380/month–can be increased 20%/year). Covers structure, some water, trash, fitness room, social room and maybe 1 jacuzzi, grounds, elevators…)

I know the builders are supposed to fund the Association to get it started. Is it possible that DR Horton is keeping the HOA’s high to cover the number of units sold “affordably”?

The process is certainly cumbersome and slows down how quickly “affordable” folks can move in. I know there are a large group of us, and I’ve been in escrow for 2 months with no new move in date in sight. It’s given me LOTS of time to read the CCR’s, meet Merit management (another not happy topic) and compare HOA’s at complexes with more amenities.

I’m not in a rush to buy or move,but I would like help in thinking out these fees.

Anyone? Anyone?

[PerryChase]

I don’t believe that they can do what you suggested. The HOA money does not go to the developer but to HOA for maintenance and reserves. If anything, the fees are low initially (to attract buyers) and rise afterwards as more maintenance is needed when the project gets older.

$380/mo is not high for a condo complex. It’s about right if you have some amenities and can be much higher in more luxurious developments.

[PerryChase]

What kind of help are you getting from the City? And what are the requirements/conditions?

[bzribee]

I am getting a reduced price on the condo, and 5.75 interest rate on the first mortgage, 3% on the second. I believe I will also be paying a lower property tax, for at least a few years. There are many stipulations: I must pay back discounts if I move within a certain period of time, I may sell, but only to someone in my income bracket and approved by the city, there is some kind of partial extra payment due in 45 years (!)…No renting allowed, no subletting, proof of primary residence due yearly…

I would tell you more but I must go to a workshop put on by the city to get all that information, and the workshop hasn’t happened yet. I am, however, allowed to change my mind up to 3 days after the workshop without losing money in escrow. I appreciate this, as I don’t have all the information to make a completely informed decision.

In the past, the city did not correctly oversee a simialr program (same builder, I think) and so they are probably being VERY diligent this round. Previous “affordable” owners were “flipping” which is against the rules. Meanwhile, there seems to be “stuff” happening between city and lender, so the buyers are on hold.

Again, I really like the unit and appreciate the price, but I’ve looked around at other similar complexes and fees seem to be lower (except one in MV) and they have more amenities. I”m a bit worried that should I ever sell, the condo fees could be over $500 in no time.

Thanks for asking. I do tend to give TMI.

bzribee

[Raybyrnes]

I looked into the affordable housing programs in Carlsbad, Carmel Valley, and downtown and the bottom line is that if you qualify it is a great deal. The only downside as I saw it was exiting the unit. You will have to find a qualified applicant to purchase the unit. This can be a challenge. Additioinlly you will lose your first time buyer status which can be useful if you are using Cal FHA loasn to get into rate housing. All in all when you net out the fact that you are building equity, improving credit, getting a tax deduction and living in a brand new development you can’t go wrong. The price of these things leave you very little downside and a very good margin of safety.

[SD Realtor]

I want to say that we looked into a similar program for my mother in law and there were some very big concerns we had about exiting as well. Also about how the property gets passed on in the event that the owner passes away.

Personally I do not think 380 a month is a good deal for HOA fees. Especially in North Park.

If you are getting a first and a second it sounds as if you are really pushing yourself financing wise. 5.75% on your first is not exceptional right now. However the 3% second is great. Have you looked into a CALHFA loan. There are some great deals for first timers out there.

My concern is that you guys sound like first time buyers. This home will not be your last home. So if you are going to be a first time buyer make sure that your exit strategy is not hindered. Also I think the program you are in prohibits you from using the property as a rental as well…

Seriously, if there is one segment of the market that has taken a beating and is continuing to get hammered, it is the condo market. I think with a little patience you guys can do really well in the next year or so…

SD Realtor

[bzribee]

Thank you to folks who have posted. I do have concerns about exiting and appreciate hearing your thoughts. My concerns are heightened by what I feel are high HOA’s.

I am not in a rush to buy so advice to wait is good. I only looked into La Boheme because of its very discounted price, and the location.

I am under the impression that affordable buyers HAVE to do the loans through the builder and that rates are set by the city (though I chose the 2nd due to the very low rate). I will DEFINITELY be looking into this on Monday.

Yes, I am a first time home buyer, but also close to retirement age. So, while I’m very stable, I may also want to travel, move, work elsewhere in a few years. I have always rented and I can certainly continue to ride out the downturn…

bzribee

[no_such_reality]

Exiting has turned into a series of lawsuits in Huntington Beach and the OC.

You may wish to check it out, if I recall correctly, the City prevailed and essentially, since you enter below market or with assistance, need to sell in the same manner.

[Raybyrnes]

A final piece of informaiton

I believe that the affordable housing program pegs all prices to the monthly payment. This means that HOA, Interest Rates and Housing Price are fairly meaningless on their own because if one lever goes up the other levers go down. For instance if inrerest rates jumped up before you closing the price of the unit would be reduces and you monthly payment would be unchanged.

Where does this work against you. If you are on the sales side and interest rates spike up then you stand to lose money at that point in time. I was ready to buy a unit in Carmel Valley when the seller insisted that I pay her realtor fees. This was a ridiculous request as I knew I was going to ahve to pay realator fees when I sell so in essence she was asking that I double pay.

What she did not realize at the time is that finding a qualified buyer was not that simple. I found her more than she found me because I was educated on these programs. Additionally interest rates were extremely low giving her a profit on her unit. She balked and interest rates went up about a point before she found another buyer. I am fairly certain she looked back and regrets not signing the papers that day and paying the sales commission.

I still believe that there is very little risk to these programs. If you can qualify I would not overthink it. It is a better deal than renting and while you technically can not use it as a rental property who is to know if a friend moves in. Possession is 9/10 the law.

Best of Luck

[debshultz]

$380. seems about right given number of units. It would be considerably more if it had a swimming pool. Also, keep in mind these “projections” by the builder are usually dated, meaning that you can plan on them going up on a very regular basis once the homeowners association gets going.
Good luck!

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