North County Mello Roos/HOA Verse Older Neighborhoods

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Submitted by Andrew32 on August 4, 2017 - 11:14am

Moved to North County two years ago and have been renting while saving up for a down payment. We identified a couple areas we could see ourselves living in indefinitely. We're planning to purchase a home with the intention of staying for the long haul until the newborn and any future kids graduate from high school.

My big question is: What would be the long-term (20- years) cost comparison between a newer home in a Mello-Roos neighborhood with an HOA than a home without either(or just a low HOA)?

a)Some follow ups that I am trying to answer:
Are homes in Mello Roos neighborhoods (i.e. Del Sur) priced less per square foot than older homes (that are updated) in neighborhoods like Encinitas, etc. with lots that aren't Mellos-Roos and HOA around $40-$80 a month instead of $160? Seems that way but I can't tell just by looking at Zillow.

b) How significant would the maintenance costs be of an older home from the 80s verse a home built in the 2010s or new with a warranty? I feel like that should add up enough to play a factor in our decision.

I know we can have a lower monthly payment with an older home that has the same sale price than a newer one with Mello-Roos and a big HOA (400-700 less a month total) and in turn that frees up money that would not be going towards equity or is tax deductible. However, on the flip side, if a home without those additional costs sells for more per square foot in North County and has higher maintenance costs, could it be essentially a wash or even possible to come out ahead in the newer home scenario over a 10-20 year time period?

I understand the many variables in play that make answering these questions challenging but looking for data, expertise, and even opinions to bring some clarity to my logic here, which I'm sure is flawed in some way(s).

Submitted by gzz on August 4, 2017 - 2:25pm.

Markets are generally efficient, so probably a wash.

Older homes will probably have somewhat bigger lots and better locations. Newer homes will probably have more younger couples with kids in the immediate neighborhood.

10-25 years ago the new home trend was big great rooms and master beds and high ceilings. Now it is splitting the big master bed into two smaller rooms and a "modular" setup to accommodate adult children or elderly parents with greater privacy.

Personally I like older big room trend more. I love the open space inside and don't have a TV requiring a formal living and TV centered family room setup. I also feel cramped in big house on small lot areas like Carmel Valley and most newer NCC developments. I also feel like they seem smaller than their interior square footage because there is less open space around them to see out the windows.

My view on timing is buy now because next summer prices will likely be 10% higher. A high income couple will get huge tax deductions. I easily got a low rate 5% down mortgage for my first purchase, locked in my low price, then did a refi once I saved up enough to do 20% down a year later.

Submitted by sdduuuude on August 5, 2017 - 6:43pm.

In Carmel Valley, there are a limited neighborhoods with no HOA or M.R. I forget the development name, but there is one area we thought was great, though it is rare to see things for sale there. Some of the street names are Heritage Glen, Monterey Cypress.

See an older piggington thread to read about paying off your Mello-Roos early. Basically it is a loan payment on a 9% interest loan. Borrowing at 4% to pay it off could pay-off. It should allow you to ask more when selling, though not all feel that way. Maybe when buying, ask the seller to get a payoff amount for the M-R.

The problem w/ HOA isn't just the HOA fees. It is the HOA itself and their rules and busybodies. I know of an aggressive HOA president in the Tynebourne area of Carmel Valley that everyone hates, hates, hates. Get into an HOA with an ass like that and your life is hell.

Submitted by harvey on August 5, 2017 - 8:40pm.

gzz wrote:
Markets are generally efficient,

Not the residential real estate market. Maybe in the big, long-term picture they are, but for an individual buyer doing a single transaction there are plenty of opportunities to encounter inefficiencies that can substantially affect costs.

A while back I actually played with some numbers, it was really rough it but seemed to me that buyers generally do not price in the cost difference of property taxes.

But it's not something that's worth the trouble to optimize in practice. Don't sweat it, just buy the house you like.

Submitted by harvey on August 5, 2017 - 9:00pm.

sdduuuude wrote:
See an older piggington thread to read about paying off your Mello-Roos early. Basically it is a loan payment on a 9% interest loan. Borrowing at 4% to pay it off could pay-off. It should allow you to ask more when selling, though not all feel that way. Maybe when buying, ask the seller to get a payoff amount for the M-R.

It never hurts to check but most bond rates today are now much lower than 9%. They were that high years ago but most issued today have lower rates and many cities have refinanced the higher-rate bonds.

Submitted by flu on August 6, 2017 - 8:21am.

You cannot pay off the MR most houses in Carmel V have (at least the MR of San Diegito, and DMUSD). I tried to call to do that, but they don't allow for that.

Submitted by SK in CV on August 6, 2017 - 8:54am.

flu wrote:
You cannot pay off the MR most houses in Carmel V have (at least the MR of San Diegito, and DMUSD). I tried to call to do that, but they don't allow for that.

This doesn't sound right. MR are special assessment bonds, meaning there is a legal document to back up the assessment. There could be pre-payment penalties, or possibly zero economic advantage, but "cannot pay off" is contrary to every bond document I've ever seen. (there are non-callable bonds, if they're paid off early, they have to continue paying interest anyway.)

It is possible that the bond servicer has a strong motivation to discourage payoffs. I found this link that appears to guide a homeowner in finding the actual bond documents.

https://arcc.sdcounty.ca.gov/Pages/Mello...

Submitted by spdrun on August 6, 2017 - 9:11am.

I know of an aggressive HOA president in the Tynebourne area of Carmel Valley that everyone hates, hates, hates.

Wait till they go on vacation. Post a Craigslist ad from anonymous wifi mentioning "moving -- everything in the house is free" at their address :) Maybe they'll get the message...

Submitted by flu on August 6, 2017 - 11:36am.

SK in CV wrote:
flu wrote:
You cannot pay off the MR most houses in Carmel V have (at least the MR of San Diegito, and DMUSD). I tried to call to do that, but they don't allow for that.

This doesn't sound right. MR are special assessment bonds, meaning there is a legal document to back up the assessment. There could be pre-payment penalties, or possibly zero economic advantage, but "cannot pay off" is contrary to every bond document I've ever seen. (there are non-callable bonds, if they're paid off early, they have to continue paying interest anyway.)

It is possible that the bond servicer has a strong motivation to discourage payoffs. I found this link that appears to guide a homeowner in finding the actual bond documents.

https://arcc.sdcounty.ca.gov/Pages/Mello-Roos-Information.aspx

Ok, I'll try calling again. But I already did twice.

Submitted by SK in CV on August 6, 2017 - 11:57am.

flu wrote:

Ok, I'll try calling again. But I already did twice.

I'm thinking that calling isn't what's necessary. Find the actual document, the MR Bond. Read the language in the bond and find out if there is anything that prohibits early pay-off. That document is binding. Not what someone on the phone says. The servicing agent is (probably) not a party to the contract.

Submitted by flu on August 6, 2017 - 12:21pm.

SK in CV wrote:
flu wrote:

Ok, I'll try calling again. But I already did twice.

I'm thinking that calling isn't what's necessary. Find the actual document, the MR Bond. Read the language in the bond and find out if there is anything that prohibits early pay-off. That document is binding. Not what someone on the phone says. The servicing agent is (probably) not a party to the contract.

Gotcha

Submitted by flyer on August 6, 2017 - 5:32pm.

Many people have these questions when it comes to buying property here, and, in your case, as a young family, some other factors you might also want to consider wrt choosing a home with Mello vs.no Mello, involve your choice of school districts, as well as how much time you want to spend commuting.

We have some rentals in Carmel Valley that have low or no Mello, so they do exist there, as well as in some other extremely desirable locations of the county, and any realtor should be able to provide you with that information.

Right now, it's a huge challenge to find a home in the most desirable areas of the county, but, believe me, it's worth the effort trying to find the home and location you really want--vs. settling for less--especially if you're here for the long haul.

Submitted by Andrew32 on August 7, 2017 - 6:48am.

Thanks for the input, @gzz. We hadn't considered the floor plan differences of older/newer homes but that makes a lot of sense. We do want the in-laws out here in the next 3-4 years, but it's unclear whether they would be with us or sell their home and we'd potentially help them buy something in an area more tailored to their lifestyle.

Our rental lease is up in January and we're working with a financial planner now to figure timing out. Emotionally, we don't want to rent for another year or two, and financial probably don't need to, but it's our first home purchase and feels like such a whale of a decision (because it is!).

Submitted by Andrew32 on August 7, 2017 - 6:53am.

@flyer - It will be important for us to keep in mind the location/home we really want verse settling. Thanks.

Submitted by Andrew32 on August 7, 2017 - 6:58am.

@sdduuuude - It would drive my wife crazy if the HOA was unreasonable and run by a tyrant. Her parents have a few unstable HOA board members in their community (not in SD). The landscapers are fired every six months and while visiting once, we watched this woman follow and bark orders at the landscapers the entire time around a 99-home community.

Submitted by sdduuuude on August 7, 2017 - 8:55am.

harvey wrote:
sdduuuude wrote:
See an older piggington thread to read about paying off your Mello-Roos early. Basically it is a loan payment on a 9% interest loan. Borrowing at 4% to pay it off could pay-off. It should allow you to ask more when selling, though not all feel that way. Maybe when buying, ask the seller to get a payoff amount for the M-R.

It never hurts to check but most bond rates today are now much lower than 9%. They were that high years ago but most issued today have lower rates and many cities have refinanced the higher-rate bonds.

Most MR bonds in CV were issued years ago, not recently.

Submitted by sdduuuude on August 7, 2017 - 9:03am.

flu wrote:
SK in CV wrote:
flu wrote:

Ok, I'll try calling again. But I already did twice.

I'm thinking that calling isn't what's necessary. Find the actual document, the MR Bond. Read the language in the bond and find out if there is anything that prohibits early pay-off. That document is binding. Not what someone on the phone says. The servicing agent is (probably) not a party to the contract.

Gotcha

Try this guy: Bob Quaid at Willdan Financial Services.
bquaid@willdan.com

He was responsible for spelling out and collecting special school fees before I could pull my permit. I doubt he is the right guy, but suspect he could direct you to the right place.

Submitted by flu on August 9, 2017 - 3:35am.

sdduuuude wrote:
flu wrote:
SK in CV wrote:
flu wrote:

Ok, I'll try calling again. But I already did twice.

I'm thinking that calling isn't what's necessary. Find the actual document, the MR Bond. Read the language in the bond and find out if there is anything that prohibits early pay-off. That document is binding. Not what someone on the phone says. The servicing agent is (probably) not a party to the contract.

Gotcha

Try this guy: Bob Quaid at Willdan Financial Services.
bquaid@willdan.com

He was responsible for spelling out and collecting special school fees before I could pull my permit. I doubt he is the right guy, but suspect he could direct you to the right place.

Thanks! I'll try that too. Maybe the bond rate is low, so this probably won't be an issue. Still, beats leaving cash in a <1% CD.

Submitted by harvey on August 9, 2017 - 6:39am.

The CD is a helluva lot more liquid.

Submitted by flu on August 9, 2017 - 8:06am.

harvey wrote:
The CD is a helluva lot more liquid.

Yes, but frankly I have too much cash on hand right now. I'd rather reduce my operating costs to keep a house that generates no income even lower.

Submitted by maoing on August 12, 2017 - 10:28pm.

I paid off MR in PUSD 6 years ago. I was lucky to pay off MR when bond interest rate was high, so the pay off amount is much smaller compared to right now, because MR authority most likely refined more debt w/ much lower interest rate.

Submitted by maoing on August 12, 2017 - 10:29pm.

agreed. but you can pay off MR for solanna beach school district, i.e. PHR homes.

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