Living in a homeowner’s association (HOA) can have a lot of benefits. But like anything related to the real estate in this economy, associations need to be carefully evaluated. The amount of foreclosures is having a negative influence on the HOA.
When a bank forecloses on a condo or other real estate that’s part of an association, they often don’t pay the association fees required from the homeowner. The banks also tend not to keep up with maintenance of the uninhabited unit, letting the home slowly deteriorate while it sits on the market. This leaves the HOA and the neighbors to pick up the tab and has major effects on those buying or selling within the association limits.
If you’re planning on buying a townhouse or other property that belongs to an association, make sure you find out the financial situation of the neighborhood beforehand. The first red flag is lots of foreclosed properties in the association. You want to avoid buying a home and then having to pay thousands of dollars for the repairs and/or the late payments to the association. If the HOA is bankrupt, it can make it very difficult to get financing. Even if the property you’re interested was not bank owned, a struggling association can lower the home values in the neighborhood. Be sure to check out the financial situation of the property and the association before getting involved. Request documentation so you know what’s going on.
If you’re thinking of selling in a struggling association neighborhood, the sooner you sell the better. A bankrupt HOA usually can’t keep up on maintenance and other services. This lowers your property value. Not only that, but if the foreclosed condos nearby remain vacant, flooding, leaks and mold can spread through the building to your unit. The new owners may have to pay a lot of extra dollars to catch up on the empty homes’ payments and on assessments. So for sellers who find themselves in this situation, it’s best to sell before these fees accumulate and discourage potential buyers.