Particularly with so many home owners “underwater” and struggling to pay their bills – mortgage, property tax, HOA dues etc. – a big concern for those in common interest developments such as townhouse and condominium communities is whether or not the reserve account is well enough funded. Too often, they aren’t.

Jacquie Berry, owner of Community Association Data Source, is our local expert in HOA documents and disclosure. Recently she spoke at the Los Gatos-Saratoga Association of Realtors Wednesday breakfast meeting and shared these statistics, which are a bit scary:

There are over 48,000 homeowner associations in California; CIDs make up a quarter of all housing in the state of California; 49 percent of CIDs are self-managed and less than 25 percent are 100 percent funded in their reserves.

To read more about her comments to the realty board, please view the post on the Silicon Valley Association of Realtors blog: REALTORS® told HOA compliance is all about disclosure.

Thinking of buying a condo, townhouse, or property with an HOA? Make sure that you check out the reserve account and the rest of the disclosures to better protect yourself against raises in dues or “special assessments” later. If you are currently a member of an HOA, keep a close eye on the financial health of the group vis-a-vis the reserve account.

If you are shopping for a Silicon Valley condominium, townhouse, loft or other property that’s part of a home owners association or “HOA”, you may find yourself flabbergasted at some of the dues being charged in San Jose, Los Gatos, Saratoga, and all over Santa Clara Valley.  A question I hear all the time is this: “Why are those HOA dues so high?”

HOA dues may cover a number of things, including:

• common areas, such as driveways, parking, pool, fitness center, rec room, elevators, landscaping, etc.
• insurance: regular homeowners or blanket insurance but perhaps also earthquake or flood insurance
• reserve funds for planned improvements (repainting, termite work, reroofing, repaving, pool replastering etc.)
• covering the defaults from units where the owners are in or about to be in foreclosure

What is the range of pricing for HOA dues in Santa Clara County and Silicon Valley?

Depending on the age of the property and the amenities, the dues may run between $150 and $250 on the low end (newer, no amenities) to close to a thousand on the high end (The Villages retirement community has extraordinarily high dues but they may include membership in the golf course too).

“Normal” is anywhere from $350 to $400 per month for a typical condo or townhome community.

Dues over $400 per month will deter investment buyers.  Dues over $500 per month will deter almost everyone! (more…)

What do you need to know if you’re buying a condominium in Silicon Valley?  Isn’t it simpler and easier than buying a house?

No, not really.

With a condo, you are buying not just the unit (or airspace) that you intend to occupy, you’re also buying a shared ownership in the common features.  This means, of course, that you are also buying into any potential liabilities.

Here are some questions to ask and areas to investigate when buying a San Jose area condo:

• What is the percentage of owner occupied homes? (Too high of a ratio and buyers will have trouble purchasing with a loan, which means you could have trouble selling.)
• Is there any litigation (lawsuits) ongoing?  Again, this can impact saleability.  Often newer condo units investigate any building problems around years 7-9 as there’s a 10 year statute of limitations for finding building errors, so younger homes that are just under 10 years of age could be involved in a lawsuit.
• Is the complex professionally managed or managed by owners? (There will be implications for each.)
• How much have the dues been going up each year?
• How many home owners are currently in default on their HOA dues? (HOA dues are often skipped before distressed home owners default on their mortgage.) (more…)

Homeowner Associations (HOAs) are created to oversee condominium complexes, townhome communities and planned unit developments on behalf of their members. These are non-profit organizations whose purpose is to manage common areas, enforce neighborhood rules and standards, and often, unofficially, to foster community unity too. In most cases, they collect fees from members and have local authority. In other words, if you do not pay your homeowner association dues, or abide by one of its rules*, the HOA can and usually will fine you or even foreclose on you!

There are loads of HOAs in Silicon Valley. As with all organizations, some are better run than others. Its a little different than owning real estate outside of a homeowners association.

What are the pros and cons?

At their best, Silicon Valley HOAs keep the communities they manage beautifully landscaped and maintained, they hire good providers for needed improvements, and minimize risk to all the members. By having reasonable rules and community buy-in, the neighborhood can look inviting and property values can be better maintained.

At their worst, HOAs can be unresponsive to members needs, erratic, arbitrary and irresponsible. They may, by poor planning, cause huge assessments to be necessary or raise HOA dues so that they are very high – to the point where they make homes hard to sell. Not only are those an unhappy occasion, they can also make it hard to sell a home with a special assessment looming. Fortunately, this is seldom the case in most areas – but if the HOA has a high number of defaults due to owner bankruptcy or inability to keep up with mortgage, property insurance etc. it can cost all of the members eventually.

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