The Effect Of A Bad HOA On Our Home Values

An HOA that puts us at constant risk of lawsuits and not effectively maintaining our community can have a serious negative effect on our home values, a much more serious effect than any 2 min. news segment will ever have.

To break it down a bad HOA BOD opens our community up to lawsuits, if we have an increased number of lawsuits our insurance premiums go up, if our insurance premiums go up, our dues go up or attention to serious maintence issues are ignored, which decreases our home values. 

Article citation: https://magazine.realtor/sales-and-marketing/feature/article/2015/09/how-to-spot-a-bad-hoa?om_mid=_BWAaU1B9F3BG7z&om_ntype=RMODaily&om_rid=AACYju

Look at the Community as a Whole – See Our Outstanding Maintenance Issues Here

Is it run-down? Don’t solely focus on the one property your buyer is purchasing. When the HOA is responsible for maintaining the buildings, check out neighboring units and common spaces along with the home your buyer is purchasing. Here are some telltale signs of an HOA that isn’t on top of its responsibilities:

  • Are the fences rusting?
  • Are the building signs in disrepair?
  • Does the asphalt look like gravel?
  • Are the pool and other amenities clean and in good working order?
  • What is the age and condition of the roofs?
  • Do the buildings need to be painted?
  • Are there staircases and balconies in poor shape that the HOA is responsible for maintaining?
  • When were the buildings last treated for termites? Have they been neglected, with a higher risk of unknown termite damage throughout the community?
  • Are there grading issues causing flooding?
  • What is the condition of the community areas?

Look at the Reserve Study – Find Our Reserve Study on Valvistalakes.org under Resources > Reserve Study 2019

See what our Reserve Funds really look like here.

First of all, make sure you and your buyers know what this is. A reserve study details an HOA’s long-term funding plan, showing, most important, how much it currently has to offset maintenance costs. It’s the most important tool to determine the financial health of the HOA.

  • What is the percent funded? Zero percent to 30 percent means it’s at high risk of a special assessment; 31 percent to 70 percent is a medium risk; 71 percent to 100 percent is low risk.
  • How much does the reserve study recommend the HOA saves each year, and how much is the HOA actually saving?
  • Has the HOA been following the reserve study and making capital improvements?
  • How much money can you foresee being needed compared to what the HOA has saved?

Proactively Ask Questions

Encourage your buyer to call and ask the HOA or HOA management company questions. You may need to make it a condition of the purchase contract that the seller will provide the answers if the HOA management company won’t answer you or your buyer. Keep these questions in mind:

  • Have there been any special assessments before? Get the details and ask if there is discussion about having another one.
  • Have there been any lawsuits or are any expected? Check court records. SEE OUR LITIGATION HISTORY HERE: https://savevvl.com/litigation-since-2010/
  • How many insurance claims has the HOA had?
  • Are there plans to change the HOA’s covenants, conditions, and restrictions?

Your buyer must review the HOA’s covenants, rules, meeting minutes, violation policy, collection policy, and other aspects. Make your buyers a checklist to help them do their due diligence. Help them become an educated buyer on HOA living.

Ignorance isn’t bliss — when it comes to HOAs. Agents and sellers could potentially avoid lawsuits by making buyers aware of all issues before they close on a property in an HOA. Remember, approximately 70 percent of HOAs are underfunded and in poor condition due to lack of maintenance. These are not HOAs “protecting our property values.”

This problem is not going away by keeping our eyes closed. Residents need to be involved and concerned with the HOA business  —  and they need to stay involved.