Value of Condo Association or Home Owner Association

The Value of Your Condo or Home Owner Association

Establishing the value of an Association, whether a Condo or Home Owners, can be a complex dilemma for home buyers.   Associations are proven to maintain/improve home values due to consistency of home condition and an assurance that continuity of style and condition will be maintained.   It is very easy during the home search process to point out to buyers the higher values of similar age homes found in an Association versus a nearby neighborhood that has no Association.  

Though this be a truth in Hampton Roads and through out the country (as reported by NAR(National Association of Realtors), the value of such Associations will vary by buyer.  This is true for the following reasons:

1.  Association Monthly Fee reduces Buyer's price point 

2.  Amenities may be limited in given Associations

3.  Condition of homes may call into question the proper use

         of Association Funds(Condo Associations)

4.  Exterior work requires Association Approval

5.  Association can censure/fine home owner for non-compliance

          to Association guidelines

6.  Association Fees are not capped thus increase are inevitable.

7.   Rental Factor in Neighborhood

8.   Mortgage Restrictions

Of these value "adjusters", items 4 and 5 are very easy for the home buyer turned home owner to see as a "value add" element of an Association.  By simply knowing the factors that can provide censure or fine or needing Association approval and avoiding these infractions will make these non factors as relates to living in an Association.  This is normally quite easy: the infractions are outlined in the Condo or Home Owner Association documents provided to a buyer prior to purchase of the property.  In Virginia, the buyer is permitted three days to read and to accept or reject the documents, resulting in the transaction continuing or being canceled.

The other six evaluation points range in meaningfulness to each individual buyer.  For example, a first time home buyer may find a $150 condo fee restricts his/her purchasing power by $30,000 even in the present 4.5% interest rate market.  For a first time home buyer, this is a significant challenge many times.  To this first time home buyer as well as other buyers, the strong possibility of fees increasing over time can be a challenge especially in Condo neighborhoods, especially if the fees have stayed constant and the properties are in need of repair.

The rental factor and mortgage restrictions can play a part in a given neighborhood.  As most condo and home owner association bylaws and restrictions tend to have a limit the number of rented homes allowed in given neighborhood.  In addition, Condo and Town Home Neighborhoods must be approved by the VA and Dept of Housing Development(meet reporting guidelines related to a given association).  As I tell buyers, though no issues are present now whether the buyer wants the condo or town home sold or rented in the future, changed parameters of the neighborhood could impact their ability to sell or rent down the road.

Even with the challenges present in a condo or town home or a single family home, an Association may be the right choice for a home buyer.  

Yet a fair and impartial evaluation is required to make the right decision for a given buyer.

Questions on what are the benefits of a Condo/town home or a single family in a Association neighborhood?   Please comment and let me know!!!

Condo Living: Right for you?

Live in a Condo???


Here are some questions to review!!  Different situations arise in condo living than exist in other homes.  Thus this article from Al Clarks Home Action Newsletter is very timely if you live in a condo....or plan to move to one tomorrow!!!

CAN'T WE ALL GET ALONG? - SURVIVAL Q AND A WHILE LIVING IN A CONDO/HOA

These Q and A's and articles are managed by Richard Thompson fromwww.regensis.net. Richard has been involved for many years with various aspects of Condo and  community living. He provides consulting services to community groups and industry vendors. He also takes questions from online consumers with Condo/HOA issues.  Question: We are updating the member directory for the first time in years. The board intends to print and mail to members and post it on the HOA's website. Our last member directory included the names of members' children. What do you think? Answer: Actually, nobody should be included in a member directory without their written permission. Children could be included but the parents should give written permission. Question: I am in a High-Rise Condo building.I have requested financial statements from the board but my requests are ignored. I'm planning to withhold my HOA fees until I get them. Answer: Members are entitled to review the finances. So, the board should produce and distribute regular financial statements to all members for review or offer to make them available upon request. Those financial statements should reflect how money has been spent in a clear fashion together with additional notes if there are unexplained, unusual or larger than normal expenses. Also, you have the right as a member of the HOA to examine all financial records. Question: Our pool and clubhouse are 15 years old. The board wants to build a larger pool and upgrade the clubhouse which would require a $200,000 special assessment and drain our reserves. Answer: The board has no authority to expand the common area amenities. Its authority is to maintain existing amenities in good condition. However, if an appropriate majority of the members are in favor of raising and spending this money for this purpose, that is acceptable. However, the "appropriate" majority may be a super majority of two thirds or more depending on how your governing documents read. This requirement could effectively kill the proposal. Question: For years, our board refused to put money away for projects like roofs, fences and painting. Well, now the roofs need replacing, the paint is peeling and fences are falling down. Home values have been compromised and special assessments to pay for the projects are routinely shot down by the membership. Answer: The concept of planning for future projects is called a "reserve study". It is a tried and proven way of dealing with these predictable expenses and events. Moreover, a fairly funded reserve study shares these costs with all members along the, usually, 30 year time line rather than nailing the unfortunate ones at special assessment time. Special assessments are the product of poor or no planning since virtually all reserve events can be anticipated many years in advance. The board has a fiduciary duty to run business in a reasonable way. It also has a duty to protect the interests of current and future members. Any board that fails to plan for foreseeable events and expenses has failed in its duty. Most governing documents obligate the board to budget for known (or knowable) expenses. Failure to plan for reserve events is usually indicative of a systemic problem like the operating budget being underfunded and poor maintenance. The results are plain to see: erosion of the property and home values. The board usually has the authority to set the budget and reserves at a level to take care of HOA business without approval from the members. If your board is required to get member approval, it could easily roadblock getting things done. But often, the board simply doesn't raise the issue because naysayers won't like it and the board doesn't want to get yelled at. However, naysayers are usually few and far between because most want to protect the value of their property and know it costs money to do it. Take this message to the board: "You have fiduciary duty to reasonably protect and maintain common assets. Reserve planning and funding is an accepted and fair way to do it."