3 HOA Pitfalls to Avoid

We’ve all heard the horror stories about homeowners’ associations (HOAs), and most of us assume that the terrible tales of landscaping, paint regulations, and vengeance are mostly exaggerations. However, if you have never lived in an HOA-governed neighborhood – or if you are considering investing rental property in such a subdivision – here are a few things to consider before you buy:
1.90 Days = Lien on the Home
Fall delinquent on your annual dues or simply miss paying a fine (or refuse to do so) and in 90 days that HOA can slap a lien on your home and threaten to foreclose. Do they always do this? Of course not. Can they? Absolutely. And HOAs have a great deal of discretion in how and upon whom they enforce covenants in most states, meaning that if you tangle with a problematic (or power-tripping) board, you could end up in serious trouble fast.
2.Reserve Funds are Falling Low
HOAs are required to keep reserve funds – basically savings accounts – in order to make emergency repairs on the neighborhood amenities and handle other issues. However, as HOA’s budgets fall flat as more and more homeowners simply cannot afford their dues or leave due to foreclosure, these funds are being dangerously depleted. Low reserve funds often lead to hefty “special assessments” on the remaining paying homeowners.
3.Kickbacks can be Common
It is not illegal in most states for an HOA to hire a contractor that has agreed to pay board members some sort of kickback in return. As a result, some HOAs will hire higher-cost companies in return for the personal gain.

Of course, plenty of HOAs care a great deal about their neighborhoods and function extremely honestly. However, because there is such potential for abuse – after all, if you bought in the neighborhood, many judges feel you signed up for it – you must investigate a subdivision carefully before buying in that area and into its HOA. If you fail to do so, you could end up in an expensive situation that is unpleasant all around.

Do you buy investment properties in HOA neighborhoods? Do you live in one?

*GOD Speed*
TLD Investments LLC


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: