guest blog by Nila Ridings
Occasionally I talk with a condo or HOA homeowner who tells me they are working to pay off their mortgage so they can leave the property to their kids debt-free when they die. None of us knows when we are going to take our final flight, but we all know the risks of owning in a condo association or HOA. For those who don’t, I’d suggest spending time on this website and reading Ward’s book, Neighbors At War!
I’ve watched the results of this plan play out over the past few years. When heirs live out of state they sell for whatever they can get or turn their new property into rentals. Rarely, do they move into the unit. And they have no clue what is going on inside of the HOA , who is running for the board, how many lawsuits are pending, or if the HOA has taken out a million dollar loan. They’re clueless and have absolutely no interest in knowing more.
If they can’t get the property sold and don’t want a rental, they are stuck paying monthly dues to the HOA. While there is no water, sewer, or trash usage during that time the HOA bill continues, along with taxes and insurance. If at some point the HOA slaps a lien on the property there is an amount to be paid that nobody knows about. Or, the lien was satisfied but the HOA never released it. Possibly the deceased wasn’t aware of it, but it’s there and it has to be paid before the place can be sold. Or an assessment pops up and heirs are on the hook to pay that, too. Suddenly, this inherited real estate becomes a pain in the neck and/or a financial burden to someone who can’t afford the extra expense or deal with all the added stress.
We learned in Neighbors At War that mortgage-free HOA properties also become targets for non-judicial foreclosure. Since corruption never misses an opportunity the dead are not exempt from HOA abuse either.
During a recent conversation with an HOA property owner I learned something that I expected was coming. This individual wanted a reverse mortgage only to learn that isn’t possible because the HOA is not FHA approved. The advice given was to take out the maximum amount in a mortgage, enjoy life with the money, and when the money runs out or the final breath is taken, the kids can let the property go back to the mortgage company and walk away. If the HOA opts to foreclose, so be it. (Who needs a good credit rating to get into the cemetery?)
Bottom line is: hundreds of thousands of dollars tied up in a covenant controlled and often times corrupt HOA is not a way to leave your heirs feeling loved. It could bring them a financial burden that could drastically change their lives and leave them feeling angry with you for leaving them in such a financial mess.
No one lives without dying. Careful thought should be given to how we wish to be remembered. Hopefully it won’t be that generations to come are left sitting around holiday decorated dining room tables discussing Mom and Dad or Aunt Matilda’s HOA nightmare that was “supposed” to be an inheritance!