I keep warning about the impending crash of the American Homeowners Association as we know it. You bought into your HOA because you thought it would protect property values. A few HOAs actually did maintain their value for a while. But just give it time. Throw a few lawsuits around, fine a few dozen homeowners for petty violations that could easily have been handled in a more genteel way. But there’s a moment coming when homeowners will just lease out their homes to get away from screaming board members.
A funny thing happens when the number of rental homes reaches a certain percentage: Mortgage companies quit lending. Then more homes are converted to rentals. More nastiness from the board. At some point your $200,000 investment becomes worth about twenty or thirty thousand. Then you have a neighborhood like the one linked below. Imagine owning a home in TymberSkan on the Lake.
From Florida to Overland Park, Kansas to Nevada and Crooked California a growing number of once thriving Homeowners Associations desperately need to be bulldozed.
(link to Florida’s TymberSkan HOA nightmare)
Nila, as tenants learn that HOAs and condo associations offer less protection of rights than renting in standard rental communities, owners may find that they cannot even get a signed lease. Then what?
If they have a mortgage I would suspect many will walk away. Most people cannot afford a mortgage, insurance, property taxes, utilities, maintenance, and HOA dues while a place sits on the market for sale or doesn’t sell and no renters come along either.
I would say most of the time there will always be renters because everyone would like to have a roof over their heads. If the HOAs are booting cars, and towing cars off driveways and these folks are renters (as some of the stories we have already heard are)then it will be less likely that tenants will want to rent in an HOA. This will be music to the ears of the apartment building owners.
This situation happens often where a parent lives in a condo or PUD and dies leaving the unit to an heir. They find themselves in a position of trying to sell something with no buyers or a mortgage that is more than the unit would sell for. It also leaves them paying the expenses including HOA or COA dues until the property is rented or disposed of in one form or another. I just had an owner call me the other day saying if they passed away their children would have to pay off the mortgage with the life insurance policy they were leaving. That would still leave the children as owners. This party did not want that to be the way the life insurance is spent. They were hoping the children could file bankruptcy on the estate and dump the condo but learned with that life insurance policy that is not possible to do. My suggestion was to file bankruptcy now and go rent a place until that final day comes. That way the life insurance would not be effected or so it would seem. The reason they were so concerned was because the children have been paying the life insurance premiums and they didn’t want the children to have to waste money on a condo they didn’t want.
On another note…like one of the blogs Ward wrote there is always that issue of the HOA being at the maximum of rentals so sometimes it’s not possible for an heir to even rent the unit. I’m thinking the HOAs put that maximum on there to keep from slipping over that line of 70/30 (30 being rentals and 70 being owner occupied)that would send the complex into the “no mortgages” zone. I certainly don’t blame lenders for not wanting to loan in a area that is over 30% rentals.
Just so much to think about before buying into a HOA or condo association.