A lot goes into buying a house as I’ve begun to find out over the last few weeks since making an offer. I’ll go into all that later, but one important thing is to understand the inner workings of your homeowner’s association (HOA).
I was devastated when I heard this story on my commute to work a few weeks ago: Not So Neighborly Associations Foreclosing On Homes. While someone was serving in Iraq, his wife missed two HOA payments. By the time he got back, the HOA foreclosed on his $300k house, which was already completely paid off, and sold for $3,500. Shocking, I know. Luckily for this family, they do have some legal recourse since the gentleman was in the military:
“In a spasm of gratitude in 2003, Congress passed the Servicemembers Civil Relief Act, which was supposed to prevent nonjudicial foreclosures against military personnel fighting overseas.”
For the rest of us, a few lessons to be learned here:
- Before purchasing a home, condo, whatever, figure out how much the building has in “reserves” and if the association charges “master association fees.”
- In other words, if something large breaks, will you have to pay above and beyond your monthly assessment? If the reserves are low, the answer is likely YES. If the roof needs to be fixed and it’s a $10,000 cost, that cost will be split among you and your neighbors, unless your building has deep reserves and uses them in emergencies.
- Speaking of emergencies, most small associations only operate on an "as-needed" basis. Make sure you properly maintain the house on a regular basis to avoid emergencies. When there's an emergency, it'll end up being more costly in the end to fix the roof or whatever needs fixing.
- Another thing to consider is joining your board. Make sure to get involved, after all you wouldn't let someone else make decisions about the money in your checking account, right? So don't let them make decisions about your reserves (it's YOUR money!)