May 12, 2017

Will Your HOA or Condo Board Hike Its Fees Soon? How to Tell

If you're looking to buy a home that's part of a condo complex or homeowners association, you're going to have to pay fees—either monthly or yearly—that go toward the upkeep of common areas such as the parking lot or swimming pool. And these fees can be significant, amounting to $200 to $300 a month for even the most basic amenities.

But consider this: Who's to say those fees won't rise once you join the club?

While no one has a crystal ball into a condo or HOA's future, you can get good clues to what might likely happen by peering into the past. Namely, the group's financial documents.

As a prospective home buyer, you will be given a period of time (typically three to 10 days) to review all of these financials—and yeah, it can be piles upon piles of paperwork. So in case your eyes glaze over at the mere thought, let's point you to the crucial areas that are well worth scrutinizing, and what they mean in terms of the fees in your future.

1. Cash reserves

Generally speaking, the cash reserves listed on a board's current financial statement is how much money it has lying around, liquid and ready to come to residents' rescue in the event of sudden problems. It's like a rainy day fund to fix a broken elevator, or to hire professional snow plowing in the wake of a huge storm.

So how large should this cash reserve be?

"There should be enough to cover at least three to six months of the expenses, which should be prominently listed in these documents," says Roger Erickson, a licensed broker with Douglas Elliman Real Estate in New York City.

Think about it: Chances are you have some money banked in case of an emergency; you want your board to be similarly prepared. If it isn't, it might have to issue an assessment—that's a temporary hike in your fees—every time something breaks. Large cash reserves ward that off.

2. Receivables

Take a good look at the building's "receivables," which refers to the money that residents owe for their common charges.

"Ideally you don’t want that number to be higher than 10% of the annual fees," explains Erickson. "Otherwise it might mean that some [residents] are not paying their fair share or are behind in their payments." And that will not only affect the board's cash flow, it can also be an underlying symptom of bigger problems (e.g., an economic downturn in that community or general dissatisfaction with how that condo complex or HOA is run).

3. Recent purchases

Also check for recent purchases. These can actually spell good news for you!

"If [the building] has had big expenses for things like a new roof or plumbing, that means new buyers won't get hit for those costs," says Erickson. That said, you'll want to make sure those expenses make sense to you. Buying a new boiler is important; but not everyone might feel the same way about burning through the reserve fund for something more arbitrary like having the hallways repainted a trendy new color.

4. Accounts payable

In the financial statement's “accounts payable” section, you'll spot money that the HOA or condo complex owes and will pay soon to cover taxes, repairs, and the like. Again, that should be no more than 10% of the board's annual expenses.

"Otherwise," Erickson warns, "it might indicate that the building is slow to pay bills because of a possible cash flow problem."

5. Notes

Even if you're not a numbers person, you can still appreciate the “notes” section provided on every financial statement.

"Here is where you’ll find out if there are any issues behind the scenes: tax problems, pending lawsuits, big repairs coming up," explains Erickson. "It’s often overlooked by a condo buyer but can provide a wealth of background detail not obvious in the financial statement itself."

6. Minutes

You also want to check out the minutes of past meetings.

"First, just make sure they exist," advises Dottie Schindlinger, governance technology evangelist at BoardEffect, a software company that provides online management of board information. "This will give you a clear sense that the board is recording its decisions in a transparent way, and also ensure that board members are doing their jobs."

Beyond checking that minutes exist, here's what to look for, according to Schindlinger: Good attendance at each meeting, an established quorum, and real discussion and deliberation taking place.

In other words, it shouldn't be just Mrs. Smarmypants bullying everyone to hire her interior designer daughter to decorate the lobby and threatening to evict anyone who objects. Because dictatorships, after all, are rarely good news for a board's financial health.

What do you do if you spot something strange?

If you do have some serious misgivings, bring them up during your board interview or by contacting board representatives directly. From there, if you find their explanation even more worrisome, you may want to consult a real estate attorney. And it's entirely within your rights to back out on your offer and keep your deposit provided you're within deadline.

Sure, it would be a shame to move on considering you've gotten this far, but a condo building or HOA with weak or worrisome financials could end up costing you way more trouble than it's worth, and make it hard for you to sell the place later.

Think about it: When you're buying a home, everyone scrutinizes your finances to the nth degree. Shouldn't you take the same precautions?

 

Stephanie Booth's stories have appeared in magazines such as Real Simple, Cosmopolitan, Glamour, and Psychology Today. Follow @stephanieBbarth

Source:  www.realtor.com

Posted in HOA
May 12, 2017

March Home Sales Were Through The Roof

Limited supply of housing cause a quick reaction from buyers.

Key Takeaway: The limited supply of houses caused a huge surge in sales as the spring season kicked off.

March homebuyers blew the roof off housing markets as they heeded warnings about the limited supply of homes for sale. Needless to say, they found houses in record time.

National monthly market reports on March transactions chronicled surge of sales as the spring season kicked off and tens of thousands of new listings turned over in a matter of days.

“We expected a seasonal uptick in sales this time of year, and March certainly met and somewhat exceeded that expectation,” said Re/Max CEO Dave Liniger.

“Calendars might say spring is only a week old, but we’re already in the thick of the most frenzied homebuyer season on record,” concurred realtor.com’s Javier Vivas.

Every report told the same story: the plunge in days on market was breathtaking as buyers gobbled up new listings as soon as they hit MLSs.

The month’s supply in Re/Max’s latest National Housing Report had fallen below for three consecutive months as of March for the first time in history.

Redfin reported its fastest March on record for home sales since it began tracking this data in 2010.

In the National Association of Realtor’s (NAR) existing home sales report, days on market fell from 45 days in February to 34 days in March. Realtor.com showed it drop from 90 days to 68 days; Re/Max went from 71 days to 64 days; and Redfin dropped from 60 days to 49 days.

The three-year inventory drought coupled with the spring surge in demand pushed prices even higher; and although wages have increased, they aren’t keeping up with the rise in home pricing.

The U.S. Bureau of Labor Statistics (BLS) reported that full-time wage and salary workers had median weekly earnings of $865 in the first quarter of 2017 — an increase of 4.2 percent from a year ago.

Despite wage growth, home prices continue to outpace incomes.

Steve Cook is editor and co-publisher of Real Estate Economy Watch. Visit him on LinkedIn and Facebook.

Published: www.inman.com

 

Posted in Market Reports