Monday, April 26, 2010

HOA's Charge Buyers Fees On Property Creating Disproportionate Share Of Expenses

Here is an interesting article from The Orlando Sentinel, regarding the Stoneybrook homeowners associations in Winter Garden:
Homeowners associations have been struggling to make up for thousands in dues lost when homes sit empty for months, waiting for foreclosure.

Two Orange County golf-course communities have decided to make their new neighbors foot that bill.

Buyers in Stoneybrook West in Winter Garden and Stoneybrook East in east Orange County have to add $4,000 to closing costs, mostly for dues that went unpaid by previous owners while the house was in foreclosure for more than a year.

The so-called "resale capital contribution" doesn't sit well with real-estate agents and bankers, some residents and a group that advocates for homeowners' rights against HOAs. Usually, buyers in those communities would pay $1,000 to move in, but the fees increased as the housing crisis deepened.
These fees are another example of why homeowners associations should be heavily regulated.  Proponents of these fees imposed on new buyers claim it is a method used to protect responsible homeowners from facing increased costs, but to me, that opinion seems to be based in unfairness, because while current homeowners don't have to face the risks they bought into, newer homeowners will have to take on not only a burden of their own, but of past homeowners as well.  These fees place a disproportionate financial burden on newer residents.

These fees are provide a real life example in economics.

"Our association was being restricted in cash flow resulting from foreclosures languishing in court for excessive periods of time," said John Santaniello, president of the Stoneybrook Master Association of Orlando at Stoneybrook East, so their solution is to punish new homeowners, but representatives of various other industries attack the fees as keeping homes empty for longer periods of times, which would make sense when taking into consideration supply and demand.  Essentially, the increased liability the Stoneybrook neighborhoods are placing on properties is decreasing the number of potential home buyers, and that in turn hurts everybody involved in the process - homeowners, real estate agents, bankers, and yes, the HOA.

"It's like you going to a restaurant and buying chicken and getting a bill for others who ate before you and didn't pay for their food. How is that fair?" said Alex Sanchez, president of the Florida Bankers Association, a group that represents more than 400 banks and financial institutions in Tallahassee. "These associations have to understand the backlog of foreclosures that we have in our state. Bankers are not delaying foreclosures because they want to."

Of course, that is not how the HOA sees it.  They believe the banks are lazy and homeowners are just "thumbing their noses" at the association.  A commenter on this article, REOgirl, made an interesting point:
Please don't make it sound like these HOAs are totally the victims here. When they sell the property the bank will pay them for 12 months of maintenance prior to the foreclosure date and then the fees due to them going forward until the property is sold. So if the property goes to foreclosure within the 9-12 month range they are making out by collecting from the banks (seller) and the new buyers. They've got quite the racket going. They are also charging the banks for interest, late fees, cable fees, and outrageous attorney fees. You'd also be surprised how many times the monthly maintenance fee goes up when they find out the bank owns the property. Many of the HOAs also now have more than one HOA that is collecting for the one property.
While I do not know if this is true for this particular neighborhood, I know that this is a common problem throughout the state.  You have incidents where associations raise the prices to compensate for foreclosures, but they never reduce the amounts after new ownership comes in, and you do have situations with associations and master associations essentially double dipping on one property.  The whole business surrounding HOAs is corrupt and balanced in favor of the association, not the homeowner, and legislators need to take an honest look at these corporations and step up the regulation to protect the property rights of homeowners.

The HOA business model is inherently flawed and is one in constant need of "bailouts."

No comments:

Post a Comment

Please share your thoughts and experiences in relation to this post. Remember to be respectful in your posting. Comments that that are deemed inappropriate will be deleted.