Stevet445, Home Buyer in Belmont Shore, Long...

I'm looking at condos in Huntington Beach and Laguna Niguel. If inventories continuously rise, could we expect HOA's to ever decrease?

Asked by Stevet445, Belmont Shore, Long Beach, CA Mon Jul 11, 2011

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Brian Wilson’s answer
Hello Stevet445,

You have received many good answers from my colleagues but I will chime in with my 2 cents as well.

I have worked in the Laguna Niguel area over 11 years and I can't recall a home owner's association (HOA) lowering their dues. The dues are to support many and various items; the common area maintenance of the landscaping, the entrances and those nice features residents get to use, like the pool, spa, and other recreation facilities (whatever they are). They also pay the bills of the utilities used to support these common use facilities. There have electricity, gas, water costs just as you have at home. Basically the HOA is a business that is run by a management company (who also wants to get paid).

Besides the normal items mentioned above, another recent stress are caused by delinquent home owners may force the dues up. To answer your question (finally) I am uncertain how inventories really affect the overall dues alone. The larger impact that I see right now is based on the non-paying owners. This is a vicious circle, the homeowner, has some hardship and can't pay his dues, the HOA then has to go deeper into their reserves to pay their obligations and if this happens to enough owners, in time, the HOA may have to raise the dues for all home owners.

Once in escrow you will receive a packet from the HOA via escrow with 12 months of meeting minutes and more. This should give you an idea as to the number of home owners that are behind in their dues. You will also be able to see how much they have in reserves and if there are any law suits pending. You will have time in your discovery period (17 days by default) to review this information and if not satisfied then you can cancel the escrow and get out of the deal.

If you have any other questions and aren't already working with one of the other Realtors from this thread then give me a call, Brian Wilson 949-933-0852.
2 votes Thank Flag Link Tue Jul 12, 2011
Hi Steve,
Actually, it could have the opposite effect. While it's impossible to determine what each individual community will do, vacancies tend to put pressure on HOA's and their boards to raise dues in order to compensate. Having said that, inventories seem to be relatively consistent month to month (This can obviously change anytime). Overall, most communities try to keep dues as reasonable as possible. Vacant units and non-paying homeowners put a lot of pressure on a community to raise dues.

Feel free to call anytime with any additional questions or concerns.
Rob Magnotta 714.330.9558
0 votes Thank Flag Link Mon Jul 11, 2011
There are plenty of condo communities in HB, Long Beach, Laguna Niguel where the HOA fees really aren't that high. High being over $350/mo. There are plenty in the lower $200's/mo. Are you not finding these?

If you need any assistance locating some great investment properties or one for you to live in, in any of these areas please let me know. The city of Orange is another option for you, where you can get newer condos built after 1995 & not have to deal with any Mello Roos. In Laguna Niguel, you'll probably have a Mello Roos tax on top of an HOA fee.

Please email me directly if you'd like to talk & make a plan.
562-430-3053 c
Realtor Since 1996
Main Street Realtors
1 vote Thank Flag Link Mon Jul 11, 2011
No, they only go up like taxes.
0 votes Thank Flag Link Fri Nov 18, 2011
HOA's also need to increase reserves to satisfy new lender requirments, so beyond the expense side, the HOA has to prove adequate reserves set aside to handle future capital improvments. An HOA that is more per month, but has a good reserve position is better than a low monthly HOA fee on the brink of insolvency! There are HOA disclosure forms to find out owner occupancy rates vs tenancy, owner delinquency rates and number of foreclosures in the development. Also fewer and fewer HOA's allow you to rent the unit because FHA encourages owner occupancy. Harder to get mortgage money for a struggling HOA community.
0 votes Thank Flag Link Thu Nov 17, 2011
Dear Steve,
I doubt your HOA will decrease, given the increase in costs for labor, materials etc. that seems to go up every day. If you think of the HOA as a substitute for what you would pay on a home (gardener,pool maintainence,painter, roofer, health club) it probably equals the same.
0 votes Thank Flag Link Tue Nov 15, 2011
Housing inventory has nothing to do with the amount an HOA charges. These charges are for maintenance, repairs and insurance costs which as you know never go down but continue to increase with the cost of living. I have only seen an HOA reduce their monthly fees one time and that was in Laguna Woods (senior community) and it only went down 10 dollars for Coop's and increase for non-coops. The other agent also pointed out that short sales are having a temporary impact on the HOA's bottom line when property owners that are upside down on their property also stop making the HOA payments. When the property is sold as an short sale most often someone has to come up with the fee's which go way up if it goes to a lawyer for collections. I would be happy to discuss this and other real estate related questions you may have.

Lori Hanson
OC Homes Realty
Laguna Niguel
0 votes Thank Flag Link Sat Nov 12, 2011
The problem is inventories that are Short Sales or Forclosures, they do not produce income. So to expect your HOA to be reduced is not a good plan for upto 5 years. Expect the inventory to adjust slowly into the future in your area.
0 votes Thank Flag Link Fri Nov 11, 2011
The HOA has nothing to do with the inverntory. If you buy a condo I suggest you attend all of the HOA meetings. That is where the fees are set.
0 votes Thank Flag Link Thu Nov 10, 2011
Hi Steve,

Very rarely do HOA fees decrease...and frankly as our housing crisis continues to work itself out, I would expect them to rise. The short sales are not paying HOA dues (normally) and this causes a strain on the other homeowners. Many HOAs have raised their rates to compensate and try and build a reserve which can handle these kinds of stresses.

The one thing you might want to check on specific properties is the reason for the HOA number....often there will be a "special assessment" issued to pay for specific issues. Such as re-roofing the complex.....everyone would pay $100/month for 3 years instead of a one time check of $3600. This raises the HOA amount...but only for a period of time. Often this must be paid off at the close as that might make a $435/month HOA more like $335/month...does that make sense?

A good buyer's agent can help you with this....we know which complexes have issues and which might have special assessments. It can shed some light on that for you.

0 votes Thank Flag Link Fri Jul 15, 2011

If you plan on financing your purchase, condos are becoming more difficult. If inventories rise, it will be that much harder. Currently, one of the "rules" for condos is no more than 15% of the units can be in default of their HOA fees.

Happy funding, Rudi
Web Reference:
0 votes Thank Flag Link Mon Jul 11, 2011
Hello Stevet445,
If you're asking because you hope to avoid the problems of an HOA that is struggling, you can request the financial documents from the HOA management company.

There have been bankruptcies of HOAs. I've heard that a community in northern California is attempting to disband an HOA. It happens.

You might have read the other day that HOAs have come under the spotlight of the press because they are foreclosing to collect on delinquent fees. More worrisome is home values keep falling and more homeowners elect to walk on their mortgages. The most recent word on this is the number of strategic defaults declined this year. Financial instability of HOAs has become more widespread because the foreclosure process has been extended for a variety of reasons, including bottlenecks in the courts in Florida and maybe more attempts at short sale and mortgage modifications everywhere. The extended stay sometimes has people neglecting to pay their HOA dues. These homeowners shouldn't assume they can do that if they are pursuing a modification. The lender isn't about to modify a mortgage for someone who has exposed the home to a lien.

The HOAs, if they are run by boards like the ones I know, are not anxious to foreclose. So, they come up with other ways to keep the HOA solvent. Some have sought more competitive bids on services they contract. But, placing liens and foreclosing is a last resort. They are also reluctant to pass along the costs of delinquent payments onto the members. But, that is happening.

HOAs manage insurance for things like roofs for condominium owners. So, it is important that you have that information.

PML of Longmont, CO
0 votes Thank Flag Link Mon Jul 11, 2011
Hi Steve,
It is not likely that the HOA feeds will go down. The fees are there to support the community costs of keeping up all the amenities and extras like landscaping, maintenance of the common grounds. I have seen some fees come down but that is not based on the inventory. It is a decision made by the board of the HOA. In fact some HOA fees may go up as more property owners default on their HOA payments. In general the less things that the association is responsible for, the lower the HOA fees. If you'd like me to get you more information on HOA fees in the areas you like please let me know.
0 votes Thank Flag Link Mon Jul 11, 2011
If you mean, HOA fees, there's no relationship between the real estate market and the costs of providing services and running a condominium.

The cost of providing utilities, insurance, maintenance, amenities such as pools and gyms and elevators, and the cost of repairs and replacement items that will be paid from the reserve fund are not going to go down in this lifetime or the next.

All the best,
0 votes Thank Flag Link Mon Jul 11, 2011
The past, current or future value of a property usually does not have any significant effect on the financial requirements of the community in which the property is located. However, there are many factors that do influence the amount of fees a Home Owners Association must collect to maintain the community properly. The type and number of amenities offered within the community is often the most significant factor. Pools, spas, ponds, streams, green belts, sports courts, club houses all require maintenance and add to the overall cost. If the community is gated or has security officers posted at the entrances, this cost must be factored into the equation. The more amenities the higher overall cost and also the liability insurance will be higher for the community too. Does the community have a lot of exposed wood surfaces? What kind of roofing materials do the buildings have and when was it last replaced. When was the community last tented to kill termites? What overall condition is the property in? A good visual inspection of the property can expose future financial requirements or needs. Does the community have adequate reserves to make necessary repairs or will they have to obtain loans? Do they have adequate reserves or have they been depleted by owners failing to make payments. Are there any lawsuits pending? These are just a few of the very important question you should ask when choosing a property. A professional real estate consultant will give you both the pros and cons of ownership. If you have any other questions, please feel free to ask. Best regards,
Web Reference:
0 votes Thank Flag Link Mon Jul 11, 2011
HI Steve T445, You will not see any HOA fees go down and as inflation is starting you will definitly not see them go down and with the short sales, there have been a lots of complexs withy not alot of reserves or some in bankruptcy or some type of litigation... Historcally over the years the HOA fees have not gone down. If you need help in finding a property with lower HOA Fees I can help you find them.. Also with regards to Mello Roos fees they are put into your taxes so you are not paying a seperate fee for them. The lender would know to calculate them in with your Taxes for your payment. How else can I help you? Ingrid Ski Realtor
0 votes Thank Flag Link Mon Jul 11, 2011
Hi Steve;
As all your answers indicated, there is no relativity between inventories and HOA's fees. Since the cost of almost everything is rising, it is more possible that HOA's will increase rather then decrease. Also there are many delinquencies are involved in HOA fees in almost all the communities that the other homeowners are being suffered by increase their fees to keep the maintenance budget of the complex. Also, if you would get a loan on your future purchase, the lender would make sure about the compatibility of the HOA budgets to be able to loan on the unit. To answer your question, No, it will not decrease but your lender will make sure that everything is in line about that HOA before they loan you the money. Please call me if you have more questions.
Best of luck
Shadi Kian
0 votes Thank Flag Link Mon Jul 11, 2011
There are factors besides occupancy rate that can affect the HOA fees. However, if the occupancy rate is the only reason a specific communtiy is experiencing higher HOA fees and the occupancy rate increases, then the answer to your questions is yes.
0 votes Thank Flag Link Mon Jul 11, 2011
As an owner of townhome for 17 years with an HOA for 30 years, it historically has never gone down. But on the other hand, while I liked what Thom had to say, I beg to differ. The missing HOA fee's are paid at close of escrow, either by the new buyer or the bank (mostly the buyer or the 2 realtors in order to get the deal to go through). And another positive thougth, due to the economy, most HOA's are trying to hold steady and work with what they have hoping that they will recover the absent funds down the road.
0 votes Thank Flag Link Mon Jul 11, 2011

Interesting question. I've noticed a 40% increase of HOA fees in many parts of Orange County. I don't see a direct relationship with HOA fee increases to housing inventory unless that inventory is primarily comprised of homeowners who aren't paying their HOA fees. When looking for a condo it is good to be aware of how financially solvent the HOA is. Lenders will want this info as well to determine whether or not they will lend in that community.
0 votes Thank Flag Link Mon Jul 11, 2011
Steve -
That would be highly unlikely - in fact just the opposite might be true. As inventory continues to rise and Foreclosures and Short Sales rise also, the number of homeowners NOT paying their monthly dues is increasing. As a result, the HOA has less income to pay their bills - so just like the US Gov't they may need to increase HOA fees just to cover their expenses.

Another way to look at it would be:

Let's say the HOA has 100 units (homes) and the fee is $100 / month per unit = $10,000 per month or $120,000 per year. Then let's say 15 of the units have NOT been paying their HOA for the past 10 months; 15 x $100 x 10 = $15,000 (Loss). The HOA has to make that money up someplace as they are now collecting only $8,500 per month or $102,000 per year - that's an $18,000 loss per year. So, That original $120,000 per year the HOA NEEDS to support the development now has to be split among the units they expect to pay on an ongoing basis. Therefore, the original $100 / month will now have to be at least $118 per month to sustain the development.

I think this is the next BIG problem in Southern CA. There are so many condo / HOA developments where a large number of homeowners have stopped paying, the fees will have to be increased and/or a one time levy per unit will need to be assessed which could cause an HOA to fail.

For all of those homeowners that are not paying, many will file Bankruptcy and the HOA will never collect. Some HOAs are filing liens, but they are not keeping up to date as the amount increases.

I recently had a short sale where the sellers had not paid their HOA in almost 3 years - they filed BK and more than $20,000 owed got wiped-out. It was a well-funded HOA - BUT - they are starting to see financial issues due to so many homeowners not paying.

The key thing to understand is to check out the HOA PRIOR TO BUYING !

Best of Luck,

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage.
888-391-5245 Direct Cell
DRE# 01398570
0 votes Thank Flag Link Mon Jul 11, 2011
rare for HOAs to ever go down unless that part of the HOA fees were short term assessments. Many HOAs are under stress do to higher rates of delinquencies. Some one has to make those dues up. Unless a particular complex has a lot of amenities, the amount of the current dues can be a indication of the health of that association. Short falls have to at some point be made up. Very much buyer beware.
0 votes Thank Flag Link Mon Jul 11, 2011
No. The cost of operating costs always go up. They may stay flat for awhile but very rarely go down.
Best to inquire the history of the Association due increases over the past few years to give you and idea
what to expect. But if a major repair comes up in the complex expect a spike or a one time charge.
Some Associations also have a maximum limit of how much they could go up.
If you have any other questions feel free to contact me anytime.
Steve Bragdon
Tarbell, Realtors
0 votes Thank Flag Link Mon Jul 11, 2011
Hi Steve,
It's unlikely that an increase in condo inventory would result in a decrease of HOA dues. Some HOAs are experiencing financial troubles because homeowners who are in foreclosure or doing short sales may not pay their dues. Increased inventory would be more likely to impact prices.

If you want to check all available condos in Huntington Beach, Laguna Niguel, or other areas, visit our website. Let me know if you have any other questions you can answer.

Shannon Jones
Keller Williams Realty
Web Reference:
0 votes Thank Flag Link Mon Jul 11, 2011
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