Home Buying in Dublin>Question Details

Homebuyer, Home Buyer in Dublin, OH

Is paying HOA better than paying a higher property tax?

Asked by Homebuyer, Dublin, OH Sun Mar 8, 2009

I'm considering properties in Dublin and San Ramon. Dublin new homes have HOA of at least $100 a month, while San Ramon/Windemere resale homes generally do not have HOA. They just have a higher property tax, due to mello roos. While I'm considering all other pros/cons for both places, i'm wondering if any of you have any thoughts to share. Thanks.

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8
Steve is right. You won't have a clear answer until you have identified the two specific homes you are trying to buy. HOAs are not necessarily bad. It all depends on how they are managed. HOAs can be managed professionally or by the home owners themselves. Sometimes the same management company can produce different results, depending on which manager gets assigned to the property. Sorrento is managed by two managers. One oversees the master HOA and the other one handles the individual sub associations. One is more seasoned than the other, but both are competent. The Terraces alone has two managers from Massingham as well. Unlike the two managers at Sorrento, I have heard that the managers at the Terraces can never be found. Apparently, according to Massingham's own people onsite and corroborated independently by various home owners, these two managers take four-hour lunches. Same company, drastically different results.
3 votes Thank Flag Link Mon Mar 9, 2009
We just had our Master HOA meeting. For those who have been attending these meetings, not much has changed. Many home owners were disappointed with the way Massingham & Associates: An Associa Company, is managing the property. After a year of persistent home owner complaints about our landscaper, we are still in the process of preparing our request for proposal, because Sorrento is "complicated," and Massingham is still "learning." The landscaper was recommended by Lisa Esposito, a Massingham executive, according to one of the community managers during the public forum from the HOA meeting last summer. At that meeting, the home owners expressed concern over weeds that are taller than most toddlers. The more civic-minded residents have been pulling and still do pull their own weeds, but they can only do so much. The excuse Massingham first gave was that the overgrown weeds were the result of miscommunication between the developer's installing landscaper and Massingham's recommended landscaper. Of course, after 6 months of using that excuse, even Toll Brothers, the developer, grew tired of the obvious neglect and demanded we look for another landscaper. Given the state of the economy, does it really take 6 months to hire a good landscaper? Most home owners at the Master HOA meeting didn't think so. This incident with the Sorrento landscaper is only one amongst the growing list of items in which Massingham is earning a failing grade as a community management company. Home owners from Trevi, Sienna, Firenze, Amalfi, and Milano understand sometimes vendors will mess up. Unfortunately, when every vendor that's been recommended by Massingham is underperforming, home owners cannot help but wonderif the problem really lies with Massingham.
2 votes Thank Flag Link Fri Apr 24, 2009
Hi Homebuyer,

I think you won't have a clear answer to your question until you identify two specific homes in each area to compare their details and your tax bracket.

Mello Roos
Most of the time you cannot deduct Mello Roos real estate taxes assessed for local benefits and improvements, so you would want to know what portion of the tax bill is attributed to non-deductible MR in the San Ramon/Windemere home.
http://www.ftb.ca.gov/individuals/faq/net/909.shtml

HOA fees
Brian brings up a good point about delinquent HOA fees, and Harpal underscores you are really at the mercy of the HOA Board. Personally, I'd pass on the HOA.

Property Taxes
With Prop 13 at least you know your property taxes won't go up by more than 2% per year. While it is true that generally most of your Property Taxes (caveat being mello roos and other special assessments) are deductible on your taxes, the "true benefit" is equal to your tax bracket times the deductible property tax paid. Another way to describe this "tax benefit" is to say, using the example below, had you not paid $7500 in property tax as a deduction, you would have paid an additional $2,250 in income tax.

Sales Price $600,000
Down $120,000
Loan Amount $480,000
Est. Annual Property Taxes (1.25% * SP) $7,500
Est. Annual Haz Insurance (.35% * LA) $1,680
Annual HOA $1,200
Income Tax Bracket 30%
Annual Tax Benefit of Real Estate Taxes $2,250

Best, Steve
1 vote Thank Flag Link Mon Mar 9, 2009
HOA dues are typically not tax deductible. Real Estate taxes are. Weigh out both scenerios. Bottom line - find the property you like best. If you aren't happy with the home, the rest won't matter!
1 vote Thank Flag Link Mon Mar 9, 2009
Something to keep in mind would be the mass amount of foreclosures that Dublin condos have faced and are currently facing. HOA's are one of the first bills consumers o delinquent on. HOA's are going to have a tough time over the next few years staying a float. The only option they have would be special assessments and raising dues.

9 out of 10 times I recommend a single family home to my mortgage clients. You can be approved more by applying your capital to your mortgage rather than an HOA.

If you would like to discuss this further I would be happy to do so with you.

Best,
1 vote Thank Flag Link Sun Mar 8, 2009
The pro of the higher real estate taxes is that they are deductible on your federal income tax return, thereby lowering your total overall cost.

But, you will have to pay homeowner's insurance that is more expensive on a single (maybe), cut your own lawn, shovel your own walk, etc.

It depends what the HOA fee includes.
Web Reference: http://usaloanshome.com
1 vote Thank Flag Link Sun Mar 8, 2009
Keep in mind that your Ad Valorem taxes are tax deductable but HOA fees are not. You should also consult with your tax accountant.
0 votes Thank Flag Link Sat Jul 18, 2009
I have more data to share. If you are considering an area with an HOA, make sure the builder is already gone. On June 7, 2009, the Sorrento Club House was robbed. The police report that details the crime will be available soon (D09-01718). Many home owners believe it's an inside job -- either a home owner going through foreclosure or a disgruntled former Toll Brothers employee. Because neither Toll Brothers nor the management company (in this case Massingham) live on the property, it's hard for them to see security from the perspective of a home owner. Once the builder is gone, the home owners will have full control of the Board, and they will be in a better position to implement policies that can better keep their properties safe.

As devastating as the crime had been to the Sorrento community, I will say that the way many home owners have rallied together, in spite of the lack of cooperation from Toll Brothers and Massingham as alleged by some, is truly inspiring. They are not taking this lying down, and they want to make sure people throughout Dublin can learn from what went wrong, so what happened does not have to be part of a continuing trend.
0 votes Thank Flag Link Mon Jun 15, 2009
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