Home Buying in Palo Alto>Question Details

Tenpro, Home Buyer in Palo Alto, CA

We are looking into Palo Alto for condo or single home. Now condos are good to okay but $500 HOA? Too high for condo. Homes are very old & very

Asked by Tenpro, Palo Alto, CA Sun Oct 24, 2010

costly I am okay to pay $200 or less HOA but most of the condo in Palo Alto or near by area has very high HOA. Also friend of mine in real estate warn me about HOA & association has constant flight among the members. your take please...

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Grace Morioka (408-426-1616)’s answer
Hello Tenpro and thanks for your post.

First, let's start by saying not all HOA fees are the same, nor are they meant to be. The HOA fee is a reflection of the age of the building, the common areas to be maintained, the past investment policies and missteps of the community, and the history of maintenance on the site.

Before we paint all HOAs with the same broad brush, let's define subtle differences that I must constantly remind my clients:

1) Condominiums are always more expensive to maintain because the homeowners association owns the BUILDING AND THE COMMON GROUNDS. The owner usually owns only the "box of air," and

2) a "townhome" is an architectural style and NOT a form of ownership, so a home may look like a townhome or "rowhouse" (as they are defined on the East Coast), but can still be a condominium; and

3) a Planned Development is an attached home where the homeowner owns the building and the land, so the costs of major renovations to the structure are borne by the homeowner and NOT the HOA, thus the fees are lower.

It's completely understandable that an older condominium community will have larger and more costly monthly assessments. The reason is that the building components are getting old, and the costs to replace the siding, the trim, the roof, the beams, the stairwells, the pool, the gym equipment, etc., will be coming due, so the reserves must be "super charged" to handle these incredibly huge expenses. In the past, HOAs were not required to put aside money for things like siding, but we now know that this must be done, so, reserves have increased and the dues have increased with the reserves. In fact, when I worked on the Dept of Real Estate's Cost Manual for HOAs, it never occurred to us on the panel that HOAs would ever need to replace the plywood siding, but here we are 15 years later replacing siding all over the county.

So look at the HOA fees not so much as "high" or "low" but as indicators of what must be repaired, replaced or refurbished within the community and how quickly or not the HOA must fund those repairs. In addition to looking at the monthly HOA fees, also look at the budget and, in particular, the amount of reserves set aside for the community. Since 2001, we've (the HOA management community) has had to "spell out" the amount of reserves set aside in terms of percentages. In other words, "the HOA is 20 percent funded in the reserves that we're supposed to have." In my client's cases, we're all 100 percent funded or more, but I run a "tight ship" with my HOAs...anyway, look for that "funding" percentage. If it's less than 50 percent, I would be very careful about whether or not to buy as this is often a "red flag" that special assessments may be in the future to fund repairs.

As to your other question about HOAs having constant fighting among members, I cannot lie, that is certainly a possibility with any homeowners association. You can minimize the possibility of getting into a contentious HOA by reviewing the minutes of the meetings to see what is said and how often someone is complaining about dictatorial Board members.

Finally, work with an agent, like me, who has knowledge of and extensive experience working with HOAs. I know a lot of Realtors will tell you that they handle HOA units all the time, but if they cannot tell you the difference between a "lot" and "unit" or how the Bylaws and Rules differ from the CC&Rs, you are not going to get the best advice.

Find a great agent and get your best home!!

Good luck,
Grace Morioka, SRES, Realtor
Area Pro Realty
Tel (408) 426-1616
Email: GraceAreaProRealty@att.net
3 votes Thank Flag Link Sun Oct 24, 2010
BEST ANSWER
I manage rental condos in Palo Alto ($250 HOA fee), Alameda ($305 HOA fee) and Santa Cruz ($584 HOA fee, but has a pool and is located across the street from the wharf). HOA fees in general are expensive and are part of the reason I seldom recommend condos as investment properties. Palo Alto HOA fees vary greatly, depending upon common area ammenities (pool, spa, game/common room, parking, security etc.).
Yes, dealing with neighbors on HOA issues can be a real pain. The most common problems are neighbors who are unwilling to spend what it takes to maintain the common areas and neighbors who either make too much noise or don't keep their unit up to the standard of the complex. Resolving these issues can be an awful headache, compounded by the closeness in which everyone lives.
Condos are always the first type of property to go down in value when markets go down and the last to regain value when markets improve. If you're buying with the intent to upgrade to a better/bigger home later, I recommend against starting with a condo; better to hold off until you're ready for a single family home. Of course, before you meet with a mortgage or real estate professional, meet with a financial planner. Make sure you understand how a home purchase fits in your total financial plan.
1 vote Thank Flag Link Sun Oct 24, 2010
You will find that condo fees, are going up. Palo Alto is not exempt from high monthly fees new high rise condo in downtown San Jose start at $400 per month. Older condo association fees are going up to due to the cost of maintenance.

Something to consider, if you are purchasing a home you will need to plan for on going maintenance and long term replacement as well. The control is up to you. Plan on outside landscaping monthly, your home owners insurance, roof, painting, etc. Plus your own time to coordinate and get cost comparisons.

In a condo you will have the benefit of a management company (also a negative) taking care of those items. You have common areas to share in. Often times there are additional amenities, such as pool, spa, work out room, that needs to be maintained for your use and others.

Your friend is right, you are at the mercy or a board in an HOA. They have "good neighbor" rules so that the community you live in has a shared understanding on how to conduct themselves and the use of the community.

In a neighborhood, if your neighbor leaves junk on the driveway, street, you will have to go to the city to see if it is considered an city issue. If they don't maintain the exterior of their house you can't tell them to paint it.

My advice is for you to really consider what a home and neighborhood means to you. Some people are busy and prefer to live in a planned HOA community due to security, maintenance, amenities. Others don't like shared walls and people telling them what they can and can't do with their home.
Web Reference: http://www.TerriVellios.com
1 vote Thank Flag Link Sun Oct 24, 2010
Welcome to the world of Palo Alto real estate!

If you decide you must live in Palo Alto, you will have to pay the price. There is no way around that.

If you are willing to live outside but still in the vicinity of Palo Alto, you can get a much better deal. You will not have to pay a premium for the privilege of living within the city of Palo Alto.

The issue of conflict within HOAs is a separate one of course, not unique to Palo Alto. It is usually a good idea to speak to some members/owners, to gauge the "culture" of any particular HOA. Be aware, nonetheless, that any HOA can change significantly over time, as owners and the dynamics between them change.

As with any real estate purchase - and most other things in life - it's a matter of arriving at the set of trade-offs with which you are most comfortable. A skillful and experienced agent could help you immensely in the process of arriving at the solution that is best for you.

Sincerely,
Dan

Daniel Berman
Pacific Century Realty
Buyer Rebates to 50%
Listing Commissions as Low as 1%
1 vote Thank Flag Link Sun Oct 24, 2010
Condo and townhome communities in Palo Alto are meticulously maintained and that comes out expensive. Out of the 41 townhomes/condos actively for sale on the MLS right now, there are a few where the HOA fee is around $400/month and less. How much will you pay per month to maintain an older single family home? Probably about the same. If you can afford, I would go with the single family home and stay clear of HOAs unless it is better for you to have someone else maintain the property with less stress and work for you. As far as bickering between the HOA board members, well, that is true. When you live in an HOA, you can be involved as much or as little as you choose. Don't want to be involved in all the bickering? Don't go to the meetings.
1 vote Thank Flag Link Sun Oct 24, 2010
Tenpro,
HOA fees in Palo Alto are higher than in surrounding cities, but there are no fees anywhere around here that are only $200. The fees include insurance and landscaping care so that is $350 a month if you were to have your own home and fire and earthquake insurance. Then there are the exterior utilities and usually water and garbage which is another $100 if you are in your own home. The rest of the money goes to reserves for future repairs and replacement and a management fee of generally 10% of the HOA fee. If you own your own home and replace your roof or paint the house you have to come up with all the money yourself. If you are in a condo or townhome then you pay a little every month and usually do not have to come up with a lump sum to fix something unless that item was not properly budgeted for in the reserves.

So the bottom line is that the only thing in the HOA fee that you would not have to pay on your own if you buy a single family home is the management fee of 10% of the HOA fee. Many people do not understand that when they buy a home their misc costs are very similar to HOA fees.
As far as fights go, it can happen, but it happens in neighborhoods also. Have you read some of the discussions on internet boards in PaloAlto over things like dog parks and soccer fields?

Marcy Moyer
DRE 019919194
Web Reference: http://www.marcymoyer.com
1 vote Thank Flag Link Sun Oct 24, 2010
I've never seen an HOA fee that high per month. If the fees include utilities, all lawn care, trash removal, community grounds with pools and tennis courts, it could maybe go that high. Is there some unbelievable added security? I would get a list of what these high fees encompass or cover, and go from there. If it's not justifiable in your own opinion, talk with other residents to see why they decided the fee was worth it to them.

Best Wishes,
Kevin
1 vote Thank Flag Link Sun Oct 24, 2010
Yes but most of HOA are in high $400 includes (water & garbage) + other maintainable items we don't care much. I mean even if you have little to maintain still it is high.

Also some of you mention that HOA will go up in future and it is correct since condos are older and in next 10-15 years they need more repairs.

If feel renting condo in $1600 to $1800 range sounds good to me at this point. Later on single home is way to go unless someone point out other way..

Thanks
0 votes Thank Flag Link Sun Oct 24, 2010
IF you can afford to purchase a single family home, that is the way to go. This way you own the land and control your own destiny.


Good luck,

Tap
0 votes Thank Flag Link Sun Oct 24, 2010
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