Homeowners Associations (HOAs) get knocked about pretty badly when a foreclosure happens in their association. They lose a good deal of money they budgeted to collect.
1. Typically the homeowner losing their home stops paying the regular HOA dues long before they actually get foreclosed on. Buh-bye money.
2. Post-foreclosure, banks don’t pay the HOA during the many months they own the property. Buh-bye mo’ money.
3. Usually the banks pay the back-owed HOA dues when they finally sell the home as an REO. So the HOAs get some money back there. Hello cashola! But we’re still missing a number of months of regular dues.
I served on my HOA’s Board and can vouch that many (most?) HOAs run on very slim margins indeed, and none are making a profit. Lately I’ve noticed HOAs getting creative to make up some of that lost revenue. Can’t really say I blame them: it costs lotsa green to maintain green lawns, common areas, mailbox depots and tot lots.
Earlier this year, a buyer client of mine at Landmark Towers (about which we’ve written extensively) paid a total of $600 in extra HOA transfer fees at closing. The detailed breakout of fees included: rush order fee $100, REO fee $100, disclosure on REO $100, and a couple 2-3 other items at $100 a pop. Wow!
Today I got an HOA transfer fee disclosure statement where the HOA is charging $3.50 for providing the buyer with a coupon payment booklet. The mind boggles.