By Kris Pedersen
Alliance Development
In today’s market, Realtors need to make every effort to differentiate themselves amidst a sea competition. In North Florida, there exists a glut of homes and condos for sale, and serious buyers are few and far between.
One way Realtors can keep precious client relationships strong, keep those vital referrals coming and the stream of clients consistent is to become a trusted expert for your clients.
And when it comes to the condo segment of the market, being able to navigate the sometimes dicey and confusing ocean of HOAs will put you head and shoulders above the rest.
Why are HOAs so important? Taking the time to get familiar with what HOAs are about can mean the difference between a happy client, and one who might regret that their Realtor didn’t walk them through the Condo Docs.
Take for example, the case of The Metropolitan at Lake Eola in Orlando. The condo association is almost $40,000 past due on its utility bills. According to The Metropolitan’s manager, the homeowners association is $120,000 in debt. The reason is that 38 percent of the condo owners are either not paying their HOA fees or they’re not paying enough. The residents are now faced with having their utilities shut off by the city.
Do you think that 38 percent were aware of what was expected by the HOA and its fees? Did their Realtors explain to them how it all work and what it covers, even for the 62 percent who pay their dues?
Another example is the highly publicized case of the El Cortez in San Diego. The former hotel, now spliced into 85 residential condos, is facing a mutiny from within combined with the slumping housing market.
The homeowners association and individuals in various suits are suing over construction defects, parking agreements, HOA reserves, disclosures on property tax agreements and the building planned for next door. The homeowners association and some individuals have filed numerous lawsuits against the developers, protesting what they see as a general neglect of some major problems and a failure to describe how much work needed to be done on the building when they moved in.
How do you think those residents feel about their Realtors?
Those are obviously extreme examples – but they illustrate that problems can happen.
Here are some important tips on what you should know about HOAs before your clients make the condo purchase:
• Read the homeowners’ association bylaws carefully. Make sure you understand the restrictions and how they will affect your property.
• Pay attention to association reserves. This is the single most important thing you can do when looking at HOAs. If the financial reserves are small, the homeowners are probably looking at large assessments in the future. Ask how large the HOA’s reserve funds (used to pay for maintenance and emergency repairs on the building) are. The larger the reserve, the less a chance of an assessment or one-time payment to chip in for an unexpected expense. The smaller the reserve, the greater the chance residents will be billed for an assessment in the near future.
• Ask about HOA’s history of assessments. By asking for this information, you can see what kind of assessments have been made in the last five or 10 years. It’s a good indication of how well-managed the community is – because better managed communities make fewer assessments.
• Know what the HOA covers. In general, security, maintenance, management companies, gutters roof, pool and more are covered. Understand what is covered by HOA, and what residents are expected to cover.
• Read the Condo Documents. Comb over the Condo Docs, and help the buyer read the Condo Docs. In today’s market, it’s important to know how many investor units are allowed, for example. Make sure you and your client understand the percentage of rental units allowed and that your client understands why it’s important to know this.
• Investigate the property’s management. When it comes to HOAs, pay particular attention to who handles the property management. Often the biggest surprise to your clients is that that they aren’t even on-site. So if an emergency comes up, phone calls go to an answering service or another state. Not to mention that many thousands of dollars of homeowners’ dues flow through these management companies each month. There are even larger sums that accrue in association reserve funds.
–Kris Pedersen is vice president of Alliance Development and can be reached at kp.alliancecomcast.net.