Stir the pot: HOA's protect property values

Started by BrianB • 16 replies • 3490 views

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BrianB (California)
Posts: 2,820

Posted:

Years ago, when i first started coming to this board, a pretty common Mantra was

"HOA's exist to protect property values in their neighborhoods"

We had a lot of great discussions about that statement, whether they did, if there was any empirical evidence, proof, data, etc.. Right or wrong, it was a common saying/thought/idea... I kind of miss those days. I haven't heard that phrase in years now.

So, anyone care to muse about how well HOA's have done to protect property values in their neighborhoods in the past 4 years? Or has that idea gone the way of the passenger pigeon?

SheliaH (Indiana)
Posts: 6,964

Posted:

Well, I don't know if the idea's extinct, but I think there's more to the work of a HOA.

I can't speak for everyone, but I live in a HOA of townhouses. Since we share common walls, landscaping, a pool and a clubhouse, I think the HOA's main priority is for its members (homeowners) to pool resources (maintenance fees) to take care of those things, and let the property values take care of themselves. Ideally, if the property is well maintained, people will pay more for the houses and therefore everyone's property values incrase.

Indeed, I'm beginning to agree more and more with what one person (can't remember who) said about the subject - property values aren't really important unless you're selling the house or refinancing. It's also a subjective thing - if you like the house and maintained it, its property value is higher in your eyes because of the work you've put into it, and as long as it meets your needs, let the market do whatever it wants.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

JeffP6 (Florida)
Posts: 91

Posted:

I would totally disagree. If the HOA isnt doing its part by maintaining the common ground then property values will go down. The neighborhood will be seen as one that is not kept up.

An example - we have numerous ponds in our subdivision. One ion particular has a bad area that annually has a huge algae bloom / and the smell that comes with it. The homes that look out onto that pond most definitely have their property value impacted - who wants to buy a waterfront property only to find that the water is green and slimy and smells. It is the HOA's responsibility to maintain the pond in a pleaseing manner.

Additional examples - maintenance of the common area grass / wall / pool area and other ammenities. If these are not maintained they most definitely impact the value of the properties within the sibdivision.

Our HOA spends a lot of money to make sure that things are maintained and as such we have been told by realtors that have homes within our subdivision that our homes sell quicker than those in neighboring communities.

DanielH1 (California)
Posts: 482

Posted:

For me, the primary mission of the HOA is to maintain the Common Areas. Protecting property values is a distant, secondary mission.

In our case, the development required private roads so, without a HOA to maintain them, the development would never have been built. The City would have rejected the project if the developer required the City to maintain the roads. The developer would have cancelled the project if it could only build homes next to the existing public roads; if that was the case, the developer would have left the entire land undeveloped and either sold or sat on it.

But, that being said, the HOA has probably protected property values better than having no protection. Without the HOA, the landscaping around the foreclosed homes would have died and buyers would pay less to move into our neighborhood with a bunch of "haunted houses". So, it has kind of protected property values in that way. Although our houses are a little more uniform than they might have otherwise been, I don't think that has had any discernible effect, one way or another.

RickW (Illinois)
Posts: 169

Posted:

BrianB,

An excellent idea for a thread. Many times HOA boards spend their time reacting to the minor details of their association and do not allow themselves the opportunity to step back and look at the big picture. Typically I would think that governing documents state the primary role of an HOA board is to collect assessments and maintaining or even improving property values would be a second duty. With the economy being what it is, most HOA's are struggling to collect past due assessments, writing off bad debts, working to keep assessments low knowing unit owner's cannot afford more than they are already paying, or trying to find ways to cut costs while keeping their association looking "presentable" to future owners.

While our association has kept assessments relatively low, we are looking at a fairly large increase for 2011. However, we are doing so in order to maintain reserves at a level that will prevent the need for a special assessment in the future. That alone helps to maintain property values, especially in this day and age of tightened FHA certification.

We have, in the past 4 years:
1. Maintained our landscaping
2. Replaced dead landscaping
3. Collected on bad debt
4. Had a Capital Reserve Study done and even have had it updated
5. Cut operating expenses to bare minimum
6. Started a website to give owners regularly updated information and future owners a glimpse into our community
7. Protested against a neighboring property when they requested a zoning variance that would be detrimental to our property value
8. Installed a fence to help with trespassing issues that have come about.
9. Developed a Satelite Dish guideline that will help to keep dishes from being mounted in unsightly areas of our complex.
10. Begun a native pond maintainence program to keep our retention ponds looks more like native land than unkept retention ponds
11. Prepared a collection policy so that all owners can be assured to be treated fairly and equally
12. Began a wood replacement program, spread over 2 years, to rectify a developer built deficiency that if not corrected would result in our units looking poorly maintained.
13. Prepared a guideline for patio extension that allows owners to expand the size of their patios while still maintaining the overall look of the complex.
14. Began a yearly roof inspection to help insure our roofs will last as long as feasible before replacemnt is necessary.
15. Promoted our website to local realtors in hopes that the website would help "sell" the units

I'm quite proud of what our board, with assistance from our property management company, has been able to accomplish. For comparison, our complex consists of 13 buildings, 56 townhomes, built in 2000-2001.

JanetB2 (Colorado)
Posts: 4,219

Posted:

OK I'm game ... I love a good debate. However, I'm going to play devils advocate and give thought to the other side of this coin. We cannot fully stir the pot unless there is another view to think about or consider.

Long ago someone came up with the idea of having an HOA to protect home values ... as initially most HOA's were located in "Higher Valued Home Subdivisions" (i.e., golf course communities, etc.) this was a choice for those individuals who at that time could most afford to pay HOA fees and wanted to have ultimate control regarding the look and feel of their subdivision. Now more and more cities are pushing for all new subdivisions to have an HOA so they can reduce or eliminate certain needs, obligations, financial, and legal responsibility of having their Planning Commission or other city department monitor subdivisions or resolve any issues. In the past if a dwelling did not follow the design guidelines when being built you went to the city to resolve the issue, now with HOA's the city is allowed to state, "hire an attorney".

While HOA's have the potential to possibly protect home values, I am getting the feeling currently across this country HOA's are falling into chaos. Why ... most probably because they are based on a Democracy while our country was founded as a Republic. Most democracy's end in chaos as they breed corruption, greed, and those who desire power and glory for themselves with little or no concern about others.

Review the following video clips to fully understand the different government types, then I think we should all ban together and come up with ideas for laws, statutes, etc. for HOA's. Then maybe we will all be able to fully protect our property and property values instead of lining attorney's pockets with lawsuits that should not be happening if we had proper laws.

Part 1 of 2: http://www.youtube.com/watch?v=qhNobpG_4fQ&feature=related
Part 2 of 2: http://www.youtube.com/watch?v=htTnD_Zl0bs&feature=related

One thought is if a city allows HOA's then they need to implement an arbitration system such as maybe a small "jury" based system to initially hear and hopefully resolve any HOA disputes at no cost or very little cost. Whatever the "jury" decides is what is implemented at that time, then if the parties still disagree they can have the option to file a lawsuit. I totally disagree with most current systems where one or a few individuals can be abused by an HOA or developer and their only recourse is they MUST pay money to an attorney and file a lawsuit. With HOA's becoming more prevalent in middle and lower income neighborhoods there may be individuals who are violated, but do not have the money to file a lawsuit ... even if they may get it back when they win. There is something morally and ethically wrong with this picture.

Most laws are written by attorneys and of course their goal in today's society is to make them so full of holes and written in circles so hopefully no one can understand, unless you hire them or one of their attorney friends to interpret. When our country was founded think about what the initial "laws" were, so few, and how simply stated so there was no doubt and most everyone could understand and follow the rule of law. This is what is needed for HOA's ... laws and rules that leave no doubt about what is morally and ethically right and which equally protect everyone. Otherwise, unfortunately maybe HOA's should be eliminated in most subdivisions except possibly those who have certain common areas that include pools, recreation rooms, common walls, roofs, etc. and which require mutual maintenance. For those with only parks for their common areas if the laws are not fixed then maybe the cities should again be responsible for these subdivisions and attorneys would not be massively lining their pockets.

SheliaH (Indiana)
Posts: 6,964

Posted:

My computer has an annoying tendency to balk at showing youtube videos (don't know why), but I think Janet made some good points.

I'm a big advocate of arbitration panels - our local BBB started a program for its members and the public could volunteer to serve as arbitrators (after going through extensive training). I've also heard of similar programs sponsored by local prosecutors to resolve neighbor to neighbor disputes before the thing erupts into fistfights - or gunfire. I would prefer such programs be legally binding at the start - if someone fails to comply with the agreement, the arbitration should be used as evidence against the other side.

Regarding HOAs abusing homeowners, there are examples of this everywhere (just look around on this website), but I also believe if the people lead, the leaders will follow. A lot of people move into HOAs not understanding or being educated on their rights and responsibilites or fail to get involved in their communities. Even if you don't want to serve on a board of directors or a committee, what's wrong with at least attending the annual meeting, getting to know your neighbors and asking questions? There's more to living in an HOA besides paying a monthly or annual fee and going about your business. It's the same as government - if you don't pay attention to what's going on, you may be in for a nasty surprise.

I also agree that the HOA documents need to be written in plain English - the legalese is confusing and people give up and don't read them. Even so, anyone living in an HOA needs to make the effort because we are talking about the most expensive thing you will ever spend money on. When you don't know what your rights are, you put yourself at risk for abuse by rouge boards. My community has been trying to ratify revised CCRs for 4 years and one of the benefits will be that the thing's written in plaiin English

(So, why hasn't it been ratified? Long story, which I won't even try to summarize here)

And that's why I think a HOA's effect on property values is smaller than people realize - if you don't have like minded people who are going to take the time and effort to abide by the rules designed to preserve the look of the community and pay the fees necessary to maintain the property (so it looks as it was designed), the fact that the home is in a HOA won't make a difference. Homeownership isn't a spectator sport, no matter where you live.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

CaroleJ (Georgia)
Posts: 70

Posted:

"HOA's exist to protect property values in their neighborhoods"

When developers are trying to sell their properties, they act like any smart home seller who listens to their real estate agent. 'No clutter, no dishes left in the sink (not even one dish), beds always made and wrinkle free, no hair in bathroom sink or shower (ever!), no litter boxes, no barking dogs, nothing personal on the dresser, no toys on the floors, green grass that's 2 inches high and no more, 3 healthy flowers only in the back, etc, etc, etc.

Finally, a buyer comes along and the seller moves elsewhere, free of the realtor's strict restrictions. And here the comparison between a home seller and the developer fails because the developer leaves all the restrictions for existing and future buyers to deal with, while the normal home buyer has not inherited the previous owner's selling restrictions. No wonder people are shocked when they move in and discover what HOA living really entails. Most people don't want to live their lives as if they were constantly trying to sell their house, where the emphasis is on the property, not the people.

Nor do most people want to buy into a community that may be really nice to look at, but hell to live in.

So my question is not do HOAs exist to protect property values in their neighborhoods, but should they exist for that purpose?

RogerB (Colorado)
Posts: 5,067

Posted:

It is interesting to read about all the bad HOAs and bad Board members. But I wonder how many of those who post such remarks have served on HOA Boards. My experiences as a property owner, a Board member in 3 states, and as a managing agent are:
1) BOARDS. There are poor Boards. But generally the Board members are those owners willing to give their time and effort to serve while those that criticise do not offer to serve.

2) MEMBERS. Those that criticise HOAs are usually people who do not want to follow rules. But they expect their neighbors to follow the rules whenever it has a negative impact on them.

3) MANAGEMENT. There are poor management companies and inexperienced managing agents. They need to be replaced which is easier than replacing a poor Board member.

4) GOVERNING DOCUMENTS. If you don't read and understand the governing documents which apply to the home in advance of purchasing a property then you have not basis for complaining about the restrictions which apply.

5) BE RESPONSIBLE. Take ownership for your decisions rather than blaming someone or something else.
For example, that is what I tell my sons when they complain about their President. Before they I warned them to look at the candidates record rather than what they said.

DJ1 (Ontario)
Posts: 798

Posted:

I think Donna and I have discussed in the past about home sale prices in our own locations. Her experience was the opposite of mine if I recall correctly.

I am unique here in that I am one of ~15 non-HOA homes interspersed among ~100 HOA homes. We've had a pretty good home sale turnover in the last few years of both HOA homes and non-HOA homes. Resale prices don't seem to differ one way or the other but many of the HOA homes have sat quite a while on the market.

I have noticed that the real estate listings for the HOA homes NEVER list they are part of a HOA. Some, but not all, don't even list that there are monthly fees! Now why would agents leave those features out if they viewed them as a positive selling point?

It is a nice subdivision with low profile homes and wider than usual streets. I think the overall appearance is what sells the area and being adjacent to a Lake. Oh, and there are plenty of violations ie. exterior landscaping, trailers, etc that have not been enforced by the HOA in the entire 9 years we've now lived here.

PatH9 (Oregon)
Posts: 12

Posted:

Is there any data that confirms or denies HOA's protect property values?

We are coming up on an extension of ours and the board has said our values will decline without CC&R's and they had two e-mails from local Realtors to support their argument.

All replies are welcome.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Okay, How about this point. Altho the HOA type of living can somewhat protect the value of the HOA based on appearances of the internal property of the HOA, it cannot affect market and financial trends and that is what sets the prices that we get for our homes. I can assure you that my Florida HOA prices went down the tubes with how the market is doing and it had nothing to do with the Board and the HOA and their struggle to keep the values up.

I think that we place entirely too much responsibility of HOAs and their Boards. As with anything, it is easy to point a finger and say that it is their fault. In reality, the neighborhoods and locations are a factor that are never factored into the equasion when the "HOA protects property values.

BrianB (California)
Posts: 2,820

Posted:

Quote:

Posted By PatH9 on 09/27/2010 11:54 AM
Is there any data that confirms or denies HOA's protect property values?

We are coming up on an extension of ours and the board has said our values will decline without CC&R's and they had two e-mails from local Realtors to support their argument.

All replies are welcome.

To date, i have not seen any comprehensive data that shows that HOA's do or do not impact property values. There may be some, i just haven't seen it.

Part of the problem is that it is difficult to get apple/apple comparisons (ie, an HOA with a tennis court does not equal the value of a non-HOA subdivision without any amenities). It may be difficult to find a Non-HOA neighborhood with a community park, swimming pool and clubhouse to compare to an HOA that has those amenities.

Secondly, if one does find equalized data, the subset may be very small, which may not be good for a broad extrapolation.

PatH9 (Oregon)
Posts: 12

Posted:

I agree Bryan but this is a scare tactic the Board is using to extend the CC&R's and there is noway to counter it.

BrianB (California)
Posts: 2,820

Posted:

Quote:

Posted By PatH9 on 09/27/2010 2:11 PM
I agree Bryan but this is a scare tactic the Board is using to extend the CC&R's and there is noway to counter it.

Ask the person making the claim for proof of their claim. There's darn good sense in keeping the Missouri State Motto always at the ready...

DonnaS (Tennessee)
Posts: 5,671

Posted:

SUCH A WISE MAN YOU ARE ROGER B.

HOW CAN THERE BE ANY ARGUEMENT ON THIS

DJ1 (Ontario)
Posts: 798

Posted:

CaroleJ, "Nor do most people want to buy into a community that may be really nice to look at, but hell to live in. "

Gotta say that gets my vote for best quote of the day.

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