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Subject: Actual data on what impacts property values?
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NZ
(Ohio)

Posts:18


08/25/2021 3:19 AM  
Anyone know some sources of real data on what impacts property values?

I'm looking for actual data, not single anecdotes or hollow assertions.
CathyA3
(Ohio)

Posts:2599


08/25/2021 4:49 AM  
If you Google "property values", you'll find a lot of information including white papers on the subject - although the ones I've looked at tend to focus on a single topic (eg. wind turbines) because that's generally how you go about statistical studies, and many of the papers conclude that "the jury is still out" because what one person finds attractive will be a deal breaker for someone else.

I work for a new home builder in the sales area, so I look at what features our new communities include, what the floor plans are like, and what our model homes look like. These things are a pretty good proxy for what increase sales (and sales prices), and you can look at builders' web sites to see these things.

On the other hand, any new home builder need to know their market and cater to it - you can't be all things to all buyers, and we've targeted a particular market (ie, not the million-dollar plus buyers).

Finally, property values are going to be impacted by things outside of anyone's control such as shifts in the broader economy and developing trends. The recent floods such as in Tennessee are demonstrating that communities that felt themselves to be immune to such things no longer are, and this will impact home buying patterns. That lovely detention pond in my community that sits behind the building next to mind will not handle 17 inches of rain, and I assume anything like what Tennessee got will take out that building and the ones on either side. Time to start asking pointed questions of the board...
NZ
(Ohio)

Posts:18


08/25/2021 5:22 AM  
Thanks for that info, Cathy. I realize I was not specific enough in what I'm asking about.

CC&Rs frequently include tight controls over things like the design of mailboxes, what color people paint their houses, or whether the material used on the exterior of a shed matches the look of the main house. People defend those kinds of restrictions with the claim that they protect property values. (In a committee meeting I literally heard someone say "If someone down the street paints his house purple that would hurt my resale value.") Yet I can't find any data on whether those kinds of claims are true. So that is the kind of data I'm looking for.

Note: to be relevant to concerns of the type I've described, the data would have to show that e.g. the color of a NEIGHBOR'S house will impact ADJACENT property values. Obviously if I paint my OWN house pink I will likely lower my OWN property value.
CathyA3
(Ohio)

Posts:2599


08/25/2021 5:59 AM  
Here's the problem with all of this: these things can change, and I'm not sure that any of it is solid enough that you want to put it into restrictions in CC&Rs. If you're working with a lawyer, that person may be helpful since they've seen *many* CC&Rs, they know what the general consensus is, and they know what sorts of restrictions cause legal conflicts and get boards into trouble.

Many CC&Rs I've seen sort of punt: rather than put in a lot of little piddly restrictions, they give the board and maybe an architectural committee the right to make reasonable rules regarding community aesthetics. This has the advantage of allowing a community to respond to changes in home buyers' demographics and tastes (and they do change). The trouble is that you exchange flexibility for the black-and-white restrictions that are easier to enforce. Definitely a trade-off.

The things I've noticed that definitely will affect property values:

* Too many rentals, especially airbnb-style. Not only do banks not want to lend in such communities, investors have now started to target single family homes (prior to this it was mostly condos), and they can destroy a community. Not only are they absentee owners who are unlikely to do their fair share of the work, their interests are at odds with the resident owners.

I *strongly* recommend a rental restriction that's as strict as you can make it - at the very least prohibit hotel-style and corporate rentals.

* Shaky finances. Poor maintenance and poor enforcement will hurt property values. A well-maintained pink house is better than a tastefully decorated home that's allowed to deteriorate. Banks also look at reserves. Make sure your CC&Rs also spell out insurance requirements. Also make sure your bylaws spell out things like the right to fine for violations. Ohio allows foreclosure for non-payment of fines which are considered assessments (some other states do not).

* Problem neighbors. This can include hoarders, drug dealers, noisy tenants (them again). At our attorney's suggestion, we passed an amendment prohibiting Tier 2 and Tier 3 sexual offenders from living in our community - they can own property, they just can't live here. You'll want the board to have as much authority as possible to deal with these things.

You'll notice that these are all big-picture things. They may be harder to wrap your brain around, but I think they make a bigger impact on home values than mail box styles and the like. And neglecting them *will* cause your community to go downhill.



PatJ1
(North Carolina)

Posts:295


08/25/2021 6:18 AM  
When cities and counties are evaluating real estate values for property tax purposes they look at raw data such size and improvements, or even the view, not what color the house is painted or even what shape it's in. I don't think you'll find actual data on color coordination, just opinions.

While some buyers will look at a hot pink house and love the color, some will dismiss it or offer way less than the house should sell for. Some don't want to live next to a hot pink house.

Where it could effect property values is in the real estate comps. driven by the sales in the area. By selling for less it can bring neighboring house appraised values down depending on the market.

Buyer's are picky and paint is cheap, but most buyer's want to like what they see and will even pass, driving up days on market or even offer less on a house with a lime green bathroom.

HOA's governing documents requiring houses painted within a certain color pallet are meant to preserve property values of the community.







Board members are volunteers. Many have no idea what they're doing. Educate them. Don't beat them up.
SheliaH
(Indiana)

Posts:4290


08/25/2021 6:42 AM  
And let's not forget the board of directors - the decisions they make (or not) will impact the Association's operations and we know what happens if THAT goes to hell.

Just in time for this discussion - here's an interesting article I read on corporate boards and how much oversight should they be imposing on a company's CEO. This article may focus on for-profit companies, but I think there are a lot of implications for boards of non-profit organizations, which is what a HOA is supposed to be - https://theconversation.com/corporate-directors-dont-see-stopping-wayward-ceos-as-their-job-contrary-to-popular-belief-165788

As for actual data on property values, you have to remember "property value" itself is subjective, so in order for any data to make sense, there would have to be universal agreement on what values are important and what goes into making that value more or less attractive. Since it's all subjective, you'll never get that level of agreement, as Cathy notes.
CarissaM


Posts:0


08/25/2021 7:17 AM  
I'm not sure if this will assist but try researching external obsolescence; where external factors have an affect on your home’s value, instead of factors on your property that can cause a decrease. This would include things like the paint color of your neighbors home, when they don't maintain their home's exterior, or other things an HOA attempts to keep in alignment with CC&R's like mailbox type, paint color palette...etc.
CathyA3
(Ohio)

Posts:2599


08/25/2021 7:22 AM  
More thoughts:

* What's acceptable will depend to some extent on your community's demographics. Busy professionals have less time to worry about mailboxes and colors than people who sit at home looking for things to keep their minds occupied. And demographics can change over time.

* It will also depend on who owns what. An association has more authority to call the shots if it actually owns the items in question or the CC&Rs give the association the duty to maintain said items. Otherwise, courts often rule in favor of homeowners' free use of their own property, meaning the association will probably lose when it comes to enforcing the restrictions.

* K.I.S.S. Board members' time is limited, and time spend worrying about mailboxes is time taken away from things that are higher priority. Distracted boards tend to make poorer decisions.
CathyA3
(Ohio)

Posts:2599


08/25/2021 7:45 AM  
Also keep in mind that you're fighting a losing battle to some extent. Even condo and townhome communities - which are about as uniform and regulated as possible - tend to end up as hodgepodges as homeowners add their personal touches and half the neighbors say "ugh". Trust me: plastic flowers do not say "up market" but you'd be amazed at how many think they're the latest word in decorating aesthetic. (Or maybe they're an ironic commentary on our shallow values - I dunno...)

So keep it simple, focus on the important stuff, and pick your battles.
CathyA3
(Ohio)

Posts:2599


08/25/2021 8:22 AM  
Posted By SheliaH on 08/25/2021 6:42 AM
... snip ...
Just in time for this discussion - here's an interesting article I read on corporate boards and how much oversight should they be imposing on a company's CEO. This article may focus on for-profit companies, but I think there are a lot of implications for boards of non-profit organizations, which is what a HOA is supposed to be - https://theconversation.com/corporate-directors-dont-see-stopping-wayward-ceos-as-their-job-contrary-to-popular-belief-165788

...snip ...



That is interesting.

The boards' view of what their job is ("we're not management") reflects a similar difference between HOA/COA boards and property managers. Viewing it that way, I can sort of see corporate boards' position on rogue CEOs. On the other hand, HOA boards are in a position to replace a property manager or even do the job themselves, and you can make a good case that it's their fiduciary duty to do something when management is off the rails. Ultimately the buck stops with the board, not with a PM or CEO who is basically an employee.

With corporations, sometimes the only way a CEO is stopped is when an activist shareholder wins a proxy fight, gets a seat on the board and now holds a majority with others who see things his/her way, and management is forced to change direction. Something similar happened at P&G a few years ago (management was strongly in favor of the activist's opponent who supported the status quo, and many mailings with proxy forms went out ahead of the annual meeting - shareholders were very aware of the proxy fight and what was at stake).

It sounds like it's up to homeowners/stock holders to take control when boards aren't doing their jobs.
MelissaP1
(Alabama)

Posts:10590


08/25/2021 8:30 AM  
HOA is not in the Home Value market. They are in the Attracting potential buyers market. They are Sales Tools. Actual property value is based on real numbers. Those are what similar homes have sold or foreclosed for in Last 6 months in a limited radius.

You can not put a real number on if someone did not want to live in a HOA or hated the yard. That is not a measurable value.

Former HOA President
TimB4
(Tennessee)

Posts:17852


08/25/2021 8:41 AM  
NZ,

Keep in mind that there are different "values" when referring to property value.

For example:

Market Value, Appraised Value, Perceived Value and all of these impact the Property Value.

In my opinion, an HOA can only affect the perceived value, which will vary person to person.





JohnC46
(South Carolina)

Posts:11665


08/25/2021 8:45 AM  
I know of no hard answers. I do know one thing. When looking for home, I paid close attention to what the neighborhood looked like. I have driven into a neighborhood and said to the real estate agent showing me around, to turn around this neighborhood is of no interest to me without ever having seen the house for sale.
NZ
(Ohio)

Posts:18


08/25/2021 8:52 AM  
Thanks everyone, this is reassuring.
KerryL1
(California)

Posts:8729


08/25/2021 9:58 AM  
As I mentioned on your other thread, NZ, your CC&Rs committee should move many of the little details to either Rules and Regulations, a governing doc in many HOAs, or to a document called Architectural Guidelines . Then when tastes and preferences change in your community, these documents are easy to update usually require only board approval.

Keep the CC&Rs more general with the latitude built in to create rules about x, y, or z.

Rules about residences' exterior appearances that are enforced helps maintain property value.

Buyers finally are getting more savvy, at least in my area, about the importance of well-funded reserves. So they now are a sales tool.

Location, location, location still matters but is usually outside owners' control.

My HOA, for instance is a city block twin tower property. Across one street is a 1-1/2 acre 25 y.o.city park. It was never well-used, had no amenities in it and was heavily treed. It became a haven for homeless people. Our street-level townhomes across the street from it and those in the tower that faced it rec'd less for their units than those in identical units in the other tower or for those units that don't overlook the park.

Members of my HOA and others near us pushed hard and the City finally funded rehab of the park, which is now underway. It's going to be fabulous with several fine amenities! Property values already have risen for those overlooking/across the street from it. The reason the prices for the affected units weren't really bad is because the general location is excellent.
NZ
(Ohio)

Posts:18


08/25/2021 12:32 PM  
Posted By KerryL1 on 08/25/2021 9:58 AM
As I mentioned on your other thread, NZ, your CC&Rs committee should move many of the little details to either Rules and Regulations, a governing doc in many HOAs, or to a document called Architectural Guidelines . Then when tastes and preferences change in your community, these documents are easy to update usually require only board approval.

Keep the CC&Rs more general with the latitude built in to create rules about x, y, or z.




Good advice, thanks. I will pass that on to the committee.

Rules about residences' exterior appearances that are enforced helps maintain property value.




This is the kind of claim that either needs to be more specific (by "appearances" do you strictly mean things that reflect the residences' level of maintenance and upkeep?) or else strikes me as an assertion lacking in empirical evidence.
TimB4
(Tennessee)

Posts:17852


08/25/2021 12:46 PM  
Posted By NZ on 08/25/2021 12:32 PM


Rules about residences' exterior appearances that are enforced helps maintain property value.




This is the kind of claim that either needs to be more specific (by "appearances" do you strictly mean things that reflect the residences' level of maintenance and upkeep?) or else strikes me as an assertion lacking in empirical evidence.




This would affect the perceived value (again, varies from person to person).
BarbaraT1
(Texas)

Posts:589


08/25/2021 1:19 PM  
I have had lots of Realtors as board members over the years, and they basically agree that home values are a mystery, wrapped in an enigma, etc.

The only thing they agree on is that adding a pool will not pay for itself in increased home value but updating the kitchen will.

Management companies and CAI emphasize "protecting property values" through enforcement of covenants because, in my opinion, its one the few measurable aspects of our job. I can't quantify for the board the number of weeds I prevented by working with the landscape company on turf management. I can't quantify homeowner satisfaction in regards to property maintenance - the better I am at my job, the less they even notice maintenance because things are fixed before anyone even knows they are worn out or broken.

But I can put in a report "sent 47 violation letters this month".

I also think that, because HOAs are so closely associated with rules, rules, rules, boards think that they MUST be nitpicky busybodies, measuring blades of grass and forming an opinion about yard art. Whenever I have been able to tell a board - there's nothing in your governing documents that specifically addresses X and you don't have to make a rule about X if you don't see it as a problem - they are relieved. Well, most of them. Sometimes people run for the board precisely in hopes of being able to measure blades of grass.

In short - "HOAs preserve property values" is a marketing slogan, not empirical fact. Many factors go into property valuation, and there is more than one kind of property valuation.

Another opinion of mine - CAI and management companies need to change their messaging to emphasize common area maintenance over rules enforcement. But "HOAs are required by cities and counties when there is common property and we are here to help you care for them, because you just wanted to live in a nice neighborhood not take on a second job managing a nonprofit corporation with physical assets" isn't much of a slogan.

TimB4
(Tennessee)

Posts:17852


08/25/2021 1:34 PM  
Here is some info:


Do HOAs Really Increase Property Values? 2015 article based on a George Mason University Study.

How Does An HOA Increase Property Values? from a management company

The Impact of Community Associations on Residential
Property Values: A Review of the Literature
2015 article by a professor at Virginia Tech.

Of course, in 2019, a Yale professor did research and specified that HOAs do not enhance property values:

Correlation of Homeowners Associations and Inferior Property Value Appreciation a pdf file.



BenA2
(Texas)

Posts:1108


08/25/2021 4:49 PM  
I have done a little research on this and I have not found any clear evidence that strict HOA covenants raise or maintain property values. Yes, there are people who will pay more to live in a community with strict controls but I do not think that is the majority.
NZ
(Ohio)

Posts:18


08/25/2021 6:41 PM  
Thanks everyone for these additional replies. Very helpful!

@Barbara: Yeah, I've heard that same thing about pools and kitchens, but interestingly I first heard about it years ago from an economist who provided data along with the conclusions.

"Sometimes people run for the board precisely in hopes of being able to measure blades of grass." <--- that is DEFINITELY the sense I got so far on this committee. It seems like most of our meeting time is spent with people discussing their pet peeves with this or that neighbor's property, with this eventually leading to vague statements about how rules might be written to punish those neighbors...and usually that's when I pipe up, channeling my inner Ron Swanson.

"CAI and management companies need to change their messaging to emphasize common area maintenance over rules enforcement." <--- another great point. When we bought this house our realtor told us the only thing the HOA did was maintain the culverts under the driveways (which turned out not to be true, but was plausible since our dues are extremely low).

@Tim: I haven't had a chance to check out those links yet but I will. Thanks for posting them!

@Ben: Appreciate that added insight. I am reaching the same conclusion, and trying to figure out how to best "package" it if I need to reference this fact in a meeting.
MaxB4
(California)

Posts:1601


08/25/2021 7:48 PM  
Posted By BarbaraT1 on 08/25/2021 1:19 PM
I have had lots of Realtors as board members over the years, and they basically agree that home values are a mystery, wrapped in an enigma, etc.

The only thing they agree on is that adding a pool will not pay for itself in increased home value but updating the kitchen will.

Management companies and CAI emphasize "protecting property values" through enforcement of covenants because, in my opinion, its one the few measurable aspects of our job. I can't quantify for the board the number of weeds I prevented by working with the landscape company on turf management. I can't quantify homeowner satisfaction in regards to property maintenance - the better I am at my job, the less they even notice maintenance because things are fixed before anyone even knows they are worn out or broken.

But I can put in a report "sent 47 violation letters this month".

I also think that, because HOAs are so closely associated with rules, rules, rules, boards think that they MUST be nitpicky busybodies, measuring blades of grass and forming an opinion about yard art. Whenever I have been able to tell a board - there's nothing in your governing documents that specifically addresses X and you don't have to make a rule about X if you don't see it as a problem - they are relieved. Well, most of them. Sometimes people run for the board precisely in hopes of being able to measure blades of grass.

In short - "HOAs preserve property values" is a marketing slogan, not empirical fact. Many factors go into property valuation, and there is more than one kind of property valuation.

Another opinion of mine - CAI and management companies need to change their messaging to emphasize common area maintenance over rules enforcement. But "HOAs are required by cities and counties when there is common property and we are here to help you care for them, because you just wanted to live in a nice neighborhood not take on a second job managing a nonprofit corporation with physical assets" isn't much of a slogan.




Very well said!
KerryL1
(California)

Posts:8729


08/25/2021 8:16 PM  
I'm not going to search for empirical evidence but as a realtor in a past life, weed- & debris- free neighborhoods without junked cars in the driveways, all else being equal, sold faster and at a better price than unkempt or "spotty" neighborhoods.

NZ
(Ohio)

Posts:18


08/26/2021 3:19 AM  
Posted By KerryL1 on 08/25/2021 8:16 PM
I'm not going to search for empirical evidence but as a realtor in a past life, weed- & debris- free neighborhoods without junked cars in the driveways, all else being equal, sold faster and at a better price than unkempt or "spotty" neighborhoods.



Yeah, I think those (plus stuff like turning your house into a rental or a multi-family dwelling) are the less controversial types of restrictions; the link between those things and diminished property values is much more intuitive and plausible. It's the extraordinary claims that require extraordinary evidence.
CathyA3
(Ohio)

Posts:2599


08/26/2021 5:27 AM  
Posted By NZ on 08/25/2021 6:41 PM
... snip ...

"Sometimes people run for the board precisely in hopes of being able to measure blades of grass." <--- that is DEFINITELY the sense I got so far on this committee. It seems like most of our meeting time is spent with people discussing their pet peeves with this or that neighbor's property, with this eventually leading to vague statements about how rules might be written to punish those neighbors...and usually that's when I pipe up, channeling my inner Ron Swanson.

... snip ....



That was our experience with committees in general: they attract homeowners with an axe to grind. Our bylaws require that all committees have at least one board member as part of the committee, mostly to make sure the committee stays in its lane - but even so ours accomplished little. That said, other communities use them successfully - finance committees seem to be the most helpful because they tend to attract people with an interest and skill in that area and fewer folks who want to punish their neighbors.

An amusing note: last night I read a funny short story about HOA-style communities. The premise was somebody hit on the idea of buying up haunted houses, hauling them to the new Haunted Hills Community, and selling them to unwary buyers. (Halloween is coming - roll with it, OK?) It was a wacky send up of developers, realtors, and HOAs in general - and of course everything went along just fine until the investor/airbnb crowd showed up.

So there is one author's view of the topic of property values: a community can survive grisly murders, demons, vengeful spirits, and horrific noises, but the investors are what ruined it for everybody. :-)


BarbaraT1
(Texas)

Posts:589


08/26/2021 7:58 AM  
Posted By KerryL1 on 08/25/2021 8:16 PM
I'm not going to search for empirical evidence but as a realtor in a past life, weed- & debris- free neighborhoods without junked cars in the driveways, all else being equal, sold faster and at a better price than unkempt or "spotty" neighborhoods.





I'm certainly not advocating for abandoning any property standards. I just don't think writing violations should be the primary function of an association. I've never managed a property where the condition of the commons didn't mirror the overall quality of lot maintenance. There will always be people who have to be reminded every two weeks to mow their damn lawn already, but generally - if the common area landscaping, fencing, parks, pools, etc are well maintained the owners will meet that standard.

Granted, the association being able to take proper care of the commons requires setting the assessment rate correctly and not having rampant delinquencies. But then, if you have a massive delinquency problem you have owners who can't afford to take care of their lots, no matter how many letters you send (which was the case from 2008 to 2016 for many communities).

I always do what a board instructs me to do, but I certainly try my hardest to bring them around to my philosophy, which is that the association should serve the membership, not the other way around. We shouldn't sit in front of a house, looking for things to write letters about. A violation is something that makes you tap the breaks and say "yikes!".

We are hard wired to respect rule for no other reason than "It's the rule!" In many ways, this is good- it's what allows society to function. It's why we respect that 70 year old museum docent who asks us not to touch the paintings when really, there are fifty of us and one of her, we could totally overpower her and touch whatever we want!

But the downside of that is clinging to rules that don't make sense, don't serve a purpose, and nobody really wants anyway because "it's the rule!". An example: I once managed a small community whose governing documents required each lot to have a live oak in the front yard. These were tiny front yards. Live oaks would ruin their foundations, plumbing, sidewalks... most homeowners didn't want to have to have a live oak in the front yard. The developer even admitted that he hadn't intended for the docs to say "live oaks" just "oak" - other oak species that would have less invasive root systems would have been fine. But when the board tried to amend the governing documents to remove this requirement, they could not get 67% of the membership to agree because "it's the rule!"

I managed an old, old community whose docs forbade pickup trucks. Now, in the 70s, when these docs were written, pickup trucks were the vehicle of the working man (and the sort of people deed restrictions were originally intended to keep out). Well it's not like that anymore. In Texas, people who have never held a hammer in their lives drive pickup trucks and they cost eighty grand or more. And yet again, changing the documents was a chore because "it's the rule! We must follow a stupid, outdated rule!"

If you cannot articulate a reason for a enforcing a rule other than "it's the rule" it's a bad rule. And, most of the time when owners call me to tattle on their neighbors, they don't actually care about the truck, or the trash can, or the sign in the yard - they care because someone, somewhere isn't following A RULE.







KerryL1
(California)

Posts:8729


08/26/2021 9:17 AM  
My, quite a reaction to my little remark, Barbara. I do agree with you and am glad none of our directors or committee members here are clipboard-junkies roaming the hallways and underground garage-levels seeking violations.

NZ, Barbara gives some good examples about why you want to keep certain things out of the CC&Rs and place them in rules or ARC Guidelines, which gives your Assn. & future boards flexibility.

What kind of "extraordinary" restrictions do some Committee members want, NZ? Examples?




AugustinD


Posts:1920


08/26/2021 9:26 AM  
I could not get the above link to work. I googled and found this site offering the above article. http://www.housing-critical.com/home-page-1/correlation-of-homeowners-associations-and-infe . Here the abstract of the study, with bolding added by me:

Housing developers’ claims of benefits led to exponential growth in neighbourhood homeowners associations in the U.S. during recent decades. Sanctioned by state laws, association rules governing homeowners are usually initiated by developers who claim that the rules protect property values. But the claim is not supported by empirical analysis. Inflation adjusted annual percentage returns in consecutive sales of a sample of 900 most recent home sales in Duval County Florida, Pima County Arizona and St. Louis County Missouri during late 2017 and early-2018 were examined. The results reveal that the annual percentage returns on homes sold in homeowners associations were significantly less than those of homes in other neighbourhoods statistically controlling for property characteristics and prevailing economic conditions at the time of the
original purchase.
Correlates of home prices at any point in time are not predictive of percentage return from purchase to sale.


A few of my observations:
-- This study offers a short history of HOAs and restrictive covenants. I found it a good read for the most part.

-- The "significantly less" annual percentage returns of homes sold HOAs does surprise me.

-- I think a follow-up study, that identifies what fraction of suburban cities and counties require developers to establish HOAs, would be appropriate.
TimB4
(Tennessee)

Posts:17852


08/26/2021 9:52 AM  
Try checking here:

http://www.housing-critical.com/home-page-1/correlation-of-homeowners-associations-and-infe

BarbaraT1
(Texas)

Posts:589


08/26/2021 10:12 AM  
Posted By KerryL1 on 08/26/2021 9:17 AM
My, quite a reaction to my little remark, Barbara. I do agree with you and am glad none of our directors or committee members here are clipboard-junkies roaming the hallways and underground garage-levels seeking violations.

NZ, Barbara gives some good examples about why you want to keep certain things out of the CC&Rs and place them in rules or ARC Guidelines, which gives your Assn. & future boards flexibility.

What kind of "extraordinary" restrictions do some Committee members want, NZ? Examples?








Nothing was directed specifically at you, Kerry.

I'm passionate about my job and happen to have particularly strong feelings about the way my industry positions itself. It wasn't personal.
KerryL1
(California)

Posts:8729


08/26/2021 10:32 AM  
Thanks, Barbara--I guess it was your cite of me that made your thoughts seem directed to me.

I don't think my HOA's CC&Rs are much different than many. But maybe they are. Ours, for example nowhere state that the HOA'a obligation is to maintain, improve or enhance our property values.

They do clearly state that the assn., and the Board have the obligation to maintain the common areas. The CEO of our MC in their annual seminar for our directors, hammers hard on this point and elaborates: directors' job is to protect, maintain and enhance the common areas. I take this to mean our shared assets, too. The things all Owners share.

If directors would always ask themselves when seeming in a quandary about how to proceed with action, decisions, etc.: How does this meet my job responsibilities concerning the common areas, they won't go wrong.

Now, presumably, if directors make sure the common areas, including budgets and reserves are maintained, property values should also be maintained or enhanced. Yep, that's just my two cents and I really believe it.
MaxB4
(California)

Posts:1601


08/26/2021 10:53 AM  
Posted By BarbaraT1 on 08/25/2021 1:19 PM
I have had lots of Realtors as board members over the years, and they basically agree that home values are a mystery, wrapped in an enigma, etc.

The only thing they agree on is that adding a pool will not pay for itself in increased home value but updating the kitchen will.

Management companies and CAI emphasize "protecting property values" through enforcement of covenants because, in my opinion, its one the few measurable aspects of our job. I can't quantify for the board the number of weeds I prevented by working with the landscape company on turf management. I can't quantify homeowner satisfaction in regards to property maintenance - the better I am at my job, the less they even notice maintenance because things are fixed before anyone even knows they are worn out or broken.

But I can put in a report "sent 47 violation letters this month".

I also think that, because HOAs are so closely associated with rules, rules, rules, boards think that they MUST be nitpicky busybodies, measuring blades of grass and forming an opinion about yard art. Whenever I have been able to tell a board - there's nothing in your governing documents that specifically addresses X and you don't have to make a rule about X if you don't see it as a problem - they are relieved. Well, most of them. Sometimes people run for the board precisely in hopes of being able to measure blades of grass.

In short - "HOAs preserve property values" is a marketing slogan, not empirical fact. Many factors go into property valuation, and there is more than one kind of property valuation.

Another opinion of mine - CAI and management companies need to change their messaging to emphasize common area maintenance over rules enforcement. But "HOAs are required by cities and counties when there is common property and we are here to help you care for them, because you just wanted to live in a nice neighborhood not take on a second job managing a nonprofit corporation with physical assets" isn't much of a slogan.




Barbara
Sorry, off topic, but have you seen any lenders impounding HOA dues and paying them directly, like taxes and insurance. Just got off the phone with a lender that also has an office in Texas that is starting to do this.
BarbaraT1
(Texas)

Posts:589


08/26/2021 11:39 AM  




Barbara
Sorry, off topic, but have you seen any lenders impounding HOA dues and paying them directly, like taxes and insurance. Just got off the phone with a lender that also has an office in Texas that is starting to do this.




No. There are some states that give HOA liens "super priority" status, so in those states it may make sense for lenders to want to ensure assessments are paid. Perhaps this lender is based in one of those states and just finds it easier to do business the same way everywhere?
NZ
(Ohio)

Posts:18


08/26/2021 12:21 PM  
I took it for granted that protecting property values is the whole point of an HOA. Maintaining common areas also makes sense, but I'm thinking specifically of neighborhoods with detached single-family homes, where common areas themselves are an "extra", not a given, and could theoretically be made private or sold off.

@Kerry, I would consider any claim that "Letting someone do X would harm my property values" where X is something like "paint their house purple" or "put up a fence made of wood lattice" or "put up a shed with a metal roof" to be extraordinary, requiring extraordinary evidence. I have heard exactly those claims from fellow committee members.
JeffT2
(Iowa)

Posts:638


08/26/2021 12:22 PM  

This is from an article in Consumer Reports:

According to Zillow, including the word “landscaping” to a home listing can add 2.7 percent more to the sale price. With a $300,000 home, that’s a gain of $8,100. Of course, the increase isn't guaranteed, but Zillow’s research shows there’s a correlation between landscaping as a feature and a higher sales price, says Amanda Pendleton, a Zillow home trends expert. It's "often part of a package of features that signal to a buyer that a listing is a ‘nice’ home,” Pendleton says. “That’s why these homes command a price premium.”
KerryL1
(California)

Posts:8729


08/26/2021 4:43 PM  
Whoa, NZ. Can you quote empirical evidence from your CC&Rs that your HOA's obligation is to maintain property values? It surely might be in them.

Can you also cite from your CC&Rs if the association's responsibility is to maintain the common areas?

Most posters here live in HOAs like yours with detached homes. But they all seem to have common areas. These are not "extras" but belong to all owners. What are your common areas? You mentioned culverts under driveways, but what else?

In your CC&Rs, cite for us what if anything the Association can do with common areas, i.e, sell them or make them private? Would that need the approval of owners?

Does your HOA have reserves? What do they cover? Prospective buyers nowadays do apparently review an HOA's reserves to see how well funded the replacement & repair of common area components are. What do your CC&Rs say about reserves?

I'm thinking your CC&R amendment committee needs clarity on exactly WHAT your HOA's responsibilities are.

With Sheila & Barbara, try & move your committee away from the specific picky restrictions. If there is agreement, put them in Rules & Regs or ARC guidelines. Do your CC&Rs permit the Board to establish rules? Or ARC guidelines?
LetA
(Nevada)

Posts:1466


08/26/2021 5:15 PM  
From what I gather property values are a culmination of the average value of 3-5 homes similar to the one being listed. You can have two homes exactly the same side by side. Home A has only builder grade amenities, while home B is over improved. Home B will almost never be appraised more than home A.
MelissaP1
(Alabama)

Posts:10590


08/26/2021 5:34 PM  
So I think many people get confused or lack understanding between "Value" and "Perceived value". Again a property value is based on REAL numbers. Basically it's something "tactile". It's something you can provide evidence. It is PROOF. Not OPINION or conjecture. I can go to an actual document to get the information from. In the case of property value that is what houses have sold/foreclosed for in last 6 months of similar size in a certain area. (Location, location, location isn't a value it's a factor). You can go to "Zillow" to see what houses have sold for.

To read an article that "Having a pool" adds 5% to your home's value is a bit of a misnomer. It translates that on average of a certain number of homes that had pools, they sold for 5% more than homes that did not. Well that doesn't mean the home value was more. It was more likely a potential buyer would pay more for having a pool.

Think need to point this out how a HOA is not actually a "Home value" protector or guarantee. Let's say you bought a house in a HOA because of the rules meant conditions of the neighborhood would stay "nice". Meaning that it will provide "Attraction to potential buyers" versus a home in a non-HOA that is a mess with no enforcements. You go to sell the house just to find out that your not going to be able to sell at your asking price. You want 100K but all the homes have average sales of 90K.

Now you think it's because of the HOA failure to enforce rules or keep the area "nice" is the reason why you can't sell for the 100K. Home values have fallen because of this. Now you want to sue your HOA. Well here is where the "rub" comes in. You have to prove to the court that you could have sold your house for that 100K if the HOA had "done it's job". Well how do you actually PROVE that? What is your "Proof"?

Well that is where the "Houses sold/foreclosed for in 6 months" on "Zillow" PROOF comes into play. Can you print off that list and PROVE your house should have appraised for 100K your asking price? Can you get a potential buyer or buyers to sign a statement the reason they did not buy your home at asking price was because of the HOA? How do you know it's because they hated the wallpaper as reason not buying? Did you exchange earnest money?

Plus you have to SELL your house at the 10K loss to prove you could not sell it at the 100 K. Well once you sell it, your no longer a member of your HOA. How then do you sue your HOA if you are not a member?

Hence why a HOA is selling people on the "Perceived home value" concept. It is NOT real numbers or proof. Rules are not proof of why your home values are damaged.

Former HOA President
MaxB4
(California)

Posts:1601


08/26/2021 7:08 PM  
ROTFLMFAO...Some of these comments are hilarious...Like there is Sunday fog everywhere.
MaxB4
(California)

Posts:1601


08/26/2021 7:24 PM  
Here are a couple of articles to chew on.

https://www.opendoor.com/w/blog/factors-that-influence-home-value

https://www.joehaydenrealtor.com/home-buyers/the-5-factors-of-value/

https://www.mashvisor.com/blog/factors-that-affect-property-value/

And not not said HOA.
NZ
(Ohio)

Posts:18


08/27/2021 6:15 AM  
Posted By KerryL1 on 08/26/2021 4:43 PM
Whoa, NZ. Can you quote empirical evidence from your CC&Rs that your HOA's obligation is to maintain property values? It surely might be in them.

Can you also cite from your CC&Rs if the association's responsibility is to maintain the common areas?

Most posters here live in HOAs like yours with detached homes. But they all seem to have common areas. These are not "extras" but belong to all owners. What are your common areas? You mentioned culverts under driveways, but what else?

In your CC&Rs, cite for us what if anything the Association can do with common areas, i.e, sell them or make them private? Would that need the approval of owners?

Does your HOA have reserves? What do they cover? Prospective buyers nowadays do apparently review an HOA's reserves to see how well funded the replacement & repair of common area components are. What do your CC&Rs say about reserves?

I'm thinking your CC&R amendment committee needs clarity on exactly WHAT your HOA's responsibilities are.

With Sheila & Barbara, try & move your committee away from the specific picky restrictions. If there is agreement, put them in Rules & Regs or ARC guidelines. Do your CC&Rs permit the Board to establish rules? Or ARC guidelines?




Like I said, Kerry, I just figured "protecting home values" was the whole point of an HOA. If it isn't, then what is the point? I don't think it says it anywhere in my HOA's CC&Rs, just like I doubt it says anywhere in my employment contract that the point of me working there is for me to help my company remain profitable. It's just taken for granted.

I think the CC&Rs say something about common areas but I'm not sure. For our HOA these include the entrance off the main road (some landscaping, signage, and a lamp post) and a big empty lot that used to be a neighborhood pool (which was removed). We have discussed possibly selling off the empty lot, and yes I believe that would require approval of 2/3 of the owners.

The culverts are not actually common areas, my real estate agent was wrong -- though I do believe our CC&Rs specify something about the culverts' maintenance.

I believe we have reserves, not tens of thousands of dollars like the HOAs of some posters here, but enough to keep the lawyer on retainer, maintain the common areas, and to fund a couple annual neighborhood events (block parties and the like). Maybe some other stuff too. (I might be misunderstanding what "reserves" means though, as I was not familiar with that term before I joined this site a few days ago.)

I did not review anything about the HOA when I was a prospective buyer, and I'm guessing the proportion of buyers who would is very small.

I like the idea of getting away from picky restrictions and putting what picky restrictions we can deem necessary -- due to their impact on property values! -- in a separate section that is easier to update. I will pass that on to my committee.
AugustinD


Posts:1920


08/27/2021 7:39 AM  
Posted By NZ on 08/27/2021 6:15 AM
I just figured "protecting home values" was the whole point of an HOA.
Years ago the HOA where I lived had a vacant seat on the board, and I applied for appointment to it. The directors interviewed me. One director asked what I thought the main purpose of a HOA was. I had read the Articles of Incorporation, the Declaration and the Bylaws. I was not very savvy, other than knowing well my job was to operate pursuant to the latter governing documents. At the interview I said I felt the main purpose of the HOA was to maintain property values.

What I said was only a newbie's impression. For any given HOA, the Articles of Incorporation give the purpose of a HOA. I googled and among the first several hits were two HOA's Articles of Incorp that speak to this as follows:

"The Association does not contemplate pecuniary gain or profit to the members thereof."

"The Association does not contemplate pecuniary gain profit, direct or indirect to its
Members, and its primary purposes are:"


All the Articles of Incorporation I have seen for residential HOAs are consistently about maintaining the common area; enforcing the CC&Rs; and collecting assessments to support these activities.

I continue to feel that an indirect result of any HOA abiding by its Articles of Incorporation is to maintain property values.

Why did the 2019 study that TimB4 cited above find that HOAs maintained property values significantly worse than non-HOAs? Many here at hoatalk might speculate that HOAs are a turn-off to many buyers. Is the reputation of woefully amateur Boards (who would not know a covenant from a rule) who do not understand what reserve funding is and serve more to feed a weak ego so manifest that this results in buyers favoring non-HOAs and so worse appreciation of HOA homes?

If this is the reason, then I would be surprised. But I cannot think of any other reason.

SheliaH
(Indiana)

Posts:4290


08/27/2021 7:39 AM  
Posted By NZ on 08/27/2021 6:15am


Like I said, Kerry, I just figured "protecting home values" was the whole point of an HOA. If it isn't, then what is the point? I don't think it says it anywhere in my HOA's CC&Rs, just like I doubt it says anywhere in my employment contract that the point of me working there is for me to help my company remain profitable. It's just taken for granted.

I think the CC&Rs say something about common areas but I'm not sure. For our HOA these include the entrance off the main road (some landscaping, signage, and a lamp post) and a big empty lot that used to be a neighborhood pool (which was removed). We have discussed possibly selling off the empty lot, and yes I believe that would require approval of 2/3 of the owners.

The culverts are not actually common areas, my real estate agent was wrong -- though I do believe our CC&Rs specify something about the culverts' maintenance.

I believe we have reserves, not tens of thousands of dollars like the HOAs of some posters here, but enough to keep the lawyer on retainer, maintain the common areas, and to fund a couple annual neighborhood events (block parties and the like). Maybe some other stuff too. (I might be misunderstanding what "reserves" means though, as I was not familiar with that term before I joined this site a few days ago.)

I did not review anything about the HOA when I was a prospective buyer, and I'm guessing the proportion of buyers who would is very small.

I like the idea of getting away from picky restrictions and putting what picky restrictions we can deem necessary -- due to their impact on property values! -- in a separate section that is easier to update. I will pass that on to my committee.


if

a few comments:

You're correct that many homeowners don't take a look at the documents before they buy-in perhaps if more people did that, we'd have fewer problems. That said, I see you've made several assumptions about your documents, which isn't good.

Before you do anything else with that committee that's drafting CCR revisions, sit down, get comfy and READ your documents - the current CCRs, Bylaws, Declaration and whatever else you got closing that you didn't pay attention to. You'll get a better understanding of how your association is supposed to work - otherwise, you and your committee may wind up drafting rules that are impractical, unnecessary and unenforceable.

Since determining what does and doesn't comprise "property values" can vary with by so many people, forget about that for now and g bidder what sort of things can help make the community a place people want to live in and enjoy. One way to start is by taking a pill of the homeowners. What prompted them to more here in the first place? How long have they lived in the community? What do they like and dislike the most. What sorts of thing would they like to see to help ensure the community stays safe, clean and attractive? And what do they think about rules enforcement anyway?

That's just a start, but as I said in another conversation just now, it f you get enough people to respond, you should be able to detect some patterns that can help guide you. For example, you may find people understand they have to get prior approval for some exterior changes, but may feel some are more critical than others. Maybe you don't need a specific CCR, but a board resolution listing design standards. Board resolutions are easier to amend and can be reviewed every few years to see what need amending or if the rule can be dropped altogether.

In an unrelated note, reserves ARE not intended for things like funding neighborhood events or paying attorney fees. Reserves are there to save money towards major repairs and replacements for the common areas, such as street repaving. You should have an operating budget that pays for routine expenses, such as attorney fees and some communities also have line items for community activities like block parties.

These are different conversations that require different thinking, so focus on the topic at hand. And take a look at your budget so you'll know where your assessments are supposed to go.
AugustinD


Posts:1920


08/27/2021 8:00 AM  
I think the following three points from the article TimB4 cited are particularly noteworthy, regarding HOA homes having average annual returns that are significantly worse than non-HOA homes:

The correlation of homeowners’ association membership with sales price at a given time does not address the question of whether or not homeowners’ association rule enforcement influences the change in price from the time the house was bought until it was sold. Meltzer and Cheung (2014) studied home prices in all Florida homeowners associations and found that price premiums were highest for new homeowners associations but lower the older the homeowner association. This suggests that the premium is associated more with the newness of the house than its location in a homeowner association. Higher house prices associated with homeowners association neighbourhoods could also occur because the developers placed their developments in more desirable locations or included aesthetic or other features desirable to potential buyers that may not be adequately controlled statistically in the mentioned studies.

Is it possible that over the years, HOA covenant and rule enforcement becomes a mish-mash and is overall, arbitrary or non-existent? One board enforces only some covenants and rules for a period of time, then the board changes and other covenants and rules garner attention? Are potential HOA home buyers then further turned off for the following reasons, as given in the study?

There are possible reasons to argue for a causal relation of lower financial appreciation of homes in homeowners associations. Some potential buyers may be unwilling or unable to pay the fees. Disputes in homeowners associations have become more commonly known as their numbers expanded probably leading some potential buyers to avoid them. People who value their freedoms likely resist being governed by homeowners’ association rules and avoid bidding on houses in such associations. Exclusion of children removes a large pool of potential buyers for those associations harbouring that restriction. These are hypotheses to be examined in future research.

As if the above were not bad enough news for those who buy into HOAs as an investment, towards the end of the study the authors point out:

The gains and losses reflected in this study do not include the annual costs of homeowners’ association fees that can vary from less than $100 to several thousands of dollars per year. If the fees were included in the cost of owning the house, the deficit in annual percentage returns compared to non-homeowners association properties would be even larger. If the homeowners association loses a lawsuit, the members must pay assessments to cover court mandated awards and attorneys’ fees.
NZ
(Ohio)

Posts:18


08/27/2021 8:01 AM  
Shelia,

HOA documents were not furnished to me before I bought. I happened to talk to a neighbor, we got on the subject, he provided a web address, then I had to hunt the CC&Rs down myself from there. Before we bought, when our realtor said "There's an HOA, the dues are $X per month (very very low number -- single digits) and it's just to maintain the culverts" that was plausible and good enough for me. (As I've said, it turned out she was wrong.) Yes, that was probably dumb of me, but given the low value of X the risks seemed extremely low too. I'm sure if X had been a higher number I'd have been more insistent on taking a look through the CC&Rs first.

Once I did find them (prior to even knowing a rewrite committee was forming), I read the CC&Rs, closely, multiple times. But I don't have them memorized and I don't want to sound more sure of them than I am, so I'm saying stuff like "I believe" or "If I remember correctly".

I agree, some research with homeowners is a great idea. In fact that's why I was invited to join the committee, because I do qualitative social research as part of my job and I am trained in it. We have discussed some practical questions with how to poll residents -- online? in the mail? going door to door? etc. Each has its difficulties and constraints.

NZ
(Ohio)

Posts:18


08/27/2021 8:03 AM  
PS. To clarify, my realtor was correct about the value of X, but incorrect that X was simply to maintain the culverts.
NZ
(Ohio)

Posts:18


08/27/2021 8:26 AM  
@Augustin:

Yes, these are interesting points. Certainly I had only heard negative things about HOAs from friends who lived in neighborhoods with them, and my intention was to avoid them in my house search. Probably if my realtor had said "The HOA dues are ΐ or 3-digit number per month]" and shown me a fat ream of papers containing the CC&Rs I'd have been strongly inclined against buying, possibly decided right then and there to pass.

My initial question wasn't about whether HOAs themselves impact property values (rather, it was about the various weird things HOAs often restrict against in the name of protecting property values, such as odd house colors, sheds, fences, expressive mailboxes, etc.), though I suppose that's inherently part of the question and a worthwhile thing to discuss.
AugustinD


Posts:1920


08/27/2021 8:46 AM  
Posted By NZ on 08/27/2021 8:26 AM
My initial question wasn't about whether HOAs themselves impact property values (rather, it was about the various weird things HOAs often restrict against in the name of protecting property values, such as odd house colors, sheds, fences, expressive mailboxes, etc.), though I suppose that's inherently part of the question and a worthwhile thing to discuss.
Yes, I think it's worthwhile as follows.

Disputes and litigation, sometimes resulting in massive special assessments, arguably are a leading cause of HOAs' bad reputation and the hesitancy of buyers to want to live in HOAs. If HOA covenants are written with an eye to the latest statutes and case law, then the chances of disputes are less. If buyers perceive that the HOA Board has solid citizens serving as directors, and the HOA attorney is known to be about avoiding litigation; being fiercely loyal to federal and state law and the governing documents and not the board per se; and staying behind the scenes as much as possible, then this will help property values.

Granted these are big "ifs."
SheliaH
(Indiana)

Posts:4290


08/27/2021 9:50 AM  
Normally I'd say you don't need to know them chapter and verse - a working knowledge what the address is a good place to start. however, you're on a committee that's looking at a rewrite, so you'll need to take a closer look. You have a committee, so everyone could take a section read it and then everyone can take turns reporting on their observations. That could save time and If you take good notes, you can refer back to your documents as necessary.

I'm not surprised your realtor didn't know much about the HOA - many don't, nor do they bother to educate the buyer because that may take too much time and their job is to sell houses anyway. It's like any big ticket you buy - ultimately it's the buyers responsibility to do some research, ask questions and not necessarily take the word of someone who may be more interested in selling you stuff, whether it's really appropriate for you or not.

Now, as for a poll, you could use Survey monkey if most of the homeowners are online. There may be a few who may prefer paper so you could mail a survey and provide a place to drop it off, such as a box in front of the clubhouse if you hate one. If the clubhouse door has a mailbox slot, they can also use that. There may be some sample polls online if you Google "HOA survey" or so n drying and get ideas on questions.
JohnC46
(South Carolina)

Posts:11665


08/27/2021 2:47 PM  
Posted By NZ on 08/27/2021 8:01 AM
Shelia,

HOA documents were not furnished to me before I bought. I happened to talk to a neighbor, we got on the subject, he provided a web address, then I had to hunt the CC&Rs down myself from there. Before we bought, when our realtor said "There's an HOA, the dues are $X per month (very very low number -- single digits) and it's just to maintain the culverts" that was plausible and good enough for me. (As I've said, it turned out she was wrong.) Yes, that was probably dumb of me, but given the low value of X the risks seemed extremely low too. I'm sure if X had been a higher number I'd have been more insistent on taking a look through the CC&Rs first.

Once I did find them (prior to even knowing a rewrite committee was forming), I read the CC&Rs, closely, multiple times. But I don't have them memorized and I don't want to sound more sure of them than I am, so I'm saying stuff like "I believe" or "If I remember correctly".

I agree, some research with homeowners is a great idea. In fact that's why I was invited to join the committee, because I do qualitative social research as part of my job and I am trained in it. We have discussed some practical questions with how to poll residents -- online? in the mail? going door to door? etc. Each has its difficulties and constraints.




NZ

I will bet you signed a document at closing that says you are aware of the "restrictions" and you agree to them by purchasing your unit.
MelissaP1
(Alabama)

Posts:10590


08/27/2021 4:08 PM  
JohnC I just closed on a house a few weeks ago. I asked the closing attorney if there is a document anywhere that I sign acknowledging the HOA. They said no. We went through the whole package and there was not one place to sign to any references to an HOA. However, I was asked if I received a copy of the HOA documents. (I had prior).

The fact I was in receipt of a copy or that the documents are filed PUBLICLY is enough in my case according to the attorney. Plus this is my 3rd house closing and knew was joining a HOA.

Former HOA President
JohnC46
(South Carolina)

Posts:11665


08/27/2021 4:16 PM  
Mel

You were experienced enough about associations to ask. I believe many posters here, and in general, are first timers and know little to nothing about associations. Our Declarant was adamant about giving buyers a copy of the docs. Even before they signed the original contract, they were given a copy of the docs and had to initial each page. Our main problem owners are not the original buyers. They are the 2nd or 3rd buyers who say well the seller and/or the real estate agent told me So and So.
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