Homeowner Associations and Foreclosures

I came across an article about homeowners associations foreclosing on their constituent’s homes.  This is especially relevant in Bend because there are so many subdivisions that have homeowners associations (HOA’s).  Nationwide, one in five homeowners (24.4 million homes) is subject to the rules of a HOA.   More than 80% of the homes being built today will be subject to a homeowners’ association.

The general premise behind a HOA is a good one or at least well intentioned.  If you own a home in a particular neighborhood or community, take Broken Top for example, you get many services and ammenities for paying your monthly dues.  At Broken Top, among other things, you have a gate attendant, access to swimming pools and tennis courts, landscaped common areas, and road maintenance.  The HOA also sets rules for things like what color your home can be painted, where you can park your car and what kind and color for sale signs can be placed in your yard.  Those are the good things.

The article in USA Today also highlights some of the bad things about HOA’s.  In the past, housing associations have gained infamy for dictating everything from the weight of your dog (one mandated a diet for a hound) to whether you can kiss in your driveway (not if you don’t want a fine in one). Homeowners’ associations have served as the behavior police, banning lemonade stands, solar panels and hanging out in the garage. One ordered a war hero to take down his flag because of a “non-conforming” pole. Another demanded that residents with brown spots on their lawns dye their grass green.  And most importantly, that they can foreclose on your home if you don’t stay current on your monthly dues.

Before you purchase a home in a neighborhood with a HOA make sure that you read the fine print.  In most cases the association has the right to foreclose on your home even if you are only a few hundred dollars behind in your dues.  All it takes is a phone call to the HOA attorney who can start the process of foreclosure by placing a lien on your home.  Making matters worse is that the homeowner usually doesn’t even have the right to a hearing.

The moral of the story is, if you are going to buy a home in a community that has a homeowners’ association do your homework.  Your realtor can help.  Make sure that the rules of the HOA are rules that you can live with.  Make sure that you can afford the dues.  And finally, ask the board how many of the homeowners in the association are making their dues payments.  Currently, approximately 50% of all HOA’s are facing “serious financial problems” according to the Cumminity Association Institute.  The last thing you want when you buy a house is to have a surprise special assessment from the HOA because your neighbors aren’t paying their dues.

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About Dan Seim

Dan Seim is the primary contributor to Preferred Residential's blog. He has been writing about real estate issues that affect home owners in Bend and Central Oregon since 2011.