Can an HOA Foreclose on Your Home?

HOAs - love 'em or hate 'em. On the one hand, they make sure that your neighbor doesn't paint their house Pepto Bismol pink. On the other hand, they can ticket you for leaving your garbage cans out too long. In Colorado, they can also put a lien on your property and foreclose in certain situations.

Under the Colorado Common Interest Ownership Act (CCIOA), HOAs can place a lien on your property if your dues account becomes delinquent. They may also be able to stick you with the late fines and attorney fees they incur while trying to get you to bring your account current. The HOA has 6 years to initiate the enforcement of the lien after the full assessment amount becomes due. This would be an amount equal to or exceeding 6 months of dues.

The other important thing to note is that this lien is first in priority over other lienholders, such as first or second mortgages, which means they can foreclose and get paid first. The only liens that have priority in this circumstance would be real estate taxes or other governmental assessments, and any liens which were recorded and acted upon before the HOA took action.

I've had plenty of clients who would not look at homes located inside a covenant controlled community, but if you choose to buy in one make sure you review and understand the rules before you close. Also, make sure you keep your contact information with them current so you don't miss any important communications.

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@elevatedrealestate.com

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The Homeowner's Guide to HOAs

If you’re house hunting for the first or fifth time, and aren’t familiar with the concept of HOAs, let me know! I am an Accredited Buyer’s Representative (ABR®) and can walk you through the entire home buying process, including what you need to know about HOAs.  
 

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@elevatedrealestate.com

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Attached or Detached?

Wildgrass Townhomes, Broomfield

A condo or townhouse (a.k.a. "attached dwelling") can be a good choice for a first time homebuyer or someone who is downsizing, as they are generally less expensive than a detached home in the same area.  They have perks that apartments don't have, such as being able to make your own changes to the interior and having someone else take care of the exterior, not to mention the appreciation on your investment.  However, there are important considerations that you should be aware of before purchasing an attached dwelling.

Do parties spill into the hallway?

• Sharing walls, floors and ceilings can sometimes be a challenge, and certain units are better constructed and insulated than others.  Ask current residences about their experiences, and consider your own lifestyle preferences to determine if being in such close proximity to other people would be a bother.

• Do you own any associated parking or storage, or do you just have use rights?  Sometimes garage or reserved parking spots are included in the deed and sometimes they are deeded separately.  If separate, there may be a list with the homeowners' association of residents who are waiting to buy or rent one.

The Board may not approve

• Like many neighborhoods these days, condos and townhouses will have a homeowners' association with rules and restrictions that dictate what you can and can't do to the property.  These may include items that affect the exterior, such as the type of replacement windows you can use, whether you can add openings, even what is allowed to be kept on your balcony.  They can also dictate what happens on the interior, such as whether you can have pets or run a business from your home.  It's very important to review the Covenants, Conditions and Restrictions (CCRs) during the contract period to be sure that the rules are not too limiting.

• HOAs require an additional fee which may be paid on a monthly, quarterly or yearly basis.  These fees may only cover common area maintenance and insurance, or they may include trash removal and other amenities such as a clubhouse or swimming pool.  Find out what is included in a particular development, and be sure that you can afford your monthly payment once you add in HOA dues.

No one likes a surprise bill

• In addition to the dues, there may be other budgetary concerns relating to the HOA or common areas.  HOAs often try to build their financial reserves to address ongoing maintenance items such as exterior painting or roof replacement, but sometimes unexpected costs come up.  When I was the Office Manager at a Boulder HOA, the old elevators had to be replaced to be brought up to code and address some safety issues that the board was not aware of.  This was rectified with a "special assessment," a several hundred dollar charge to each condo owner above and beyond their monthly dues.

• How the HOA is being managed can affect homeowner satisfaction.  Most hire professional management companies to run both the administrative duties as well as the maintenance of the development, but some still hire their own people that are supervised by the board of directors.  Ask current residences about their experiences, or attend an HOA meeting and ask to see several months of meeting minutes to determine if there are ongoing issues with residents, maintenance or other items.

You can't pick your neighbors

• Condos and townhouses can sometimes be difficult to finance as lender requirements are different than they are for detached homes.  The proportion of owner occupant units versus rentals is a big factor in obtaining financing.  Lenders may also look at the delinquency rate for HOA dues, as well as any outstanding litigation against the development.  Not long ago, I was working with a Buyer who also had a townhouse to sell.  She was tripped up by a buyer's lender who would not finance the loan due to a pending lawsuit over another owner's unleashed dog biting someone.  Even though my client didn't know these people, the dog owner was in violation of the HOA leash rules, and the HOA was adequately insured against such lawsuits, it still made the underwriter nervous.  Be sure to talk to your lender about financing limitations regarding a particular unit you are interested in purchasing.  Your Realtor should also be able to find a lender who has experience with harder-to-finance developments.

• Find out what the master insurance policy for the development covers and what it doesn't.  Make sure you understand where your responsibility picks up - depending on the type of attached dwelling you buy, you may or may not be liable for damage to or systems within shared walls.
  

In this area of Colorado, the attached dwelling market tends to move slower than the detached market, which can inform your negotiation strategies.  Keep that in mind when it comes time to resell your unit, as well.  Give me a call if you need some help sleuthing information for a particular development.

images: TenSafeFrogs, TCHganja, joeltelling, smerikal

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@stauferteam.com

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