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H.o.a. Lawsuits Affect Value?

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Greg Amburgy

Freshman Member
Joined
Apr 21, 2003
I have begun to notice a familiar comment made by Realtors in the MLS.

"No deed restrictions"

After my neighborhood unknowingly elected a Nazi to head our board for two years, we were suddenly faced with the prospect of having the covenants and deed restrictions interpreted to the letter. Most of us didn't give them much thought as everyone keeps their property properly maintained and groomed and no one has a '78 Eldorado up on blocks. We found out that we could be fined if our grass was higher than 3-1/2 inches and we had to get permission to plant a flower.

Our annual meeting was a mess. The new president hired 2 attorneys, with our money, to keep us from impeaching him. He is currently involved in lawsuits with a few neighbors. He is suing me for leading the charge to have him impeached (defamation of character). I won the suit but he is appealing.

Realtor friends have told me that they are aware of our neighborhood's internal conflict and have told prospective buyers about the problem. We are one of the only middle class neighborhoods in our area that has experienced true depreciation in the last two years. For instance, one neighbor paid $195,000 in 2000. He added a fabulous deck, split rail fence, finished the basement, and sold the property in 2003 for $189,000. Another neighbor paid $180,000 in 1999. He improved the property and sold it this year for $175,000. I have been inside both houses. They were very well kept.

I have looked into this and found that another similar subdivision in our county has also experienced depreciation. There are currently six pending lawsuits involving the home owners association in that neighborhood. Again, the Realtors are aware of the problem and have to disclose this to potential buyers.

Has anyone ever made a negative adjustment because of lawsuits involving an overzealous H.O.A. board? This seems to be the only explanation for the decline in value.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Has anyone ever made a negative adjustment because of lawsuits involving an overzealous H.O.A. board? This seems to be the only explanation for the decline in value.

Not explicitly, but one of our resort /golf course developments fell into disreputable management after the owner went belly up and lot prices went from $25,000 to $6-8,000. Condos sold for $30K in the early 90's. Covenants were not enforced making the problem worst. New management turned it around in 5 years or so. Lots now sell for $30,000 - 45,000. Condos are selling in the 70K range. Clearly the market reacted to the precieved bad management and left. Likewise, if the rules do seem punitive, you will see a lot of people who avoid the area for that reason.

Anyone living with a HOA needs to realize while one is not protected in rural areas BY convenants but on the other had they do not have those Rules beat over their head. Few people know the full rules. Fewer comply with them. And the managers and elected "Nazis" are very selective about what they enforce.

If the Nazi is only enforcing what was established by the rules, then the rule writers were fools. I have seen fights over grass heights, mowing common areas, the COLOR of a house (no white houses, but oh so close to white), pools, fence heights, etc.

I want no part of a property that has home owner rules...so those properties personally to me, have zero value except a quick buck made by flipping the property at a profit.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Eeeeyuw!

That really stinks.

The man is lucky he hasn't been lynched by outgoing sellers.

If you find it in the market... I personally would adjust for it under location
and place subdivision name in that grid slot...

"it appears that due to Realtor reporting of perceived current HOA 'issues' to potential buyers that the subject subdivision is perceived as less desireable than other subdivisions lacking similar issues."

Location-location-location seems to apply :(

are you SURE you are seeing a value difference, all other things being equal?
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Last year I had a HOA Nazi knock on my door and tell me I'd taken too much of the leaves and pine straw off the ground and to go get some more to put back down!

Nope, won't do that. The HOA reg suggest keeping it 'natural', doesn't say you have to keep the debris!!! One of the past HOA Nazis lives right next door to me and he was the one pushing the other Nazi to reprimand me. I really like where I live, but this has gotten absurd! Not in decline on values here though.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
I've got some lakefront property in a development near here - going to retire there. Shortly after I bought, lawsuits flew between several parties and the HOA. Judge blew a gasket, put whole thing in recievership, and, after $100,000 in fees to the reciever, we're still in court. It's almost impossible to sell a property there due to the lawsuits. However, the HOA anticipates getting rid of the receiver by the end of the year and hopefully rid of the individuals who sued. It's going to be a while before properties returen to pre-lawsuit values.

Roger
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
you all are scaring me:
I HAD contemplated living my senior years in such a complex... but I'd be tossed in jail for sure if I ran into any of THAT sort.

Guess I better stay out where I can't even SEE the nearest neighbor :lol:

I also may need to do a little more digging into the poop behind a complex or two round here... nothing in the news, and no realtor has mentioned anything... Oh right, you gotta play nice and actually TALK to that sort before you get info like that :redface:
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Lee Ann said
contemplated living my senior years in such a complex

Oh heck, in 50-60 years when you retire, HOA issues will all be settled. No problem for me...ain't never gonna be able to retire. My loans are longer than my life expectancy.
 

John Hassler

Senior Member
Joined
Jul 23, 2002
Professional Status
Certified Residential Appraiser
State
California
Greg

This isn't what you asked about but it's something to consider.

You indicated values are down because the HOA mess has limited marketability for owner occ. Probably doesn't affect rentability (most tenants don't know or don't care). If you were thinking of being a landlord this might be a good time to buy a couple of units in your development with the depressed prices. The GRMs should look very attractive right now and when the litigation and lawsuits eventually end you get a big upwards pop in equity. I tried to do this 5-6 years back. Construction litigation forced several owners to walk away from their $100k condos. I bid in the high $40's on three units but another broker got them all for low $50's. Lawsuits settled, reapirs done ($30k/unit) and now they are selling in the $225k area. This is a good nich to exploit.

John Hassler
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Sig Heil! Guess I am one of those HOA Nazis. Have served on the HOA Board of Directors for nearly 12 years now...in my former complex and now on the board of this PUD neighborhood. Seems anyone who lives in a PUD and doesn't take care of their property screams....."Nazi, Nazi" every-time the board attempts to enforce the condo declarations or PUD covenants.

Law suits within a HOA definitely affect value. Non payment of dues (in this state) sets you up for foreclosure by the HOA. My former business partner lived in a complex where the board pushed through a mandatory assessment against every property in the complex (about 130) for $17,000 payable in cash right now. Big law suit! You couldn't sell a home in that complex for nearly two years. Guess what???
Association won the suit. Needed to replace all the roofs and siding on every unit.

I serve on our board to keep things in line....keeping the board honest and the neighborhood a decent place to live. Have come to the conclusion most people will live like pigs if you let them. In the old complex, one of the new owners felt it was ok to leave open containers of dirty diapers on his deck for months at a time. Finally we had to lien his property because he refused to clean up the place or pay his fines and dues.

After one year on this board (new neighborhood), I haven't turned down a single owners request for landscaping, storm doors, windows, security bars, etc. By the same token, will not let someone paint their house bright purple either. Nearly every new neighborhood in Colorado Springs has an HOA and dues now. It isn't really a bad thing.

If you want to see the opposite, go to eastern El Paso County where there was no zoning, no covenants, no building permits. Looks like East Beirut out there. Property rights are not absolute.
 

G-man

Member
Joined
Feb 4, 2002
Professional Status
Licensed Appraiser
State
Ohio
My brother may be looking at the same type of situation. An owner of three or four units in his Condo complex is getting sued because an agent of his told a woman that she could not rent her a condo because she had kids. Apparently in the bylaws of the HOA there can be no kids. This is, of course, illegal and nobody enforces it, as there are several families in the complex. Now said woman is suing the owner of the units, the agent who is working for him and the HOA of the complex. If this lady wins, the HOA will have to fork over some hefty $$$. The affect of this would be to raise their HOA fees and make their complex less competitive with other, similar units. My brother is VERY :eek:nfire: about this. There is plenty of back & forth between the HOA, the owner of the units, the agent and the HOA's insurance company :argue: Someone even suggested planting a :sniper: on the rooftop for the idiot agent and owner, but that might create even more detrimental impact on the property. Can't have dead bodies floating in the pool, it can really depress the value of propeties ;) .
 
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