How Are High Condo HOA Fees Justified?

I received the following question about HOA fees and typical maintenance costs from a reader via email:

Why are so many condo HOA fees are so high? Alternatively: are the maintenance costs of a small single-family home (SFH) much higher than most people assume, or is the monthly fee of a well-run HOA a great estimate of what it costs to maintain a SFH similar to the units in the HOA?

In most discussions about the costs of owning real estate on Seattle Bubble, I see assumptions about monthly maintenance costs for smaller SFHs being something like $100-$200.

But even though many HOAs should get good economies of scale for repairs, roof replacements etc. (as compared to the average SFH), and they don’t always include maintenance of pools, hot tubs and other possibly costly shared assets, many of them end up with HOA fees above $400. This seems to be the case even for well run HOAs that don’t have lots of deferred maintenance without funds built up, empty/foreclosed units, etc. Very few, if any, seem to get down to $100-$200 per month in fees.

Condo HOA fees are something that I have never really looked into closely, but I do know that they often include not only typical maintenance and shared space costs but also monthly bills like cable, trash, and sometimes water—expenses that can easily add up to an additional a few hundred dollars a month for a typical single-family home.

Generally the number I like to use for estimating the ongoing maintenace cost for a single-family home is one percent of the purchase price per year. A $250,000 home might cost about $2,500 a year to keep up, while a $750,000 home will be more expensive, running you closer to $7,500. Of course, these costs are never spread out evenly throughout the years, so some years you may spend very little, while other years you may need a new roof (can cost $20,000+), new paint, and a bunch of new appliances.

The benefit of a condo HOA is that unlike most owners of single-family homes, the HOA forces owners to save for these big expenses in small chunks every month. That said, it certainly seems possible that some HOA fees are unnecessarily high. I’m sure some HOA boards would prefer to err on the side of collecting a little too much each month rather than risk ending up with a burdensome special assessment.

Perhaps Urbnlivn‘s proprietor Matt Goyer will grace us in the comments with some insights from someone who follows the condo market a lot closer than I do, and owns two condos of his own. I’ll walk down the hall and ask him.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

97 comments:

  1. 1
    Real World Express says:

    Here’s the real mystery…who do we pay these fees to?

    I mean, take a building with six condos.

    Say all six are purchased.

    Ok, so those six people “own” the building right?

    Or not?

    What other “party” still remains in a building that’s been totally bought.

    And what part does this party still own?

    And can’t the six people effectively get together and say “hey, lets cut our HOA fees” ?

  2. 2
    Ryan says:

    I believe insurance makes up a nice chunk of HOA dues as well (for common areas, liability, etc.).

    Also, I remember Kirkland Springs condos (in Kirkland, duh) were in some serious litigation over construction deficiencies from their conversion…one of the issues the attorney’s for the HOA was addressing was the deliberate setting of HOA fees ultra low to entice buyers and then jacking them up when the units were sold. From what I heard, this was common practice and many condo HOA accounts are underfunded.

  3. 3
    Kary L. Krismer says:

    Ryan is correct that developers in the past would set fees low. I’m not sure how common that is today.

    One thing that drives up the cost is having a pool. Pools are expensive to heat and maintain. There is also the fact that most condos have earthquake insurance, which is not true of most SFR properties. And deferred maintenance can also result in increased dues due to catching up on the past.

    What I don’t think some condos realize is that dues do affect values. You can increase dues to the point where you can be virtually assured of never ever needing a special assessment, but that’s probably not fair to the owners that might want to sell in the next 2-3 years. On the other hand, you don’t want to set the dues so low that you are virtually assured of needing a special assessment and cannot perform necessary maintenance. I once ran into a condo where even a $200 bill would have possibly tipped them over!

  4. 4
    Patrick says:

    I agree that most people doing these comparisons are not doing an apples to apples comparison, and also agree that probably some HOA fees are too high (don’t move to those buildings then).

    As you point out, HOA includes much more than what the reader includes in his email of an SFH maintenance estimate. To do a comparison you need to model the reserve fund – estimate what it would cost to replace your roof and all carpeting in the next 12-20 years, and amortize that over each year. Also, gas, if you have it, is usually included in HOA. For me, sewage, water, and electricity is not included. Also count earthquake insurance, and in some cases full home owner’s insurance is included in the HOA.

    Also, condos usually have common areas (hallways, lobby), that are cleaned by a weekly cleaning service. SFHs don’t have common areas. They have hallways, but you probably clean them yourself. So you might want to factor in a maid service for your SFH comparison. HOA also includes a management company usually. If a pipe bursts in your house’s hallway, or robbers break into it and damage things, or you need to make an upgrade to your heating system, who handles coordinating that work? You do. With a HOA, the management company often does that coordination (if they’re a good one).

    Also, it’s often erroneous to assume that condos get good economies of scale on repairs as the reader assumes. On many things beyond simple repairs, condos deal with city fees, permitting, inspections, conforming to city ordinances, etc. An SFH in the suburbs, or even one in the city, might not have as many of those things apply.

  5. 5
    Drone says:

    High condo fees are just compensation for a particular lifestyle. Compare the condo fees to a SFH with earthquake/liability insurance, a reasonable repair budget, plus water/sewar/garbage, plus a part-time maid, plus a groundskeeper / handyman, plus an admin to coordinate it all for you. For the lifestyle, the condo is probably a far better deal.

    The “cheaper” cost of SFH is compensation for reduced insurance coverage and much much much more unpaid work performed by the owner.

    I can totally understand the value of a condo for a person who wants the lifestyle. What I can’t understand is a condo as a more affordable alternative. Even worse is a SFH with a local HOA charging fees for neighborhood upkeep, on top of the house upkeep the owner already pays.

  6. 6
    Kary L. Krismer says:

    RE: Patrick @ 4 – Where they often get good economies of scale is roof repair. If you have an 1000 square foot unit in a ten story building you’d effectively only pay for 100 square feet of roof.

  7. 7
    Econe says:

    HOA fees + property taxes currently just about equal the rent I paid at the complex I rented at in Kirkland from 1996 to 2000. There were also some large special assessments over the last 15 years.

    It was cheaper to rent vs buy back then and it still is.

    Had I purchased a unit in 1995 and sold at the peak in 2006, I still would have come out better renting all things considered.

    Here are the numbers.

    1996-1997 rent: $1000
    1998-2000 rent: $1100
    2001-2005 rent probably went from $1200-$1400
    2006 rent: $1600 (asking per craigslist)
    2009 rent: $1500 (asking per craigslist)
    2010 rent: $1600-1700 (asking per craigslist)

    1995 sales price $250,000 + $700/mo HOA + (property tax)
    2006 sales price $550,000
    2011 sales price $285,000 + $1,000/mo HOA + (property tax)

    Building: Juanita Shores 9727 Juanita Dr. NE 98034

    Advantage: Renting

  8. 8
    Patrick says:

    RE: Kary L. Krismer @ 6

    That’s true. Straightforward repairs like roof replacement may have economies of scale. My line of thinking though is that often condos have complications that SFHs don’t have, that can increase costs. For example, you probably didn’t consider that many condo buildings have rooftop decks, with 1000+ lb planters on them. That will drive up the costs of the roof replacement. :)
    But in general, larger condo buildings with many units have better economies of scale, and smaller boutique buildings have lower economies of scale.

  9. 9
    Jon says:

    Excellent question. Patrick certainly brought up some good points, but here are a few more things to think about:

    Owning a $450k home in Seattle, costs are:
    Water/Sewer: $100
    Electricity: $50
    Gas: $50
    Homeowner’s Insurance: $100
    Earthquake Insurance: $40
    Maintenance: $50
    Total: $390

    I anticipate that your homeowners dues will be about .01% of your purchase price. So if you spend $450k, your homeowners dues would be about $400-450 a month.
    They usually cover:
    Insurance (you still need HO6 insurance, similar to renters inusurance, about $30 a month)
    Earthquake Insurance
    Water/Sewer
    Gas
    Maintenance on amenities
    Conceirge
    Window Cleaning (2x a year)
    Elevator maintenance
    Regular cleaning (garage included, carpets, hallways, bathrooms)
    A slush fund for a rainy day
    Professional (usually) property management
    A board that watches your back

    I think, overall, that 10% more you pay is usually worth it’s weight in gold.
    Earth

  10. 10
    ARDELL says:

    Generally HOA dues are not allowed to have “slush funds for a rainy day” except for a smallish “miscellaneous” category. This coming from places that have more hard and fast rules than WA. The Condo Blue Book is a must have for anyone on an HOA Board, or who wants to know what HOA dues are all about.

    http://condobook.com/

    Basically once a year the board looks at two things to “adjust” the dues.

    1) Operating budget and how well last year’s budget fit the year’s actual needs. There should be no underage and very little overage in “the operating” budget. In fact if you plug in the miscellaneous category as a budget item, there should be no overage at all.

    Let’s say the operating budget for common area lighting, landscaping and amenities is $500,000 for 230 owners. $50,000 divided by 230 = $181 a month for Operating Budget needs. A complex like 60-01 in Redmond with over 700 “units” and mega landscaping issues and 3 “lakes” will be higher. A complex with fewer units and no pool and little or no landscaping will be lower.

    Now you have a portion of your condo fee “accounted for” and you do not reduce or increase it unless the budget itself has “an issue”. The fee itself is never “the issue”. You want to hire a cheaper landscaper, then you can reduce the operating budget portion of the dues. You can’t just say “let’s make them lower” unless you end up with an overage or you cut a an annual service cost.

    Then you add the reserve portion to the dues via the Reserve Study. I just did a few Reserve Studies for Single Family Homes using the same principles of “Major Components” balanced with “useful life expectancy” and “remaining useful life” of each major component.

    http://raincityguide.com/2011/03/17/single-family-home-reserve-study/

    Once you determine the components and useful life figures, the rest is simple math. Cost of roof divided by number of units divided by useful life years divided by 12 = each unit’s responsibility to the reserve fund. Let’s say that is $120 per month and add that to $181 and you have “the monthly condo dues” for each owner. $181 + 120 = $301 a month.

    At that point the Board has to balance being $300 + vs $200 something. Best to take it down to $295 or even $297 a month for unit value reasons.

    There is no “mystery” to HOA dues. It’s simple math when done well. No real excuse for there being too much or too little.

    Every person pays their fair share of operating expenses plus 1 year’s worth of “wear and tear” toward replacement value of every major component. It’s a “pay as you go” plan. You don’t have to be an owner at the time the new roof is put on to pay your fair share of the cost of that roof. If the roof lasts 20 years, then you pay your share toward that roof for each year you own your unit.

    Simple stuff.

    The only exception is a building with a flat roof and sometimes ones with exterior stucco vs siding. That is because the “useful life” figures are more difficult to ascertain, and a Reserve Study generally does not count anything that has a life expectancy of 35+ years. That causes a flat roof (which generally never gets “thrown away” and stucco exteriors (which need more ongoing maintenance vs full replacement) to fall through the cracks using normal methods of determining monthly dues.

  11. 11
    Drshort says:

    When i was on a condo board years ago, about 1/3 of our dues went to water/sewer/garbage. We also had professional landscaping, property management, and a live on site manager. A relatively small percentage of the budget went to maintenance. But, any large project would cause a special assessment.

    Owning a home isnt any cheaper, but with a condo you have to qualify for the mortgage with the HOA dues built into the payment (PITI+HOA dues).

  12. 12
    Kary L. Krismer says:

    One place a condo is cheaper is it’s harder to repeatedly go to Lowes and spend $300+ if you own a condo. ;-)

  13. 13

    Condo’s can be real fun to finance in this market too… conventional mortgages have a 0.75% hit to fee (typically priced into the rate) if the term is longer than 15 years or the loan to value is over 75%.

    Lenders want to make sure that the HOA has plenty of reserves, occupancy ratios are a factor as well as how many units are delinquent.

    The HOA dues are factored into the debt-to-income ratios for qualifying.

  14. 14
    jlb says:

    If you’re looking at a particular condo, I assume any good real estate agent will ask for several years worth of historical records from the HOA, which should include their full budget so you can see where the money is going.

    It’s definitely an apples and oranges thing, and (excluding mismanagement, etc.) whether it’s worth it or not is pretty subjective.

  15. 15
    Jeff Baird says:

    RE: Patrick @ 4

    To this, I would also add that you do a lot of work yourself as a volunteer in your home, such as lawn mowing, trash removal, snow shoveling, etc. I am president of a 25-unit building in Chicago. We have cut some costs by having volunteers do special projects, but in general, you don’t want volunteers to be in charge of shoveling snow because they are unreliable. When 25 people depend on the walkway being shoveled, you generally want to all pitch in and pay for it.

    Property management is also a big chunk for most HOA’s. This covers collecting checks, paying bills, getting quotes from vendors, providing advice to the board, administrative stuff like mailings, and usually a 24 hour emergency number.

  16. 16
    Ross says:

    In theory, I think condos can have economies of scale for work, but they can also introduce a lot of inefficiencies:

    – Paying for a management company (this does have some benefits though)
    – Paying for consultants to figure out what you need to save (i.e. a reserve study)
    – The other side of the equation: Incompetent board members can defer maintenance out of ignorance or frugality, but create major expenses down the line.
    – Over-maintenance. Some members of an HOA community will often ask for everything on (near) their property to be fixed (to get their “fair share”), even though they wouldn’t do the same maintenance if they were the sole owner.
    – Disputes: This can generate tons of fees, lawsuits, paying for attorneys and so on.
    – Having a large reserve fund can make an HOA more attractive for a lawsuit either from the community or from an outsider (or a fraud target for an insider – this happened to a capitol hill condo recently)
    – Board extravagances: Either paying themselves a salary or expensing things that are inappropriate (this might be fraud, but sometimes may be legit).

    That doesn’t account for all of the drama and time wasted fighting over things that would be a simple decision to a sole owner.

  17. 17
    Ross says:

    By Kary L. Krismer @ 12:

    One place a condo is cheaper is it’s harder to repeatedly go to Lowes and spend $300+ if you own a condo. ;-)

    Not that hard … especially for townhome style condos. There’s plenty of work that can be done on the interior.

  18. 18

    Not Only Do You Have HOA Fees

    You have HOA board members [generally wanna-be manager types with lower education and usually older/retired or partially employed], and there’s plenty of trouble they can cause for you over nothing, if they don’t like you. My advice, be a quiet mouse in the corner and/or become a board member if you have a HOA….to avoid politics from inexperienced HOA managers with power trips.

  19. 19
    Jon says:

    By ARDELL @ 10:

    Generally HOA dues are not allowed to have “slush funds for a rainy day” except for a smallish “miscellaneous” category. This coming from places that have more hard and fast rules than WA. The Condo Blue Book is a must have for anyone on an HOA Board, or who wants to know what HOA dues are all about.

    http://condobook.com/

    I know of a dozen associations with over a 1/2 million dollars in reserves (or the last time I checked, they did)… I look at a condo and help clients decide if they want to buy into it after they receive a resale certificate (an advantage for buyers… you can walk away from the deal if you don’t like the color of ink on that resale cert) and if the reserve/slush fund is not large enough, I will point out the inherent risks associated with it. I don’t like selling condos that operate with razor thin margins… in my book, razor thin margins = Special Assessments.

  20. 20
    ARDELL says:

    RE: Jon @ 19

    Most often Associations with very high reserves have elevators. 60-01 has townhomes and 7 or so “mid rise” building with elevators.

    The replacement cost of an elevator is quite enormous. Having more than one of them, or a couple of huge ones for a high rise building, expands the need for reserves dramatically. They can also be very expensive to maintain.

    The cheapest condo fee would be “garden” apartments with shingle roofs and no pool with enough units per building to share the cost of each building exterior, and little or no extra “land” issues to maintain. A “garden apartment” style is the one where you go down a few steps to the first floor and up steps to the 2nd and 3rd level. Three levels total, no elevators.

    Unfortunately these have a lot of siding and wood rot issues, but if you replace the siding with “hardieplank” it would dramatically reduce the need for reserves and wood rot maintenance.

  21. 21
    Kary L. Krismer says:

    By ARDELL @ 20:

    Unfortunately these have a lot of siding and wood rot issues, but if you replace the siding with “hardieplank” it would dramatically reduce the need for reserves and wood rot maintenance.

    Much cheaper to accomplish the same result by just painting on an adequate schedule and making sure dirt doesn’t contact wood.

  22. 22
    ARDELL says:

    RE: Kary L. Krismer @ 21

    Having a lower maintenance product like HardiePlank works better than counting on various HOA Board Members, who change from time to time, to insure proper maintenance over time. Works some times, but not often, and rarely over the long vs short term.

  23. 23
    EconE says:

    Questions for the RE experts…

    What are the most cost effective condos?

    Garden w/ hardiplank and no elevators?
    Concrete & Steel highrise?
    Old brick buildings?

    Are they all a crapshoot?

    How does one avoid buying into a complex that ultimately turns out like this one?…

    http://www.redfin.com/WA/Seattle/9030-Seward-Park-Ave-S-98118/unit-307/home/2617

  24. 24
    Drshort says:

    RE: EconE @ 23

    Whats the story with that building? I’ve seen several units in the past year there for very cheap. Some noted a $60k+ special assessment — anyone know what that is for?

  25. 25
    David Losh says:

    RE: EconE @ 23RE: Real World Express @ 1

    I surprised no one responded to comment number 1. Yes, you are buying into a group. Agents used to always recommend a prospective buyer attend a Home owners Association meeting before buying. Some associations have to approve a buyer. That’s why there are minutes of the meetings included in the resale certificate. It also let’s you see if there is anything coming, like a special assessment.

    Which brings me to the EconE building. It needs repairs. It’s on the water, was probably an apartment building, and at that time there was a recession here in Seattle. Some builders built apartments, like they will be doing now, just to hold the dirt for future development.

    The location is great, had they ever finished the development plans for the area. As it is you’re are two blocks from a bus transit center that attracts more than office workers.

    The concrete structure of the garage appears to be solid enough with some spots that look like they need some care.

    I have sold units in the building, and helped people to sell units there. I personally like the property, but there would need to be a lot of Home Owner cooperation to make it a viable investment. It is possible with the right mix of people this could be a great investment for every one.

    I’ll use an example of a building close to the Seattle Center. It had a similar demographic of a mix of older unit owners from the original conversion buy in. It also had some very low end units that people of modest income owned. There were also a couple of spectacular conversions of taking a couple of units, combining them, and putting in high end finishes.

    The entire building got together and came up with a plan to improve the building. People paid a fair share, took some special assessment money, did some concessions, had some garage sales, and a dance contest. They made a workable group to improve the property. They turned the finances around. There again they were a co-op which is an easier structure to get moving in one direction.

    Kary, and I had a small debate, but condos are a niche for a couple of law firms in town. Something will have to be done to keep some projects intact so they can continue to be sold. I’m pretty sure the EconE building is at a cash sale price because financing would be difficult. Maybe some day that will change, but it will be a long road.

  26. 26
    ray pepper says:

    I have NEVER been able to make the numbers work for me to purchase a condo. It was always just far financially feasible to just rent. Even now at Trustee Sales where I see Condos virtually “GIVEN” away at 9k, 14k, 23k, 31k,42k,44k…Week after week Condos get cheaper and cheaper as their dues continue to escalate.

    These glorified Apartments I see week after week coming back at pennies on the dollar but I have yet to see one I would even take for free. Between the never-ending special assessments, ever increasing HOA Dues, and far higher tenant to owner ratio in these developments I advise people to just rent all day long…

  27. 27
    HappyRenter says:

    RE: ray pepper @ 26
    Why is it then that some people buy or have bought condos? I have never met a single happy condo owner so far, even those who did not buy for investment purposes only.

  28. 28
    ray pepper says:

    RE: HappyRenter @ 27

    Well, Happy , we will witness in the coming years the unrelenting masses that will continue walking from their upside down condos and amazingly high dues. With no vested interest in staying and being able to rent the one next door for far less, they will walk in masses. I have witnessed this already in so many condos across the western states….

    Escalating homeowners dues/assessments will feed on itself and ravage condo associations thereby increasing dues in a never ending loop of hell. Remember someone offering to GIVE you their condo for FREE is hardly a gift..

  29. 29
    HappyRenter says:

    What about town homes? Are those a better deal? I have seen town homes with zero or < 100$ HOA.

  30. 30
    ARDELL says:

    RE: EconE @ 23

    Unfortunately WA just started to mandate that Associations do Reserve Studies, and in many ways that new Law has no teeth. Unless it is an association too small to cover its needs, like a 4 plex or up to 12 or so units, there really is very little excuse for a special assessment, if the dues are determined and managed correctly.

    People should truly be more worried that the dues may be too low, vs too high.

    What concerns me is people think $500,000 in reserves is enough when in fact $1.5M can be too low for some complexes and $250,000 more than sufficient for another. Without understanding “earmarked” reserves, there is no way for a complex to be managed well. It’s not “a savings account”, and all too many HOA Boards treat it as such.

    Without appreciation, there is likely no advantage to owning vs renting. If you do own, it pays to be on the Board so you can manage your investment and keep an eye on things.

    CA has the best Laws I’ve seen, including not letting a Board take over and reduce the dues and ruin the place. Professional Management doesn’t help that much, because they have no authority over the Board who hires and fires them.

    As to your question, the exterior is really only one of the Major Components, and often not the most expensive one.

    This complex had a much higher special assessment than the one you note, and it did not destroy the values. In fact the values went up vs down.

    http://condocompare.com/WA/Kirkland/Downtown-condos/Harbor-Lights.aspx

  31. 31

    RE: HappyRenter @ 27

    LOL

    I knew a condo owner who could only have her TV on at a whisper level or her neighbor went into a rage.

    IMO, if you have real sharp hearing you don’t belong in apartments, condos or office cubicles….we should have a special island for your types, so you can bicker about noise just among your own kind….LOL

  32. 32
    Kary L. Krismer says:

    By ray pepper @ 26:

    I have NEVER been able to make the numbers work for me to purchase a condo. It was always just far financially feasible to just rent. . . .
    These glorified Apartments I see week after week coming back at pennies on the dollar but I have yet to see one I would even take for free. . . .

    I’ll give you the last point. With the boom many of the condos today are really apartments, and built never intended to be anything more or suitable to be anything more.

    As to the first point, however, it’s not just the finances. When we did the remodel at our old house we moved out into an apartment. We moved out of it early and into my 1 bedroom condo because we could no longer take apartment living. The tenant noise and A-hole behavior became too much. And it was seemingly a fairly nice apartment at the time (Foster Greens on Interurban).

  33. 33
    Kary L. Krismer says:

    By HappyRenter @ 27:

    RE: ray pepper @ 26
    Why is it then that some people buy or have bought condos? I have never met a single happy condo owner so far, even those who did not buy for investment purposes only.

    Maybe you hang out with negative people. I was just with a happy condo owner this weekend–an attorney I used to work with and I asked him how he liked the place I knew he had moved to about 10 years ago. He said he loved it.

    It does remind me of a point though. I’ve always said that about 5% of the owners of a larger complex will be complete nutcases. They will not be happy with a single decision the board makes, no matter what the decision is, and they’ll have alternative solutions that make no sense whatsoever. They’ll repeatedly run for the board and then cry foul when no one votes for them because they don’t realize they are nutcases. It’s the one major downside of living in a condo that possibly affects all condos in all price ranges.

  34. 34
    Haybaler says:

    RE: EconE @ 23

    I know this complex.

    A few years ago I was supervising the rehab of two units on the water side, facing the marina. The investor had picked them up for low 200’s and dumped about 30K into each.

    At that time structural and environmental engineers were crawling all over the building to determine an estimate for the remediation of the mold and rot problems that existed inside the exterior walls….the building is sided with a stucco product which failed and allowed water penetration. From the photos linked, it appears that the siding has not been replaced. I remember scuttlebut that the cost was in the millions and the association was looking into insurance claims and a lawsuit.

    I notice that the listing says only “subject to special assessment”. There you go.

    Other than that I thought the place was nice enough. Safe. The owners were nice responsible mature folks.

    If I had a college aged kid at the UW I’d buy this and pop them into it.

  35. 35
    Kary L. Krismer says:

    By ARDELL @ 30:

    If you do own, it pays to be on the Board so you can manage your investment and keep an eye on things.

    I frequently don’t agree with much of what you say, but I really do agree with this. One thing you can’t assume is that you can buy a condo and do less. It may be necessary to get involved with the board.

    For me that realization occurred when we had a special assessment, but when I went over the budget I discovered it had been incredibly accurate. The members of the board were simply too sheepish to push through a dues increase which was necessary because the developer had set the dues too low. It was a special assessment that was almost certain to occur.

  36. 36
    Haybaler says:

    RE: Drshort @ 24

    Maybe my post above answers your question.

  37. 37
    HappyRenter says:

    By Kary L. Krismer @ 35:

    By ARDELL @ 30:

    If you do own, it pays to be on the Board so you can manage your investment and keep an eye on things.

    I frequently don’t agree with much of what you say, but I really do agree with this. One thing you can’t assume is that you can buy a condo and do less. It may be necessary to get involved with the board.

    Why buy a condo then? I thought by buying a condo I would actually have to do less compared to owning a house. I need to ask again. What about town homes? They seem to be a compromise between condo and a single family home.

  38. 38
    Fred M. says:

    Tim,

    If the person with the question is including co-ops in “condos”, they should know that property taxes are included in co-op HODs and paid by the corporation.

  39. 39
    Kary L. Krismer says:

    By HappyRenter @ 37:

    By Kary L. Krismer @ 35:

    By ARDELL @ 30:

    If you do own, it pays to be on the Board so you can manage your investment and keep an eye on things.

    I frequently don’t agree with much of what you say, but I really do agree with this. One thing you can’t assume is that you can buy a condo and do less. It may be necessary to get involved with the board.

    Why buy a condo then? I thought by buying a condo I would actually have to do less compared to owning a house. I need to ask again. What about town homes? They seem to be a compromise between condo and a single family home.

    Well for one thing, if you want to live walking distance to downtown Seattle a condo might be your only choice, assuming you want to own.

  40. 40
    ARDELL says:

    RE: HappyRenter @ 37

    “What about townhomes? They (townhomes) seem to be a compromise between condo and a single family home.”

    There is no ownership classification of “townhome”. Townhome is merely a style of home. They have to be either single family home or condo. On The Eastside townhomes are usually condo ownership status and in Seattle they are more often a single family (row) home ownership status.

    They are not a “compromise” in between the two. They are one or the other.

  41. 41
    HappyRenter says:

    By Kary L. Krismer @ 39:

    Well for one thing, if you want to live walking distance to downtown Seattle a condo might be your only choice, assuming you want to own.

    I don’t want to live walking distance to downtown Seattle. We have been looking in North Seattle and are considering anything from condo to town home to single family home.

  42. 42
    ARDELL says:

    “Why buy a condo then? I thought by buying a condo I would actually have to do less compared to owning a house.”

    You “do” less only because you delegate the “doing” to someone else, and you pay more for that feature than if you do it yourself. The theory is that you will be in a “forced savings” for major improvements via the Reserve Fund. But in WA that has not worked out as well as it should, with many condo owners facing major special assessments.

    “Do”ing less, like not having to change your own light bulb by your front door, costs you a lot more than changing the bulb yourself. So you pay more to “do” less.

  43. 43
    Kary L. Krismer says:

    By ARDELL @ 40:

    RE: HappyRenter @ 37

    “What about townhomes? They (townhomes) seem to be a compromise between condo and a single family home.”

    There is no ownership classification of “townhome”. Townhome is merely a style of home. They have to be either single family home or condo. On The Eastside townhomes are usually condo ownership status and in Seattle they are more often a single family (row) home ownership status.

    They are not a “compromise” in between the two. They are one or the other.

    That doesn’t really answer the question. Many of these SFR townhomes are attached to at least one other unit. That means you will have issues with your neighbor(s). They deal with those issues through covenants rather than having an association.

    I’m skeptical of how that will work out, but I’ve also been skeptical of very small condo units (e.g. 4 units). I suspect buying a SFR townhome will be sort of like buying Lake Washington waterfront–an event that greatly increases your chance of being involved in litigation with your neighbors.

  44. 44
    ARDELL says:

    RE: Kary L. Krismer @ 35

    That is almost always the case, Kary. The original developer wants the dues low at time of original sale of all units, so he can get max price for them. When the HOA is turned over to “The Board” comprised of homeowners, they need to make the adjustment upward. Usually the operating budget is OK. It’s the Reserve Fund portion that needs to be adjusted.

    The longer the new Board waits to make the adjustment, the worse off the complex is, as it is hard to make up for those years of insufficient reserve contribution.

  45. 45
    ARDELL says:

    RE: Kary L. Krismer @ 43

    It usually doesn’t work out that way Kary. I know that “row” homes are a relatively new thing in Seattle, but not in many other parts of the Country.

    In practice it works out much like fences. It’s nice when neighbors replace their fences at the same time, but not necessary.

    Attached single family homes have been around for more than 200 years in Philadelphia, with no problems like the problems you fear. They just happen to be a “new thing” here in Seattle.

    Yes, the neighbor can have an eyesore of deferred maintenance that impacts your property value. But that is true of all single family homes, not just townhomes. The neighbor is just a lot closer in a townhome.

  46. 46
    Kary L. Krismer says:

    RE: ARDELL @ 44 – The thing was, the board had a CPA and an attorney on it before I joined. It really was a lack of political will. They could have easily increased the dues a year earlier and avoided the special assessment.

  47. 47
    Kary L. Krismer says:

    RE: ARDELL @ 45 – But with these things the lack of maintenance by your neighbor can affect your building envelope. That’s not the case with a condo or a traditional SFR. Also, with a traditional SFR in a HOA area, the association can be the one to force the owner to make the repairs. Less litigation that way too.

  48. 48
    ARDELL says:

    RE: HappyRenter @ 41

    The majority of townhomes in North Seattle use HardiePlank exteriors and composite shingle roofing materials. Count the roof as lasting 20 years, even though most use a 25 year warranty shingle. The exterior is the opposite, and should last 50 years, though the warranty period is normally 30 years depending on the brand name.

    The only major problem I’ve seen was this one:

    http://www.realtown.com/Ardell/blog/home-inspection/extreme-home-inspection

    The person who put in the original toilets didn’t account for the 1/2 bath floor being wood on the mid level vs the toilets up that were going to be vinyl flooring. They tried to compensate by using a jumbo wax seal, but that doesn’t last as long as the true remedy of the main pipe being higher in the first place.

    A primary consideration when buying is the position of the garages. When they are too tight, you run the risk of the neighbor bumping into your house, so which townhome you buy is important. Consider how many people will be maneuvering in the space near your home. One of my favorites was one I sold for a client in Ballard that had a single family home appearance, as it was a front unit with the garage full front on to the street, but they are a rare find.

    I’m also not a huge fan of rear position townhomes with the front door at the back accessed by a narrow dark “alley” on the side of the homes.

    When it comes to townhomes it often ends up being more of an “access” issue, either on foot to the front door or getting in and out of the garage, than the townhome itself,. Most have fairly similar interiors. There are only a few basic interior style variations that largely involve the number of and position of bathrooms.

  49. 49
    HappyRenter says:

    By ARDELL @ 42:

    “Why buy a condo then? I thought by buying a condo I would actually have to do less compared to owning a house.”

    You “do” less only because you delegate the “doing” to someone else, and you pay more for that feature than if you do it yourself. The theory is that you will be in a “forced savings” for major improvements via the Reserve Fund. But in WA that has not worked out as well as it should, with many condo owners facing major special assessments.

    “Do”ing less, like not having to change your own light bulb by your front door, costs you a lot more than changing the bulb yourself. So you pay more to “do” less.

    Yes, but if you need to be involved with the board, as you state in your previous post (in order manage your investment and keep an eye on things), then you are not really delegating it. You end up with an equal amount of work as if you owned you own home.

  50. 50
    ARDELL says:

    RE: Kary L. Krismer @ 47

    All homes have “lateral right” issues, and also drainage issues impacted by their neighbors improvements or lack thereof. Complaints that someone planted a tree in their yard blocking the sun from the neighbors yard. There are many “neighbor” issues that impact “quality of life”, whether homes are attached or not.

    I understand that “row homes” as single family are a newer concept here in the Seattle Area, but reinventing the wheel is unnecessary, given there are many major cities who have dealt with this style of housing without covenants for 100 or more years. Covenants really don’t help. You can tell the neighbor they “have to”, but if they don’t have the money to do it, you can’t get blood from a stone. Nothing replaces having the money available via a condo monthly fee.

    I have seen some people arrange a reserve fund via covenants on single family dwellings that are attached, but it usually doesn’t work out well. They also can become more difficult to finance if you create some kind of hybrid condo/SFH out of it, especially if all of the neighbors do not comply with the terms of that covenant, and the covenant has no “teeth” to enforce it.

    If you want those kinds of assurances, then the City should refuse to allow them to be SFH vs Condo in the first place.

  51. 51
    Kary L. Krismer says:

    RE: HappyRenter @ 49 – You can delegate the things you don’t want to do. People sitting on boards don’t usually end up mopping the laundry room floor. ;-)

  52. 52
    ARDELL says:

    RE: HappyRenter @ 49

    Depends what you call “work”. Work as in physically doing things: landscaping, painting, caulking windows. That is the “work” you have “less” or little of.

    Being a responsible owner is not something you can easily delegate, and that is not the “work” you are relieved of via condo ownership vs single family ownership.

    The mistake people make about condo ownership is in thinking that “the HOA” is someone else. It is not. The HOA is you and your neighbors.

    If you can elect the right people, well then you can delegate your responsibility that way by voting responsibly. But as Kary pointed out, electing a CPA and an Attorney did not work out for him.

  53. 53
    Kary L. Krismer says:

    RE: ARDELL @ 52 – I should point out that the CPA and other attorney were on the board for many years after that, and did provide good service. Since I wasn’t a part of the board when they didn’t raise the dues, I don’t know what the deliberations were on that–how the CPA and other attorney voted. BTW, we also ended up with a board member that was in the profession of facilities maintenance, so we ended up with a very good board at one point.

  54. 54
    ARDELL says:

    RE: Kary L. Krismer @ 53

    It is not uncommon for people to vote for irresponsible Board Members who will keep the dues as low as possible at the expense of future special assessments. Not everyone wants to deal with tomorrow…today. Very few in fact. They figure they’ll move out by then.

  55. 55
    HappyRenter says:

    By ARDELL @ 52:

    RE: HappyRenter @ 49
    The mistake people make about condo ownership is in thinking that “the HOA” is someone else. It is not. The HOA is you and your neighbors.

    I guess you need to make a balanced decision about how much money you can spend on a home and how much work you want to do yourself. If you own a SFH you can decide whether to do the landscaping yourself (if you have the skills and the time) or hire somebody (which is more expensive).

  56. 56
    ARDELL says:

    RE: HappyRenter @ 55

    Generally speaking, ownership of a condo is more expensive and “forcibly” so, than owning a home. They both require the same maintenance and replacement costs, but in a condo you have to pay someone a management fee (usually) in addition to the higher cost of the improvements.

    If you own a home you can decide to patch the leak in the roof indefinitely vs putting on a new roof. In a condo if the Board says they want to do a whole new roof and no patching…you are stuck with that decision.

    Most condo Boards are 5 people, so you are putting your financial future in the hands of 3 that form a majority in most cases. That’s often not a good choice for many people.

  57. 57
    ARDELL says:

    RE: HappyRenter @ 55

    Also if you own a home you can hire the neighbor’s kid to mow the grass vs a professional landscaper. Rarely and pretty much never does an HOA have that option, due to liability issues.

  58. 58
    HappyRenter says:

    RE: ARDELL @ 57
    Thanks Ardell and Kary. I never stop learning about RE thanks to this blog. We once visited a town home near Sand Point Way. It had a 50$ HOA for the landscaping. However, you shared the roof with one neighbor (two town homes with the same roof). I don’t remember right. I think that they had a covenant and a board which would decide when all roofs had to be replaced and everybody was forced to do it, and it would be a special assessment. The advantage is that it would be cheaper since the company would give them a discount by doing a lot of roofs at once. I asked what happens if somebody refuses to pay for a new roof? They said that they would still replace it, but they would put a lean on the house and you would be in the bad neighbors list. I think that they also had rules about how the outside walls and the front door had to be painted. It seemed like a condo association with low HOA but a lot of special assessments. We liked the location and the style but now I have mixed feelings.

  59. 59
    ARDELL says:

    RE: HappyRenter @ 58

    I personally like those. In Philly we called them “twin” homes. Basically two identical homes with one party wall. My first home was “a twin” in a neighborhood of twins.

    There are a few in Redmond but they are duplexes where one person owns both and rents out one and lives in the other. There are quite a few on The Eastside with one in Bellevue collecting a full HOA condo type dues over by Lake Sammamish, even though they are single family. Others in Kirkland collect the $50 or so as you mention. Upland Green is the one I’m most familiar with in Kirkland. Nice sized “homes” with good sized yards. I personally haven’t seen any in Seattle.

    There are not a lot of them and are sometimes hard to come by. But I like them best and better than many other options.

    Most of my clients do not consider “townhome or condo” though in Seattle, or even Eastside. Normally the decision breaks down to detached single family or attached single family. I am having that discussion with one of my clients in North Seattle now, as the single family home options in the same price range can be a severe “money pit”.

  60. 60
    EconE says:

    RE: Haybaler @ 34RE: ARDELL @ 30RE: David Losh @ 25

    Thanks for the info.

    I personally wouldn’t want to buy into a potential maintenance nightmare, but to each his/her own.

    I always wondered why that area wasn’t more developed/gentrified during the bubble. It would have been a great candidate even if it’s in one of the more sketchy areas. Maybe it’s the public housing complex (that is public housing isn’t it?) that is just to the west?

  61. 61
    HappyRenter says:

    By ARDELL @ 59:

    RE: HappyRenter @ 58
    I am having that discussion with one of my clients in North Seattle now, as the single family home options in the same price range can be a severe “money pit”.

    Too much maintenance?

  62. 62
    David Losh says:

    RE: EconE @ 60

    Yes, or I should say it is a compound of some kind.

  63. 63
    ARDELL says:

    RE: HappyRenter @ 61

    More like “deferred maintenance” meaning needing an immediate large cash investment prior to being able to occupy or within the first year or two of ownership.

  64. 64
    tomtom says:

    HOAs and their dues are simply another layer of govt and taxes. If you live in the US there is the Federal govt and Fed Taxes. If you live in Washington, there is the state Govt and state taxes. If you live in Seattle, there is the city Govt and city taxes. If you live in a condo in the city, there is the HOA and dues. You have the right to elect representatives to each, and they raise money from you to provide services. You can actively participate or delegate and take what they give you.

    That’s one way to think about it.

  65. 65
    Kary L. Krismer says:

    RE: tomtom @ 64 – That’s a good way to think about it. Our HOA spends money on off-duty sheriff patrols, so it’s correcting what it considers to be a deficiency in King County government.

  66. 66
    HappyRenter says:

    By ARDELL @ 63:

    RE: HappyRenter @ 61

    More like “deferred maintenance” meaning needing an immediate large cash investment prior to being able to occupy or within the first year or two of ownership.

    It leaves a narrow range of what one should consider buying, if looking for the best value: condos are more expensive than SFH, but SFH have deferred maintenance. The only option are twin homes but there aren’t many of them. So what’s best for your money? Keep renting and investing all your savings into mutual funds?

  67. 67

    RE: Kary L. Krismer @ 35 – when I owned a condo in Des Moines… I wound up being VP on the Board…it was painful. Most of the owners were retired and there were just a handful of use who were working and/or had kids. Our HOA was divided. One of my happiest memories of living there was being done with my duties of serving on the HOA board.

    With that said, if you live in a condo (or PUD) I think you MUST be involved and at the very least attend the board meetings.

  68. 68
    Kary L. Krismer says:

    RE: HappyRenter @ 66 – Not all condos have deferred maintenance (over the reserves).

  69. 69
    HappyRenter says:

    By Kary L. Krismer @ 68:

    RE: HappyRenter @ 66 – Not all condos have deferred maintenance (over the reserves).

    You meant to say “not all single family homes” have deferred maintenance.

  70. 70

    RE: EconE @ 60
    The public housing just to the west isn’t quite public housing anymore, it’s taxpayer funded private development of mixed income housing. Don’t know a whole lot about it, but they tore down Holly Park in it’s entirety and replaced it with ” New Holly Park”. It was controversial because when they built anew, it had a lot less low income units:
    http://www.seattlehousing.org/CommunitySites/newhollycommunity/newhollycommunity.htm

  71. 71
    ARDELL says:

    RE: HappyRenter @ 66

    That’s only the case in a given price range. The majority of my clients are not looking at that scenario. That only happens when someone is in a “starter home” price range that overlaps with townhome and condo prices, and often less than desirable single family homes. Then it becomes less about best for their money and more about creature comforts for both the humans and the creatures.

    My client has a sizeable dog, so we’re holding out for a single family home that doesn’t need a lot of work. Found a couple, but they are not the short sales and bank owned properties for the most part. They tend to be homes of older people who maintained them well. Might need updating, but they are quite liveable as is. You can put money into them, but they don’t “need” anything right away. Not in the “hippest” neighborhoods, but close enough to Downtown.

    Without pets and or children, more people opt for the townhomes. Condos? I don’t think I’ve ever helped someone buy a condo who could afford something else. I guess that pretty much says it all.

  72. 72
    ARDELL says:

    RE: HappyRenter @ 69

    I think he meant condo because he said “over the reserves”, but I think he wasn’t following the conversation as to “deferred maintenance” of single family homes.

  73. 73
    Peckhammer says:

    By Rhonda Porter @ 67:

    RE: Kary L. Krismer @ 35 – when I owned a condo in Des Moines… I wound up being VP on the Board…it was painful.

    I couldn’t agree more. I served on a condo board for eleven years. The experience was indeed painful, but not being on the board would have been even more painful. The biggest lesson learned is that I will never, ever, own a condominium again. They are very risky prospects, financially speaking. Imagine walking into a bar, picking 50 strangers at random, and then saying, “hey, let’s pool our resources and share our financial futures together.” Sound risky? Let me assure you it is.

    Couple of other quick points relevant to the broader discussion here:

    1.) HOA dues are typically not high enough to cover the real costs of keeping the building — especially with regard to its future — in good repair. Did you know that fire sprinkler systems have a useful life? Are they accounted for in your reserve study?
    2.) Buying and selling a condo unit is like a game of musical chairs, with the goal of not facing the consequences for what I said in #1.
    3.) Owners never want their dues to go up, not even to keep pace with inflation.
    4.) Owners who are not on the board seem to forget that Board members are owners too.
    5.) I never realized how much adults lie until I started living in a condo, and especially when I started serving on the board. This lies typically have to do with money, or not taking responsibility for damage caused — and that can even include board members. For example: “Hi, I left my key to the building in my car, which was parked in the garage, and it was broken into last night. The key was stolen.” O.K., thanks for letting us know, the cost to re-key the building is $4000, which you will be responsible for since this has resulted in a loss of security and there is no question as to what that key gives access to. “What! I mean… I lost my key while on vacation in Mexico last month, did I say parking garage… I meant a parking garage in Mexico… last month”
    6.) Since we live in a non-recourse state, for those that walk away from their obligations, or for every bankruptcy declared, you get to pay a share of your former neighbors condo dues, and assessments if there were any, until a new owner takes their place.
    7.) Rules? What rules?
    8.) Having a good management company and a good lawyer are absolutely imperative. Don’t skimp on either.

  74. 74
    Kary L. Krismer says:

    RE: Peckhammer @ 73 – The cost of re-keying is why most larger buildings should go to a key card setup. It’s more expensive at first, but the money you spend re-keying can only last a week if someone loses a key again. Also, when combined with a DVR security system, it can be very useful. For example, if the owner gives their key to someone you don’t recognize who does something like park in someone else’s parking space, you know who to trace it to.

  75. 75
    Peckhammer says:

    RE: Kary L. Krismer @ 74RE: Kary L. Krismer @ 74

    Kary, I absolutely agree. However, the cost of retrofitting a keyless entry system in the building I used to live in was $30,000. Given what I said before, you have a conundrum. Owners do not want their dues to go up, no matter what the benefit might be. They’d rather see a fellow neighbor — the one honest enough to own up to the loss — shell out $4K than pay an extra $20/month.

    You could also try to push it through as a special assessment, but because the dollar amount is over $25K, and it is considered an improvement, it would have to be voted on by a majority of owners (as per the declaration). Now you are talking about assessments in the amount of $300 to $1200 in that particular building, depending on ownership interest. (despite what Ardell seems to think, you don’t just divide a cost by the number of units; there are usually percentages of ownership interest assigned to each unit based on size or value).

  76. 76
    Kary L. Krismer says:

    RE: Peckhammer @ 75 – That price seems steep, but it would depend on the layout of the building. I’m not certain, but I think the two buildings I’m familiar with both did it for under $20,000, and the higher priced one was more because it was a newer technology at the time.

  77. 77
    Peckhammer says:

    RE: Kary L. Krismer @ 76

    We needed to get AC power to 12 doors in a concrete structure, plus tie-in to an elevator. The system itself is reasonably priced, IMO, but that’s not the only hurdle your up against in a retrofit.

  78. 78
    HappyRenter says:

    RE: Kary L. Krismer @ 74
    Why is it necessary to re-key the entire building? Why not re-key just the front door?

  79. 79
    Kary L. Krismer says:

    RE: HappyRenter @ 78 – What I’m talking about is re-keying the entry doors. It’s not the door locks that are that expensive–it’s those Medco keys that are pricy. You have to give a new one to each occupant of the building.

  80. 80
    ARDELL says:

    RE: Peckhammer @ 75

    I agree that the division of cost per unit is not always directly related to merely the number of units, but the simplistic method applies more often than you might think. I’ve seen one large complex that tied the dues to the market value of each unit, but the appeals as to what market value actually was each year was a nightmare. Per square foot method fell apart when 2 garages or none become an optional feature, and the people with no garages (or storage units) did not want to pay for repair and maintenance of the garages for those that had them.

    For the complex I mentioned that has many townhomes and mid-rise buildings with elevators, there is a huge disparity as the townhomes are technically larger than the units in the mid-rise buildings on a per square foot basis of each owner. But the midrise buildings have the cost of elevators and the townhomes do not, creating the need for a much higher reserve position for the elevators paid for by the townhome units who have no elevators.

    Whether you divide by the # of units or another calculation of “units fair share of”, the process is still a simple math calculation. Even with a Reserve Study, reserves are almost never “fully funded”, nor does the Reserve Study Company expect it to be so.

    The goal however should be no special assessments ever, as the person who lived there a week before the special assessment is announced can end up paying for many years of wear and tear from the prior owners. The concept of paying your fair share of replacement value on an annual basis will always be the core rule of condos, whether the owners honor that or not.

  81. 81
    Kary L. Krismer says:

    By ARDELL @ 80:

    The goal however should be no special assessments ever, as the person who lived there a week before the special assessment is announced can end up paying for many years of wear and tear from the prior owners.

    It’s not quite that simple. Let’s say the reserve fund doesn’t match the reserve study. Do you increase the dues so that it does match within 12 months, even if that means doubling the dues? Or if you look at projected cash positions, do you raise the dues enough so that you’ll be okay if something fails in 3 years that is scheduled to fail in 6?

    As I noted initially, if dues are too high that harms people who are selling. The board needs to balance competing interests when setting dues.

    Finally, I would note that if the item causing the special assessment is an exposed (not flat) roof, or some other fairly obvious item in disrepair, the buyers should be aware of it prior to even making an offer. And if it’s something planned on being done within a year, it should be disclosed in the resale certificate.

  82. 82
    ARDELL says:

    RE: HappyRenter @ 29

    More significant than the costs we are discussing is the cost of “in and out”. Let’s assume for a moment that you are in the $300,000 price range. Whether the monthly dues are $50 or $200 is not the most important cost issue. The cost of buying and selling, if you buy something, only to find you don’t like living there, is about 12% of the purchase price. That $36,000 is much more important than the money you pay monthly.

    For that reason you should rent vs buy until you have a much clearer vision of what you want and will be happy in for at least 7 to 10 years. Even it you think the seller will be paying up to 3% of your closing costs when you buy, you are really paying that in the sale price and financing that cost. Then when you go to sell, the costs are usually in the 9% range for excise taxes, commissions and other costs of sale. So 12% or $36,000 (assuming the value were a constant, which it isn’t) is what you stand to lose if you are not happy. That’s a lot of money to flush down the toilet.

    Anyone who doesn’t know if they want a condo or a townhouse or a single family home should not be entertaining the idea of buying anything at all, until they have a much clearer picture of where they will be happiest. Some people’s happiness is not remotely connected to where they live. Many people like change and want to live here for awhile and then there for awhile and not be chained to “must live here” because it’s going to cost me 9% of the value to get out of here.

    My standard rule is if you have to ask IF you should buy or WHAT you should buy, you probably shouldn’t be buying anything. Making a wise financial choice is important, but you are putting the cart before the house. Lacking a strong commitment to wanting “that” enough to buy it, the financial consequence of buying it pales by comparison.

    It’s like asking should I marry Joe, or Jim or Bob? If you have to ask that question, you likely shouldn’t be marrying any of them.

  83. 83
    HappyRenter says:

    RE: ARDELL @ 82
    Thank you Ardell for your advise. I will be renting for a while. However, in order to get an idea of what I want, I need to look around, compare and ask questions. It’s never too early to start doing that. This is the reason why you date before marrying, you want to find out whether this is the right person for you. Renting a single family home or a town home can be a good way to figure out whether this is what you want. But there is nothing wrong asking around what other people’s experience is (unless Tim comes up with a rule how many questions a blogger is allowed to ask). I have learned a lot here, especially how important it is to be a responsible home owner.

  84. 84
    ARDELL says:

    RE: HappyRenter @ 83

    Agreed…on all counts. :)

  85. 85
    doug says:

    The house I just bought is technically a condo, what’s up with that? It’s a 1700 sqft completely detached SFR on 4000 sqft of land. There are $50 a month in HOA dues for common area maintenance (playgrounds and the like). In all practical respects, it is a house. So why is it labeled a condo?

    (due to this quirk, I caught a few breaks on insurance, so there’s a slight silver lining :-) )

  86. 86
    Peckhammer says:

    RE: doug @ 85 -I’d venture a guess that it’s a PUD, and there are more homes on the parcel than would be allowed under SFH zoning rules, hence the quasi-condo designation.

  87. 87
    ARDELL says:

    RE: doug @ 85

    Is it in Snohomish vs King? Bothell 98012 maybe? Snohomish has different rules on that than King,and well, even different than the “legal” definition of what a condo is and is not. I expect that will be repealed and reversed at some point.

  88. 88
    ARDELL says:

    RE: Peckhammer @ 86

    Most all PUD’s are SFH vs Condo except for a quirky New Rule in Snohomish.

  89. 89
    David Losh says:

    RE: Ira Sacharoff @ 70

    I think EconE looks at maps, and is referring to the buildings just North of the Grocery Store complex. There are multi story brick buildings that I think are low income, however as you pointed out designations have changed in the area, and I don’t know if those buildings were a part of that, so I referred to them as a fanced compound.

  90. 90
    David Losh says:

    RE: doug @ 85

    Builders were allowed to fast track condo projects of this kind with common areas. I think the structure to lot size is higher, as you say 4000 sq ft lot as opposed to 5000 sq ft. There are a lot of these in South Everett.

  91. 91
    Troy says:

    Hey Tim, article idea: visit a couple listings with very high HODs and find out where the money goes. Does it fund high maintenance expenses, a massive reserve (or avoiding a future assessment), insurance premiums, or something else?

    You mentioned 1%, but 1.5-2% is common and even more is not unusual. http://www.redfin.com/WA/Seattle/1101-Seneca-St-98101/unit-1501/home/51297 is 2.3% ($836 on $440k list). It’s an older building and that includes some utilities, but not $400/month (1.3%) worth. Based on the listing, that building has an elevator, a pool, and a hot tub/sauna; seeing how much of the board’s expenses have been spent on those amenities would be pretty neat.

    I’d be interested to hear from HOA board members what goes into the decision whether to sub-meter utilities. As a buyer, I’d much rather have a sub-meter (even if my costs are higher than my pro-rata share would be). I’m sure some HVAC systems are easier to sub-meter than others.

  92. 92
    Peckhammer says:

    RE: Troy @ 91

    There’s no need to wonder where the money goes. Utilities, Insurance, Maintenance, Administrative costs (management, legal, accounting, auditing), and Reserves. And for every amenity added, say a pool, or a spa, or an elevator, or a concierge, or security, the price just goes up from there.

    Here are a few of the actual expenses from a 50-something unit building where I lived in 2010:
    Insurance: $72,470
    Utilities: $49,602 (common area electric, water, sewer, garbage)
    Facilities Maintenance (including one part-time employee): $63,009
    Replacement Reserve Funding: $47,784

    The only way to reduce costs is to cut management fees, amenities, or contributions to reserves. If given a choice, I would cut amenities; cutting management fees (often tied to quality) and reserves (the only way to minimize special assessments and properly maintain a building), will have a very negative affect on a condo.

    You cannot bargain down things like elevator maintenance and monitoring, fire safety system testing, or good insurance coverage. Sure, you could drop earthquake insurance, but after seeing how the Nisqually earthquake did $500K damage to our building, that would not be advisable.

    If dues are cheap, it’s for a reason, and I would be suspect. Of course dues could be crazy high because a board has no idea what they are doing, but I don’t think that’s typical.

  93. 93
    mer says:

    RE: Kary L. Krismer @ 3

    What’s a Special Assessment?

  94. 94
    mer says:

    RE: doug @ 85 – Your lucky it is only 50$. I live in a 1590 square foot condo in the Fairfax willow oaks home owners association location that is worth about 280 thou and I have to pay $120 a month for the HOA and $180 a month for the Condo fees. There is no concierge, pool, fitness center, or valet. There is a small childrens playground, that’s it. Furthermore it keeps increasing each year and the houses around me that are 3300 square feet at 600 thou a year are paying the exact same HOA fee minus of course the condo fees. I will never again buy a property with HOA fees.

  95. 95
    Mel Cooke says:

    By softwarengineer @ 18:

    Not Only Do You Have HOA Fees

    You have HOA board members [generally wanna-be manager types with lower education and usually older/retired or partially employed], and there’s plenty of trouble they can cause for you over nothing, if they don’t like you. My advice, be a quiet mouse in the corner and/or become a board member if you have a HOA….to avoid politics from inexperienced HOA managers with power trips.

    How about being involved, attending meetings, being part of the solution. One doesn’t have to be on the Board to be involved. Condo Associations include all members and all members have a responsibility to participate.

  96. 96

    […] 3,683 pageviews, 03/22: How Are High Condo HOA Fees Justified? […]

  97. 97
    Joel Tax says:

    Even though the HOA fees may seem like a lot, most condo projects are not collecting enough. We see this everyday in our Reserve Studies. Unfortunately like many have stated earlier the builders often kept the HOA fees low to attract Buyers and these fees are typically kept below what is needed in the long-term. Replacement of roofs, siding, windows, elevators, etc. is extremely costly and many associations have to rely on loans and special assessments when these items need replacement/repair. If they had planned for these expenses years in advance the monthly amount collected would be much more manageable and the annual increases would just need to keep up with inflation.

  98. 98
    Mark says:

    I bought a condo here in Ketchum ID next to a ski resort.
    28 unit complex with mostly owner living there.
    I paid 187,000 which is a good price for the area.
    What is the problem you ask?
    $348 HOA fees per month !!!
    They pay for hot water and we have a hot tub. Other than that nothing special.
    I want to give the place a face lift and get out next Spring but this HOA will stop a lot of buyers from wanting the place.

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