PASTA DINNER

Supporters of Law Enforcement in Devonshire (SOLID) is sponsoring the 17^th annual Pasta Dinner, Friday, October 19^th from 5:00 pm to 7:30 pm, at St Nicholas Church, 17037 Plummer Street, Northridge.

 

The cost for the dinner is only $ 8.00 per person with food from a variety of restaurants. This event helps support Devonshire Division with equipment and supplies the City doesn’t provide.

 

For more information please call Devonshire Senior Lead Office at 818 363 1726.

Warning: Underfunded HOAs

Consumer Warning:
Underfunded Homeowners Associations
By Joseph Aiu (Statewide Subdivisions Compliance)
California Department of Real Estate
The California Department of Real Estate (DRE) has issued this warning as a result of the growing number of homeowners associations (HOAs) that do not have sufficient funds or reserves to adequately maintain the common areas in the housing developments for which the HOA is responsible.
This warning will explain the negative effects and impacts of an underfunded HOA, offer suggestions on how to gauge the financial health of an HOA, and discuss some typical causes of an underfunded HOA.
Negative Effects of an Underfunded HOA:
An underfunded budget may cause unexpected expenses for the owners living in a CID and/or have a deleterious affect on the value or condition of an owner’s property. If the HOA cannot properly maintain the common areas due to budget constraints, roads, pools, exterior paint, and roofs may fall into disrepair. Moreover, underfunded HOA budgets may create pitfalls for homebuyers who do not investigate the financial health of the HOA prior to buying into a CID. HOAs facing severely underfunded budgets often must resort to levying special assessments on the owners living within the CID in order to pay for needed repairs or maintenance. Special assessments can run into the tens of thousands of dollars so owners and buyers would be wise to look into the financial health of the HOA to ensure they aren’t exposing themselves to unexpected expenditures and financial problems.
How to know if the HOA is Financially Healthy:
HOAs are required to produce a yearly budget and to furnish it to the owners in the association. In addition, at least once every three years, the HOA is required to review the major components of the CID that the association is obligated to repair, replace, restore, or maintain, as part of a study of the reserve account requirements, to ensure sufficient funds are, or will be, available to adequately maintain the common areas. Included in the budget documents, the HOA is required to provide a summary of its reserves and whether the reserves are adequate to maintain all the major components of the CID. This summary disclosure document is an excellent tool to determine the long term financial health of any HOA.
In addition, the law affords a potential buyer or an owner in an association the opportunity to review the HOA’s financial documents. For a potential buyer, the financial documents may be requested from the seller. For an owner in the association, the financials should be received from the HOA at least annually.
Typical Causes of HOA Underfunding:
Foreclosures are a significant cause of underfunded HOA budgets. Homeowners in
foreclosure often do not make their assessment payments. Due to the length of the
foreclosure process, the non-payment of assessments may cover a period of 90 days to a
few years. Although HOAs have the ability to place a lien against a homeowner’s
property for non-payment of assessments, HOA liens are often extinguished at the
foreclosure sale because the value of the property is insufficient to pay off all the liens
against the property. This is especially true in cases where the value of the property is
less than the mortgage. The end result is the HOA ends up with less than the projected
assessment income, which leads to an underfunded budget.
Inadequate planning on behalf of an HOA board can also lead to an underfunded budget.
In instances where a CID or HOA is facing dire economic conditions, an HOA board may
succumb to the pressure of its association members and not increase assessments or even
reduce assessments and forego on-going maintenance. These types of bad decisions
inevitably result in the HOA levying special assessments against the owners to address
health and safety issues that arise from neglect. In addition, reduced care and upkeep of a
CID’s common areas result in the inability to sell or secure financing because of the
dilapidated condition of the property.
HOAs that rely on inadequate assessment collection procedures usually suffer from
insufficient funding to satisfy their financial obligations. For example, homeowners who
are not in foreclosure but refuse to pay their assessments may rely on the association’s
poor collection process as a way to delay making their assessment payments. This may
result in a “domino effect” where other members stop paying their assessments under the
rationale that since others are not paying, why should they.

What to be Aware of when a CID has an Underfunded Budget:
Special assessments. Inevitably, underfunded budgets lead to special assessments
as mentioned above. This is the common method HOAs use to satisfy financial
obligations. While an HOA is limited on how much it can increase assessments -
typically 5% per year – a special assessment can be assessed in order to resolve a
health and safety issue. This means the entire cost to make a repair can be levied
against all its members, or members who are paying assessments. Special
assessments can be tens of thousands of dollars.

Inability to sell or declining property values. It can be very difficult to sell a
home if the HOA’s assets are inadequate to satisfy its financial obligations.
Buyers will be leery of special assessments and/or increased monthly
assessments. Moreover, property values may depreciate dramatically because of
deferred maintenance and inadequate funds to satisfy financial obligations.
Inability to secure financing. Lenders (subject to underwriting guidelines from
Fannie Mae or Freddie Mac) may deny funding loans whenever an association
funds less than 10% of its operating funds into its reserves. In addition, lenders are reluctant to fund loans when an association cannot meet its financial obligations.
Quick Tips for Evaluating the Financial Health of an HOA: If you are a buyer, demand that the seller provide you with copies of the most current financials for your review.
If you are an owner, make sure that you are given annual financial reports, especially the delinquency report and those pertaining to the adequacy of the reserve account.
If you are a buyer, do a physical review of the property and observe how the common areas are maintained. For example, assess the condition of exterior paint, amenities, roads, roofs, drives, fencing, etc.
If you are an owner, be involved with the board and its decisions, especially when you see deferred maintenance of common areas or are subject to special assessments.
Conclusion:
The issues raised in this warning, along with the suggested steps to take to avoid potential financial problems, are not all inclusive. Each project in California may have unique issues that can only be addressed by you, as either the buyer or owner, performing your due diligence.
However, what appears to be a common thread in today’s real estate economic climate is that many projects are falling victim to hard times and the result is the underfunding of HOA budgets.
Please refer to DRE’s web site, www.dre.ca.gov for additional information on Common Interest Subdivisions, including the brochure Living in a Common Interest Development.

There is a shortage of homes for sale

2012-05_SFV_Charts

As home rents head higher, owning regains its appeal

Rising rents, coupled with slumping home prices and interest rates near record-lows, are boosting demand for homes at entry-level prices.

Increased buying activity from investors and second-home purchases may be factors behind the recent pickup in home sales, but real estate agents say they are fielding more calls from anxious tenants complaining about rising rents.
Average apartment rents rose by 2.7 percent last year, while the national vacancy rate dropped below 5 percent for the first time since 2001, according to a quarterly survey released Wednesday by REIS Inc., a real estate research firm.
The largest rent increases came in San Francisco and San Jose, Calif., which saw increases of 5.9 percent and 4.9 percent, respectively. Such increases are one reason why industry analysts believe 2012 will be the first year since 2005 when the share of apartment renters that moves out to buy a house increases from the previous year.
Historically, the cost to rent an apartment has been about 10 percent lower than the after-tax cost of owning a home. That rental discount began to fall in 2010 and disappeared entirely last year, according to analysts at Deutsche Bank who track housing costs. By the end of 2011, the bank’s research found that the cost to rent an apartment was about 15 percent higher than the cost to own a home.
It isn’t always easy for home buyers to make it to the closing table though. Lending and appraisal standards remain tight, keeping many would-be buyers out of the market. And aspiring buyers are competing with savvy investors who have turned buying and reselling foreclosed homes into a business.

CEO Kelly has good news

Mistakes housing investors make

With traditional investments delivering low returns, some are considering buying rental housing.  However, potential investors should do their homework and avoid the following common mistakes.

Making sense of the story

• Investing in real estate right now can be profitable, if everything goes as planned.  Rents are increasing in many areas, and more properties may be coming on the market.
• Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s inventories of foreclosed homes into affordable rentals.
• Traditionally, investors rented out properties for 1 percent of the purchase price per month.  However, according to one property management firm, today, some investors are receiving as much as 2 percent of the purchase price.
• While it may be true that in some areas home prices are relatively low, that doesn’t mean the property can be rented out.  Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers.  The same is true for less-attractive properties or those in less-desirable school districts.
• Prior to purchasing a property, investors should also factor in closing costs of 3 percent to 6 percent, the costs to fix up the place and maintain it, and the holding costs.
• Investors become landlords, and as such, need to keep in mind that, just like homeowners, tenants may not always be able to pay rent.  Evicting tenants can take several weeks.
• It’s also important to remember that owning a rental is not the same as owning a home.  An owner may put up with flaws in a home that a renter wouldn’t tolerate.  Additionally, many states and communities have strict laws for landlords, even for those who own only one property.

Read the full story

Margaret Kelly, RE/MAX CEO