The Lion's Den

Currently Homeowner Associations, Condo Associations, and Townhome Associations are also battling the pain of the economic downturn. Homeowners are dealing with the pain of not being able to pay their bills due to unemployment or underemployment, but this is also trickles down to Associations that these homeowners are members. 

When people fail to pay their dues, then it puts the Association’s finances in jeopardy. Associations pay for commmon area maintenance (pool, pest control, or lawn maintenance), common area utilities (outside lighting, etc), or security measures.  All of these matters are considered to be critical to the perception of a community. If those issues deteriorate, property values will continue to fall, which will hurt the investor’s or other homeowners who are seeking to protect or increase the value of their investments.

Many homeowners fail to realize that the basic functions of a homeowners association are designed to preserve property value and protect the community. There are horror stories of Associations who are overzealous, but the few horror stories should not overstate the value of the Association.

We have seen investment properties that were located in communities without a HOA completely deteriorate into condemnation. The lack of Association made it difficult to coordinate waste services for the community, common area lighting, lawn maintenance,etc. This erosion of basic services continued to drop the property value. The properties were originally purchased by many investors and homeowners at $145,000 a four-plex.  Today, those complexes are being sold for $15,000 to $25,000 a four-plex and many of the issues could have been quelled if there were a mechanism in place to facilitate communication between owners. Many of the homeowners let the investments go to foreclosure in the end or short sold the units.  Investors should not completely shun the idea of purchasing properties in communities with a association in place. In many instances, the association can at least assist in maintaining community appearance. The community factors are outside of a investor’s control, but they have a equally devastating effect on the property perception and value. In many cases, the community perception can overwhelm any positive features that a unit may have for potential tenants.

Associations will have to evaluate all levels of the operation to determine if they can remain lean in these difficult times. This could include reviewing vendor contracts, scaling back services, and evaluating any revenue generation options that are open to the community.

Hopefully, the economy will turn around,  and homeowners will not be forced to face the choice of paying the association bills or paying the light bill.  Till then end, remember that your Association may be one of the few mechanisms to protect your property values that you have as a homeowner or investor.

(Jay Raman is the owner of a full service real estate firm, Ashoka Lion www.AshokaLion.com that provides Association Management services. You can send emails to him through the “Contact Us” portion of the site)

This entry was posted on Thursday, February 11th, 2010 at 11:31 am and is filed under Buying Property, Economy, Houston Real Estate, Investors, Owning a home, Real Estate General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.