Posted: 16 Jan 2014 08:14 AM PST
It is one of those horrible scenarios, but you may be on the hook for a potentially large assessment from your homeowners association, and not even know it. In fact, your homeowners association may be close to being broke…
When you buy a home that is governed by a homeowners association you sign a long document that gives the association certain powers over your property. Typically you get the bylaws right around closing time as you have 100 plates spinning in the air, and you give it a quick glance at the homeowner bylaws and then sign that you agree to be bound by them.
This could be costly. These agreements govern how the homeowners association can collect their dues, including potentially foreclosing on your house to do so, how you must maintain your home, and assess special fees if the association needs to make upgrades or create new amenities.
So you may wake up one day to hear about a $10,000 assessment because the association feels the need to fix a problem or add an amenity and it will be coming out of your bank account.
Now here is the scariest part, a majority of the homeowners associations in the United States are underfunded. The housing crisis has put incredible pressure on the associations as people just can not pay their dues, or the homes in their neighborhoods are in foreclosure.
This is not to scare you from buying a home with a homeowners association, but do read the documents when looking at the neighborhoods and ask about potential assessments in the future, or common maintenance issues that you see. It may save you from an expensive mistake.
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