Buyer beware of underfunded HOA

Home Sale Hindsight

Q: If I purchase a condo with a 97 percent occupancy in its complex with a monthly maintenance fee per owner of $500 per month, and three years later, due to the economy, the occupancy rate drops to 70 percent, do the remaining owners absorb the maintenance fees that are not being paid by the missing occupants? –Ken, California

A: Probably the single most underreported effect of the foreclosure crisis is the tailspin into which it has sent many homeowners associations (HOAs) across the country. When HOA members stop paying their dues or, worse, stop paying their mortgages and lose their homes to foreclosure, it has an immediate and intensely negative trickle-down effect on their fellow HOA members.

Most condo owners stop paying their HOA dues long before they stop paying their mortgage. So, by the time condos go into foreclosure, they are often many months or even years delinquent on their dues.