Home Owner Associations Are Going Belly Up with Defaulting Members!

May 29, 2008 | Real Estate |  2 comments

This year is the worst year for foreclosures in history, as expected. With the slide of homeowners goes the slide of the HOA’s that the home is listed with. This is having a very negative impact on the homeowners that remain.

I was informed of a case in Florida where a condo owner can not rent or sell his condo due to the condition of the property grounds which are now not being maintained. This is just the tip of the iceburg. The condo association has 60% of its memebers in default! As a result, the association has had to stop paying for the insurance as well! Now the owners are responsible for getting their own insurance on top of continuing to pay their association dues. In addition, the association faces a real possibility of going bankrupt. The owners are concerned that the utilities are the next thing to be shut off! When this owner contacted the insurance company to get insurance he was told that this is common right now and that many associations are facing similar problems. 

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Reader Comments

tammy gould on July 3, 2008 at 8:00 am

I am in a lease purchase agreement for 2 years now. During this time my husband and I have been doing our best trying to get our credit scores up in order to purchase the house.
We went to a broker who pulled our credit and told us to pay all outstanding debt . It took us this long and now our scores have actually dropped! We have no open credit and no way to get any! Any advise for us? I am around 530 and my husband was below 500 .

Tom Voli on July 7, 2008 at 10:43 am
tom@tomvoli.com

Tammy,

Unfortunately, credit scores require positive reporting accounts to improve. Your scores dropped because the last activity on the account is negative…even though it paid off debt, they were negative items. The system is not seeing positive information since then. That is the problem.

You will need to open a secured credit account (credit card). This is where you deposit an amount that will be equal to your new credit line. This deposit is held as security against the credit line in case you default. It earns a small amount of interest. The key is to use the credit card monthly and maintain a small balance (20% of the credit limit). It is not better to pay if off monthly as many think. The credit scoring models lean towards those who can keep a balance on their account and pay it on time. Keep your balance under 30% of the credit limit and you will see your scores improve over time. Unfortunately, there is no quick fix.

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