Home » 2014 Real Estate » Is Your Homeowners Association Underfunded?
Is Your Homeowners Association Underfunded?

Is Your Homeowners Association Underfunded?

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.

Foreclosures on delinquent properties by homeowners associations were almost unheard of before the financial crisis of 2008. Now lawyers and real estate researchers say they are becoming more common as association funding bases shrink because of previously foreclosed homes’ standing empty. About 70 percent of association-governed communities are underfunded, up 12.5 percent from 10 years ago, according to Association Reserves. The average association has financial reserve accounts — the amount required to maintain infrastructure and common areas — that are only funded at 52 percent, down from 60 percent a decade ago, its research shows. via AOL Real Estate

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. 


  1. What can homeowners do to prevent being taken advantage of by their Homeowners Association? Any tips?

    • First piece of advice would be don't buy any place with an HOA.

      Second would be if you already own, be sure to read 'Neighbors At War' by Ward Lucas and check out his website. Investing time in reading what he shares will be the best real estate associated investment you'll ever make. neighborsatwar dot com

    • Get as involved as you can. Ask for an Annual Financial Audit and detailed Monthly Reports from the Board. Ask what you can do for the HOA. Look for ways to improve the Community. Work within the Committee structure that is set up … or be part of setting one up to take care of community needs and wishes of residents. Don't expect the HOA to meet your needs without you coming forward to be involved and to contribute. Ask your Neighbors to attend meetings and functions. Spread cheer and good will. Stop the complainers from taking over. Most of all, be SURE the HOA is being run as a REAL Business and that it has a Five Year Plan that looks ahead to making your community the best it can be ! for more contact us at Coalition for HOA Reform http://www.hoaowners.org

  2. Ryan, great question. I am working on a post answering just that question for next week. I have just scheduled interviews with 2 homeowner association management companies to find out the key things to look for and ask about.

    • The absolute worst place to get HOA advice is from a property management company that is using the play book of the CAI to tell them how to abuse the homeowners.

      If you want the 100% truth about HOAs and what they are all about, interview Ward Lucas, George Staropoli, or Shu Bartholomew. These are just a few of the leaders in the HOA industry that know exactly what HOAs are all about. Lucas has published an incredible book, Neighbors At War. It can be found on Amazon or through his website http://www.neighborsatwar.com

  3. Probably more of an issue with condominiums. If you're buying in a senior community (condo or homes) be especially alert as seniors tend not to vote for long term funding.

    • Underfunding is a problem in every HOA and condo association I know of….and I know of a lot of them. The biggest problem in HOA and condo associations is the lack of integrity and corruption of the board members and property managers. Anybody discussing HOAs should read, Neighbors At War by Ward Lucas. It's comprehensive and 100% truthful. He spent 40 years in the television investigative journalism world and leaves no stones unturned in his exposure of HOAs. It truly is a MUST read. We now have 350,000 HOAs in America with 63 million people living inside these nightmare hellholes. Our legislators need to be reading the book and stepping up to help the homeowners instead of listening to the lobbyists that are paid by the CAI. A great place to stay informed on HOA issues is the website neighborsatwar dot com

  4. The question we are asking is WHY are HOA mandated by State Laws? Let's re-examine the entire matter of how our Communities are authorized and are built to serve the needs of Homeowners. Today there is little choice but to be in a Restrictive Planned Community. Why don't Owners have other choices. Join our effort to ask Legislators and Realtors and Builders that question … and allow for Owners to buy in less restrictive communities that are not bound by the overly confining HOA Laws on the books today. See http://www.hoaowners.org and join the national effort. Thanks

Leave a Reply

Your email address will not be published. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>