Tim Stone’s Blog

For most people, the only time they think about their Home Owners’ Association is when they pay the bill, or receive a notice that something is wrong.   People don’t like to pay fees, and they don’t like being told what to do, so often the HOA is only seen in a negative light. 

Actually, a good HOA will protect your investment.  Property values are higher in associations because the neighborhood is well maintained.  Having consistent rules makes the homes more desirable when they are re-sold, and that leads to a better return on the owner’s investment.

HOA policies also increase good neighbor relations.  Associations typically prohibit actions that intrude on the other residents.  Thus, you won’t see abandoned vehicles parked for months at a time on the front lawn, you won’t have streams of cars to a "residential business", and you won’t see ugly additions / paint / landscaping.  New homeowners know all the rules before they purchase, so their rights are not being infringed upon.

A good association will also protect your long term investment.  There are common areas which must be maintained, and the cost is the responsibility of all the owners.  The use of reserve accounts makes special assessments less likely which certainly helps the owner’s budget.

For most people, the only time they interact with their association is to file a complaint.  It is helpful to remember that the board consists of volunteers who also own property in the association.  You may disagree with their policies, but they are trying to move forward in a direction they believe is best for the community.  

If you feel changes should be made, approach your board at a regular meeting.  Let the manager know you wish to be on the agenda.  Then take your suggestions to the board with plenty of material to backup what you wish to share.  You don’t have to present it all verbally, but you can certainly hand it to them for reference if they wish to explore your ideas further.  Be prepared to listen, because sometimes the comments you wish to share may have been explored previously.  If your idea is good, but not new, maybe you can share some thoughts on how to "get there from here" that doesn’t add a strong financial burden on the association.

You can communicate with your board in writing, but keep the comments focused on a positive expression and specific outcome you would like to achieve.  Offensive language has no place in verbal, or written, communications with your HOA board.

Finally, if you believe the board is truly out of touch with the realities of the community, and you can’t get the message across, maybe its time for a change of leadership.  You can wait for the next election, or move forward on a recall.  In either case, be prepared to collect proxies, campaign hard, and then be ready to devote your own time, as a volunteer, should your movement be successful.  You may get rid of some people, but unless you are ready to step in and take a leadership role, your actions will probably not be helpful.

For further study, get to know your HOA.  Read the CC&R’s you received when you moved in, and also become very familiar with the Rules and Regulations.  You can view the minutes of previous board meetings and you will have a better understanding of what is occurring at the meetings.  Also, start attending the meetings.  It is, after all, your association and being involved is a great way to know your neighbors.

Many people think a Home Owners’ Association is some distant company that tells them how to live, charges assessments, and is intent on making life unpleasant for some residents.  The residents don’t feel they have a voice, or representation.

Actually, the company who sends the bills, and those sometimes annoying letters, is hired by the Board of Directors of the Association.  There are many companies that provide management services, but they are all under the direction of the Board.

So who makes up the board ?  The property owners !  In a new development, the builder holds the seats on the board, but then releases them to residents as the units sell.  Ultimately, the board is made up of only owners. 

Every year the HOA holds an election.  The owners receive a Proxy ballot, usually with names of candidates.  This is not a simple process unfortunately.  First, the board can use Proxies to cast ballots for anyone they want if the owner returns it without designating how the votes are to be cast.  Candidates can collect proxies, even if an owner has sent one in, and they can use it if the signature date is later then the original returned to the board.  A ballot can be used to cast votes equal to the number of openings, so a proxy could be worth 3 votes if there were 3 seats available.

When a board becomes entrenched and seems intent on retaining power, they do so by collecting the ballots that are used for "quorum purposes" and don’t specify candidates.  They can then cast the votes for the individuals on the board which usually is sufficient to retain the seats.

A group of owners, concerned about the direction of the association, can get elected and take control.  This is usually done by "walking the neighborhood" of the association homes, and asking people to sign proxies on behalf of themselves, or the slate of candidates they wish to elect.  This is usually done fairly close to an election, and the ballots are then presented at the annual meeting when the officers are chosen.

Most people simply won’t get involved.  However, if you have concerns about your HOA, and how it is being run, then perhaps you, and other like minded owners, should seek seats on the board and redirect the efforts of the association in the direction you believe will be best for everyone.

Next:  The Management Company

The Home Owners’ Association brings immediate feelings to residents, some good, and some otherwise !  In reality, the HOA is simply an extension of the the owners in a community which is designed to handle issues in common.  How it works is really dependent on the involvement of the property holders.  Its success, and failures, are directly related to the involvement of the property owners.  In this series, I will discuss key issues everyone should know about HOA’s.

What is a Home Owners’ Association ?

When neighborhoods are developed, many builders now place all of the homes into an HOA ( Home Owners’ Association ).  This is done by forming a legal corporation, and binding all of the homes in that development into that entity through their deeds.  Often the association is designed to handle common areas, like slopes, parks, recreation centers, and parkways.  The association is tasked with maintaining these areas which are deeded to a group of homeowners in common. 

Where does the association get its authority ?

The Association gets its authority from a document commonly known as CC&R’s.  This stands for Covenants, Conditions, and Restrictions.  When someone purchases a home in an HOA, they sign a document agreeing to abide by the CC&R’s.  This is not optional because all homes in the domain of the HOA are bound to these CC&R’s.  This is a pretty large document, but to fully know your obligations you should read it.  CC&R’s are usually created by the original developer and rarely change.  The CC&R’s are bound to the property and transfer with it whenever ownership changes.

The Rules we live by

The specific rules that govern life in the association are in a separate Rules & Regulations document.  These are also created by the original developer, but they are often modified, enhanced, or reduced, by the HOA Board of Directors.  These rules can be very specific, ie. discussing acceptable landscaping, parking, color selection, property use, etc.  When conflicts arise between an HOA and residents, it is about these rules.

HOA assessments

Most HOA’s have property to maintain.  The actual obligation varies depending on the location, type, and size of the common areas.  There are also variations in responsibilities.  Gated communities have "private" streets so the association pays to pave and repair them.  Condominiums have structure in common, so the association usually must pay to paint the exteriors, fix all walkways, handle termites, and more.   Some gated communities hire guards.  Hillside communities must maintain the slopes, which involves plainting, trimming, watering, and damage repair.  HOA’s with recreation areas must maintain them, and pay for ongoing maintenance.  In addition, HOA’s should set aside reserves to handle unexpected needs in the future. 

All of this must be paid for by the member homeowners who actually benefit from these services.  HOA’s are not profit making companies.  They collect funds from the homeowners for actual and necessary expenses.  As costs rise, assessments may also rise.

When people fail to pay their assessments, it harms the Association and places a burden on the other residents.  The costs for the upkeep of the properties in common will not reduce or go away because someone doesn’t want to pay their assessment.  To protect the interests of the residents in common, the HOA does have authority to penalize people who miss payments, and to even place leans against properties. 

It is important to remember an HOA is not a voluntary membership.  If you purchase a property inside a development that has an HOA, you will be bound to its rules and regulations, and will be required to pay an assessment that covers costs in common.  You have no legal alternative if the property you own is governed by a Home Owners’ Association.

Next:  Who runs the HOA ?

Perhaps you would like to buy a home, but you just haven’t been able to save enough for a down payment.  Recently you may have heard about a first time buyer’s tax credit, and that it may be possible for you to buy a home with very little down.  It might sound like a dream come true, but it could be your worst nightmare. 

With the advent of easier FHA guaranteed loans, requiring only 3.5 % down payment, the possibility of home ownership may seem to be in your grasp.  Then you hear that the down payment can be gift money, and the loan can contain additional funds to help cover your closing costs.  Thus, if you have no savings, but can get relatives to help out, what would be so wrong ?

If you have not been able to save any money, it is probably because your expenses pretty much match your income.  You have a balance.  If you have good credit, you’ve earned it by being careful with your spending.  Most financial advisors will tell you that this economy puts you in a position where you should have at least 6 months of income saved in case a crisis, like a job loss or illness, strikes. 

The cost of your mortgage is only the beginning of the expense you must consider when buying a house.  There is also property tax, insurance, maintenance, repairs, and utilities.  These are all significant expenditures.  You also need to build an emergency fund.  If you add all of these up, and it comes out to less then your current rent, you can maintain your financial balance, and the purchase may be fine.

Many people sincerely believe they can work a little harder, tighten their belts, and make that higher payment.  The rate of defaults and foreclosures on mortgages show that is not a realistic expectation. 

So what happens if you move ahead, guess wrong, and can’t cover the expenses ?  Is it really that bad ?  Remember the good credit you built up before you bought the house ?  It vaporized.  Remember the peaceful evenings in your rental ?  They now get interrupted all evening with calls from the bill collectors.  Then the bank says enough, you lose the house to foreclosure, and find it is really hard to even find someone willing to rent to you because of your "poor credit risk".

This may sound like doom and gloom, but its not really.  As a real estate agent, I would love to help you find a house to buy.  That’s how I earn a living.  However, I also want you to be a client for life, and that doesn’t happen if the purchase ends up as a disaster.  I encourage my clients to buy within their means, and we always evaluate all the costs that come with the house they are considering.  I want them to start out right, without any regrets, or future frustrations. 

So, check out those properties, set your goals, and if you’re ready to make a move, do it with a peace about the transaction.  Never let others convince you it will be OK, and you can do it.  In the end, you are the one with the financial obligation, not your friends or advisors/agents. 

Please feel free to email me, or call, if you’d like to discuss your situation in depth. 

I’m not in the loan business, so I will admit I don’t have "expertise" on this topic.  However, as a real estate agent, and homeowner for over 30 years, some advice that is being given today just doesn’t make sense to me, and it might really hurt you if you buy into it.

It works like this.  A homeowner discovers their property is no longer worth what they paid for it based on resale information they receive for similar homes.  They get frustrated, and feel they are wasting their money.  Maybe they had a rate adjustment, and a higher payment, and they are frustrated.  So what should they do ?

They start following up on some of the emails and ads they see for loan modifications.  They are told to stop making their payments, and the lender will be forced to lower the interest rate and the loan balance.  So, they do this, and happily spend the money on luxuries they just don’t need.

This advice just doesn’t make sense to me.  First, it would appear that the person giving the advice gets paid up front, so they have no reward for helping you to succeed with a better financing plan.  Secondly, I don’t see why this is an incentive for a lender to suddenly cut you a deal.  In fact, you risk a rather quick foreclosure, and possibly a default judgement for the difference between what you owe and what the bank receives when selling the property.  In addition, you risk a destroyed credit rating for 10 years.  You could be out of the market for purchasing a new home, and have difficulty with renting.  You will pay higher interest for any loans you might get to pay for cars and other large purchases, and if you are job seeking, you may have problems with a bad credit rating.

Certainly having a loan modified is important.  Banks may well adjust interest rates, especially if you have an adjustable mortgage.  It is less likely they can adjust how much you owe on a loan because they actually paid that money to someone else when you signed the contract.  It is not as likely they can make you a gift of their investor’s funds.

If you need to make changes on your loan, your best results will come when you work with the bank.  Making your payments shows your good faith.  Emails, and even phone calls, just don’t get a timely response.  If you have a local branch of the bank that handled the loan, pay them a visit.  Ask for help from the manager or loan officer.  Be open about your difficulty, and present a cooperative, but passionate, plea for help.  Be sure to follow up quickly to get a progress report. 

If you just don’t get anywhere, stick with it.  The federal government has a new program, and more will be coming.  Also, talk to the person who originated the loan.  Remember, if they are now "selling" loan modifications, be very, very cautious.

This article is just to get you to think about your options.  More information will be coming in future posts.  Share what you think below.

We’ve got to admit, when summer vacation arrives, Rancho Santa Margarita has a lot of fun activities.  Be sure to check out some of these in the upcoming weeks:

Taste of Rancho - June 6, 4 - 9 PM Held in Central Park, behind City Hall, local restaurants will provide samples of there menus at reasonable prices.  You may also visit the beer and wine tasting garden.

Summer Concerts  In Central Park 6-8 PM

July 12  Rock to the tribute band for Bruce Springsteen. 

July 19  Hello Cleveland: A rock and dance band with a wide range of music offerings

July 26  Stone Soul: performing classic 60’s soul and Motown music

August 2  Hot August Night - a tribute to Neil Diamond with his classics

August 9  Swing Shift - performing great dance and romance tunes

August 16 Neon Nation - focused on the 80’s experience

Starr Ranch Summer Junior Biologists

Multiple sessions are offered in June and July will acquaint kids with the scientific study of wild animals and their habitats.  For information call 949 858-0309.

Summer Camps at the Community Center

There is no need for your kids to sit home in front of the TV.  Let them stretch their experiences with summer camps in town center.  Camps include Engineering with Legos, Dnace and Cheer, Sewing, Claymation Magic, Survivor, Mad Scientists Workshop, Shakespear,

and a lot more.  Stop by Town Hall to get more information or call 949 216-9700. 

Church Programs

Looking for a faith based experience for your kids this summer ?  Most houses of worship in the Rancho offer summer programs for kids on a weekly, full week, or evening basis.  Call your preferred house of worship and ask for details on programs they may be offering.

We’ve got to admit, when summer vacation arrives, Rancho Santa Margarita has a lot of fun activities.  Be sure to check out some of these in the upcoming weeks:

Taste of Rancho - June 6, 4 - 9 PM Held in Central Park, behind City Hall, local restaurants will provide samples of there menus at reasonable prices.  You may also visit the beer and wine tasting garden.

Summer Concerts  In Central Park 6-8 PM

July 12  Rock to the tribute band for Bruce Springsteen. 

July 19  Hello Cleveland: A rock and dance band with a wide range of music offerings

July 26  Stone Soul: performing classic 60’s soul and Motown music

August 2  Hot August Night - a tribute to Neil Diamond with his classics

August 9  Swing Shift - performing great dance and romance tunes

August 16 Neon Nation - focused on the 80’s experience

Starr Ranch Summer Junior Biologists

Multiple sessions are offered in June and July will acquaint kids with the scientific study of wild animals and their habitats.  For information call 949 858-0309.

Summer Camps at the Community Center

There is no need for your kids to sit home in front of the TV.  Let them stretch their experiences with summer camps in town center.  Camps include Engineering with Legos, Dnace and Cheer, Sewing, Claymation Magic, Survivor, Mad Scientists Workshop, Shakespear,

and a lot more.  Stop by Town Hall to get more information or call 949 216-9700. 

Church Programs

Looking for a faith based experience for your kids this summer ?  Most houses of worship in the Rancho offer summer programs for kids on a weekly, full week, or evening basis.  Call your preferred house of worship and ask for details on programs they may be offering.

When I first came to the Saddleback Valley in 1973, I heard about this rustic restaurant hidden in Trabuco Canyon.  It was several years before I tried it, but in several return visits I’ve never been disappointed.

The Trabuco Oaks Steakhouse was started in 1968 by the Sherod family.  It was originally a snack bar serving the campers at O’Neill Regional Park.  Soon they decided to serve dinner, so they stayed with a traditional steak and potatoes offering.

Now this place is rustic.  You may share your table with a tree, and I wouldn’t be surprised to see some of the natural residents hanging out in the parking lot sometimes.  Your memory will be of the mesquite grilled steaks, which are always carefully selected, and cooked to perfection over natural coals. 

Don’t dress up for this dinner unless you plan to donate your tie ( which will be cut off at the entrance ) to the hundreds hanging from the ceiling.  You’ll also be able to do plenty of networking without your smartphone, twitter, or facebook accounts.  The walls are papered with thousands of business cards of visitors from all over the world.

For a great treat, you should pay the Trabuco Oaks Steakhouse a visit.  It is a unique experience.  Check ahead, though.  Call them at 949 586-0722 for reservations.  They may be out of the way, tucked behind the general store and across from Trabuco Canyon Elementary School, but they are definitely popular.  You can also check out more at their website, www.trabucooakssteakhouse.com.

How is your garden looking these days ?  It really may have a significant effect on your emotions.  It can have you smiling, or depressed.  Unlike so many things we face today, this is something you can actually control with a little effort and a few dollars carefully spent.

Many of us have lawns, and they can get to be looking rather dead and brown.  Their biggest need may be some good fertilizer, but before you add it, make sure you take a rake and pull out all the thatch that has built up. This also breaks the soil.  Cut your grass, rake it firmly, and then spread the fertilizer.  Finally, use a shower nozzle and soak it by hand so the water doesn’t run off, carrying away that new nutrient.   Water again by hand a day later, then water every couple of days and watch it spring back to life.

Our plants may have grown a lot, but if they look leggy, its time to prune them back and clean out the dead material.  I love to prune the inside of bushes so they can breath.  Many gardeners just cut off the tops of the branches, but I like to get inside and get rid of the ones that criss cross each other and just get in the way.  The library has some good illustrated books on the way to best prune plants to stimulate new growth.

Sometimes plants overgrow others and you get a nice mess.  Your yard will look a lot better if you thin it out so what is growing can stretch out, breath, and have room to develop.  While delving into your bushes, make sure to pull out those pesky weeds, and use a hand cultivator to break up the soil.  Then give those plants some food.

Finally, your flower beds are filled with dirt, but if you add some colored bark, they will stand out and be quite attractive.  Most bark also acts as a mulch which improves the soil quality.

Seasonal ( annual ) color flowers are a great trim and bring a lot of cheer to your yard.  You can get flats of them on sale most times at your local nursery.  Seeds are also readily available, inexpensive, and will grow into beautiful flowers.

You may be tired after a weekend cleaning up your yard, but you’ll enjoy the results for months.  Wouldn’t it be great to come home after a tiring day in the "world" and be greeted by a cheerful, colorful, bright yard ?  Not only can it soothe your soul, but it may thrill your neighbors.

I’m often asked by visitors to Open Houses if they should move, or expand their current home.  Of course, as a real estate agent, getting a commission for helping them find a new home, and one for selling their current residence, helps me support the economy.  However, that is not always the best piece of advice.

When someone asks if they should consider an addition, it is pretty clear they are attached to their home, and probably the neighborhood.  My first questions are about their current house, and their relationship with the neighbors.  If there is a strong bond, then expanding the house, within reason, is probably a more pleasing option.

Of course, you can overbuild for a neighborhood.  If you have homes that do not exceed 2000 square feet in size, and suddenly you expand to 4500 square feet, you may never recoup the expense.  Usually people only need one or two more rooms, or larger rooms, or an additional bathroom, and these are not excessive. 

Cost can be a big factor.  It is not just the price of the house that is important. Check the taxes.  In California, value is based on the purchase price of the property, and you may move into a newer area that has Mello Roos assessments.  So, you could have a current tax bill of $ 1500 / year and move to a slightly larger home and face a tax bill of $ 10,000 / year.  ( Always have your agent check the projected tax bill based on the sale price, not the current tax rate of the owner ).  You may also have association fees.  Your new purchase may have higher payments, plus there are the costs of getting the loan, the sale of your home, and fees associated with moving.

Your current home may be your castle, and it has been molded to your way of living.  A new home will require changes to accomodate your family.  Do you have the energy for the work ?

Of course, you may have postponed moving for a long time, and now you simply need a new home.  In that case, this is a good time to make that purchase.  Interest rates remain relatively low, prices are down, and deals are awaiting you. 

Finally, if you are concerned about the fact your home will net less now than two years ago, keep in mind your new home will cost less than two years ago.  The relative value should remain the same, but the lower prices do mean lower tax assessments.

If you have questions, please call me direct, toll free, at 800 504-6787.  I’d love to speak with you about your opportunities.