I'm in a situation where I lost income after getting laid off, and as a result my mortgage and HOA dues are now close to 50% of my monthly pay after taxes. This makes things rather tight, since I have other bills to pay also.
Equity wise, I'm not underwater, but my place has lost enough value since buying it that I'm close.
The problem is the HOA. They're levying a $16,000 assessment for a repair (decks -- a lot of people have said that this figure seems too high to be reasonable).
Since they're not new decks, the value increase to the condo will be small. I'd have to stay in this place for a few years to break even... but in the process of financing that $16k, I would end up underwater, paying PMI, so my monthly payments would exceed 50% of my monthly income. (It's hard to start a new business with no spare income, too.)
Without the HOA special assessment and the HOA-driven extortion (they're going so far as to threaten to shut off utilities as well as foreclose, throwing extra junk fees and penalties my way in the process), I'd be able to refinance, lower my monthly payment, and be entirely out of debt.
To top this off, all of my options for financing are either credit cards (high interest) that I've been avoiding, or dependent on a high appraisal, which is very unlikely.
So, due to the HOA's assessment, I'm in a situation where my best financial option is to attempt a short sale and failing that foreclose. Though it would hurt my credit, it would also allow me to transition to somewhere with a MUCH lower cost of living (rents are low), and without any debts at all. Which is good for going to into business for myself, because I'd be able save enough money to live on for six months in... six months.
I don't know how things work when an HOA forecloses though. I will be talking to a lawyer to make sure that they can't come after me beyond my property if they foreclose, which they most likely will when they find out that I'm not going to pay the $16k or the $1600 in fees that they're throwing at me (some of which are unexplained, and some of which another person in condo management said might not even be legal).
More like HOA's are a way to privatize many of the functions of local government, even allowing them to make rules (through contract law) that would be unconstitutional or unpassable in real government. The private police force in Robocop doesn't seem so far-fetched anymore.
There have been a few stories on NPR about HOA's that have been foreclosing on people for being a few hundred dollars behind on their HOA dues.
HOA's have a lot more power than they should, and there's been some push lately to create laws to reduce their power, but that's a pretty recent thing, and probably triggered by some HOA's getting desperate for money and becoming abusive.
They're capitalizing on the fact that we're trained to believe that our credit ratings are hugely important, and foreclosures trash them. With rental rates being as low as they are though, it's hard to see why I should tolerate this extortionist practice. If I can rile up some of the other owners to stand up to the management (not likely, I think they're largely sheep except for the one who's short-selling) I can probably put a stop to this, but otherwise, there's not much I can do other than stop paying my mortgage, let the HOA foreclose, and save raftloads of money by finding a place with relatively inexpensive rent.
Equity wise, I'm not underwater, but my place has lost enough value since buying it that I'm close.
The problem is the HOA. They're levying a $16,000 assessment for a repair (decks -- a lot of people have said that this figure seems too high to be reasonable).
Since they're not new decks, the value increase to the condo will be small. I'd have to stay in this place for a few years to break even... but in the process of financing that $16k, I would end up underwater, paying PMI, so my monthly payments would exceed 50% of my monthly income. (It's hard to start a new business with no spare income, too.)
Without the HOA special assessment and the HOA-driven extortion (they're going so far as to threaten to shut off utilities as well as foreclose, throwing extra junk fees and penalties my way in the process), I'd be able to refinance, lower my monthly payment, and be entirely out of debt.
To top this off, all of my options for financing are either credit cards (high interest) that I've been avoiding, or dependent on a high appraisal, which is very unlikely.
So, due to the HOA's assessment, I'm in a situation where my best financial option is to attempt a short sale and failing that foreclose. Though it would hurt my credit, it would also allow me to transition to somewhere with a MUCH lower cost of living (rents are low), and without any debts at all. Which is good for going to into business for myself, because I'd be able save enough money to live on for six months in... six months.
I don't know how things work when an HOA forecloses though. I will be talking to a lawyer to make sure that they can't come after me beyond my property if they foreclose, which they most likely will when they find out that I'm not going to pay the $16k or the $1600 in fees that they're throwing at me (some of which are unexplained, and some of which another person in condo management said might not even be legal).
I will never live anywhere with an HOA again.