Q. We faithfully pay $200 a month HOA fees and every time something goes wrong in our complex the board of directors (BOD) charges each unit an additional assessment because they say some people are behind on dues. However, they (the treasurers) never provide a financial statement. I'm the secretary and have asked for financials several times via email. We are frustrated and don't know the laws behind getting monthly/quarterly statements. We are also proposing an external company take over managing the finances. Laura, L. Pasadena, Ca.
A. The BOD works for the owners. If they're not doing their job - which includes preparing (or having prepared) financial statements - the members (owners) can vote them out.
The laws are pretty straightforward in California, but vary by state. For most communities, financials need to be prepared. It's up to the board to make sure they are done. But there is no government entity to make sure they are completed. An HOA is a private entity and enforcement is left to the owners via the Bylaws and CC&Rs and the courts, unfortunately, if needed.
I highly suggest you work with the BOD to hire an outside management company to help handle issues, including financial statements. This is one reason why it's best to stay away from owning property in HOAs that are not professionally managed and/or may not have the money to pay for the proper management and accounting of the property. You’re in a challenging situation, and hopefully you can work with all parties to resolve the issues amicably on a forward going basis.
Q. I’m considering refinancing because rates are about .75% lower than my current mortgage. Some people say if the rates are .5% lower it makes sense to refinance, some say it must be 1.0% lower. What’s your opinion? Mark G. Sioux City, IA
A. The correct answer is that it depends. The bigger the mortgage and the lower the rate, the more it makes sense. And you have to look at what you are paying (the cost of refinancing) compared to what you are getting (saving interest on your mortgage).
For example, if the cost of financing is $4,000 and you save $1,000 per year in interest charges, that is a four year payback period $4,000/$1,000 = four years and that’s a pretty good deal. If your payback is longer than four years, it makes less sense to refinance. Once it gets to six, seven, eight years until payback, that doesn’t really make much sense to me.
When you figure out the costs of refinancing, make sure you isolate the relevant costs and don’t include any costs that you’d have to pay regardless, like property taxes, interest pro-rations, and insurance costs. Talk to your lender to better understand what is not a cost of refinancing. Good luck!
This story was written by Leonard Baron, an MBA who is America’s Real Estate Professor®. His unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University Lecturer, blogs at Zillow.com, and loves kicking the tires of a good piece of dirt! Email Your Questions to: Leonard@ProfessorBaron.com