Foreclosure Fallout

>>Idle agents and displaced homeowners aren’t the only victims of a real estate meltdown fueled by foreclosures and short sales. Homeowner associations (HOAs) also have their feet to the fire, because they are now faced with the challenge of providing services without all the maintenance fees they require.

What’s an HOA to do when part of its normal income disappears as a result of members ousted by foreclosures or financially strapped through job loss and hard times? The pool still has to be cleaned. The grass must be mowed.

Current law isn’t helpful.

In sales that are not foreclosures, the buyer pays all past-due fees owed the association. Lenders who sell a foreclosed condo unit are on the hook for six months’ worth of arrears. Rodger Bevington, of Century 21 AAIM Realty in Fort Myers, explains that with single-family homes, lenders are required to pay maintenance fees only from the date of the foreclosure forward. Compounding the problem is the lengthy time it’s taking foreclosures to make their way through crowded court systems.

Associations are dunning delinquent members, borrowing from reserve funds and/or imposing special assessments on paying members to meet the shortfall.

According to Fort Myers Realtor Chuck Scariano, prospective buyers attracted to low prices are often turned off by the maintenance fees. "We have very educated buyers out there now, and they know they have to take a close look at the association’s budget," he says.

Scariano, of Downing-Frye Realty in Bonita Springs, says times are particularly hard for communities built in 2004 and 2005. "There was a lot of speculation then that has resulted in foreclosures and short sales," he observes. "Older, more established gated communities are in less difficulty."

Scariano stresses that agents must disclose the financial status of a community to prospective buyers and urge them to get information from the HOAs.