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Tommy and his wife thought they were settling into their dream home when they moved to Colorado last August. But just months after the purchase, they were hit with an unexpected $5,000 special assessment from their homeowners’ association.
Turns out, the HOA has been quietly building up nearly $1 million in deferred maintenance. And that’s just the beginning.
Speaking to personal finance experts George Kamel and Rachel Cruze on a recent episode of “The Ramsey Show,” Tommy explained that the $5,000 assessment is just a stopgap.
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“The total amount to get back to zero would be a $20,000 fee,” he said. “There might be more assessments in the future,” Kamel added.
The community is in a high fire-risk zone, the homes are over 50 years old, and to make matters worse, the HOA lost its standard insurance coverage. Residents are now covered by excess insurance, and premiums are expected to climb even more.
“We’re expecting that to probably go up to almost 75 cents of every dollar that comes in,” Tommy said.
When asked if any of this was disclosed before purchase, Tommy admitted, “There was nothing to disclose. At best, we maybe could have dug into the documents and found it, but the HOA is not in very good shape.”
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The HOA fees currently sit at $340 a month, and while governing documents limit increases to 3% annually, that won’t cover what’s needed. If the proposed $5,000 assessment doesn’t pass a community vote, the HOA could be headed toward bankruptcy.
Tommy says their total housing costs, including the mortgage, insurance, and HOA dues, are already pushing 40% of their take-home pay.
Still, the hosts aren’t suggesting a quick exit. “The bad news is you got to pay this $5,000 assessment no matter what,” Kamel said. “Even if you sell, it’s going to come out.”
“If you want to live in a non-HOA community, you’re going to have to go probably further out and it may not be a home that you love,” Kamel added. “This is a trade-off of living where you want to live. HOAs are everywhere.”
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The hosts advised sticking it out for now. Moving immediately would mean a projected $25,000 loss when factoring in realtor fees and the lack of appreciation so soon after purchase.
“You’re going to know a lot in 12 months,” Cruze said. “You can make the call in three years or so.”
While they wait, Tommy and his wife might consider using WiserAdvisor’s free tool to connect with a vetted financial advisor. With no obligation to hire, it could help them plan their next move, especially as costs continue to rise.
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This article They Just Bought Their Dream Home And Got A $5K Surprise From The HOA. There's More To Come As There's $1M In Deferred Maintenance originally appeared on Benzinga.com