Personal finance broadcaster Dave Ramsey advises homeowners to look out for warning signs.
If these alarms are serious enough, he might suggest selling the entire house.
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He recently received a question from a counseling student who identified herself as Daniela.
“I live in Dallas, Texas, and I was wondering if I should sell my condo to pay off debt,” she explains, according to KTAR News in Phoenix. “I owe $120,000, it’s about $260,000. Plus the homeowners association fee was $450 a month and has gone up $100 a year over the last two years, so now we’re paying $650 US dollars.”
“No one ever told us why the fees were so high,” Daniela added. “There haven’t been any major improvements to the complex in the last five years, so I don’t know what to think. Can you give me some advice?”
Ramsey suggested that she take immediate action to find out the cause of the homeowners association fee increase.
“Dear Daniela,” Ramsey wrote. “As a homeowner, I’d like some answers by the end of the day as to why the HOA fees are so high. I mean, for a $260,000 apartment, the fees you mentioned are ridiculous unless the building owners do a major renovation, like replacing the parking lot or updating the community club. .Until then, that’s crazy!”
“On top of all that, it devalues your apartment,” Ramsey continued. “No one wants to buy a $260,000 apartment with a $650 hourly fee each month, especially when the fees have gone up so much for no apparent reason.”
The radio host considered the possibility that fees were rising to prepare for property improvements.
“There’s always the possibility that the company will build a war chest of improvements in the next year or so,” Ramsey wrote. “But you do have a right to know exactly where the money you’re paying in HOA fees is. Ask to see a copy of their financial statements, and if they don’t — or explain why the fees are high and where the money is going — you need to sell the place because it’s poorly managed.”
Ramsey confirmed that Daniela owed an explanation for the higher fees.
“If you try to sell the place, you will have to tell potential buyers why the HOA fees are so high,” he wrote. “Maybe there’s a good reason to bury it somewhere. But without knowing more, as a buyer, there’s no way I can take this thing off your hands.”
Ramsey said he’s not a fan of HOA fees in the first place, but that situation seems particularly troubling to him.
“There are so many red flags flying about the situation, Daniela,” Ramsey wrote. “Even in a place like Dallas, those HOA fees are about twice what they should be for a $260,000 apartment. I’m not saying this just because I don’t like HOA, which I don’t. And it’s mainly because I don’t like paying money for something, and then Someone else tells me what I can or can’t do with him.”
“But you need some answers to get your information private, to have peace of mind, and to give potential buyers an honest answer when they ask why fees are insanely high. Take the headache away. Sell it.”
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