HOA Expansion or Acquisition

Why HOAs expand?

While most associations aren’t governed by expansionists boards, occasionally opportunities arise that are worth consideration. When an opportunity arises, few HOAs have a war chest of funds readily available to take advantage of the situation. Fortunately, the market for Association loans can help fill the void.

Adjacent land

Recently, an HOA in the Southeast found themselves facing an unpleasant dilemma. Their community bordered a private golf course. Many unit owners within the association were also members of the golf club. In fact, the proximity to the course was one of the main reasons they lived in the community.

A death in the family prompted the owners of the golf course to list the property for sale. When a local developer, showed interest in converting the course into another development, the HOA began to get nervous. Aside from the convenience of a neighborhood golf course, residents feared their home values would decline if the course disappeared.

The association was able to come together in agreement to purchase the golf course. They viewed the transaction as a defensive move that would help protect their home values. They overwhelmingly voted to increase their monthly dues enough to meet the debt service on an HOA loan.

Vacant unit

A Midwestern HOA found themselves in a precarious position when one of their units went into foreclosure. This unit had been a problem for many years and was actually impeding the overall values on the entire community. Although the lender had paid the delinquent dues, they did not appear to be in any hurry to market the unit.

Several members of the board approached the bank about selling the foreclosed unit to the association. The bank was receptive to the idea and even helped the association model a renovation budget. Members of the community voted to raise their monthly dues in order to repay a loan that was intended to fund the purchase and renovation of what had been an eyesore to the community. After the property was renovated and sold, the loan was repaid and the eyesore was gone.

Clubhouse

Owners in a large Southern community knew their dues were low compared with other communities in the area. They also understood that they were in a dilemma. Their property values were low because they had no amenities. However, their dues were also low for the same reason.

The board undertook a study to assess and project how the market values would react if the HOA were to build a community pool and clubhouse. The results were compelling.

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