HOA Insurance Deductibles Tank Condo Values

Summary

Homeowners associations, or HOAs, are increasingly making decisions that negatively impact property values, driven by rising costs and inflation. A recent significant issue involves insurance deductibles. In one case, an HOA raised its per-unit insurance deductible from $50,000 to $100,000 to lower monthly insurance premiums. This change, while seemingly a cost-saving measure for the HOA board, has made many units ineligible for conventional financing through Fannie Mae and Freddie Mac. Consequently, buyers must now secure cash or take out significantly more expensive non-warrantable loans, with interest rates between 8-10% compared to conventional rates of 6.5-7%. This drastically shrinks the buyer pool by an estimated 75%, leading to decreased property values and difficulty selling. Experts advise potential buyers to wait for prices to drop in such communities and consider joining HOA boards or attending meetings to influence decisions that affect their investments. Homeowners are encouraged to stay informed about HOA financial decisions, especially regarding insurance policies and maintenance, to protect their property values.