HOA: The purpose of this organization (a volunteer group of neighbors) is to provide a basis for preserving, maintaining, and enhancing homes and property. Since most homeowners’ associations are non-profit corporations, they are subject to state statutes that govern such groups. The HOA sets down covenants, conditions, and restrictions (also known as CC&Rs) that govern the use of property within the community. A wide variety of items can be controlled by these restrictions, including exterior paint color, the number of vehicles that may be parked at the residence, the age of the residents, and the use of common property. Since CC&Rs vary greatly, especially in terms of scope, strictness, and enforcement from one community to another, it is important that you are familiar with (and accepting of) them before agreeing to buy a particular home.
- HOAs charge a monthly fee that must be paid by property owners. HOA fees are almost always levied on condominium owners, but they may also apply in some single family neighborhoods. The fees each unit pays are applied to annual operations such as landscaping, water, insurance, property management, pool maintenance, and the like. Any excess HOA fees that exist after paying for pertinent services as described above are stored in an account and are called reserve funds. HOA fees can vary widely depending on factors such as community amenities and how effectively the reserve fund is managed.
- Occasionally, homeowners associations need to levy what are called special assessments. Special assessments are a one-time required expense to pay for significant maintenance or repairs (i.e. a new roof for the building, façade brick repainting, etc.).
- Failure to pay the required fees and/or assessment will most likely result in fines, liens, or even, in extreme cases, foreclosure
- Average annual dues for a homeowners association is $420, according to the U.S. Census Bureau. And there’s value in the fee. A 2005 study, which appeared in the Cato Institute’s Regulation magazine, compared a group of Washington, D.C., area HOA properties with similar homes without community benefits—a total of about 12,000 homes. The HOA house values were found to be 5.4% higher. That’s $1,067 on the average U.S. home value of $197,600!
Mello Roos: Many prospective homebuyers in California are becoming increasingly aware of the term Mello-Roos when looking to purchase new and used homes. After CA proposition 13 was passed which fixed the residential property tax, some very creative legislators Mello and Roos came up with a bond plan that would allow builders to finance the infastructure of new build communities. Mello-Roos is simply a special tax assessed to homeowners in a community as repayment for bonds used to fund the infrastructure within their community.
Advantages of a Mello-Roos District to Home Buyers
- New schools, parks, recreation centers, etc can be built and funded using the revenue generated from the Mello-Roos income.
- More housing inventory will be created when undeveloped locations are built up.
- Generally speaking, low crime rates and highly desirable new schools are common in Mello-Roos communities.
Disadvantages of a Mello-Roos District to Home Buyers
- Cost of housing may be increased because of the tax, possibly limiting the amount of prospective buyers when it comes time for resale.
- Maintenance of the improvements could be more costly than anticipated.
Tax Rate: Another important part of your payment is the base tax rate. The lowest tax rate is 1% and it is figured as a percentage of the purchase price of the real estate.
- If you purchased a home for 500K then the tax rate is 1% per year or $417 per month.
- If your base tax rate is 1.4% then the monthly tax bill is $583 per month.
Remember that the $166 per month difference will buy a good deal more house.
You can check any home on the Orange County Tax Assessors website (opens to: http://tax.ocgov.com/tcweb/search_page.asp)
See approximate rates below:
- Laguna Niguel 1%
- Lake Forest 1%
- Laguna Hills 1%
- Older Mission Viejo 1%
- Newer Mission Viejo 1.1%
- San Juan 1%
- Dana Point 1%
- Aliso Viejo 1.12%+ Mello-Roos
- Laguna Beach 1%
- Ladera Ranch 1.2% + Mello-Roos
- Irvine Older 1%
Have questions? Give us a call!