Monday, August 24, 2009

What happens when....

What happens when the HOA or the developer goes tits-up on your development. The obvious answer is "you're screwed" and here's a perfect example. (thanks to reader Ken for this story)

Residents of the bankrupt McSweeny Farms development in southeast Hemet say the neighborhood in which they are living is a far cry from the one they were promised when they moved in over the last several years.

Facilities such as a park, an Olympic-size swimming pool, gym, lounge, party room, and landscape maintenance have either not been finished or have been withdrawn, say several residents.
Though they are not getting what they were promised, they are being charged what they promised, $177 per month, for the operation of those facilities.

SunCal has filed bankruptcy and a trustee has been appointed to oversee operation of the development, which was only about one-fifth completed when the housing market collapsed and work at McSweeny Farms came almost to a halt.

A phone call and e-mail message seeking comment were not returned.

.....................

You can read the rest of the article if you want, but you get the idea. Many of the newer developments especially the unfinished ones have a chance of running into similar problems. HOA dues are based on a specific number of homes. If a development falls short of building out the HOA probably will not have the funds to do everything they are supposed to. That leaves 2 options, raise the fees or cut back on services.

Developers going BK before projects are finished can lead to even worse situations. Promised parks, streets and even utilities can be affected. Buying in a unfinished development is rolling the dice these days. Do you feel lucky? The worst thing about the BK developements is that you don't know what they will build 5 years down the road. Those unfinished lots will be auctioned off for pennies on the dollar. The new developer will more than likely build smaller cheaper homes because that's what will be selling for the next 10 years. You could easily have a 1200 s/f house right next door to a 5000 s/f McMansion. Don't laugh I saw it happen in the early 90's.

There are quite a few unfinished developments spread around the IE. In Corona you have gobs of them over in Eastvale. In South Corona there's The Retreat, Dos Lagos, and Sycamore Creek. None of those developments are built out and two of the three are on golf courses that are not financially healthy.

It's the same throughout the IE. There are unfinished developements everywhere. Factor this in when you think of buying in one of these developments.


7 comments:

jersey said...

thanks for the article. can you update the link to the article? it appears to be broken.

Terry said...

Link to the story doesn't work.

kjfitz said...

Corrected link here.

Ken said...

Here is the link - http://thevalleychronicle.com/articles/2009/08/21/news/doc4a8ed6b87014b328422253.txt

Martin Burtin said...

"Large lot horse property lost half its $540K purchase price." Yup, easily. I was out there looking around at one single story that was about $300K. No way Jose. You have to discount homes like that even more than average, because of the headaches and uncertainty. The common areas that were supposed to be assets are now money pits, that can't even be enjoyed. How much does that detract from what you'd normally pay? Plus you still are supposed to pay the HOA??? ya right.

OSA said...

things are looking up apparently. kb homes is resurrecting "the cove" here in san jacinto. don't know what they are drinking but i want some

golfer_X said...

KB has always been the first one back. Their usual MO is to open back up but building much smaller homes than they did before. It will be interesting to see if they follow their usual pattern.