Associations and 'Unintended Consequences'

Real Estate Broker with RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago

Unintended Consequences ....

We know that many times one new rule made to benefit others has the opposite effect sometime in thehomeowners association, future.  It's seems to be a new 'law of the universe' over the last few years with mortgages, appraisals and this new real estate economy.

A case in point for associations making rules against owners renting out their units or selling to investors. The rule is 'intended' to clean up the neighborhood making owners a clear majority in the subdivision.  The normal thinking is that owners preserve their properties better than tenants so the entire subdivision benefits.

But do they?  

Let me tell you a story about those unintended consequences.  This particular subdivision stopped allowing renters and investor purchases many years ago and then the economy changed. Owners could not sell their properties and they couldn't rent them either.  The board officers would now be able to hear 'on a case-by-case basis' the homeowner hardships for a variance of this rule.  Another problem occurred when the board just said 'no' or the economic impact to the homeowners didn't seem damaging enough.

So what happened?

What did happen was these owners who were not able to sell and not able to rent their properties were left with one option - foreclosure.  Now, I'm sure that was the furthest thing from anyone's mind when they voted for the anti-renting regulations nearly 10 years ago.  

But things have a way of changing .....

This comes up many times a year when I'm asked and I've changed my stance on rent restrictions.  Does the subdivision really benefit when restricting rental rights? Obviously in this example you can clearly say 'no'.  Personally I would take a tenant in the subdivision over a foreclosure any day.  A foreclosure has a heavier impact on the values than any renter ever could.

It's not always about right now!

Regardless of your age, you want to be sure that your assets passed down to your family are not hindered in any form.  If your descendants can't sell at a decent price and they can't rent either - what are they to do with your home?  It just becomes a money pit which your survivors cannot afford.  Why restrict anything that they could do with your property?

Thank hard before you give up any future ownership rights.

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Lyn Sims    Schaumburg IL Area    Northwest Chicago Suburbs  ●  (847)230-7324

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Home Selling
Illinois Cook County Schaumburg
Bartender, Make it a Double
Active Rain Newbies
condo association rights
homeowners association

Comments 19 New Comment

Dorie Dillard
Realtor-Canyon Creek- NW, Austin TX Homes For Sale
Coldwell Banker United Realtors

Good morning Lynn,

I came over from Pat's post on last week's favorites and am so glad I saw this. Some HOA Boards just don't get it. Not everything can be set in stone and needs to change as our world changes around us. Excellent point! Mike says it well..restrictions are a two-edged sword and have done major damage before anyone could stop it!

February 18, 2013 03:54 AM
Steven Cook
- Pierce, King, Kitsap, Thurston, Mason Counties

Lynn-- I also came over from Pat's post.  I was going to point out the FHA/VA/Freddie/Fannie issues, but looks like previous commenter beat me to it.  Hope you are having a great Presidents' Day!

February 18, 2013 11:58 AM
Lyn Sims
Schaumburg Homes
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago

Mitchell:  The FHA condo guidelines have recently been changed to 15% which will help many HOA's.

Mike:  You just never know how things will turn out with too many restrictions. 

Steven:  The board will not get the re-cert for FHA approval. Baffles me why not.

Dorie:  Sometimes they show no flexibility & honestly just don't understand the laws of ownership or mortgage financing. 

February 18, 2013 02:02 PM
Gene Riemenschneider
Turning Houses into Homes
Home Point Real Estate

I think one consideration of the HOA is keeping homes eligible for FHA lending so first time and underfunded buyers can buy them and live there.

February 19, 2013 11:15 AM
John DL Arendsen
Real Estate Broker, Mfg Home Dealer, General Contr
TAG Real Estate Sales & Investments & ON THE LEVEL GC

Couldn't agree with you more. Great post. Maks sooooo much sense.

February 19, 2013 02:48 PM

Lyn Sims

Schaumburg Homes
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Additional Information

Lyn's blog gives market comments, updates and real estate news about the surrounding communities in the Chicago Northwest Suburbs near Schaumburg IL.

RE/MAX National Housing Report for March 2014

Illinois Housing Report for Year 2013