The more you get, the sooner you get it, the better off you are.” I felt my forehead scrunch in that familiar expression of confusion as those words rolled off my real estate instructor’s lips. “Come again?” I raised my hand. He then held up two bills: one a twenty dollar bill, and the other a ten. “Which one do you want”, he tempted? “The twenty”, I bit. “Let me ask it again”, he continued. “You can have the ten now, or the twenty in ten years. Now which one do you want?” You could almost see the bright cartoon ‘light bulb’ appear above my head. “That’s the ‘Time Value’ of money” he said, nailing down his point.
Today that issue strikes at the heart of how some HOA’s still depend on liening a property to collect past dues – when all the dynamics upon which that once-successful formula worked have changed. Properties aren’t selling, delinquencies are increasing, and costs to cure are rising. We’re now wedged between a rock and a hard place where buyers are insecure about the market, and lenders require the ability to leap tall buildings in a single bound prior to granting a loan. And it’s getting worse. For example, Fannie Mae and Freddie Mac Federal Lending Guidelines now require Condominium HOA’s to have no more than 15% of their properties 30 days or more delinquent on dues, in order for any property in that project to qualify for a loan. Do you see the vicious cycle? The more delinquencies rack-up, the less likely you’ll see your liens settle any time soon. Meanwhile properties are getting older and in need of more repairs. This is no time to not have time on your side.
Another downside often missed is that delinquent homeowners don’t care if their old property has a lien against it, because that only reflects poorly on the property – not them. What leverage do you have to get a delinquent homeowner to pay you if there’s no consequence to them? It’s far easier and less expensive to take simple steps to pursue the debtor, and it’s far more effective as well… but more on that in a moment.