Countless numbers of investors around the world have been eyeballing plummeting home prices in Las Vegas. As the economy tanked, HOA prices in some areas of the country have been falling at precipitous rates.
You may have heard it from friends: “I’m gonna buy a condo or house in Las Vegas. You just can’t beat those prices.” But there’s a reason to be cautious. Nevada Homeowner Associations are collecting an increasing number of lawsuits, actions which will ultimately cost homeowners tens, even hundreds of millions of dollars.
Two Las Vegas attorneys have filed a lawsuit against more than 500 Nevada HOAs, supposedly on behalf of taxpayers and the federal government. The attorneys allege that the Homeowner Associations have been illegally charging the government too much money on foreclosure insurance claims. More than 23,000 homes have been foreclosed upon since 2008. The lawsuit claims the HOAs charged Fannie Mae and Freddie Mac for unpaid HOA dues, dues the mortgage giants weren’t really required to pay.
That’s just one of many lawsuits now accumulating against struggling HOAs. Here’s the rub: some of those wide-eyed investors who moved in to buy up those cheap homes are now potentially liable for any judgments levied against the homeowner associations. As attorneys’ fees, penalties, interest and judgments pile up, those cheap homes are going to begin to look impossibly expensive. But once those buyers are caught in the HOA rat trap, they won’t be able to waltz out. Lawyers will go after every penny those homeowners are worth, inside or outside of Nevada, even if those homeowners had nothing to do with the original wrongdoing or malfeasance that led to the original lawsuit. Fundamental fairness, is just not part of the equation.
And Nevada isn’t the only danger zone. In Florida, a 1.2 million dollar beach home recently sold for just $10,000. But as lawsuits pile up, legal judgments may take the price of that home a whole lot higher. The same for tens of thousands of condos and homes in HOAs in Florida, Texas, Missisippi, the Carolinas, Pennsylvania and many other states.
HOAs claim they protect and preserve property values. The exact opposite is turning out to be the more relevant truth. They don’t. The claim is a scam. But there’s always a new flood of young homeowners willing to believe the myth, and become the next victims.
There’s actually a postive aspect to this story. It’s a wonderful time to be a lawyer!