Liquidity in this case can be defined as the owner’s ability to easily sell their home (at a reasonable price) while the buyer facilitates the other end of the transaction by using traditional financing, likely FHA. These properties can’t be bought and sold if there is not financing, typically FHA financing. And FHA financing wasn’t going to happen unless the proper reserves were in the HOA budget, and often, hundreds of thousands of dollars in reserve are needed in the HOA budget. These communities needed enough cash buyers to come in, buy, and to occupy, thereby correcting the “owner occupancy ratio.”
Communities then began raising monthly dues, and the homeowners who were barely making it defaulted on the higher HOA fees, which added to the foreclosures. Ultimately, the monthly HOA fees in these communities experienced dramatic increases. With appropriate budgeting, the reserve requirements and owner-occupancy ratios were re-aligned by market forces to create “liquidity” again. At that point, financing options resurfaced. However, HOA fees are now, by and large, MUCH higher than before 2008. So you now have to ask yourself, “What am I getting for my $250-$500 a month HOA fee?” On the high end, you might be able to take advantage of clubhouses and community pools, sometimes multiple community pools, tennis courts, and great landscaping. In less attractive projects, with lower HOA fees, you may only get a parking lot and a carport. As a potential buyer, you’ll have to evaluate the merits of the benefits offered in the community vs. the HOA fees.