The value of a freehold home in an estate or gated development depends heavily on how well the development is managed by the home-owners’ association (HOA) and its directors.
An HOA needs to be functioning well and able to protect and enhance the value of all the homes in the estate, says Gerhard Kotzé, managing director of the RealNet estate agency group.
Buyers should also establish the percentage of owner-occupants in the community versus the number of tenants. “Banks are often more reluctant to grant loans to prospective buyers in developments where more than a third of residents are tenants…”
Kotzé says buyers should also check levy collection records and find out if the HOA has a stated reserve fund requirement and how much it has in this account.
“A well-run community will have more than 75% of the reserves it needs in the bank and lower levels generally spell trouble because necessary repairs and replacements are likely to be deferred, once again to the detriment of property values in the estate.
*Subscribe to our property360 weekly newsletter