Q: Our community is levying a significant special assessment of $10,000 to be paid over 10 years. They tell us that the outstanding balance must be paid whenever a home is sold. The community has given us the choice of paying off the whole assessment in one payment, saving $4,300.00. What is your recommendation? — Jane
A: Because of deferred maintenance, underfunded reserves, and stricter community association laws, many, if not most, communities will likely see special assessments in the near future.
The assessments will range from a few thousand dollars to more than a hundred thousand. The amount will depend on the repairs needed and how much reserves were deferred.
Because some repairs need to be made quickly, communities cannot wait until their residents “save up” enough to pay for it and must get bank financing.
Special assessments like the one you describe are usually made with a bank loan, and the lender will dictate some terms of the assessment that needs to be passed by the association.
While monthly special assessment payments can be continued to the new owner when a unit is sold, many communities, and lenders, prefer the assessment paid in full by the departing seller to help maintain property values.
Buyers can only afford so much of a monthly payment, and ongoing assessments drive prices down.
Whether to make monthly payments or receive a considerable discount by making one lump-sum payment will largely depend on your financial health.
Paying less money for the same thing is a better choice, so if you can afford to make the lump-sum payment without jeopardizing your emergency reserves, do so.
Using the figures you provided, you will save more than four years of payments by doing so. However, you will be better off making smaller monthly payments if you are on a monthly income without a lot of money in your savings account.
