John Gallagher Realtor West Roxbury

09/24/2022

Bidding-War Rate Drops to Lowest Level Since April 2020 As Mortgage Rates Surge
WRITTEN BY REDFIN

Just over 4 in 10 Redfin home offers faced competition in August, down significantly from a year earlier as 6% mortgage rates price buyers out of the market

Nationwide, 44.6% of home offers written by Redfin agents faced competition in August, the lowest bidding-war rate since the beginning of the pandemic when the housing market nearly ground to a halt, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. It’s down from 63.5% a year earlier and a revised rate of 47.2% in July, and marks the seventh-straight monthly decline.

The typical home in a bidding war received 3.2 offers in August, compared with 3.5 one month earlier and 5 one year earlier, according to data submitted by Redfin agents nationwide.

The bidding-war rate is falling as the housing market cools and buyers back off from the pandemic-driven homebuying frenzy in 2021 and early 2022, with the number of home sales down nearly 20% year over year.

Buyers are dropping out of the market and competition is dwindling largely because mortgage rates have doubled from a year ago, reaching 6% in mid-September. The increase in rates makes buying a home much more expensive: A buyer purchasing a $400,000 home has a monthly mortgage payment of roughly $2,500 with today’s 6% mortgage rate, up from under $2,000 with last year’s 3% rates.

San Antonio, Tampa and Phoenix among metros with the lowest bidding-war rates

Just over one in five (21.7%) of home offers submitted by Redfin agents in San Antonio, TX faced competition in August, the lowest share of the 36 metros in this analysis.

Tampa, FL had the second-lowest bidding-war rate, with 23.8% of offers facing competition, followed by Olympia, WA (24.2%), Phoenix (26.4%) and Minneapolis (27%). Tampa, Olympia (part of the greater Seattle metro) and Phoenix are all among the 20 U.S. housing markets cooling fastest this year after attracting scores of homebuyers during the pandemic.

To be included in this analysis, metros must have had a monthly average of at least 50 offers submitted by Redfin agents from March 2021 to March 2022. Scroll down to the bottom of this report to see a table with data on all 36 metros.

Philadelphia, where 61.7% of offers faced competition, had the highest bidding-war rate. It’s followed by San Jose (58%), Providence, RI (54.5%), Boston (54%) and Detroit (52.9%).

Homebuyer competition declined most in North Carolina

The bidding-war rate has declined most in Raleigh, NC, where 35.4% of home offers faced competition in August, down from 78.9% a year earlier. It’s followed by San Antonio, where 59.8% of offers faced competition last year.

Charlotte, NC (31.4%, down from 68.8%), Olympia, WA (24.2%, down from 60.7%) and Colorado Springs, CO (29.7%, down from 62.5%) round out the five metros where competition has dropped most.

The bidding-war rate declined in all 36 metros in this analysis except Philadelphia, the metro with the highest rate. The rate there is up from 60.2% a year ago.

Townhomes most likely to face competition, condos least likely

Offers for townhouses were more likely than other property types to encounter competition, with 44.1% of Redfin offers facing bidding wars. They were followed by single-family homes (42.1%), multi-family properties (40.2%) and condos (37%).

Townhouses are popular in today’s pricey housing market because they’re typically smaller and more affordable than single-family homes.

09/19/2022

Prospective Home Sellers and Buyers Retreated in August as Mortgage Rates Approached 6%
WRITTEN BY REDFIN



New listings fell 8% in August to their lowest level since May 2020. Prior to the onset of the pandemic, the last time so few homes hit the market was August 2012

Seasonally-adjusted new listings of homes for sale fell 8% from July to August to their lowest level since May 2020, when the housing market was paralyzed by the onset of the COVID-19 pandemic, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. Prior to the pandemic, we hadn’t seen so few homes hit the market since November 2012.

Mortgage rates climbed from 5% at the beginning of August to 6% by the end of the month, pushing many homebuyers out of the market. This sharp decrease in demand gave the buyers who were left some additional negotiating power and softened home prices a bit, but caused many potential home sellers to hold off on listing. As a result, the market as a whole is relatively balanced between buyers and sellers, but there’s very little activity in terms of homes being listed and sold.

“When mortgage rates were below 3%, sales and home prices soared. The market was like a game of musical chairs with buyers vying for too few homes,” said Redfin Chief Economist Daryl Fairweather. “As mortgage rates approached 6%, almost everyone left the party. Now the market is more like a middle school dance where a small number of buyers and sellers are pairing up during a slow song.”

While we may be in a housing recession, the slowdown in sales is not a sign of a bubble bursting, Fairweather went on to explain:

“The bottom line is that homeowners don’t need to sell in this environment. They locked in rock-bottom mortgage rates last year and are sitting on piles of equity. The jobs market remains very strong, so there’s little risk that mortgage delinquencies or foreclosures will rise significantly. It would take a severe—not soft—recession to send homeowners into distress. We will have to wait and see if the broader economy steers towards normalcy or recession in the upcoming months.”

National Highlights

Market Summary


August 2022


Month-Over-Month


Year-Over-Year

Median sale price


$406,900


-1.3%


7.1%

Homes sold, seasonally-adjusted


500,100


-1.7%


-19.5%

Pending sales, seasonally-adjusted


489,200


0.2%


-17.3%

New listings, seasonally-adjusted


534,322


-8.2%


-20.2%

All Homes for sale, seasonally-adjusted


1,524,400


-1.1%


2.7%

Median days on market


26


5


9

Months of supply


2


-0.2


0.6

Sold above list


37.6%


-9.6 pts†


-14.3 pts†

Median Off-Market Redfin Estimate


$417,800


-0.9%


18.2%

Average Sale-to-list


99.9%


-1.1 pts†


-1.7 pts†

Average 30-year fixed mortgage rate


5.22%


-0.19 pp†


+2.38 pp†

† - “pp” = percentage-point change

Metro-Level Highlights

Competition

Indianapolis, Grand Rapids, MI and Rochester, NY were the fastest markets, with half of all homes pending sale in just 8 days. Albany, NY and Omaha, NE were the next fastest markets with 9 and 10 median days on market.
The most competitive market in August was Rochester, NY where 73.0% of homes sold above list price, followed by 72.4% in Buffalo, NY, 65.8% in Newark, NJ, 65.2% in Hartford, CT, and 62.8% in Worcester, MA.
Prices

Cape Coral, FL had the nation's highest price growth, rising 20.6% since last year to $392,000. Knoxville, TN had the second highest growth at 20% year-over-year price growth, followed by Tampa, FL (19.7%), North Port, FL (19.5%), and West Palm Beach, FL (19.2%).
4 metros saw year-over-year price declines in August including San Francisco (-7.3%), Oakland, CA (-3.2%), Baton Rouge, LA (-1.1%), and Honolulu (-0.6%).
Sales

No metro areas had year-over-year sales growth in August. The smallest declines were in Dayton, OH, down 1.4%, followed by Greenville, SC, down 2.7%. Rochester, NY rounded out the top three with sales down 3.7% from a year ago.
Las Vegas saw the largest decline in sales since last year, falling 37.2%. Home sales in San Jose, CA and Phoenix declined by 33.8% and 31.9%, respectively.
Inventory

North Port, FL had the highest increase in the number of homes for sale, up 51.2% year over year, followed by Austin, TX (39.5%) and Nashville, TN (38.0%).
Allentown, PA had the largest decrease in overall active listings, falling 44.5% since last August. Bridgeport, CT (-29.7%), Hartford, CT (-27.0%), and Montgomery County, PA (-26.8%) also saw far fewer homes available on the market than a year ago.
To view the full report, including charts, metro-level data and methodology, please visit: https://www.redfin.com/news/august-housing-market-slowed-by-high-mortgage-rates/

New listings fell 8% in August to their lowest level since May 2020. Before that, the last time so few homes hit the market was August 2012.

09/15/2022

What If You’re Priced Out of Buying a Home?
WRITTEN BY ASHLEY SUTPHIN


First-time homebuyers are facing a serious problem when it comes to buying a house. While the acceleration may be cooling somewhat, there are still record-breaking rises in home prices. Recent data shows for the first time in the U.S., median home prices surpassed $400,000.

Several factors are likely to continue this trend. There are a lot of motivated buyers, limited housing supply and low mortgage rates. Inflation is pushing prices up for essentially everything, including homes. Low mortgage rates allow buyers to buy more than they would be able to ordinarily, so they can get involved in heated bidding wars.

Sellers are also staying put because they don’t want to jump into a highly competitive buying market, limiting the supply of available homes even more.

Homebuilders can’t get the materials they need, and even if they can, there’s a labor shortage.

Where does this leave first-time buyers or any buyer?

What Does It Mean to Be Priced Out?
If you’re priced out in the real estate market, it means that you can’t afford even an entry-level home. There are often a number of factors that can lead first-time buyers to be priced out, many of which are converging with one another right now.

If you’re trying to buy a house right now, you probably notice the down payment you worked hard to save isn’t going as far as you planned. If you saved 20% of the expected price you prepared to pay for a house, that might no longer be sufficient.

So, what can you do?

You might think automatically you should keep renting, but rent prices are going up because of inflation as well, while wages aren’t keeping up, so this isn’t the ideal option.

There are a few things you can do, and none of them might feel ideal, but your options are limited when you’re priced out.

Save More
If you live in a market that’s not affordable for you right now, you may need to keep renting and adding to your savings. This does also allow you to wait out the market somewhat. You may need to be patient because it could be a couple of years before you’re able to re-enter the marketing successfully.

As you’re thinking about what you can afford, it’s better to base it on your monthly expenses rather than the sales price.

If you are setting more money aside and you’re going to try and wait out the market a bit, don’t just put it in a standard savings account. You may need to put at least some of your savings into riskier but more high-earning options like stocks.

Change Your Expectations
Another option you have available when you’re otherwise priced out of the market is to change your expectations. With limited inventory and all the other factors going on in the market right now, you may have to give up a few things on your wish list, or maybe more than a few.

You could end up buying a fixer-upper that’s more in line with your budget.

For first-time buyers, being humble is key to getting a home in the current environment.

Broaden Your Home Search Geographically
Just like you might need to give up on some of your wish list as far as home features, you might also want to broaden the area where you’re looking geographically. There can be considerable differences in the price of homes from one neighborhood to the next or one suburb to the other.

Many people aren’t just moving out of urban areas to be able to afford a home—they’re changing cities altogether. For example, residents of expensive locations like New York and San Francisco are moving to more affordable cities like Austin and Atlanta.

Hire a Great Real Estate Agent
Finally, if you don’t already have a great real estate agent on your side, it would be nearly impossible to navigate the current market as a first-time buyer without getting one. Even if you can find a home you’re able to afford, you may be facing stiff competition.

Real estate professionals know about properties before they go on the market, so you’ll have an edge there. They’ll also be able to help you understand your local market so you can adjust your expectations as needed.

A real estate pro can negotiate on your behalf and cut some of the stress out of the experience for you.

It’s not an easy time to buy a home, but that doesn’t mean it’s impossible. You might wait it out, or you could shift your approach and strategy a bit.

09/07/2022

Typical Home Now Sells For Less Than Asking Price
WRITTEN BY REDFIN



The average sale-to-list ratio fell below 100% for the first time since March 2021 and the share of homes with a price drop came down from its record high.

The average home sold for less than its list price for the first time in over 17 months during the four-week period ending August 28, as the housing market cooldown continued. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

Every month since March of 2021 has seen an average sale-to-list ratio of over 100%, meaning that the average home has sold for more than its final asking price, after all price drops. This comes as the share of listings with a price drop has finally begun to plateau.

Despite the easing in home prices, demand from homebuyers is still chilled—mortgage purchase applications and pending sales both saw large declines from a year ago—thanks in large part to another spike in mortgage rates, which rose to 5.66%, their highest level since June. Home sellers are also reluctant to step into the market: new listings and total inventory of homes for sale saw large declines as well.

"While the cooldown appears to be tapering off, there are signs that there is more room for the market to ease," said Redfin Chief Economist Daryl Fairweather. "The post-Labor Day slowdown will likely be a little more intense this year than in previous years when the market was super tight. Expect homes to linger on the market, which may lead to another small uptick in the share of sellers lowering their prices. Homebuyers’ budgets are increasingly stretched thin by rising rates and ongoing inflation, so sellers need to make their homes and their prices attractive to get buyers’ attention during this busy time of year.”

Leading indicators of homebuying activity:

For the week ending September 1, 30-year mortgage rates rose to 5.66%. That’s down from a 2022 high of 5.81% but up from 3.22% at the start of the year.
Fewer people searched for “homes for sale” on Google. Searches during the week ending August 27 were down 26% from a year earlier.
The seasonally adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other home-buying services from Redfin agents—was up 15% from the 2022 low in June during the week ending August 28, but was down 16% year over year.
Touring activity as of August 28 was down 9% from the start of the year, compared to a 11% increase at the same time last year, according to home tour technology company ShowingTime.
Mortgage purchase applications were down 2% week over week, seasonally adjusted, and were down 23% from a year earlier during the week ending August 26.
Key housing market takeaways for 400+ U.S. metro areas:

Unless otherwise noted, this data covers the four-week period ending August 28. Redfin’s weekly housing market data goes back through 2015.

The median home sale price was $370,000, up 6% year over year. Prices have declined 6% from the record high of $393,725 hit during the four-week period ending June 19. A year ago, they rose 0.4% during the same period.
Three metro areas saw a year-over-year decline in their median home-sale price: Honolulu, HI, where prices fell 3.6% to $676,875, Oakland, CA, where prices fell 3% to $918,500, and San Francisco, where prices were down 3.7% to $1,453,125.
The median asking price of newly listed homes increased 9% year over year to $379,194. Asking prices are down 5.8% from the all-time high set during the four-week period ending May 22. Last year during the same period they were down just 0.4%.
The monthly mortgage payment on the median asking price home was $2,306 at the current 5.66% mortgage rate, up 39% from $1,665 a year earlier, when mortgage rates were 2.87%. That’s down from the peak of $2,461 reached during the four weeks ending June 12.
Pending home sales were down 18% year over year.
New listings of homes for sale were down 16% from a year earlier, the largest decline since May 2020.
Active listings (the number of homes listed for sale at any point during the period) fell 0.9% from the prior four-week period. On a year-over-year basis, they rose 4.2%.
35% of homes that went under contract had an accepted offer within the first two weeks on the market, little changed from the prior four-week period but down from 43% a year earlier.
24% of homes that went under contract had an accepted offer within one week of hitting the market, little changed from the prior four-week period but down from 30% a year earlier.
Homes that sold were on the market for a median of 26 days, up from 21 days a year earlier and the record low of 17 days set in May and early June.
37% of homes sold above list price, down from 50% a year earlier.
On average, 7.5% of homes for sale each week had a price drop, a record high but unchanged from the prior four-week period.
The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, fell to 99.8% from 101.4% a year earlier. In other words, the average home sold at its asking price. This was the first time since March 2021 the ratio has fallen below 100%, meaning the typical home is now selling for below asking price.
To view the full report, including charts, please visit: https://www.redfin.com/news/housing-market-update-homes-sell-below-asking-price/

The average sale-to-list ratio fell below 100% for the first time since March 2021 and the share of homes with a price drop came down from its record high.

09/06/2022

Can You Use Home Equity to Buy Another Property?
WRITTEN BY ASHLEY SUTPHIN
When you have equity in your home, you can tap into that and, if you’re strategic, use it as a way to build long-term wealth.

There are a lot of ways you can capture equity to build wealth. For example, you can pay off higher-interest debt or make home improvements that ultimately increase the value of your house. You can start a business or you can even invest in the stock market where returns might be significantly more than the interest you pay on your loan.

Another question people commonly have is whether or not they can use their home’s equity to purchase another property, which we discuss below.

Can You Use a Home Equity Loan to Buy a House?
In short, yes. You can use a home equity loan to buy a house, but that doesn’t mean it’s always the right decision in every situation. Using home equity can be a way to buy a second home or an investment property with caveats.

A home equity loan is a second mortgage, giving you a way to access the equity you’ve built in your home. Home equity refers to the difference between what you owe and what your home is worth.

The Upsides
If you’re thinking about using your home’s equity to buy another house, there’s a distinction you need to first make. Are you buying a second home or an investment?

If you’re planning to buy an investment property, using a home equity loan can give you more liquidity and make it less expensive. Benefits of using equity to buy an investment property include:

• You can put more toward your down payment. A home equity loan is something you receive as a lump sum payment so that cash can go directly toward a down payment. You’ll be a more competitive buyer, which is essential in the current market, and you’ll get lower interest rates and monthly payments.

• It can be harder to finance a second property because there are more stringent down payment requirements, so a home equity loan can be a more affordable solution and also one that’s more convenient.

• A home equity loan is secured with collateral, which is your current home. As a result, you get the benefit of lower interest rates.

If you’re buying an investment property, using your home equity can be a good wealth-building strategy. If you’re buying a second home, you have to consider that it’s not going to bring in income like an investment. That means that you’re going to be tying your home up in a loan and then taking on another loan, so you need to be in a solid financial position to make this work.

The Downsides
The downsides of using equity to buy an investment property do exist. These include:

• You’re swapping an asset for a debt. You’re taking the part of your home that you own, and then you’re putting it into a loan. Ultimately, no matter the specifics, you will have higher debt, so is that what you want?

• You’re vulnerable to housing market shifts, even more so when you own two properties instead of one. You’re doubling your risk if something happens in the housing market. For example, if the value of either of your properties goes down, you might owe more on your home equity loan and your mortgage, overextending you.

• If you were to default on your loan, you could lose both properties.

• You might end up having three mortgages but only two homes. Most home equity loans are second mortgages, so you have to combine this with the loan you’ll need for your second home, meaning three mortgages.

• Another downside you’ll have to weigh is the fact that interest payments on your home equity loan will probably not be tax-deductible because of 2018 changes in tax codes.

The big takeaway here is that, yes, using home equity to buy a second home is an option and sometimes a very good one. At the same time, there are risks and it’s not always the right decision, so you need to go over the details in your specific situation carefully.

09/05/2022

Interior Design Trends to Love Right Now
WRITTEN BY ASHLEY SUTPHIN



Even though vaccinations are widespread in the U.S. right now, many people are still spending a lot of time at home. Summer 2021 is likely going to bring some return to normalcy, but it’s probably going to be a slow process. You still want your home to feel like an oasis, and with that goal in mind, the following are some of the biggest interior design trends right now.

Maxed Out Design
Minimalism had its time to shine in the design world, but now we’re turning a corner into what you might want to call maximalism. This means that less is more isn’t holding true, and instead, more is more is a better approach.

It’s easy to see why over-the-top interior design style might be trending right now, following a pandemic. People want things that make them feel happy and uplifted, and that can come in the form of over-the-top interior design style.

This could mean colors, silhouettes, and patterns are all very attention-grabbing.

Peel and Stick Wallpaper
You might have thought the days of wallpaper were never coming back, but it’s here now in a big way. Peel and stick wallpaper is great because it gives you the chance to customize your space without the messy glue, and it doesn’t take long to put up. You can even add it to your rental.

Grandma Chic
Grandma style is really just a reference to a love of vintage items right now. Maybe this means florals and antiques, but grandma chic is a style that works well when newer pieces are integrated as well. Other facets of grandma chic style to explore include the use of velvet, toile, and fine china.

There’s a tendency, particularly among new home buyers to want to stop spending money on cheaper items and instead invest in fewer meaningful pieces that are high-quality or curated vintage.

Black Kitchens
White kitchens were a favorite among many homeowners for years, but now black is taking over. A black kitchen is bold but also functional. It’s easier to keep clean, and every little thing isn’t going to show like it does when you do an all-white kitchen.

Black cabinets look modern and sleek, and you have so many options as far as countertop colors and materials, your backsplash and hardware.

Black kitchens can also create a separation between this space and your living area if your home is open concept.

Monochromatic Doors and Trim
It’s a really seamless and beautiful look to make trim, including baseboards, window and door casings, and crown molding the same color as your walls. This could mean all white, or you can even do it with bolder colors.

When a room is all one color it feels high-end and opulent.

Earth Tones
Earth tones tend to come and go as far as popularity in interior design, but they’re certainly in right now. Earth tones include beautiful greens, oranges, and burgundy. They’re rich and grounding, which are two terms you always want to associate with your home.

Quirky Bathrooms
Finally, bathrooms are a good place to make an impact. You can use a bold color palette or wallpaper, add funky lighting and go out of the ordinary with the vanity you choose. Powder rooms are an especially popular place to do some experimentation with the wilder side of your style.

09/03/2022

6 Things That Happen When You Become a Homeowner
WRITTEN BY JAYMI NACIRI



Becoming a homeowner is more than having a set of keys and your name on the deed. You may have a rush of emotions the day you take possession and recognize you now have your place in the world—literally. And that’s just the beginning. Here are a few more things you can expect.

You learn what pride of ownership means
You may take pride in your car and your clothes and other minor possessions, but nothing compares to the feeling of being a homeowner. Buying your first place is an accomplishment, and you get to come home to that accomplishment every day.

You’ll have more peace of mind
Once you have moved into your new home, unpacked, and taken a breath, you’ll have that moment—that moment where you realize, “This is mine.” Thankfully, that moment is repeated regularly. You’ll have it when you look at your countertops and realize you can redo them any way you want. And when you decide to get a dog and don’t have to ask permission. And when you want to paint your walls—any color you choose.

You’ll obsess over paint colors
Speaking of paint colors, get ready to spend hour after hour at Home Depot gathering dozens and dozens of paint chips. Even if you just want a fresh coat of white on the walls, it’s easier said than done. “There are hundreds and hundreds of white paints available, and most of them are considered white,” said The Spruce. “This makes choosing a plain white paint color nearly impossible.”

You learn skills you’d never imagine
Soon you may be able to snake a toilet, tile a backsplash, and refinish your floors. Yes, there are people you can hire for these tasks, and all the others you’ll want and need to do in your home over the years, but it can be so much more satisfying—and cost-effective—when you do it yourself.

If you’re on a strict budget after buying your first home, you’ll likely also have to learn how to care for your lawn. Get those edging skills down!

You start prioritizing differently
Oooh, that skirt is so cute. But if you buy it, you’ll want the shirt and the jacket and the boots, and the jewelry, and, before you know it, you’ve spent half the money it would take to update your fireplace.

You start investing in yourself
When you put money and sweat equity into your home, you’re impacting its value. That’s an investment in your home, but it’s also an investment in you and your future.

09/02/2022

Ask the HOA Expert: An Owner Demanding Board Meeting Minutes For The Past Five Years WRITTEN BY RICHARD THOMPSON



Question: Our board received a certified letter from an owner demanding a copy of all board meeting minutes for the past five years to be sent to him within 10 days. This request represents a significant investment in time and effort. Are we obligated to comply with this request?

Answer: What you describe is a common tactic to gain control. The logic goes something like this: All owners have a right to most HOA information and records. So, an owner that is unhappy for some reason initiates a series of demands with the message that "I want it now or else!"

Getting the requested information is secondary to keeping the board off balance. Intimidation tactics are highly effective when they get the board worrying about the "consequences" (or else). Usually, though, when the board complies, it triggers another demand letter. It's a game of serve and volley, a game the board can't win.

While it's true that members are entitled to most information, the board is not obligated to provide it at no cost. Charge a reasonable cost for requested records in advance. When a price is put on the demands, they usually go away. Or better, post rules, policies, governing documents, budgets, financial statements, minutes and newsletters on an HOA website so all members can self-help.

Question: We have members who would like to volunteer to do minor repair work on such things as our clubhouse, trails and pool. The board is concerned about the liability factor.

Answer: As long as the work is not precarious (ladder work, on the roof, etc.) there is nothing wrong with allowing volunteers to do certain task. In fact, the board should encourage volunteerism and find outlets for those that are so inclined.

Question: Our governing documents prohibit homeowners from having above ground pools in their yard. The board has decided that kiddie pools are included in this prohibition stating that the HOA could be sued if a child drowns. Is this correct?

Answer: The governing document prohibition on above ground pools likely has to do with curb appeal and not safety. As long as the wading pools are not visible from the street or an attractive nuisance to area children, the HOA should allow them. Since the pools are on private property, the HOA cannot insure against events that happen there.

Question: The board has announced that collection and rule violation hearings will be held in public. Is this advisable?

Answer: All collection and rule violation issues should have an established process which includes notifying violators in writing, stating the specific details, the correction needed, the penalties for failure to comply and the right of appeal. If an appeal is requested, a private hearing should be held at a convenient time and place where the board and accused can discuss the issue.

It is not appropriate to hold public meetings since the accused may not be guilty or there may be extenuating circumstances. The board should never engage in public humiliation of its members. Besides a legal challenge from an offended owner that could embroil the HOA in a lawsuit, it just makes practical sense when neighbors are governing neighbors.

Question: Our HOA has only one bank account for both operating and reserve funds. This frequently gives the board the impression that there is more spendable cash then there really is. If we run short, money that was intended for reserves gets tapped.

Answer: Operating and reserve funds should be kept in separate bank accounts for exactly the reason you point out. States like Oregon require it. Reserve funds are intended for specific major renovation scheduled to take place in the future, some times funds aren't protected from operating budget shortfalls, the money won't be there in the future when it's needed and the HOA will be forced into unfair and unpopular special assessments.

Question: I read somewhere that the cost of a reserve study should be paid for out of reserve funds rather than the Operating Budget.

Answer: It depends. It's reasonable to pay for the initial reserve study with reserve funds. Afterwards, some states require annual reserve study updates. Whether mandated by state law or not, it makes good sense to update the reserve study annually to keep it accurate, just like the Operating Budget. So the cost of an annual update should be included in the Operating Budget. If the reserve study is only being updated every few years, it makes sense to plan for it in the reserve study.