Latest / The Jon Sanchez Show / Could You Lose Your Home...Even If You're Making Your Mortgage Payments?
Transcript
- Jon G. Sanchez: Good Tuesday afternoon to you. Welcome to the John Sanchez Show on News Talk780K, which it's a pleasure to be with you and a pleasure to be with one of my two co-hosts. We don't need two of them. We just need one. He is the man, Aaron Clark of Edrility. How are you doing, buddy? Good. Yeah, no kidding. know. I was just thinking I was taking a break before the show, and I'll just think in. You I think I'm I was I was sitting on my porch and I was thinking, you know, I think I'm gonna welcome the first time that I see snow falling. Aaron Clark, Edge Realty: I'm doing great. Glad to be here again on this hot smoky day. Jon G. Sanchez: You know, we complain when it's cold and we want the warm weather and then it's here it's like, nah, I think I'll take the the ⁓ the snow falling. ⁓ Aaron Clark, Edge Realty: Ha ha Yeah. See I like the weather of winter. know that's weird. Everybody thinks I'm crazy. But also in my world w we are a lot slower in winter, so it's kind of like the break time. We're we're flipped for everybody. so I like the weather of winter, but obviously you can't do as much cool outdoor stuff. So I do miss that part. But I'm looking forward to it this year. Jon G. Sanchez: That's true. That's true. Yes. Yeah, I agree. Well, ⁓ unless you're a skier or snowmobile or something. You know. I used to many years ago, but just don't seem to do that anymore. I tired of trying to lift an eight hundred pound snowmobile out of the the hole that I got it stuck in. But man, I love that sport. I love that sport so much. ⁓ my god, I had so much fun doing that. Love it, it. All right. Well, Millard is ⁓ tied up with some family events, so that's the reason he is not here, but we will ⁓ we will take the reins from him and and run with it here. Aaron Clark, Edge Realty: Yeah. True. I bet. Jon G. Sanchez: All right, folks, what a ⁓ what an first of all, what an incredible day again in the market. So, can I tell you this record setting day one more time? And ⁓ you know, you thought the gains were big yesterday. Well, they were huge today. So hopefully you made a lot of money in the market. I hope and pray for you. But let me tell you what ⁓ we're gonna get into after the stock market recap. We've today's show, Could You Lose Your Home Even If You're Making Your Mortgage Payments? Think about that for a second. Think to yourself, how can that happen? Well, if you came up with the answer of homeowners associations, you're absolutely right. What and I are going to be focusing on today is what every homeowner should know about HOAs, property taxes, insurance, and foreclosures. Because you lose your home even if you never missed your mortgage payment. Again, sounds unbelievable. I know. But what we're seeing going on is there's a growing number of homeowners, and this is a nationwide issue, that are finding themselves in foreclosure, not because they missed a mortgage payment or payments. But because of unpaid homeowners' association dues, as well as other housing related costs that typically, as you will find out, create the problem with the HOAs. we're gonna discuss this growing trend and steps that every one of you that are a homeowner should take to protect your home. Aaron, ⁓ this a great topic you came up with. What what you to want to talk about this? Because people think, okay, I pay my whatever, two, three hundred dollar a month HOA fees. But you know, we've we've we've never touched on this. Topic specifically as far as the foreclosure, because it's a it's almost a pandemic that's going on nationwide as far as the number of HOAs that are filing foreclosures what used to be, you know, all right, they're gonna send you some nasty letters if you miss a payment or fall behind a little bit. ⁓ now, because of as you're, you know, as Aaron's gonna enlighten us, because the financial ⁓ status many HOAs find themselves in, because remember, folks, these are these are viable businesses. Now, now most of this real quick, Aaron, most of them are are nonprofits, aren't they? Aaron Clark, Edge Realty: The HOA companies? Well, I mean, they're they're not registered as n like five one C threes. They're they're for no, they're they're for profit because, you know, they're making income from the homeowners and then that those proceeds are being used to pay for certain aspects of the property. Jon G. Sanchez: Yeah. They're not okay. I I for some reason I was thinking they were. Okay. They're for profit. Okay. Okay. Yeah, for some reason I was thinking some of them were eat were nonprofits, but yeah, not thinking about that or talking out loud, that doesn't make much sense. ⁓ but Aaron ⁓ ⁓ They they they ⁓ exactly. here's your morning, put your trash can away or refining you fifty dollars. And if you and if you don't pay the fifty dollars, ⁓ HOA tournament, if you don't pay the fifty dollars for the for the for the trash can being outside, guess what? We're gonna file. Aaron Clark, Edge Realty: Yeah, they have to do fundraisers and raise money and no, they just call the homeowners and say, Give us money. Yeah. It's the HOA golf tournament. Jon G. Sanchez: lean against your house and start the foreclosure process. Yeah. So you know, I don't know if you have any war stories of, you know, clients that you've you know over the years that you know of that have got themselves in trouble with HOAs, but you know, I remember, you know, years ago when I lived in Tahoe and we had an HOA and I tell you what, you know, it it was it just a nasty, nasty organization. I mean, ⁓ start off, you know, you you know, I have a lot of trailers and things and and ⁓ we, you know, split our time between the ranch and and in the Tahoe house. Aaron Clark, Edge Realty: Exactly. Yeah. Jon G. Sanchez: And you know, I'd bring a trailer home like to, you know, load stuff up or bring it back. And, you know, I think you had a 24 hour time period. Well, you know, you bring it home on a on a Sunday night and you're like, ⁓ okay, yeah, I'll I'll I'll get it out of here, you know, come Monday or Tuesday. Well, you don't. Well, here comes the nasty letters. And they don't mess around, Aaron. And and that's the point I really, really want you to get across to people is people think these organizations have legal power when in reality, as I know Corey's in ⁓ mentioned this many times. I don't know if you have. Aaron Clark, Edge Realty: Mm-hmm. Jon G. Sanchez: But many times they almost have more power than say your mortgage company from a foreclosure standpoint, right? And Aaron's shaking his head yep. And and so Aaron Clark, Edge Realty: Yeah. Yeah, they what people don't realize is that they have the power to even supersede like an IRS tax lien to foreclose on your property. Yeah. So and and and also, I mean, clarify too, they when when we use the word nonprofit, they're not they're not they are a non profit in the sense of like they're registered as such, but they're not nonprofit like a ⁓ Jon G. Sanchez: No kidding. See I did not know that. No kidding. Aaron Clark, Edge Realty: church or a charity or something like that where they're a five ⁓ one C three. but they don't have shareholders who receive profits. So when we we even though they're they are from ⁓ the status point, we don't refer to them as non profits because of that reason. Yeah. So just a clear Jon G. Sanchez: That's where I'm getting messed up. Okay. R okay. Okay, yeah. Okay. But technically they are, but just not a true five ⁓ one C three. So again, middle middle of the ground here. Yeah. Aaron Clark, Edge Realty: Yeah, exactly. Because they're collecting money through dues, just like nonprofit and surf the surplus of funds are typically used for reserve accounts, landscaping, things like that. So but they're not tax exempt nonprofits. Yeah. Jon G. Sanchez: Right. And folks Okay. And folks, if you want some really good if you ever have a a sleepless night we we used to manage the funds for for quite a few large HOAs in town. And I you what, I had to up, you know, this was years ago. I ⁓ had to bone up the NRS statutes regarding HOAs. And I tell you what, want again, you can't sleep one night, go go to the NRS statutes look and see what these organizations can do. I mean Aaron Clark, Edge Realty: Yeah. Yeah. Jon G. Sanchez: It's mind blowing. It is it is I I can't I hate to be use slaying words, but it is mind blowing the power that they have. and again, many people have no idea, Aaron, that they have that amount of power. Aaron Clark, Edge Realty: Yeah, the the power that an HOA has is pretty crazy. And the reality of it is is, you know, a lot of people get into an HOA situation and they think, ⁓ it's no big deal. It's only a little bit of cost for this HOA. And I can s yeah, and I can settle with all the the talking points of what they require. But then, you know, I mean, they can raise their dues anytime they want. I have a investment property that's in an HOA where there was a fire in the Jon G. Sanchez: Yep. Yeah. Again, a couple of hundred bucks a month, whatever. Aaron Clark, Edge Realty: Complex and because of it, they just told everybody, You're on your own to get insurance. We're not covering anymore. We're just not gonna collect it. And then they raised our dues. Somerset has HOA where because of the retaining rock walls that are in Somerset, there were some issues when the builders did all of the infrastructure, and so you know they needed money to fix them. So then they put an assessment on all of those homeowners in all of Somerset. Every time a home is sold, you have to pay for an assessment. Jon G. Sanchez: Ha ha. Yes. Aaron Clark, Edge Realty: for the repair of that. The condos on Charlens on the way up to Somerset, I have a deal over there going. You have to pay now because one of the buildings is sinking. So everyone in the complex has to pay a flat fee once they sell to help pay to repair that one building, even though it's not their building. So ⁓ any time, if they need funds, that's where the non profit part comes from. Jon G. Sanchez: Mm-hmm, mm-hmm. Aaron Clark, Edge Realty: Is they're raising funds to pay for what's actually needed. There's not an excess that goes into investors or anything like that. They need it, they're gonna get it. And if they can't do it and they can't be whole, then have a problem on our hands because now you can't get a loan on the property. You know what I mean? Because you don't have so w so what Dwight's not here to talk about is when you go to buy a property, they are the lender will get an HOA questionnaire from the HOA company and ask some things like what their s they're Jon G. Sanchez: Yes. Mm. Aaron Clark, Edge Realty: ⁓ accounts are at, all that kind of information, if there's any lawsuits what the owner occupancy ratio is, if there's any issues in regard to that, then they can't qualify for the loan on that property. So all of those HP have to be good standard. Yeah, it's the same well, a condo association, yeah, they are the same. I mean a condo association, an HOA for a condo association is the same for the Somerset homes, for example, or Collin Ranch or Arrow Creek or whatever. If you have an HOA a homeowners association, Jon G. Sanchez: So very similar to a condo association. Very very w a lot of those things you're saying, very similar. Okay. Aaron Clark, Edge Realty: then all within the same rights, privileges and powers, whether it's a condo, a house, or Jon G. Sanchez: See, see, I did not realize because I I've never heard about that with a friend, client, or myself with an HOA, like you were saying about the the ⁓ the rock wall situation, having an assessment like that. I obviously condos you hear that all the time. That's why a lot of people shy away from condos. But yeah, in a in a boy. Especi if you're ⁓ you know, a new t newcomer and you're you scraped every dime you could to to get into that home and and then ⁓ of a sudden here comes a nasty big assessment. Aaron Clark, Edge Realty: Mm-hmm. Yeah. Yeah, you can get blindsided. And in some of those skyscrapers that were converted into condos like that were old casinos, like the montage, for example, they had major issues with the infrastructure for like the pool and the clubhouse area. There was a huge lawsuit. They needed to get the money from the homeowners for the differential. And so you got charged I can't remember exactly what it is, it was like a hundred dollars per square foot. So whatever your property was, multiply it that square footage by a hundred, and that was your Jon G. Sanchez: Yep. Yep. Aaron Clark, Edge Realty: HOA assessment to help pay for those repairs. So you have to be very careful. Yeah. Mm-hmm. Jon G. Sanchez: On top of your normal. You gotta be very careful. And and boy, I can't believe it's already time for the first break. I haven't even mentioned the market yet. no, no, no. It's it's it's fascinating. No, I and we we'll we'll hit the market when we come back from the break. But off the top of your head, or maybe you could research it during the break, what percent of housing tracks l let's say Reno Sparks, or if you want to just pick one one area, what percent of housing tracks are regulated by an HOA versus aren't? I think that'd be interesting because last time I heard, I mean ⁓ Aaron Clark, Edge Realty: Sorry, too much. ⁓ Jon G. Sanchez: Obviously all the new ones are, right? But and and the other thing I want you to touch on too, Aaron, that just came to mind is wonder, well, why is there an HOA? Many times developers with their it's usually their idea, right? Correct me if I'm wrong. My experience is it's the developer's idea to create the HOA to maintain, you know, good looks and and quality and things like that. But then what happens is of course the developer's long gone and here they created structure and those rules and so on and so forth, they don't care. They don't care. They're long gone. But now the homeowner's the ones stuck to pay for everything. Aaron Clark, Edge Realty: Yep, exactly. And sometimes it's good because it maintains the quality of the area. So Jon G. Sanchez: ⁓ Yep. Yep. Yep. Absolutely. And stops Aaron from leaving his trash can out. Just joking. Just joking. I I'm I'm Do you have an HOA? No. Do you really? A city HOA? I've never heard of that. Aaron Clark, Edge Realty: That's right. Which I do. we do. We have a we have a city HOA. Yeah, so when you drive up the street, you know, you have all the trees on the side of the road type thing. That's a city H way, so it goes to the city. Jon G. Sanchez: Yeah. Okay. ⁓ Interesting. Get you every direction, don't they? Beautiful. right. Well, again, great introductions. As you can tell, a very ⁓ very interesting topic that we're going to be going over. When we come back, we'll tell you about this record breaking day on the market, then we'll get to our topic. Could you lose your home even if your mortgage payments are current? With Aaron Clark of Adriality. Aaron Clark, Edge Realty: Mm-hmm. Jon G. Sanchez: Welcome back to the John Sanchez show on News Talk 780 KOH with Aaron Clark of Adriality. Of course, Dwight again is ⁓ tied up with some family events. taking a kid to college. I mean, it doesn't get much more fatherly than that one, I tell you. Good for him. All ⁓ let's down to the market and we're gonna get back to our topic. Could you lose your home even if you're making your mortgage payment? You know, I've been thinking since the close at one o'clock, Aaron, how to summarize today's market activity. I wish I could say it was this, this, this, and this, you know, three or four, you know, primary reasons. But I really can't. I and here's why. It go back, it goes back to this morning. my first stock update, I'm looking at my notes, 523, of course. Dow Futures already up 640. What happened? Right that, and we're, you know, kind of up a couple hundred carrying forward from yesterday. Treasury Secretary Scott Bissett appeared on CNBC, did an interview. And All he had to say, which I thought was strange that Trump chose him to say this versus Trump himself saying this. But Basent, as a treasury secretary, said, We're gonna have a deal either today or tomorrow with Iran. Strait of Hormuz is gonna be opened up. Free trade, kumbaya. And this market just ripped that. Once again, just believe it. Now remember, yesterday with our what we have 500-plus point gain on the Dow, it was Trump saying, ⁓ you know, Saturday he he He's called off all military attacks against Iran. And then yesterday he said, Yep, there's ⁓ we've we started negotiations today with with Iran. And know, ⁓ should have deal soon. Well, again, we've heard that many, many times, of course. but then Iran throughout yesterday said, don't know what he's about. We we're not talking to anybody, basically. And then again, the Treasury Secretary coming out, making those comments. So there's factor number one. Really, the main reason was effect. These earnings numbers, the AI-driven, fear of missing out type of situation. That really, I'd say 80% of today's rally. The other 20% was what I just mentioned about Treasury Secretary Besent. But it was record setting day. Let's get to the numbers first of all. Record setting day for the SP, record setting day for the ⁓ Dow Jones Industrial Average. ⁓ We're still struggling little bit on the NASDAQ, and and I apologize, I I said something wrong yesterday, and it hit me this morning. ⁓ I said yesterday was a trifecta. We had record setting day for all three major averages. We don't, we didn't. It was the Nasdaq. I forgot. We had that sell-off period. ⁓ we're still we're still a little bit ⁓ bit aways from the ⁓ the Nasdaq. Let's see, we closed at 26,584. Yeah, 27,190. So, you know, we'll call another six, seven hundred points on the NASDAQ, and then we we get into record territory. But ⁓ down yesterday record, down SP today record. Here's how we finished up. ⁓ 907 point gain, 907 gain on the Dow. 1.71% closed at 54,085. Aaron, I've shared with you where the Dow was when I started in this business in 93, right? 20, 2200. 2200. Hey, wait, wait. Not that long ago. I'm not that old. was at 2200, and here we are at 54,085 today. Remarkable, remarkable. ⁓ 1.71% gain, as I said. NASDAQ surging 671 points, 2.59%. Aaron Clark, Edge Realty: Yeah. Five? Ten? Yeah. Crazy. Yeah. Jon G. Sanchez: 26,584 and the SP rising 136 points, 1.79%, to close at a record, 7,736. am not going to bore you because we want to get to our topic as quickly as possible of all the major winners. I'm just going to hit a couple of them because it was right across the board. I mean, very, very diversified, well diversified across all various sectors. ⁓ Let's hit of the technology, the semiconductors, first of all. Marvel Technology today up $24.82, $12.81%. Intel, $9.94 gain, 10.92%. disk up $139.59, $10.84. ⁓ that I shared with you on the show yesterday had blowout earnings after the close yesterday. That momentum continued up $29.42%, $36.96 gain. ⁓ chimed in with a 2.56% rise of $5.30 to $211.94. ⁓ One of the big catalysts of the Dow today was Caterpillar. Very strong earnings numbers early this morning in the pre-market. finished up $46.51, 5.6% gain to $876. ⁓ 54%. ⁓ contributor to the Dow, ⁓ Goldman Sachs, a $25.92 gain, 2.5%. JP Morgan up $4.88, 1.38%, ⁓ across the board. But it was unusual. Amazon, which of course had some excellent momentum from the end of last week after the earnings report, started to sputter a little bit yesterday, did it again today in this. Very strong market. Amazon down six dollars and sixty cents, 2.32% rise to 277.42. let's see. Yeah. ⁓ I want to mention SpaceX before we go to break. So, course, the first time since the company going public that they've had an earnings report. So let me just bring you up to date real quickly on on company. ⁓ So in the session, SpaceX, now remember, just to give you into perspective, when SpaceX IPO'd, remember it was $135 a share, and then we went up to what, $160 and some change, and ever since have back, pulled back, pulled back. So today finished up $11.53, 10.07% rise to $126.6. So here's what happened on the earning side of things. First of all, here's what the stock is doing right now in the after hours. it's down eight dollars and seven cents, six point four four percent loss to one seventeen twenty-six. Now, here's the the the earning side the of the ⁓ equation. ⁓ So the company reported revenues of $7.81 billion. Expectation was $6.93 billion. per share nine cents. Estimated loss was 26 cents. So they did better on the loss per share, did better on the revenue side. Revenue up 92% from $4.1 billion a year earlier to the loss of Excuse me. Let me rephrase this. Revenue jumped 92% from $4.1 billion a earlier. ⁓ while the company's net loss narrowed, there we go, to five hundred and forty-one million from a loss of a billion. again, opening, ⁓ remember the opening trade was $150 back on June 12th, June 12th, excuse me, ⁓ stocks about 16%, wiping out close, wiping out close to as of today's close, you know, obviously a significant portion of the the gains. Last year, ⁓ SpaceX lost 4.9 billion due to heavy investments in AI. Company merged with ⁓ of course, XAI in February and so on and so forth. So Space 962 million, connectivity made 4.2 billion, so that's gotta be the Starlink of things, et cetera. AI, 2.56 billion, beat the estimate of 2.18 billion. ⁓ The operating loss the space unit was 542 million, the AI unit loss. Listen to this, Aaron. You're you're a numbers guy and an AI guy. their loss from the AI unit, one point two six billion dollars. you know, again, gotta bring reality to the conversation very quickly. And as hear me go through these numbers, you hear me talk about this market at, you know, record after record. We are on a house of cards, okay, just to be real blunt with you. We have to watch this negative cash flow and these capital expenditures by all of these companies, not this SpaceX, all these companies, right? We we heard it last week when we had ⁓ numbers from a lot of the major tech companies. If something, right, Aaron, if somebody slips and we can't pay our dividend because our CapEx expenditures in in AI you know exceeded we thought. Whatever the reason is they miss some numbers, or whether it's earnings per share numbers, they miss a dividend, something along those lines, that will be the first, ⁓ know, we'll call it the chinga game that we all played, right? That's gonna be that first little piece that comes out. This is the only thing that I see that can really slow down this whole fear of missing out in the AI trade, the semiconductor trade, which is driven by AI, is if remember, we had we had Google say they've got negative cash flow. We have Oracle that has negative cash flow. because of their AI expenditures. So if you're wondering what's going to stop this market, that's your number one sign to watch. If one of these major tech companies has a miss in some form or fashion because of the amount of money they're spending on AI infrastructure and capital expenditures, that's going to be the capitalist. You agree, Aaron? Aaron Clark, Edge Realty: ⁓ yeah, absolutely. You gotta watch that like a hawk. And the thing is, is they're all in a horse race. So one's good great in number one for a week and then it switches to another one 'cause they just did an update. So I am very interested to see how this sort of scenario is gonna unfold over the next few years. Jon G. Sanchez: Yeah. One hundred percent. Yeah. Yeah. I I just hope and pray, you know, I it's I live through of course the the dot com era and I just hope and pray it doesn't end the same way. They say a lot of people smarter than myself say it won't because this is actually a product. But is it? I I yeah Aaron Clark, Edge Realty: I mean, the dot com era couldn't prop itself up. The AI can. ⁓ Jon G. Sanchez: Right. Well, i but AI is only propping itself up. The revenues aren't there. You know, you you you you s you spend a dollar to get a penny in revenue. spending the market. Yeah, exactly. Exactly. And that's my point. Aaron Clark, Edge Realty: Yeah, no, I mean spinning the market. Yeah. And and all of these trading c all ⁓ like we've talked about before, a lot of these trading companies and stuff, they're using the product itself to generate their their ⁓ wealth and and investments and things like that. it's ⁓ think it's kind of interesting when they talk about like how AI cause AI if you don't if you don't carefully monitor what you have AI do. Jon G. Sanchez: Yeah. Yes. Aaron Clark, Edge Realty: It will give you wrong answers. It'll make you feel great about yourself when you're wrong, all kinds of things. Exactly. So you have to keep an eye on it. So I wonder in its own world of self-preservation, I know this is ridiculous as I'm saying it out loud, what it can do to manipulate itself, if you will, within the market, which we're we've already seen. There's articles that have come out talking about how it's been able to do this. So, and even like different models that are happening, people are finding Jon G. Sanchez: Of course. Or go rogue like we experienced with a couple of models last week. ⁓ why don't you say? ⁓ yeah. ⁓ yeah. Aaron Clark, Edge Realty: little loops and holes and things like that and I'm and going to the CEO saying, Hey, look what I can do, you know. So I don't know. Jon G. Sanchez: Yeah. ⁓ yeah. Yeah, yeah, yeah, yeah, yeah, yeah. Yeah. talk about a self-fulfilling prophecy, right? But look at what what ⁓ yeah, absolutely. The government has invested interest. But real quickly, you you you look at the again, the volume, the the amount of business that is done every day, minute by minute on the stock market, that is being handled by AI, by algorithms, by AI, et cetera. It's yeah, I don't know where we're up to now. 90%, ⁓ somewhere there. It's massive. So yeah, it it is that's a that's a that's Aaron Clark, Edge Realty: Yeah. And how much government money is getting pumped into it as well. I mean yeah. Mm-hmm. It's wild. Jon G. Sanchez: We're gonna have to have a show with you on that one. That's a that's a fun one to to discuss. Very good. right, you're up to date. ⁓ oil down four dollars and sixty-three cents, seventy five seventy three. All right, when we come back, let's get into our topic again. Could you lose your home even if you're making your mortgage payments with Aaron Clark of Edri? Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: Welcome back to the John Sanchez Show on New Stock 780 KOH with Aaron Clark of Edge Reality. All right, once again, record setting session for the Dow and the SP 500. We finished up 907 on the Dow, 1.71% gain to 54,085. NASDAQ higher by 671 points, SP up 136 or 1.79%. As said very quickly, let me hit it again. ⁓ Oil down four dollars and sixty-three cents, 75.73 a barrel. This market was fueled this morning when Treasury Secretary Scott Bensent ⁓ on CNBC interview said, We're gonna have a deal with Iran today or tomorrow. gold rose six ⁓ sixty one dollars and ninety cents, four thousand one fifty one seventy six an ounce. And we had nice, ⁓ nice pullback in the treasury yields. This was another major factor. Tenure yield down six basis points, so yield of four point six three percent. And in the absence of Millard, how'd we do on the thirty year mortgage? Well, according to Mortgage News Daily, Aaron. Down seven basis points, but six and three quarter percent on the 30-year fix. Ain't a budget. Ain't a budget. Nope, six and three quarters hovering right there. right, let's get to our topic. Could you lose your home even if you're making your mortgage payments? So as and I said at the beginning of the show, you know, you ⁓ you mentioned word foreclosure and people go, ⁓ that's, you know, cause because someone's not making their mortgage payment. But what if I told you this? What if I told you you could be current on your mortgage and you could still lose your home? Aaron Clark, Edge Realty: Not much movement. Jon G. Sanchez: A recent report highlighted that a growing trend among homeowners associations becoming much, much more aggressive and collecting unpaid dues. foreclosure filings reached 6,376 properties in first quarter of this year. That's 40 nearly 40% higher than just two years ago. Think about that. 40% higher than just two years ago. And the reason, as you're gonna find out, associations are facing rising insurance costs, just like you as the homeowner. Higher maintenance cost, just like you, and higher operating cost. So, Aaron, let's start off with why are HOA foreclosures increasing? Aaron Clark, Edge Realty: Well, I mean, you hit the nail on the head, you kind of stole a little bit of that thunder. The insurance premiums, just like they're raising for homeowners themselves, with you know, or getting cancellations, things like that. The same thing's happening to the HOA companies that are managing these different communities and things like that. So as I explained earlier, a property that had a building catch on fire, the insurance the reason that they turned the insurance ⁓ Policies over to the individual homeowners. And this was in a townhome subdivision, if you will, was because they could not get an insurance policy to cover the entire set of homes within the complex. So they had to turn it over to individual homeowners because they would be judged differently than the homeowners association. So insurance premiums is a huge one. Maintenance costs, we've talked about. Yeah, absolutely. Yeah. Jon G. Sanchez: Uh-huh. Can I can I stop you on the let me stop you this real quickly on the on the rising cost, you just brought something back. folks, let's go back to what was it a little over a year ago, the massive wildfires in Southern California. I I remember I covered this on the show, Aaron. You've got, if you've ever driven down through Westlake and and you know, the the hilly parts of Southern California specifically, you've got obviously thousands, probably hundreds of thousands of homes and tracks nestled in the hills, right? Surrounded by weeds. Aaron Clark, Edge Realty: Mm-hmm. Jon G. Sanchez: After those fires broke out down there in Pacific Palisades and all that, Palos Verdes, these homeowners or these homeowners associations, to your point, Aaron, they're being dropped like rocks by ⁓ insurance companies because they're going. I think about this. If you were the insurance underwriter and the and you're going, let's see, I'm insuring, what's a typical housing track in SoCal? Probably a thousand homes. I'm insuring a thousand homes plus all the infrastructure. Aaron Clark, Edge Realty: ⁓ yeah. Jon G. Sanchez: No, I'm not gonna do it. See, I don't care what your premiums are. these companies, I I don't know what they ended up doing. I ⁓ following it. I imagine they went to the state, state fund ⁓ that they have in California, as many states do. But Aaron, could we be something like that here? Right. I mean, we're no different. ⁓ And and look the fires going on right now in Washington and Oregon and you know, all across the West Unlike, you know, knock on wood, we're we're we're skating past it at this point. But We know what happens in other states affects us. Aaron Clark, Edge Realty: Yeah, I mean, you know, the the the we call it the californication of Nevada, right? it's there changes coming that are similar and that we're experiencing some of the same issues in regard to those. And the truth of the matter is, is when an insurance company doesn't have to cover and they're taking huge losses, like they're gonna have to cut their losses and run. And so that's a real reality of where things could go. So, you know, you just you don't know. And they're gonna the The HOA company doesn't have magical money flow trees in the back that they can pull this extra money from to fund these things. It comes from the homeowners. So they're going to build in those premiums as best as they can predict. But when the insurance renewal rate comes for the complex, yeah, and that renewal comes in 20% higher than it was, then your HOA dues are going up. They're going to pass it on to the homeowner because they they're not paying them. They're paying them from the reserves of the homeowners. Jon G. Sanchez: There you go, the renewal. That's where it gets you. Shh, if they're lucky. Mm-hmm. Mm-hmm. Aaron Clark, Edge Realty: So that's what people have to understand. And then on top of it, you have to understand that co that coincides with that is remember all the cost of maintenance and things like that going up during COVID for products and whatnot. Well, we've all seen there hasn't been much relief. Like we were talking about that during the break. It's not like, ⁓ you paid, you know, a hundred percent more for a furnace and it dropped back down to what it used to be. No, it dropped down like 50%. So Jon G. Sanchez: Yes. Mm-hmm. Yes. Yeah. Aaron Clark, Edge Realty: Costs are being passed down to the HOA company. And that goes for materials when they're replacing air conditioners, painting roofs, whatever. But now you also have services, landscape maintenance, you know, having getting Yeah. Streets being repaved or sidewalks or parking s you know, guest parking areas, whatever, clubhouse maintenance, pool maintenance. I mean, all of those things have Jon G. Sanchez: Sure, sure. Everybody's charging more and ultimately the consumer's gonna pay. Yep. Aaron Clark, Edge Realty: quadrupled in prices over the last ten years, let's say. So all of these things, the money comes from the homeowners. And that's where those those costs are getting passed down and people can't afford it. Jon G. Sanchez: Yes. Yep. W when when we come back, can you talk to the audience, Aaron, about the importance of underfunded reserves by the HOA how they should do their due diligence or their real estate professionals should do the due diligence. Again, we we still have this discussion on condo associations. Now we're talking about you know, homes homeowners associations. Yeah, all the same. But we never talked about it with homeowners, right? 'Cause it's a couple hundred bucks a month. But now now it now we are. but talk about again what Aaron Clark, Edge Realty: Yeah, they're all one and the same, yeah. Yeah. Jon G. Sanchez: What real estate professionals for their clients need to do as far as the due diligence going into a housing track. Because the last thing you want to do, as you'll discuss, is come in and go, they're underfunded by five million dollars. Well, it's obvious there's going to be some assessments coming, and you need to be ready for that or go to a different housing track. So we'll talk about underfunded reserves with HOAs with Aaron when we come back. Aaron Clark, Edge Realty: Mm-hmm. Jon G. Sanchez: I Aaron, your phone number, please. Aaron Clark, Edge Realty: six seven three sixty seven hundred. Jon G. Sanchez: Thank you, sir. Appreciate it. right. Fascinating topic. And I we're probably gonna have to continue this on the next time you join us because we're we're on our ⁓ our first page here and we got about three pages to go through, so we're not gonna miss it or not gonna make it. Again, could you your home even if you're making your mortgage payments? Aaron, we left off with Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: The due diligence that needs to be done by the real estate professional and the and the homeowner, future homeowner coming into a housing track in regards to the financial condition of the HOA, right? The underfunded reserves. Go down that path. Aaron Clark, Edge Realty: Yeah, and and the thing is we have to be careful with underfunded reserves because if again, they haven't been raising the rates, which I know we don't want them to, but if they're not raising the rates to meet the new standard of cost and they're underfunded, then you have all kinds of issues where you may not be able to qualify for a loan there because they're underfunded, because the the lender's gonna request an HOA questionnaire which will have all this information. They're gonna require require a list of what their residuals are, their budget, everything, and make sure that they're in a positive cash flow situation. If they're not, they're not going to issue the loan because that is their collateral. So they don't want to have an issue with their collateral. Jon G. Sanchez: There you go. The the special assessments. ⁓ happens there? You can't fight it. ⁓ Aaron Clark, Edge Realty: Mm-hmm. So on the special assessments, if they're short, so for example, they their HOA budgetary line item, they need to replace the roof every 20 years. So they're going to take the total cost of that plus inflationary money, divide it by 20, and then that's what goes into your monthly cost over 12 months for that year. If they find out, ⁓ well, the cost has gone up and whatever, so the ⁓ 30% under, they might have to rush to get that positive cash flow up to where it needs to be. So that's where a special assessment comes from. It's not necessarily just because of bad things like there's an issue with a building or or landscape or whatever. Sometimes it can just be we're w we way undervalued the cost to replace all the roofs in this complex or these using a condo as an example. So we're gonna charge everyone a special assessment of fifteen hundred dollars per year for the next three years. Yep. Jon G. Sanchez: Mm-hmm. Yep, happens every time. Real quickly, tell the audience who regulates these HOAs? People are going to be surprised at this answer. Aaron Clark, Edge Realty: Yeah, so the HOAs are regulated by the homeowners. So you get elected. Jon G. Sanchez: Well no, even higher than that. The state I'm talking about. Aaron Clark, Edge Realty: ⁓ yeah, absolutely. So the state regulates these HOAs and they're the ones that can come in and and make sure that people are following the rules and and hold people accountable for not doing what they're doing. And that's where you can lose your home. Jon G. Sanchez: Well, and and again, you get a yeah, you get this nasty assessment letter as an example from your homeowners association. They're being told they get audited by the state. I believe if I remember correctly, when I studied the NRS regulations years ago, Aaron, I think Department of Real Estate, who regulates you and other real estate professionals, also regulates ⁓ a yet real estate division, HOAs. Aaron Clark, Edge Realty: Yeah. The real estate division. Yeah. Jon G. Sanchez: But there are very, very stringent rules on how they can invest their money very conservatively, certain reserve percentages and ratios and things they have to have. So if they fall below that, now they find themselves in trouble with the state. Now they're gonna get in trouble. So it's the old saying, you know what flows downhill. So I wanna I wanna make sure everybody understands that. how do you lose your home to an HOA? Aaron Clark, Edge Realty: Correct. paying your bills and and the HOA company file a lien against your property. So what they're even if you're paying your regular dues, if there's a special assessment and you're not paying that, they're gonna warn you so many times and then they're gonna file a lien against your property and then they will foreclose for the amount due. Jon G. Sanchez: And yeah, it it literally it could be for a hundred dollars. They file the lien, they can foreclose. I've seen that happen where a vacation home, for example, people don't quote get the mail, they don't see the bill. Next thing they know, they're in foreclosure. some states can even obviously file the foreclosure if you're current, but Aaron, who quickly, what's the pecking order of who who who has more lien rights, we'll call it. Aaron Clark, Edge Realty: Yes. Yeah. Jon G. Sanchez: Your mortgage company, the IRS, or your HOA. There you go. Right at the top of the list. There you go. There you go. It's that big. advice for for homeowners that currently have HOA or are looking to get into a track that has HOAs? Aaron Clark, Edge Realty: The HOA. Yeah. It's HOA, IRS, and then mortgage. Yep. Yeah, I tell new buyers to quickly drive through a neighborhood they're interested in. ⁓ 'cause they go, Well, can I park my trailer here? Well, do you see trailers parked there? That's a great way to find out. do you like the neighborhood and how it's managed? Does it look like so perfect? Do you feel like you would be out of place? Those are the best ways to feel it. ⁓ and then of course and then read the documents. ⁓ Jon G. Sanchez: Yeah. And read the HOA agreement before you sign your loan documents. Aaron Clark, Edge Realty: And we all have access through the title companies to get the HOA documents so we can send those to homeowners and they can review. Jon G. Sanchez: Absolutely. topic, Aaron. Thanks so much for bringing it to our attention. Appreciate you, buddy. Aaron Clark of Adriality. God bless everybody. We'll you tomorrow on the John Sanchez Show. Stop.