DEAR BOB: I own and live in a nice condo in what I thought was a well-managed association of 24 condo owners. But when our longtime treasurer, a retired CPA, suddenly died, we discovered we are practically broke. He was a nice old man who everybody loved. At his funeral, which almost all the condo association members attended, he was highly revered, as if he was almost God. But a few weeks later, after our condo board of directors appointed a new treasurer, we discovered the ugly facts. He wasn’t corrupt, but he just didn’t tell us we needed to raise the dues to have adequate reserves for emergencies. Isn’t there a law requiring adequate reserves? – Harper T.
DEAR HARPER: State condominium laws establish guidelines, such as periodic reserve replacement estimates. But there is virtually zero enforcement unless a condominium board of directors takes charge and insists on adequate reserves.
Purchase Bob Bruss reports online.
Also, most condo associations are required to have annual audits of their treasury. Large associations can afford to have outside CPA audits. But smaller associations rely on member audits.
To illustrate, for many years my mother was on the audit committee of her condo association. Although she wasn’t on the board of directors, nor was she an accountant, she was very financially savvy.
She and the other audit committee members, in addition to going over the expenses, recommended increasing the monthly fees to increase the reserves. The board eventually listened and now has a 5 percent annual dues increase policy to pay for rising expenses and to keep the reserves growing as the property ages.
WHAT IF A WILL ISN’T PROBATED?
DEAR BOB: My mother died in 1999. I knew her will left her house to my brother and me (her only children). My brother, who is “mentally challenged,” lived with my mother and took great care of her during her last years. He still lives in her house, and I think he should continue living there. He has enough income as a “bagger” at the nearby supermarket to pay the house expenses, as it is free and clear. But my concern is what should we do about the house title? Our mother didn’t leave many financial assets but they all had “pay on death” provisions so that was resolved. However, I am concerned about the house title. What should I do? – Aran H.
DEAR ARAN: You should have the title to your late mother’s house probated as soon as possible, according to the terms of her will. Consultation with a local probate attorney will inform you of the least expensive method of transferring title to you and your brother.
Because of your brother’s special situation, you might want to have a conservatorship created to look out for his best interests, especially if he doesn’t have a written will.
IF SENIOR HOMEOWNER NEEDS INCOME, GET A REVERSE MORTGAGE
DEAR BOB: I am 76, in fair health, with a yearly income around $20,000 from Social Security, a small retirement, and an IRA. My three-bedroom house has a $46,184 mortgage. Houses like mine nearby sell for around $500,000. But my daughter wants to buy my home, and will allow me to live in it until I am unable to care for myself. I know you frown on adding a child to the title, but she is the executor of my living trust, has a medical power of attorney, and I trust her completely. Is this a good idea to sell her my house as an investment and pay me monthly income? – Gerald S.
DEAR GERALD: I am not thrilled by your daughter’s suggestion. Why give up control of your most valuable asset?
For your daughter, that’s a great deal. But for you it could become a big problem living on a fixed income from their mortgage payments to you.
At age 76, you are in a great position to obtain a reverse mortgage, which requires no repayments as long as you live in your home. The reverse mortgage could pay off your current mortgage, and give you choices of lifetime monthly income, a credit line (except in Texas), or lump sums as you need them, such as for a new roof, new car or whatever.
When you move out of your home for more than 12 months, sell it, or die, then the reverse mortgage principal and interest is paid off from the home sales proceeds. Until then, you control the situation. More details are in my special report, “The Whole Truth About Reverse Mortgages For Senior Citizen Homeowners,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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