PUDs can be clusters of single-family homes or attached town house style units with common areas such as club houses, swimming pools, and tennis courts. The big difference is that you own the structure and the land it sits on, plus a small yard or patio. PUD financing is the same as single-family homes, since you own both the dwelling and the land. But, you’ll probably have to factor the HOA fees into your qualifying ratios.
PUDs are becoming popular in areas where land is scarce and expensive. By putting homes on small lots, developers hope to keep home costs down to where they will sell reasonably fast. You’ll want to beware of PUDs that have too many look-alike homes jammed on small lots; the project can take on a sterile, impersonal look. This is not the type of development that creates homeowner pride. And homeowner pride is a key component of an area that maintains and increases its value.
Because many PUDs have similar market economics as condos, you should also look at the owner to rental ratios. A PUD that has a lot of rentals is going to have a problem keeping its value. Actually, a neighborhood of single-family homes in a standard subdivision with more than 10 percent rentals can have the same problem too. PUDs are becoming more popular because the monthly fees are lower than condos, and you have more control over your home. But, you still don’t have quite the same freedom as the usual subdivision, because the homeowner restrictions are stricter to protect everyone’s investment.
The biggest downsides of PUD living are that you may not agree with the restrictions and you pay the monthly homeowner fee whether you use the amenities or not.
Loren and Dora found this out when they retired from Boeing and downsized to a smaller home in an upscale PUD. It was a new development, and they enjoyed making friends as more people in their age range moved in. Soon, phase one sold out and the homeowner association assumed management of the project. The first few years were fun. Dora was active in the homeowners association, while Loran improved his golf swing. But when new people were voted into the homeowners association, things began to change. New rules were proposed by the new administration and passed. Restrictions were made, such as that you couldn’t keep RVs next to your house or garage doors open for more than a certain period of time, and grass had to be cut twice a week. It was an attempt by the homeowners to maintain the image and value of their community.
Loren and Dora had a small motor home and parked it next to their house on a concrete extension of their driveway. They were given notice by the association that it had to go. Also, the association’s enthusiasm for the new rules grew, and soon maintenance personal were instructed to knock on doors or leave notes on the doors of homeowners who were slow to comply.
For most of the homeowners, it wasn’t a big deal, but for Loren and Dora, the restrictions and their deteriorating relationship with the association officers were too much, so they decided to sell. It wasn’t long before they found a buyer and ended up making a good profit, which, ironically, was due in part to the association’s working hard to maintain its image as a quality place to live. The lesson learned here is that before you buy a home in a development that’s managed by a homeowners association, check out the bylaws and rules. Look at the lifestyles of the people who will be your neighbors. Ask yourself if you would be comfortable living there for a few years.
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