By: Lynne R. Anderson, Realtor Accredited Buyers Representative
You’ve vacationed here for years. Long, lazy strolls along Hilton Head’s picturesque Atlantic beaches, children and grandchildren pilgrimaging to join memorable family retreats, perfecting your game on world-famous emerald green golf courses… After years of enduring a long-distance love affair with the island, you’ve made the decision to buy. Now it’s not whether to purchase Hilton Head real estate, but what kind. Welcome to the great Villa vs. Home debate. In addition to the obvious differences such as square footage, proximity of your neighbors and ease of ownership, it’s time to shed some light on the pros and cons of villa ownership.
WHAT’S A VILLA REGIME?
Regime, by definition, is a general term that refers to a system of governance. The word is interchangeable with HOA, which describes the specific type of elected body typically made up of property owners, that governs island villa complexes. This association enforces villa bylaws, levies fees and assessments for maintenance and upkeep of common areas, creates a budget, and insures the structure against liability, flood, fire and other hazards.
WHAT’S THE REGIME FEE?
To make a fair comparison price-wise between villa and single home ownership, examine the amount of the villa’s monthly or quarterly regime fees and everything it covers. Things like waste removal, exterior insurance, pool and common area maintenance, pest control, cable TV, landscaping and more are all common inclusions in a villa’s monthly regime fee. But do your homework! On Hilton Head, regime fees and services vary greatly between villa complexes, and even within villa complexes of the same name. Your neighbors regime fee may cover the cost of cable. You on the other hand, may need to call the cable guy. Also, explore the HO-6 Insurance Policy even if your villa regime fee provides insurance on the exterior structure. HO-6 plans cover the interior of your villa, and personal property inside, commonly known as “studs in” or walls in” coverage. Under the new Fannie Mae and FHA overhaul, most lenders now require HO-6 policies. To be fair, villa regime fees are designed to cover the expenses deemed necessary to protect the investment of the whole, or of the entire complex. In addition, you may opt to pay the same fees - or higher ones - for similar services with single family home ownership. But a regime’s mandatory deck repairs, landscaping or trash removal are a single family homeowners choice, versus a requirement.
IS MY REGIME FISCALLY SOUND?
This is vital when making a villa buying decision. Your realtor can be pivotal in helping determine whether a villa regime is financially healthy. MLS realtors have quick access to regime documents and financials. Why does this matter? If you love a particular villa and its price, take a look around. Are the ground kept up? Are the pool and tennis courts clean of debris? Are the sidewalks safe, is the paint chipping, is the roof new? If the answer is no, dig a little deeper. A regime should have sufficient funds in its capital reserves to adequately manage the surrounding grounds and common areas, as well as prepare and pay for unforeseen weather-related issues. If it doesn’t, an assessment could be coming.
IS IT REALLY FEE SIMPLE?
To further confuse buyers, there’s always fee simple villa ownership. Fee simple almost always means a) the monthly regime is on the lower side and b) you are responsible for the exterior maintenance of your villa. Although you will still pay a monthly fee, it generally includes only the coverage of common area maintenance of the land on which the villa complex is built.
BY THE BOOK AND BY THE BYLAWS
Villa ownership also comes with a specific written set of association bylaws - Covenants and Restrictions - designed ultimately to protect the property’s value, thereby protecting the individual interest of each villa owner. Bylaws also vary widely within villa complexes on Hilton Head and can address things such as parking, pet ownership, short and long-term rental opportunities, exterior landscaping, guest usage, age of guests and virtually anything else the governing owners vote upon. If you live in a private or gated community, these regime restrictions are in addition to existing community guidelines enforced by your plantation POA. Make sure you request a copy of the most recent Covenants and Restrictions and Bylaws. After you close on the villa of your dreams, stay involved and you’ll stay in the know!
SECURE YOUR ‘FOR SURE’ LENDER.
Most lenders have slightly different and sometimes more strict lending guidelines for underwriting villa mortgages, especially when it comes to FHA and VA loans. If your complex does not qualify for an FHA loan, this means you would need to pay cash or obtain a conventional loan to buy. In turn, this restriction could affect the number of available buyers who can buy the villa when it comes time for you to sell. Some Hilton Head complexes are not approved for FHA or VA loans because the occupancy percentage of owners vs. tenants exceeds 50 percent. In other words, if you’re an investor looking to buy a villa for solely rental purposes, bring your personal checkbook, a mortgage may not be for you.