A homeowner’s association (HOA) provides you with the chance of living in an orderly and well-run neighborhood that’s managed by an organization that sets the rules and regulations under which you and other community members agree to live.
While some people may welcome the chance to be a part of this organized living arrangement, others might not like the aspect of having restrictions on how they can manage their property. If you are thinking about moving into a community run by an HOA, here are a few things you should first take into consideration.
An HOA is run by a Board of Directors (they usually must be homeowners who are elected by the other community homeowners), and it’s the responsibility of the association to enforce the community bylaws and covenants as well as set rules and regulations for the neighborhood. These organizations exist in single-family home communities, condominium communities, and townhouse communities.
In communities with HOAs, homeowners automatically become members of the association when buying property and must pay monthly or yearly dues. The HOA’s elected board of directors uses these funds to make neighborhood improvements and maintain shared facilities.
Pros of a Homeowner’s Association:
You will live in a Well-Groomed Neighborhood
There are strict guidelines put in place to ensure the neighborhood looks good. For instance, typically lawns are meticulously groomed and manicured, there are limitations imposed on the colors of exterior paint, and there are restrictions on parking vehicles, boats, etc. on the street.
The HOA Manages the Commons Areas
One benefit of living in a community with an HOA is that the organization manages the common areas. This may include the landscaping, the pool area, playgrounds, barbecue areas, parks, security gates and community centers. Some townhome or condominium HOAs also maintain the landscaping in front of each unit which can include sidewalks and driveways.
The HOA May Maintain the Home’s Exterior
Some HOAs (usually townhome or condominium communities) also care for the exterior of homes within the community. This can include repairing or replacing siding, power washing, and maintaining the home’s roof and fence.
If you purchase a property within an HOA community, you could potentially save thousands of dollars during the years that you live in the home.
Cons of a Homeowner’s Association:
You Have to Pay Monthly HOA Fees
HOAs collect yearly or monthly HOA fees to fund their community projects and build up a reserve fund. These fees vary depending on the community. The association may have to raise the monthly fee if it doesn’t collect enough funds to maintain the community. Additionally, HOAs are free to schedule what are called “special assessments,” or extra fees to pay for larger projects that the HOA’s reserve fund won’t cover.
Defaulting on HOA Fees Has Repercussions
Depending on your state, defaulting on HOA fees could put you at risk for foreclosure. But even if your state doesn’t allow foreclosures under these circumstances, the amount you owe will accrue until you pay.
It’s crucial that everyone living in the community pay their fees. If the HOA is unable to collect enough money from residents, this can result in insufficient funds for maintaining the property. As a result, the community might have to get rid of its property manager, and the appearance and condition of the community can go downhill. This can have a negative impact on property values.
The HOA Imposes Rules and Regulations
Homebuyers are automatically required to agree to the HOA’s governing documents and bylaws and abide by the HOA’s rules.
The HOA can decide what color you can paint your front door or shutters, as well as the type of front door and windows you can have. The association can even place restrictions on outside decor and the number of vehicles you’re allowed to park in the community. Other restrictions can be operating a home-based business or your ability to rent out your home. Violating the community’s rules and regulations could result in a fine.
Ready to buy a home with an HOA?
When you’re buying a home, you have the property inspected. Shouldn’t you take a good look at the HOA too? Understanding the rules you’ll be subject to is a critical piece of making sure you love your new home.
Read the Governing Documents
it’s important to read the HOA’s bylaws, amendments, covenants, rules/regulations, and articles of incorporation. Pay special attention to items pertaining to individual homes, like paint colors, architectural design approval, landscaping rules, rental property restrictions, and even regulations around satellite dishes. It’s important to know what you’ll need the HOA’s approval on before you start a project, even if it improves the value of your home.
Look at the HOA’s Financials
You can ask to see the most recent financial statements to make sure that the organization is well-funded and doesn’t have a high percentage of unpaid dues. Look at reserve funds, which is money allocated for the repair of big-ticket items like sidewalks or other common areas. An HOA should have a healthy reserve fund to be prepared for unforeseen repairs.
Itemize the Dues
If you’re going to be paying an HOA fee, you should know how the money is allocated. Is garbage collection included? Neighborhood parties? Know where your money is going and how it will be spent. Also, take a close look at dues over the last few years to see if there have been any large increases. HOAs usually raise their dues by a percentage each year but be aware of what the trend for your HOA has been.
For some people, living in an HOA-controlled community is the right place for them. Others prefer the freedom and independence of living in a property free of outside oversight. As you select a home or community to live in, a good realtor will help you learn the ins and outs of each neighborhood so that you make the decision that is right for you.
