How do homeowners associations (HOAs) work anyway?
If you plan to buy a home or condo in the new year, keep in mind the property may be governed by a homeowners association, or HOA. More than 63 million people live within communities that are overseen by HOAs, according to the Community Associations Institute. That means 24% of U.S. homes are part of community associations.
Many buyers appreciate the benefits provided by HOAs, but the mandatory dues and covenants, conditions and restrictions (CCRs) occasionally rub some people the wrong way. Before you make an offer on a property governed by an HOA, here are some factors to consider.
What do you get from the HOA?
Homeowners associations often provide access to amenities that individual residents couldn’t otherwise afford — pools, gyms, tennis courts, walking trails — and their rules can protect property values. Some associations also take on services traditionally provided by government, such as trash pickup, landscaping, street lighting and street and sidewalk maintenance.
Your perfect condo may have a great pool or your dream home might be sitting on the first tee, but remember that those things are only part of the HOA’s scope. When you purchase a property governed by an HOA, you enter into a legal contract with the association. You agree to abide by the association’s regulations and pay its dues. In exchange, you get a community guided by an HOA and the access to its facilities and perks.
Read before you buy
Make sure that any uses or freedoms you expect to come along with your property are allowed in the CCRs. Want to store your boat trailer in your driveway? The association’s CCRs may not allow that. Want to paint the house? Some HOAs have restrictions on permissible colors, so check the palette allowed by the association.
You may have heard horror stories of home repossessions and other legal squabbles involving property owners and HOAs. A common theme among many of these cases is homeowners not understanding the regulations or ignoring them. Review the CCRs carefully before you purchase the property and you’ll be much less likely to run afoul of your HOA.
Inquire about dues
HOAs run on dues, your annual fee for living in the community. These fees can range from $100 to thousands of dollars, depending on the neighborhood or building and what amenities it offers. Ask how much the dues are and if they’ve increased during the past few years.
Find out what the dues cover and what they don’t. For example, your condo association may perform all exterior maintenance. That means when the roof leaks, your dues pay for its repair, even if you live on the ground floor of a three-story building.
If you live on that third floor, however, you don’t have to pay to repair the entire roof yourself. If the association manages a pool, you’re paying for it, even if you can’t swim and never use the amenity.
Who’s in charge?
When you review an HOA’s documents, be sure to inquire about its finances. Is the HOA solvent? Does it have a reserve fund? Who controls the money? What kind of oversight is that person subject to?
Find out who manages the HOA and what role residents have in its governance. There may be a board or other group of property owners who manage the association. Take some time and talk to people who currently live in the community. How do they feel about the neighborhood, development or building? Find out their impressions of how the HOA is run.
Perform due diligence before signing a contract to purchase a property governed by a homeowners association.
You will be able to make an informed decision about the HOA’s pros and cons, as well as your responsibilities, without jeopardizing the transaction or subjecting yourself to regulations that aren’t consistent with your lifestyle. For expert advice about HOAs and all kinds of information about owning, buying or selling a home, ask your Realtor and visit HAR.com.