What to Know About Homeowners Associations (HOA)
Things to Consider When Buying Into a Homeowners Association
If you are considering buying a townhome, condominium or a single-family home in a planned development, you need to know about homeowners associations (HOAs). These groups have a significant amount of control over what you can and cannot do with your property—rules you must agree to if you decide to purchase such a property.
There are lots of things you should know about before ever considering purchasing into a homeowners association.
It is in your best interest to educate yourself about HOAs to avoid getting into a situation that you regret. Homeowners associations can be quite useful and even make your life easier, but only if they are properly managed and if they share the same goals that you have.
Lots of owners find out the homeowners association where they have purchased is not what they expected. In many cases, you’ll be disappointed to find out the people who run the association have nothing better to do than make your life miserable.
In fact, many of them are board members for the power trip they get from being in these positions.
Don’t find out the hard way. Do your due diligence when purchasing where a homeowners association exists!
What is an HOA?
What does a homeowners association do? An HOA is an organization that determines the rules of a community that it manages. It is responsible for ensuring that community rules are followed by all residents. It is also responsible for enforcing those rules.
For instance, if no street parking is allowed, the HOA would issue a warning and then assess a fee for a resident who parked a car on the street.
The association charges all property owners a fee to pay for the operation of the HOA and to maintain a cash reserve for community repairs.
For example, if the roof of your group of condos needs to be repaired, the HOA would be responsible for the repairs, using yours and other owner’s fees to pay for the repairs.
Although the initial idea of an HOA can seem restrictive, the general idea behind them is sound. The HOA should help to improve and maintain the quality of life in your community. By enforcing rules, it should make it more enjoyable to live there—and the regulations should help to preserve the value of all properties in the group.
However, not every HOA is well-managed. And not everyone is an ideal fit for living in an HOA community. Research is vital for anyone considering purchasing a property in a homeowners association.
Things You Need to Know
1. Find out what the rules of the HOA are.
Since the HOA will be watching to ensure that you are following the rules, it is obviously essential that you know what those rules are. Many HOAs will have their rules listed online, but not all.
Your Realtor should be able to get you a list of the rules and help you determine what they entail. You need to know not only the rules but what happens if you break those rules—such as the fines that will be levied against you.
Some HOAs can actually foreclose on your property if you break the rules or fail to pay your dues, so you definitely want to know if this is the case with your particular HOA.
You should also find out how rules are added or changed. You can attend HOA meetings as a member. If this interests you, verify that the meetings are held at a time that works for you.
Never underestimate how silly some rules can be. Can you imagine buying a condo only to find out you can’t plant flowers out front? Most reasonable thinking humans would say to themselves who would have a problem improving the property. Who wouldn’t want beautiful flowers out front?
Some homeowners associations will prevent you from doing something exactly like this. Never say never when it comes to what the association may or may not do.
Here are some common things to think about:
You may be disappointed to find out that none of these things are allowed! On the other hand, you may be wanted all of these things to be the case. This is why it is so crucial to understanding precisely what you are buying.
Additionally, buying a single family vs. a condominium can be night and day as well.
2. Can you rent your property?
Whether you can rent your property is such an important question I have given it its own sub-heading. Can you picture yourself buying an investment property only to find out the association does not allow you to rent it?
There can be restrictions placed within homeowners associations that limit the number of rental properties. This can be good or bad depending on what side of the fence you are sitting on.
3. How are changes/decisions made in the neighborhood?
Can you imagine buying into a neighborhood where everything you would like to be able to do is not allowed? What if the majority of the homeowners all think alike? You should always find out how rules are made and changed. Does the majority rule? Do all the owners have to agree? It is vital to determine exactly how your lifestyle will be controlled.
4. Verify that the home you are going to purchase is currently in compliance.
It is possible to buy a home in an HOA and then discover that the house is already breaking the rules. That means that you will have to make changes immediately or risk being fined or otherwise reprimanded.
5. Learn about the fees.
When buying into a homeowners association and especially a condo community, it is essential to ask vital questions. Some of the most important questions will center around the fees you will pay. You will be required to pay the standard fees, so it is a good idea to know what that entails. You need to learn things like:
6. Talk to current members.
You can get a good idea of what living with the HOA is like by talking to a few of your would-be neighbors. Keep in mind that there are a lot of reasons why someone could be upset with the HOA, not all of which are valid. That is why you should talk to at least two or three different homeowners to get a clearer picture of what it is like to deal with the homeowners association day in and day out.
It is also advisable to get a copy of what is called the minutes from the last few meetings. The minutes are all of the things that were discussed during the association meetings.
Some important things to think about are:
7. Look for signs of over-management and under-management.
A delicate balance is required for an HOA to fit you just right. An over-managed HOA is one that is going to be overbearing and hard to deal with, but it can be just as frustrating to deal with an under-managed HOA.
If the HOA is not doing its job, then there is a strong possibility that your property value and quality of life could be negatively impacted.
As an example, an HOA that does not manage money well might be under-funded when a disaster strikes. Instead of having money for the needed repairs, the coffers may be empty. Then you are left trying to figure out how to get repairs done without the money that was supposed to be there.
8. Think about the fees and what they mean for your budget.
The fees you pay to the HOA need to fit within your budget. They come on top of your mortgage, and you want to be sure that you can afford them. It is also worth considering if the cost of the fees is worth it to you.
If you only have to pay a little more to get a home that you want (the one you thought was too expensive), then it may be better to go with your dream home.
Your purchasing power without paying a steep association fee could increase significantly.
9. See if the HOA is environmentally friendly.
If taking care of the environment is essential to you, be sure to check how the HOA attempts (or doesn’t attempt) to minimize the environmental impact of the community. The priority of the HOA may or may not be the environment.
Many require that you maintain a lush green lawn. Some dictate that low impact landscaping practices like xeriscaping are not allowed. Things like solar panels, compost bins, and other green methods may not be allowed, either.
10. Know your temperament.
Some owners fit right in with an HOA, while others bristle at just the thought of it. If you are the latter, think very carefully about how you will feel being an HOA member. It does not matter how beautiful the neighborhood, how perfect the home, or what a steal it is.
If you are going to be frustrated by the regular intrusion into your life and ownership, then it might be better to choose a home without an HOA. They are out there, and you can find one if you work with a Realtor that is knowledgeable and respected in your area.
11. Attend a meeting if you can.
Since the HOA is going to have so much influence on your life, it is advisable to attend a meeting every once in a while. Try sitting in at least once before you make your final decision.
From personal experience, I can tell you that living in one homeowner’s association to the next can be vastly different. Not only have I been selling real estate for over thirty-one years, but I also own property in Florida and Maine.
In one location the condo association is tiny, in the other, it is quite large. These two places could not be more different. The point is don’t assume that because you have lived in one homeowner’s association, you’ll be happy. Always ask a lot of questions to increase the odds you’ll be a happy camper.