When you purchase real estate in a planned development, you are obligated to join that community’s homeowners’ association (HOA) and pay monthly or annual HOA fees for common areas’ upkeep. What is a homeowner’s association?
What Is a Homeowners Association?
A homeowners association is a membership organization run by a board of directors–usually neighborhood volunteers–that regulates and manages a building, set of attached homes, or a single-family neighborhood.
The HOA will set regulations governing various architectural issues, assess HOA fees–to be paid annually, quarterly or monthly, and sometimes through special assessment–that go toward a neighborhood’s upkeep.
In many cases, an HOA begins with a real estate developer, and the company might hire a community association manager to assist the board in its duties.
10 Things You Need to Know About HOAs
Learn the HOA’s rules. You may be able to find the HOA’s covenants, conditions, and restrictions (CC&Rs) online, as well as information about what happens if you violate a rule.
Make sure the home you want to buy is not out of compliance with HOA rules. Buying into an existing problem can be a headache. Find out what the rules are and whether you would have to make changes to the home to comply.
Assess environmental practices. If environmentally-friendly living is essential to you, be aware that some HOAs may dictate that you use fertilizers, pesticides, sprinkler systems, and whatever else it takes to keep your lawn picture-perfect. They may not allow xeriscaping (an environmentally friendly form of landscaping) and may limit gardens’ size, ban compost piles, and prevent you from installing solar panels.
Consider your temperament. Are you the type of person who hates authorities telling you what to do? If so, living in a community with an HOA may be a very frustrating experience for you. One of the significant benefits of homeownership is the ability to customize and alter the property to suit your needs, but HOA rules can interfere with this.
More of 10 Things You Need to Know About HOAs
Find out about fees. Fees will differ for each community. Because of this, you should make sure to ask your HOA the following questions:
How are HOA fee increases set?
How often do increases occur, and by how much have they historically risen?
Can you get a printed history of HOA dues by year for the last ten years?
Also, ask for a record of special assessments and ask if the HOA has plans for any special assessments. Note that economies of scale can mean that special assessments are higher in smaller HOAs.
Find out what the monthly dues cover. Will you still have to pay extra for garbage pickup? Is cable included?
Try to get a copy of the minutes from the last meeting or sit in on an HOA meeting before you buy. The meeting minutes can be very telling about the policies of the HOA. Be alert for potential drama. Power trips and petty politics can be an issue in some HOAs. Talk to some of the building’s current owners, if possible – preferably ones who are not on the HOA board and have lived in the community for several years. Some questions to ask:
What are the current and past conflicts?
What is the process for resolving any conflicts?
Has the HOA sued anyone? How was that resolved?
Final three of 10 Things You Need to Know About HOAs
Watch for under-management. Not all HOAs are over-managed. The opposite problem may be an HOA where no one cares, where no one has an interest in maintaining the building, making repairs, or hearing resident grievances. Residents may take turns serving as HOA president or randomly appoint someone, so prepare to serve in this role whether you want to or not.
Find out what kind of catastrophe insurance the HOA has on the building. Insurance is vital if you’re considering a condo or townhouse purchase and you live in an area that is prone to floods, earthquakes, blizzards, fires, tornadoes, hurricanes, or any other type of potential natural disaster – and that is virtually anywhere.
Consider the impact of HOA fees on your short- and long-term finances. A condo with high HOA fees might end up costing you as much as the house you don’t think you can afford.
Consider Renters. Renters can make up a large percent of condos. Find out if there is a problem with renters who disregard the HOA rules.
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