A Homeowners Association, HOA, manages properties that include condominiums, townhomes, Villa’s, planned single-family developments and mobile home parks. Usually a non-profit corporation an HOA offers a vehicle to manage property after the developer finishes building and selling units in the development. An HOA leaves a management infrastructure in place to see to the common areas, buildings and amenities of the property.
What is a HOA and what does it do?
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If you buy a home in a community with an HOA, you will be required to pay a fee that is for the maintenance of buildings, in some cases, upkeep of common areas, and facilities, such as pools, tennis courts and other community amenities. If you are purchasing a home that requires you to be a member of an HOA, then you should be aware of what a HOA is and is not.
Homeowners, who are members of the association and have been elected by other homeowners to sit on the HOA board, often run HOA’s. Some properties have both and HOA and property manager, hired by them to take care of day-to-day maintenance of the property.
When you buy, a property that has an HOA the monthly fee that you pay to this association can be from $200 and $400 per month, or more depending on how upscale the property is. The more amenities the higher the HOA fees are likely to be for homeowners. If there is a major repair on the property, like an elevator or new roof and the HOA doesn’t have funds for the repair, they can assess homeowners for an equal portion of the cost of the repair. Hidden assessments can be costly and a financial hit to some homeowners.
Make sure you know the Rules
Called covenants, conditions and restrictions (CC&R’s) the rules of an HOA are for you and your home. They can be so refined to cover the architecture and color of your home, the plants used in your landscaping, whether you can have a pet, or sublet your property and may other restrictions that can impede your enjoyment of life if you’re the sort that doesn’t like be subject to a bevy of rules and regulations. On the other hand, the rules of an HOA and the CC&R’s that homeowners are subject to can add value to your property if the HOA is operated properly.
Check for Compliance
If you are buying a home with an HOA check the home to make sure that it is in compliance with the CC&R’s for the community. If the property is not, you may be required to spend thousands of dollars after purchase for it to comply.
Is an HOA for You?
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If you are considering the purchase of a home with an HOA, carefully consider if one is for you. Being a member of an HOA can be a frustrating, sometimes fruitless endeavor but a well-run HOA can add to the quality of life of a community and maintain property values. Ask the neighbors before you buy about the community HOA, if possible. They will be a good barometer on how it is run. The person selling to you will tell you that all is well in HOA land, even if it’s not.
Not for everyone, an HOA may not suit you if you don’t want a committee of neighbors telling you that you can’t paint your front door red, or fly the flag of your choosing. If you don’t like being told what to do an HOA is not for you.
Due Diligence required when an HOA is Involved
Although a seller is required to disclose knowledge of changes regarding HOA’s, in some states, other states have no requirements. If that is the case it is better to be safe than sorry and gather all of the information about the property you wish to buy, including the HOA in order to make an informed decision.
Check the Fees
HOA fees will vary from one community to the next so if you are looking at properties make sure you know the fee before you purchase. Because it will be a monthly cost, over and above your mortgage, taxes and insurance for which you will be responsible. Check the following, too, so that you know how the HOA can affect you.
- What due the monthly dues cover? Do they cover lawn care, painting, and trash pick-up, WiFi, water, cable or any other utilities or amenities?
- How often are HOA fee increases?
- How are the increases determined?
- Does the HOA have a reserve fund for emergencies and how much is it.
- If you can do so, get a list of special assessments that have been made in the past and ones that are planned for the future.
- Get a list of HOA dues for the last ten years, if possible.
What is a HOA?
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In a perfect world, an HOA is a group up people tasked with taking caring of the investment of the group who owns the common areas of the building and land where you and your neighbors live. A good HOA board will take the fees you pay and add value to the entire property by enforcing the rules and regulations under which everyone lives and seeing that maintenance is performed properly.
The other side is the HOA board that squanders everyone’s fees through mismanagement of the funds. This can require assessments from homeowners on repairs that should have been adequately funded. Before you buy in a community that requires your membership in an HOA, do your homework to see how it can affect your life once you have become a part of the community.
2 Point Highlight
A Homeowners Association, HOA, manages properties that include condominiums, townhomes, Villa’s, planned single-family developments and mobile home parks.
Usually a non-profit corporation an HOA offers a vehicle to manage property after the developer finishes building and selling units in the development.
