What You Should Know About Homeowners’ Associations

If you’re a home buyer looking to buy a townhome, condo or single-family home in a planned development, there are a few things that you need to know about HOAs before you invest.  Homeowners’ Associations offer many benefits, but there are some restrictions, as well. Homeowners must abide by a set of rules, sometimes a strict set of rules, that you agree to when you purchase a property within a given community.  So, what is it exactly that you need to be aware of before you buy into a property belonging to an HOA? First, you need to understand what an HOA is.

An HOA, or homeowners’ association, is an organization that determines the rules of a community that it manages.  It’s responsible for ensuring that each resident follows set community rules, and they have the responsibility of enforcing those rules.  For instance, some enforce rules about street parking. In this situation, if you are found to be parked on the street “unlawfully,” the HOA will give you a warning and ultimately charge you with a fee if you don’t take “corrective” measures.  

Residents within an HOA-run community must also pay fees into the association each month.  This collection is done to maintain a cash reserve for community repairs. The overall idea of having an HOA is to help improve and maintain quality of life for the entire community and preserve the value of all properties within.  Of course, there are times when association ideals can be somewhat restrictive.

For many new homeowners, HOAs are not what they expected.  In fact, sometimes the feeling can be remorse when you find out that some HOAs are not there to make your life more comfortable or easy, as there are inevitably those board members out there who make it their mission to simply go around enforcing extreme rules.  So, to make sure you don’t find yourself if this situation, you must do your due diligence before purchasing a home with an HOA. Here’s what you need to know:

• Know the rules – Before you make an offer, find out what the rules of the HOA are.  After all, you can’t follow them unless you know them. Some HOAs have their rules listed online, but not all, so you should ask your Realtor® to get you a list to help you make a fully informed decision.  You also need to know what the consequences are to breaking those rules as well as how rules are both added and changed.
• Know the rental policy – If you’re buying an investment property, will you even be allowed to rent your property out?  There are sometimes restrictions placed on HOAs that limit the number of rental properties, so be sure to find out on which side yours falls.
• Know how changes and decisions are made – You always need to know how rules are made and changed within a community.  Does the majority rule? Do all homeowners have to agree? This is vital to knowing exactly how your lifestyle may or may not be controlled.
• Know your property’s compliance – Before you make an offer, you need to find out if the home you’re interested in is currently in compliance with HOA rules and regulations.  It’s entirely possible that you might buy a home only to discover that the house is already breaking the rules. This means that you will become responsible for making immediate changes or risk taking on the fines.  
• Know the fees – When buying into an HOA, especially a condo community, you need to know about the fees.  You’ll need to ask about things like cost comparisons to other communities, the process required to increase fees, the last time fees increased, what dues cover, if there are any hidden extra fees, etc.  
• Know your budget – You must think about how HOA fees will work with your budget.  Remember, these will be paid in addition to your mortgage, so you need to make certain that you can afford them.  Also, take the time to consider whether the cost of the fees is even worth the overall purchase to you.

HOAs can differ drastically from community to community, even state to state.  So, take the necessary time to do your homework, and weigh the pros and cons. After all, purchasing a home is all about the freedom of deciding how you want to live your life.