What You Need To Know About Living In An HOA
Explore key factors of buying in an HOA community: rules, fees, amenities, financial practices, legalities, insurance, and potential benefits.
What you need to know if you’re considering buying in an HOA community!
Homeowners Associations (HOAs) are entities that enforce the rules for a community. These are common in planned developments. If you decide to own a home in a community with an HOA, by default you agree to join the association and adhere to their covenants, conditions, and restrictions (CC&Rs). Before you decide on a home, especially if it has an HOA, you should consider the following seven factors.
HOA COVENANTS, CONDITIONS AND RESTRICTIONS
The document that the HOA creates and enforces is the CC&R. Simply put, it provides a roadmap to homeowners living within HOA communities of what is expected and permitted in their neighborhood. Before committing to a property, be sure to ask your real estate agent for the CC&R’s. Since the rules and regulations differ from one HOA to the next, don’t rely on second-hand information or past experience with other HOAs. Some examples of the restrictions and rules you may see are limits or requirements for yard decoration, yard work, fencing height and placement, parking RVs, etc.
An HOA needs funds to operate. But where does it come from? Fees are paid by community members and some associations can be quite high. In addition to knowing the HOA fees for the property you are interested in, you should also find out how often fees have increased over time and by how much. HOA fees are usually mapped out a few years in advance using estimates of the future costs of utilities, labor, and maintenance.
Find out what your fees are paying for and determine how that will affect your finances. For instance, do you have to pay for trash pickup? Utilities? Are cable and internet services included? Remember that you are paying for the perks such as the pool or park area, even if you do not use them.
HOA MONEY MANAGEMENT
An HOA may adopt one of several approaches to financial management. These choices mainly affect how it funds unexpected expenses or capital expenditures. Some associations might keep a large cash reserve to pay for maintenance, repairs, or other issues. Others might have lower fees, relying on special assessments to cover unexpected expenses.
HOA FEES AND YOUR POTENTIAL MORTGAGE
Similar to taxes and insurance, lenders will also factor the HOA fees into your debt-to-income ratio to determine how large a mortgage you can afford. Higher HOA fees could leave you with a smaller amount to spend on a house.
HOA LEGAL POWERS
In any community, disagreements arise within a planned development, sometimes over members breaking the rules. Before you commit, explore how rules are set and enforced and what penalties are imposed against rule-breakers.
Insurance provisions within a planned development can be divided. For example, the HOA may cover some perils or areas, with homeowners held responsible for the coverage of others. Check whether the HOA provides additional coverage as a perk for owning within the development.
THE GOOD NEWS?
Living in a Homeowners Association (HOA) can have several positives, which may vary depending on the specific HOA and its rules. Here are some of the potential benefits:
- Community amenities: HOAs often maintain common areas, such as parks, swimming pools, gyms, clubhouses, and playgrounds, which can enhance the quality of life for residents and provide recreational opportunities.
- Property maintenance: HOAs typically take care of common area maintenance, including landscaping, snow removal, and exterior repairs, ensuring a well-kept and aesthetically pleasing neighborhood.
- Property value preservation: HOAs enforce rules and standards that promote uniformity and consistency in the neighborhood's appearance, which can positively impact property values over time.
- Dispute resolution: HOAs can help mediate disputes between neighbors, providing a structured process to address conflicts related to noise, parking, or property boundaries.
- Enhanced security: Some HOAs may invest in security measures like gated entrances, security patrols, or surveillance cameras, which can contribute to a sense of safety within the community.
- Rules and regulations: HOAs establish community guidelines to maintain order and prevent extreme deviations that might negatively impact property values or disrupt the community's harmony.
- Social opportunities: HOAs often organize community events, gatherings, and social activities, creating opportunities for residents to get to know their neighbors and foster a sense of community.
- Budgeting and financial management: HOAs manage common expenses and collect dues from homeowners to fund maintenance and community services, ensuring resources are allocated effectively and transparently.Access to professional management: Larger HOAs may hire professional management companies to handle administrative tasks and ensure efficient operation, which can lead to a well-organized and professionally run community.