HOA Pros and Cons
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Something that must be taken into consideration when looking to purchase a home is the role of any homeowner associations, or HOAs, in the community. As with anything there are both pros and cons to them, but never fear! I’ve got you covered with everything you need to know about how to best navigate HOAs if you find yourself considering a home that has one.
Pros of an HOA
When buyers look at a house they are also evaluating a neighborhood. Tidy yards as well as rules and regulations in a neighborhood can help your home’s value and keep the curb appeal of the community top-notch. An HOA may cover items like maintenance of private roads, security gates, and signage for the neighborhood. They may also maintain a community beach, club house, or park that all members can enjoy. And since they have a governing document that every neighbor “buys into” when they purchase a home in that homeowners association, they can also be a mediator for small disputes. Typically an HOA requires a fee to live in the community, and these can vary a lot depending on what they offer. For example, condo associations usually cost more since the HOA takes care of some utilities, building exteriors, and landscaping.
Cons of an HOA
Rules. You have to follow a set of rules outlined in the community’s Covenants, Conditions, and Restrictions, commonly known as CC&Rs. When you get upset that someone needs to approve something on your property, you have to remember you signed up for this.
Important Things to Look For
Your real estate contract should have an HOA contingency so that you have an opportunity to look at the health, rules, and regulations of the HOA. This is typically a five-day review period, and in a normal market you can exit the contract if you disapprove of anything in the HOA documents.
You will want to look at recent meeting minutes (I recommend from the last six months) and annual minutes, since these will give you an idea of what the HOA is working on as well as future assessments, financial health, or legal issues they may be having. These will also give you insight into things like how they deal with complaints and any problems homeowners are having.
Another item you’ll want to explore is the financial health of the HOA and whether they have the reserves to maintain what the community needs, such as roads, sewer, a community well, gates, security, and community parks or beaches. Also ask about special assessments or big projects coming up in the future so you can plan on any expenses above and beyond the normal HOA fees. Typically fees do go up nominally each year, but it’s a very slow process and must be voted on.
Does the HOA have an Architectural Control Committee (ACC) that requires you to get approval for any changes to your house? For example, painting the exterior, building a deck, adding an outbuilding, or expanding your home. What are the setbacks from your property lines? As a buyer can you do what you want on the property for YOUR highest and best use? Keep in mind the ACC will have a governing document for you to review as well.
Based on what your plans are for the property, some other items to consider include: Is RV parking allowed? What about overnight guests’ cars? Rules on street parking and driveway parking? How strict is access to shared community spaces or neighborhood parks? Are short-term rentals allowed in the neighborhood, or rentals of any type? Can you have chickens?
If you are in a heated market like it has been for the past 18 months, when you are looking at neighborhoods or are interested in a particular home, ask your agent to provide you with this documentation in advance of making an offer. That way you have time to review it for the items most important to you and you can make an offer confidently and waive any contingencies, making your offer stronger.
As you determine whether or not you want to buy a home that’s part of an HOA, here are a few closing thoughts to consider. Some neighborhoods have recorded CC&Rs on title BUT they may not have an active HOA to enforce the rules. Or they might have an HOA but only to enforce rules related to shared spaces, like a community beach. In addition, CC&Rs can expire so they may not still be active, and some HOAs may show up on a house but there are no fees collected or no active governing body. Connected agents in your community will have files of these documents for neighborhoods they are familiar with, and this knowledge can be a huge asset in making a buyer feel more comfortable if they know how strict an HOA is.