What is an HOA?
HOA, which stands for homeowner association, is a private organization and the governing body of a subdivision, condominium or townhouse complex, or any planned development. It is run by a board of volunteers who are residents of the community. The HOA makes and enforces the rules for the properties and their residents, helps manage, organize, and preserve the community, as well as protects and increases property values.
If you become a homeowner in a neighborhood with an HOA, you automatically become a member. This means you’ll agree to their terms, owe them monthly or yearly payments, and be able to enjoy the shared amenities and services they provide.
How does an HOA work?
HOAs usually form when a community is built. When a developer acquires land for a planned community, they create the homeowners association and then hand it off to the people who buy houses in that community. The homeowners vote for a board of directors to run the association. The board then decides on the community’s features and services, collects monthly, quarterly, or annual fees to cover the expenses, and sets community rules and standards. These rules are described in a governing document called a Declaration of Covenants, Conditions, and Restrictions or CC&Rs.
Although some states have statutes that govern how HOAs run, most states do not oversee or control how HOAs function. Instead, many homeowner associations are governed through voting and member participation.
5 crucial things to know before buying a home in a neighborhood with an HOA
Living in a community run by an HOA can have its pros and cons. Here’s what you need to know before making that purchase!
The rules and regulations, often referred to as the CC&Rs, often cover all kinds of community standards and violations. Request copies of these documents and read through them carefully ahead of time. It will help you become familiar with the rules concerning the following:
Pet regulations – There may be limitations on the type of pets, breed, size, and how many pets or animals you can have. You might be looking for a house with a huge backyard where you can raise chickens or bees, for example, but your HOA might have some restrictions when it comes to any backyard farming.
Parking – Be mindful of any rules regarding parking overnight on the street, leaving your garage door open for an extended period of time, or parking for any commercial vehicles and RVs or trailers.
Property modifications – Some changes you might want to make may require approval from the board and/or your neighbors. Likewise, some property additions might not be allowed at all.
Leasing or renting restrictions – You may need to get permission from the HOA board to be able to rent the home. Or you may be required to join a waitlist if there are already too many homes in the neighborhood that are being rented. This is crucial if you want to use your home as a future investment property.
Don’t forget to also explore any rules regarding:
Noise levels
Yard decorations
Yard work and maintenance
Fencing height and placement
Exterior paint colors and other design choices
Use of shared amenities and common areas (pools, parks, community centers, basketball courts, etc.)
Before joining a neighborhood with an HOA, it’s crucial to get a clear understanding of the financial obligations that come with it. One of your responsibilities is to pay HOA fees, which are regular payments made by members to cover various expenses such as maintenance, repairs, and upkeep of the common amenities.
By being aware of exactly how much these dues are and how often you need to pay them, you can calculate them into your total monthly costs. You can then determine whether the HOA fees align with your financial capabilities and expectations.
Furthermore, you should also review the HOA’s financial statements and keep an eye out for the association’s financial health. These documents provide insights into the association’s income, expenses, and reserves. You’d want to ensure that the HOA has a well-maintained reserve fund that can be used to handle unexpected expenses, such as repairs and emergencies.
It’s also a good idea to review the minutes of recent HOA board meetings to become familiar with the issues they’re discussing, including any planned assessments, common homeowner requests, and the timeline for completion of small and large projects.
HOA fees also vary depending on the range of amenities and services that the community offers. When considering a home within an HOA, check what amenities are available and how they could affect your membership. Is there a community pool? Do they have playgrounds for kids? Are there basketball or tennis courts? These extras can be beneficial to your daily life and help cultivate a vibrant sense of community.
However, remember to be vigilant when it comes to the quality and upkeep of these amenities. It’s not just important that they are available and accessible; also check whether these spaces are being kept clean, well-maintained, and in safe condition.
In addition to amenities, don’t forget to check the scope of services provided by the association. These may include tasks such as landscaping, trash collection, snow removal, security, and other maintenance and repair duties.
Every community’s HOA works differently. Typically, people within the community elect the members that they believe will best represent community interests, making up the board of directors or a similar governing body. But some HOAs are professionally run.
Ask your real estate agent or a community representative for the HOA’s contact information so you can ask them questions directly. This extra step will help you understand how the HOA board communicates, how they handle disputes, their decision-making process, and the level of influence and input individual homeowners have in shaping the community’s policies and rules. Are homeowners encouraged to attend board meetings and are they able to voice their concerns and opinions? You can then get a glimpse of the sense of transparency and inclusivity that the community fosters.
If the association in the community you’re interested in is being managed professionally by a private company, you might want to investigate its reputation. You might want to avoid investing in a property in a community whose HOA is involved in frequent drama and petty politics.
Understand that HOAs are legal entities and that they have the legal right to enforce rules and issue punishments for rule-breakers. Before settling in a particular neighborhood governed by an HOA, explore how rules are set and enforced, what penalties are in place for not following them, and the process for resolving disputes.
In some HOAs, the consequences may include being fined or sued, or worse, having the HOA place a lien on your property or foreclose on your property.