Four Things to Know About an HOA
So you’re about seal the deal and sign on the many dotted lines to become a homeowner. But there’s a caveat—the property has an HOA tied to it. Is that a deal-breaker for you? Or is it what you’ve wanted all along, you just didn’t
know it because HOA sounded like a remnant of FDR’s New Deal and you’ve only just discovered what those three letters stand for.
Do you go through with the purchase? Is an HOA great for you and your family? Or is it a burden?
That’s the question. And we think this looks like a great time to break down the details on HOAs so that you can make an informed decision. After all, while homebuying season is fun all year-round, spring and summer are some of the busiest times for it.
What the H Is an HOA?
HOA stands for Home Owner’s Association. It’s a neighborhood entity that acts as its own small, community government, with residents who are part of it all agreeing to abide by the rules.
Often HOAs are run by a management company with neighborhood volunteers working as leaders or liaisons between the neighborhood and the management company. Some HOAs are entirely run by the management company, and a portion of your HOA dues pay for the management company.
Many modern planned communities or developments, such as condominiums, townhouses, and single-family homes, now have an HOA.
Like most things in life, the HOA can be both an excellent feature or a drag on your enjoyment of your new home. What determines this can be something as simple as how well you follow rules, or how the management company runs things.
Looking at the pros and cons of the HOA as a whole may help you decide if your vote is yay or nay on buying into a neighborhood with or without an HOA.
Protects Property Values
Many a homeowner swears by the efficacy of the HOA. Homeowners that belong to a neighborhood HOA agree to abide by the covenants, conditions, and restrictions (CC&R). This is a set of rules that were determined by homeowners or lawyers who were hired
by the management company who had the initial say in what the future neighborhood would look like.
Depending on how you see yourself, the HOA may be just the thing to keep you happy by ensuring that you won’t succumb to a temptation to paint your house hot pink on a whim. It will also keep your neighbors in line.
But, is that a good thing? Though the monthly fees that some HOAs charge are extremely high, recent research shows that often the presence of an HOA increases how much a home sells for because there’s some guarantee that your neighbor’s home won’t fall into disrepair or they won’t be parking a gutted vehicle in the front driveway for months on end. These sort of eye-sores can damage the property value of the homes around them. An HOA is one way to be certain no one will add this sort of . . . er, flavor to your neighborhood.
Creates Neighborhood Uniformity
While the presence of an HOA can limit individualism in the exterior of homes and yards, you also have the comfort of knowing that your neighborhood will appear pretty decent looking for quite a while. At least, as long as your neighbors respect the rules.
Without an HOA, a neighborhood can appear to be a hodgepodge of various styles and tastes, sometimes bordering on wild tastes and whatever so-and-so up the street is into at the moment (HAM radio? Boating and RV-ing and leaving behemoths parked out at the curb or in the driveway for months at a time?). There’s a price to freedom.
So, the benefit of the HOA rules often means that everything looks relatively uniform and well-kept. But it can also mean that there’s less opportunity for individuality. If you find it fun to drive through neighborhoods that are beautifully unique and want to live in a place like that, an HOA might not be an ideal fit for you.
Offer Communal/Shared Amenities
Every neighborhood and HOA is different, but your dues might be paying for the presence of communal space. This could be as nice as a pool, tennis courts, and basketball courts, or it might be as simple as a small park. Some HOAs offer security in the
form of a guarded gate.
Whatever your potential HOA includes, be sure it’s what you want and that it will add to your way of life rather than detract from it. Pools and tennis courts will have hours of operation. Do they fit into your schedule? If not, then perhaps the added expense isn’t currently right for you.
Possibly Create Extra Neighborhood Drama
Because HOAs are usually run by people, and because the HOA itself is limited in what it can do to enforce its own CC&Rs, the potential for drama can run high in neighborhoods and condos with HOAs.
For example, a resident may decide to paint their front door a gorgeous fluorescent green regardless of what the CC&Rs say. Depending on what power the HOA has been granted by the CC&Rs, enforcement may run anywhere from fines to liens against the home of the person violating the rules. But that’s not always enough to guarantee that others will abide by the restrictions.
And knowing that a neighbor is in trouble for a violation can add to the general sense of drama surrounding your home. You may side with them, or against them, but even having to think about it may be too much for your peace of mind.
Before you finalize the purchase of your home, we heartily recommend obtaining a copy of the CC&Rs of the future home if it has an HOA. This can be done through your real estate agent. Whatever happens, find out the monthly dues before you buy. Those
can vary from year to year and are more likely to go up than down, and they won’t change as interest rates change or possibly go away like mortgage insurance can.
I'm a first-time homebuyer.
- 9 Homeowner Tasks to Prepare for Winter
- Read Between the Lines
- Buying a House: Right Size vs. Right Budget
- 4 Things to Know About an HOA
- The Top Tax Benefits of Homeownership
- Purchase an Existing Home or a New Build?
- 4 First-time Homebuyer Mistakes
- 5 Tips for First-time Homebuyers
- Which Loan Program is Right for You?
- Comparison of 4 Popular Loan Types
- Thinking Outside-the-box to Get Inside a Home (Infographic)