If you’re considering the purchase of a condominium, home in a gated community or property that’s part of a planned development, it’s possible you’ll be obligated to join the homeowners association (HOA). What is a HOA?
A homeowner’s association is an organization that’s typically put in place by the developer of a community. The HOA is responsible for managing and promoting the sale of properties, as well as for maintaining the grounds and buildings in the neighborhood . HOAs are able to do this because they require residents to pay fees – generally ranging from $200 to $500 based on the value of the properties in the community.
Here are 5 things you should consider before putting an offer on a home that will require HOA membership.
1. Covenants, conditions and restrictions (CC&R). Most HOAs have CC&R policies that outline rules and regulations by which residents must abide. For example, the color options for painting your home, what recreational vehicles you can have parked on your property and yard maintenance regulations could all be included in your HOA’s CC&R policies.
2. Know what your fees cover. HOA fees can cover a range of community expenses – upkeep of recreational areas, parking, security and, occasionally, certain utilities. Be sure you have a thorough understanding of what your HOA fees will cover before signing a contract on the property.
3. Know your HOA. Try and attend a HOA meeting or contact members of the board of directors before deciding to buy the property. Is the HOA self – managed or will there be fees to cover the management of the association by an outside party? What are the projected increases in HOA fees for the next few years and how are increases set?
4. Ask about your HOA’s reserve and request information regarding the most recent reserve study. A certain amount of funding should be put aside each month to cover unexpected expenses, such as repairs of common grounds, repairs covered under contracts and security. A reserve study shows the HOA what they should be setting aside – request information about this before buying.
5. Self – assess. If you’re a homeowner who desires full freedom when it comes to your property, you may not be the best candidate for HOA membership. Weigh the benefits a HOA offers against the cons – property maintenance and community supervision versus required fees and rules by which homeowners must abide.
There are positive and negative aspects involved with homeowners associations. Before you commit to purchasing a property requiring the homeowner’s membership to a HOA, speak with your realtor. A realtor can help you understand the ins and outs of the HOA policy and can answer questions that will help you decide if a HOA is right for you.
