Buying Tips August 1, 2019

What’s the Deal with HOAs?

What is an HOA?

In the very simplest of terms, an HOA, or Home Owners Association, is an organization founded by real estate developers as a means to manage a community of homes, townhouses, and condos.

According to the Community Associations Institute, over 26 million homes in the U.S. are governed by HOAs and are “given the authority to enforce the covenants, conditions, and restrictions as well as manage the common elements of a development.”

Many buyers are resistant to the idea of an HOA having control over the way they manage and showcase their home, but many are flocking to the idea of having the added amenities and full-time maintenance that come along with such an arrangement.  HOAs take in fees in order to help maintain the common areas and community services, and often come with access to things like community pools, community centers, and even tennis courts.  While homeowners must pay dues when living in an HOA community, there is an added advantage that the payment can be figured in to the mortgage lender’s assessment.

HOA fees can range anywhere between $100/year up to $1,000/month, depending on the community the home is in.  Higher-end communities are likely to have higher dues but come with more amenities—as HOA fees are put in place to protect property value, it makes sense that the higher the property value, the higher the HOA fee.  Regulations are put in place in these communities to ensure cohesiveness and unity, so the neighborhood always looks presentable and pleasant.  Many higher-end homes on the market will fall under this category—with an HOA being even more prevalent in gated communities.

So, are there any downsides to an HOA?

There are pros and cons when it comes to almost anything in life that involves a decision—so certainly there are many downsides alongside the upsides when it comes to considering a property with an HOA.

An HOA sets the standards for homes in a community, so the association is responsible for determining what is acceptable in terms of a home’s appearance.  A community HOA can create rules and regulations for elements of a home including:

  • Paint color
  • Parking
  • Lawn maintenance
  • Landscaping
  • Exterior alterations
  • Exterior decorations
  • Add-ons—like sheds, pools, spas, etc.

Along with these regulations comes a recurring fee—a mandatory membership fee that’s required monthly or annually, depending on the lender/association.  Fees tied to an HOA can fluctuate, but a board must vote on any changes before they are made.  These regulations and fees can be a deterrent for potential buyers off the bat, as many people would rather have full control over their private property and save themselves the fees that come with feeling so restricted.

If a buyer comes to the conclusion that they don’t mind the fees and regulations, there are still a few other problems that might come up as more is learned about what an HOA entails.

For instance, an HOA can be quite overbearing, leaving the owner to feel as though their autonomy as a homeowner has been taken.  HOAs often have heavily mandated restrictions on above-ground pools, renting, and even pets.  There is a very good chance that an owner would be restricted from having a dog if an HOA decided pets who spend times outdoors are not permitted.

Because an HOA takes in fees to keep up the physical appearance of a community, owners within the HOA will likely see a lot of red tape when it comes to any type of modification to the exterior of the home.  Even something as simple as a swing set can go against the rules put in place by the HOA.  This red tape can extend itself to more than just exterior updates and modifications, it can extend to financial prospects too.  An HOA has every right to limit an owner from renting out the property—but even if renting is allowed, the added price of the HOA fee to the rental fee can be a major deterrent.

One of the biggest issues buyers tend to have with HOAs is the financial burden of knowing that when the HOA has a problem, it becomes the homeowner’s problem too.  If legal problems should come up, or budgetary initiatives, the cost of representation is passed to the homeowners of the community.  An HOA can freely throw assessments at homeowners if it needs money to cover expenditures or to make up for lost money.  To top it off, if an HOA is infiltrated by bad management practices, it can be a really difficult problem to reverse.  Replace a member of an HOA board can take a lot of time and a lot money, but if problems persist, it’s an important step to take to redirect the success of the association.

So, is there anything good about an HOA?

You might be freaking out after reading about the negative aspects that could arise with an HOA—but fear not!  There are tons of positives that come along with an HOA too!

First off, the amenities can be unbelievable.  Many communities with an HOA offer special conveniences beyond simple maintenance.  These amenities can include (but are not limited to):

  • Tennis courts
  • Pool
  • Community center
  • Fitness centers
  • Gardens

The fees taken in by an HOA help to manage these common areas and properties within the community.  The preservation on the amenities alone can cost a lot and can include everything from landscaping to pool supplies, and even front gates and tennis court needs—but HOA dues also help pay for the general upkeep and appearance of the neighborhood.  There are rules in place to prevent property neglect by neighbors, ensuring no overgrowth or unsightly items in yards.  In turn, with a good HOA and proper diligence, the property values in the community will remain intact.

Another major benefit to having an HOA is the streamlined appearance the neighborhood will gain from it.  Since the HOA makes the rules pertaining to paint colors, add-ons, parking, and landscaping, it’s a fair bet that the community will appear well preserved and uniform.  A streamlined look throughout a community is a huge selling point and could act as a huge benefit in a future resale.  Property values are essentially maintained because the neighborhood always looks good.  Add to that the focus on maintaining a modernized and streamline look builds a much deeper sense of community because there is an awareness that everyone plays a role in the success of an HOA.  Having the perspective that everyone is “in this together” ensures everyone works towards a common goal, and in the process, a community is created.

However, for those moments when someone in the community might be lacking, there are safeguards put in place by the association to guarantee homeowners do not have to personally address the issue.  An HOA will help handle disputes with neighbors who might be going against the rules of the association.  Whether it be a noisy dog, loud parties, or eyesores in a yard, a representative from an HOA will take the lead in addressing the concern without the homeowner having to lift a finger.

An HOA will be there to represent a homeowner in the best and worst of times.  It will ensure that your concerns are addressed, as they pertain to the neighborhood—but it will also give homeowners a sense of security that their investment will be fruitful when the time comes to sell.

It is completely reasonable why a homeowner would struggle with the idea that they would pay an organization to have control over the property they themselves own.  It can be hard to wrap the mind around not having complete autonomy when it comes to making changes to a massive investment, like a home, without the okay from an outside source—but for many people it’s a blessing.

As it is laid out above, there are some concessions a homeowner must make (if they are involved in an HOA) that many buyers may see as a disadvantage.  On the other side of that, there are buyers who love the idea of giving authority over to an outside source if it means their property value will remain high and the community they live within will be streamlined and pleasant in appearance.

Really, at the core of it all, whether an HOA is a plus or a minus is up to the buyer’s personal preference.  It all boils down to what the buyer sees as beneficial to their own investment.  Managing a property can be tough, but with the right foundation of knowledge, and a better understanding of what comes along with an HOA, a buyer can make an educated decision as to what works best for their own lifestyle—and isn’t a peace of mind something we could all use?