A homeowners association, or HOA, is an organization formed by real estate developers in most neighborhoods in the United States. HOAs help the developer sell houses and manage them. The ownership of the organization is transferred to the homeowners after all the lots in the subdivision are sold.
If you are buying a house in a neighborhood with an HOA, joining it is mandatory. The organization comes with many rules and regulations that all residents must obey, which explains why many people prefer a community with no HOA.
On the other side, it comes with a lot of perks and positives as well. The rules enforced on home upgrades and maintenance keep the properties’ high value and preserve the neighborhood’s general appeal.
Additionally, the association provides many amenities for the community, such as pools, tennis courts, green spaces, walking trails, and much more.
If you are trying to decide whether buying a house with an HOA is right, you should follow these tips :
1- Ask yourself the right questions :
HOAs are known for being too restricting, which is why it’s important to know what to expect. Before considering any neighborhood, ask the locals about the rules and restrictions of the homeowners association. You don’t want someone telling you not to paint your house or change the lawn.
Find out what’s important to you and ask yourself the right questions:
- Are you okay with obeying rules and restrictions and not be able to make certain changes to your house?
- Are you willing to pay the association’s fees?
- What common spaces do you want in your neighborhood (pool, park, or tennis courts)?
Once you answer these questions and figure out what you want, ask your potential HOA if they care about the same things.
What are the rules and regulations?
Homeowners associations have a say in everything, from what color you can paint your house to whether you can have a basketball hoop for your children.
The rules might be beneficial for you sometimes as they will keep your neighborhoods from building additions. But, they will also stop you from displaying your favorite plants in your garden or having a cute mailbox.
What are the additional costs?
The homeowners association’s fees are mandatory and not optional. You might as well consider them part of your mortgage. The board can even increase the costs, and you will be obliged to pay them. You should find out about the fees to decide if you afford to live in the neighborhood.
However, sometimes the fees you pay do not give you access to the pool or the golf course, which is why you should double-check with the board. If you live in a condo, you should find out if the HOA is responsible for the roof before hiring a roofer yourself. Make sure you know what they cover and what you have to take care of yourself.
What’s their funding?
Homeowners associations usually have a financial account that allows them to maintain the neighborhood. If that account doesn’t have enough money, things will start falling apart, and repairs will not happen.
Who’s on the board?
If you like to do things with precision, having a board that makes sure the rules are obeyed will be beneficial for you. However, if you don’t want too many regulations, you will not like the drill sergeant.
So, Are you comfortable with authority?
2 – Find out about the reserve fund
The reserve fund is probably the reason you pay the extra fees, and it’s an essential part of your HOA. The reserve fund ensures that the association can make repairs to common areas.
You should think of it as a savings account or an emergency fund for the neighborhood.
How much money should be in the reserve fund?
Your HOA conducts a reserve study that tells them how much money they’ll need to make repairs and when it should be done. For example, if they know that the building needs repainting in 20 years that will cost $200,000, they will try to collect $10,000 per year from the residents. If you live in the neighborhood, you need to put money in the reserve fund plus the regular fees to maintain common amenities.
What if there isn’t enough money in the reserve fund?
The money for the reserve fund has to come from somewhere. If your board doesn’t ask you for additional fees, you should expect a sudden rise in the usual fees or special assessments to pay for the repairs.
Ask about the finances before you buy
As a potential homebuyer, you can ask about the HOA’s fees and regulations before you purchase. You can even hire a professional to see if they are well managing the money. You can also ask the residents about their opinions on the association and if it’s well run.
3 – How can you improve the neighborhood?
Once you purchase your home, there will be some improvements that you’d like to see around. One of the many pros of having a homeowners association is that anyone can run for the board. However, there are many things to take into consideration before running for the board :
Why do you want to be on the board? Running for board means you’ll be working with other people to help improve your community. So if you are thinking about it from a strictly personal perspective, it’s probably not your best option.
Do you have enough time? Being on the board means attending meetings and committing to many things, so make sure you have enough time to deal with everything.
Do you understand all the rules? As an authority figure in the neighborhood, residents will expect you to know all the regulations and to enforce them. So, you need to make sure you fully understand the rules before you start campaigning.
If you are buying a house in a neighborhood with an HOA, educate yourself first. If you decide to run for the board and be an influencer in your community, understand all the rules and regulations, and get ready to be a rule enforcer.