Buying a Home with an HOA: 5 Things to Consider
A homeowners association, or HOA, is an organization that establishes and enforces guidelines in planned communities or condominiums. The HOA is usually responsible for the maintenance of common areas, some insurance coverage, and deed restrictions.
Most buyers of homes or units within an HOA will automatically become members of the HOA, which means they will pay dues and be subject to the association’s rules and regulations. Some homeowners association fees can be much higher than others, and some HOAs’ rules and regulations are more stringent than others.
And that means a home within an HOA might not be right for every home buyer. Here are five things to consider when looking at homes that come with an HOA:
1. What are the costs?
This means learning the monthly, quarterly or annual dues and building those costs into the home purchase. These dues can’t be avoided, and sometimes add quite a bit to your house payments. Also, make sure the property you’re buying is already paid up. If not, there might be a lien on the property, and/or the seller might be unwilling to pay what’s in arrears and try to make the home buyer assume past due amounts.
2. Make sure the home is already in compliance
Again, most HOAs establish rules and regulations, including deed restrictions that may prohibit certain colors, building materials, out-buildings, etc. Not every homeowner complies, however, and a new buyer might get stuck with a prohibited color of siding, trees that are too tall, or a shed that’s not supposed to be there. Just as you don’t want to assume a seller’s unpaid dues, no home buyer should want to take on a home that is out of compliance.
3. What’s covered?
The HOA will be required to carry some sort of insurance, and it makes sense to know what that covers. Is it only liability coverage for the area playground or pool? If properties are attached, does insurance cover the exterior of the structures? Also, do your dues automatically give you access to that pool or playground, or is there an additional fee? Do your dues provide anything like basic cable TV or internet? If you are paying dues, you should know what they cover.
4. Check the books
It might sound like a hassle, but ask to see the association’s financial records. From time to time, an HOA will assess owners for upcoming projects, such as maintenance to common areas, new sidewalks, or other needed repairs. Does this happen regularly? How big are these assessments? Is there one planned in the near future? Also, examine how much cash in reserve the association has. If reserves are low, the next assessment could be high.
5. What’s your personality?
Homeowners associations can do a lot of good, and one of the main goals is usually to protect home values in an area by keeping things neat and uniform. But the tradeoff is a certain lack of freedom. You probably won’t, for example, be able to paint your house bright pink or keep your RV in the driveway year-round. If you’re not the kind of person who can handle being told what to do, then an HOA might not be an easy adjustment to make.
A home that’s within a homeowners association is going to come with some pros and cons. A home buyer has to weigh those pros – access to amenities, insurance coverage, property value maintenance – against cons (costs, restrictions) and determine if the benefit is worth the cost.
It’s an individual decision that will be different from buyer to buyer, but it’s a must to know everything to consider heading into that decision.
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