Home Owners Associations (HOAs) often get a bad reputation. But, they aren’t always bad! In fact, HOAs can provide a lot of benefits to homeowners. It’s important to know how to scout out an HOA as a buyer and also how to interact with your HOA when living in a home with one. HOAs are not all bad. You just need to know about yours! So, here’s everything you need to know about HOAs.
What is an HOA?
HOAs are established when the community is planned by a builder or developer and are typically mandatory as part of the purchase of your home. The builder or developer will have bylaws already in place as they are developing the community, however HOAs will eventually have a governance structure in place that can make changes to the by-laws over time if needed.
HOAs are there to take care of community assets like neighborhood landscaping, the community pool, the guard gate or the dog park if there is one. They are there primarily to protect the aesthetics of the community. Sometimes bylaws will enforce that homes have similar paint colors or windows, have regulations about your landscaping, or even enforce when your trashcans can be put out each week. The amount of rules or details within HOA bylaws will vary from one neighborhood to the next but are always self-governed by the community members.
Mandatory vs Voluntary HOAs
There are two types of HOAs: mandatory and voluntary. Mandatory HOAs are required to be a part of while you own your home. They more than likely have monthly or annual dues that are required as well. If you choose not to pay the HOA dues, the Association has the right to foreclose on your house the same way you can be foreclosed upon if you do not pay your taxes. You cannot opt out.
Voluntary HOAs are more like a volunteer community group for your neighborhood. They are more concerned with the culture of the neighborhood rather than enforcing bylaws for the aesthetics of the neighborhood. There’s typically a small fee to be a member of the group but again, it’s completely optional to be a part of. So, while you may benefit from not having to pay monthly or annual dues, there is also no one responsible for maintaining the aesthetics of the neighborhood.
How do HOAs affect the house buying process?
The biggest thing to take into consideration when buying a home is that HOA dues are going to affect your house buying budget. Dues are going to affect what you are required to pay out of pocket each month. Every homebuyer is going to pay the principle, interest, taxes and insurance for your home. However, if you have an HOA, then you’ll have to be paying that each month (or annually) as well. Again, it’s not optional.
HOA fees can vary widely from one community to the next based on the number of services that HOA provides. For example, if you are in a condo, the HOA may be more because they take care of a lot more since you only own from the sheetrock-in for your condo. The HOA is then responsible to take care of everything else. For townhouses, the HOA is typically in charge of roof and foundation, which can be really helpful and necessary so that you don’t have to convince your neighborhood that work needs to be done.
When starting the home buying process, you and your agent need to be considering possible HOAs in for the type of home you are looking for and the area you are looking in. Ask your agent what normal HOA dues are in this area for this type of property. This will help you to determine your budget for your home.
Once you are under contract, you will receive the bylaws for your HOA. During this time it’s important that you review each of the bylaws thoroughly to determine if there are any red flags or deal breakers before you become a homeowner with that HOA. For example, some HOAs limit the number of pets you have, the breed, or even the size of your pet. This could be a deal breaker for you, so it’s important to know before you close on this house.
Your lender will also be receiving information on the HOA, but they will be receiving information to determine the financial health of the HOA. They are doing their due diligence and have specific questions for the HOA during the approval process. Some communities will have higher HOA fees because properties or communities are in need of updates and the lender can ensure that they have the reserves needed to provide those for homeowners.
Interacting with Your HOA
Once you are a homeowner with an HOA, get involved! Go to the board meetings or even run for office. You can make a difference in the community by being involved in some way with your HOA. It also allows you to ensure that the community is being run in a way that you want it to be run. A good HOA can also make a difference in your property value.
Know the bylaws. It’s so important to read, know, and understand what is required within your HOA. Are there things that could cause you to get a fine? Know those to avoid an unwanted fines.
Living in an HOA can be a great thing. But we know that it can also be difficult at times. We want you to be aware of the hurdles you may face when purchasing a home with an HOA as well as the unique benefits your HOA may have to offer. If you have any specific questions, please let us know! We are always available to help and want you to make the best decision when it comes to your future home.
Until next time,
Brianna and Keelie