For many families, finding the right neighborhood is a crucial part of the home search process. A good neighborhood is safe, has other children, and features amenities like playgrounds, sidewalks, and maybe even a clubhouse with a swimming pool. But to make these things possible, there also has to be a homeowners’ association – commonly referred to as an HOA.
As you search for the ideal neighborhood for your family, you need to consider the HOA carefully. Some are good, some are bad, and others are downright frustrating. Knowing what you’re getting into ahead of time can help you make a smarter purchase decision.
The Lowdown on HOAs
In the simplest form, an HOA is an organization within a subdivision, planned community, or condominium development that makes and enforces specific rules for properties that are within its jurisdiction.
“[HOAs] are formed by planned communities with single-family homes or multiple units, such as condominiums,” Investopedia explains. “Membership in an HOA is usually a requirement for the purchase of certain properties. An HOA is typically established to make and enforce rules regarding the properties within the jurisdiction.
Almost all HOAs are incorporated, which means they’re subject to state laws. This gives these associations rather significant legal power over property owners. Violation of rules or refusal to pay can lead to fees, force compliance, litigation, and perhaps even foreclosure in extreme situations.
Another downside to HOAs is they can be restricting. If you want to make significant changes to your home’s architecture, put a garden shed in your backyard, or even place a basketball goal in your driveway, the HOA can tell you what’s acceptable. Not only does this create logistical issues, but it often creates unnecessary “drama” between neighbors and can sometimes make a neighborhood an unpleasant place to live.
But for all of the negative connotations that come with HOAs, they’re actually great in many respects. The collected fees help maintain the common areas and allow homeowners to pool their purchasing power to make upgrades that better the neighborhood. They also help mediate problems, so individual neighbors don’t have to handle sensitive issues on their own.
HOA covenants, conditions, and restrictions (CC&Rs) often seem strict, but they serve a greater purpose. For example, it prevents your neighbor from painting their house bright purple and putting a neon green trampoline in the front yard.
“Ultimately, the HOA helps the homes within the neighborhood retain their value,” real estate agent Patrick Garrett says. “When there are rules and guidelines governing how homeowners should keep their property’s appearance, it helps keep the neighborhood looking desirable for the consumers perusing the neighborhood in search of a new home.”
6 Tips to Consider Before Buying
If you’re looking for a home in a neighborhood with a homeowners’ association, it’s smart to do some due diligence before purchasing. Not all HOAs are created equal, and you should know what you’re getting into before buying a house. Here are a few tips:
1. Learn the Rules
The first thing to do is grab a copy of the HOA’s CC&Rs and review the rules. You may be able to find this information online. If you can’t, ask your real estate agent to acquire the documents for you. And once you do gain access to them, ensure that they are current.
Pay attention to the specific rules and consequences. It’s also smart to see how much power the HOA has. Can they initiate foreclosure on your property? What sort of fines are there for violations? How many people are on the board? Who determines when a homeowner violates a rule? Questions like these shouldn’t be ignored.
2. Ensure the Home is Already in Compliance
This is something most homebuyers don’t think about. If you’re buying a home in an HOA, you need to make sure that it isn’t already out of compliance. Once you become owner, any headaches the previous homeowner dealt with suddenly belong to you.
3. Ask for a Reserve Study
The long-term health of the HOA is something that you must give serious consideration. Do they collect enough money to pay for major repairs and expenses in the future? If not, there could be some huge special assessments down the road.
The best way to evaluate the long-term health of an HOA is to ask for a copy of a reserve study. This will shed a little light on cash flow.
4. Run the Numbers
Just as you would with any other monthly house-related – such as a mortgage or property insurance – it’s important to run the numbers on the HOA so that you know how much you owe. In addition to the current fee, you also need to study how often increases occur, and by what percentage they typically increase by. This will allow you to plan for the future.
5. Get a Copy of the Minutes
This isn’t always possible, but try asking for a copy of the minutes from the last HOA meeting. This will provide you with some insights on common problems, current issues, and the relationship between the board and homeowners.
6. Speak With Current Homeowners
If you happen to know someone living in the neighborhood – or have a mutual connection to a homeowner – ask them a few questions. Actual HOA members will be able to give you a much more realistic picture of the health of the association. Some questions to consider asking:
- Have you had any positive or negative experiences with the HOA?
- How much have fees increased since you moved into the neighborhood?
- Do you feel like the HOA oversteps boundaries?
The more intel you can gather, the better. Every homeowner has his or her own experiences, so take each opinion with a grain of salt.
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