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What is a Homeowners Association or HOA?

Picture yourself out and about house shopping. You visit a neighborhood that captures your imagination. The beautiful lawns and landscaping further enhance the eye-pleasing houses coordinated by style and color on one street after another. Your real estate agent sees your eyes light up and explains that the neighborhood is part of an HOA. Anytime you buy a home in an area governed by a homeowners association (HOA), it will affect you, your family, your expenses as a homeowner, and your experiences in the neighborhood. HOA basics follow.

What is an HOA?

An HOA is a homeowners association. An HOA is a non-profit organization that handles community management and involves collecting monthly fees to pay for shared amenities and other expenses. All property owners within an HOA are required to pay the required fees and follow a set of rules and bylaws. The association establishes and enforces those rules and bylaws, usually through representatives elected by the homeowners.

What is an HOA fee, and what does it cover?

HOA fees are the dues that each community homeowner must pay to cover amenities and the maintenance of all common areas. Fees range widely, starting as low as under $200 per year to thousands of dollars every month. The average cost of an HOA is estimated at about $170 monthly.

HOA fees help to cover:

  • Costs of shared amenities
  • A reserve fund for large expenditures, such as resurfacing a parking lot
  • Special assessments that may be required for large, unexpected one-time expenses, such as making repairs after a flood

What amenities do HOAs provide?

The amenities provided by an HOA differ according to the decisions made within each separate organization. The more amenities, the higher the costs. The following are among the most popular amenities covered by HOA fees:

  • Security
  • Playgrounds
  • Fitness centers
  • Swimming pools
  • Clubhouses
  • Golf courses
  • Parking garages
  • Community events
  • Centers for retirees

Services such as trash removal, landscaping, and building maintenance in shared spaces may also be provided by an HOA. 

What rules and regulations are associated with HOAs?

It is always important to find out the details about a particular HOA. Review the HOA’s bylaws as well as its Covenants, Conditions, and Restrictions—documentation commonly referred to as the CC&R—which outlines the rules of the community.

Read the CC&R to determine whether you want to live under the community’s rules. For instance, you may be required to get approval for any additions you make to your home or even before replacing your roof. Sometimes an HOA prohibits the freedom you might otherwise have to rent out your home.

What if you break the CC&R?

As you carefully review a community’s CC&R, pay special attention to the consequences of breaking the rules. Punishments vary, and associations are all run somewhat uniquely. Usually, any violations or late payments first receive a polite reminder by mail and perhaps later in person. Most violations are resolved in this way. However, you could be charged a one-time fine or your fine may involve a fee for each day in which there was a violation. One form of punishment for breaking HOA rules is banning you from using common areas. 

What happens if you don’t pay your HOA fees?

Failing to pay your HOA fees is one of the ways in which you break community rules. Typically, when you miss a payment, you will be charged interest and late fees. You are subject to being sued for unpaid HOA fees. In most cases, HOAs are able to put a lien on your house due to unpaid fees. The rules of the community may make it possible to foreclose on your home.

How are HOAs run?

HOAs operate in various ways. It is most common that an HOA is run by a board of volunteer homeowners who live in the community, and the board members are typically voted in by fellow HOA members. Sometimes, though, a real estate developer or property management company runs HOAs. 

What are the Pros & Cons of an HOA?

The Pros of HOAs may include:

  • Home value may be increased.
  • The neighborhood is consistently well-maintained.
  • Amenities often make HOA fees worth the cost, providing perks such as swimming pools, gyms, snow removal, a clubhouse, playgrounds, on-site security, and opportunities to socialize with neighbors.
  • Disputes between neighbors involving property-related issues can be handled by an HOA board.

The Cons of HOAs may include:

  • The HOA fees could put too much of a stretch on your household budget.
  • The HOA board has an option to hike membership costs.
  • Special assessments could further increase the cost of an HOA membership.
  • Restrictions can potentially infringe on many freedoms, including such things as the color and style of your mailbox, the number of guests you can entertain, and whether you can hang a flag from your porch. 
  • Homeownership can be at risk because foreclosure may be possible if you can’t meet HOA requirements.

What are some of the reasons people regret buying property in an HOA?

Buying property that requires HOA membership may not be for you if:

  • You hate being told what you can and can’t do.
  • You enjoy things that are not approved by most HOAs, such as working on cars in your driveway.
  • You want your home exterior to have a unique appearance.
  • You prefer to have no strings attached to home ownership.
  • After your mortgage has been paid off, you don’t want to pay HOA fees.

What are the top reasons people love living in an HOA?

A home in an HOA community may be a perfect fit for you if:

  • You appreciate uniformity and order.
  • You are highly tolerant of rules and regulations.
  • You will make good use of the amenities and services provided by your HOA.
  • The track record of your HOA is that property values consistently increase.
  • You feel good about going home to a community that always looks beautiful.

Real estate agents can help you by looking for houses only in neighborhoods that do or don’t have an HOA, depending on your preference. Or, if you aren’t sure, real estate professionals can help you sort out whether a particular HOA fits your needs and your budget.

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