Everything to Know About an HOA

You might not love the idea of your neighbors watching and monitoring you, but that is what tends to happen when you move into a community with a homeowners’ association (HOA). While it can be tiresome to deal with HOAs, they aren’t all bad, and some people prefer them for different reasons, which we’ll touch on below. 

Before you buy a home in a community with an HOA, make sure you know all of the implications so you ensure you’re making the right choice. 

What is an HOA?

A homeowner’s association or HOA is a structure that’s a way to keep a neighborhood clean and cohesive. If you buy a condo, townhouse or a single-family home, there may be an HOA. 

They’re often within what are called planned developments. 

A homeowners association’s responsibilities can vary depending on the property type primarily. 

The self-governing organizations are in common interest communities, and all the homeowners pay fees to maintain their units or the neighborhood. Most are run by resident homeowners. The homeowners running the HOA are unpaid volunteers, and they’re usually elected to a board of directors. The board of directors oversees managing the HOA. 

There are rules and bylaws that govern the properties in an HOA, and the association is responsible for enforcing them. Every property owner’s HOA fees cover the use and maintenance of common areas and may include pools, parking lots and roads, communal landscaping, and parks. 

You could end up paying anywhere from $200 to upwards of $2500 per year in your HOA fees or assessments, with this variance stemming primarily from the amenities in the community. At a minimum, you have to pay your part of the operational costs of the association, which can include most often parking, shared utilities, garbage pickup, landscaping and maintenance, and safety and security. 

Most of the communities with higher assessments will have private gated streets and sometimes security professionals who are always on-site. 

Homeowners are sometimes asked to pay special assessments, usually if there’s an unexpected problem affecting the community, like an unbudgeted repair or a natural disaster. The HOA does have power to levy one-time special fees to cover these costs. 

While every HOA is going to have rules, some are much more restrictive than others. 

Most require you to get approval before you make changes to the exterior of your home. Some prevent you from renting out your home, and in very restrictive situations, they might even tell you how many plants you’re allowed in your yard or the height your mailbox has to be. If you don’t comply with the rules or you don’t make your HOA payments, the group can place a lien on your home or fine you. 

What Are the Pros and Cons of an HOA?

Some of the upsides of purchasing a home in a community or building with an HOA include:

Most HOAs have rules about what the appearance of the neighborhood has to look like. This can alleviate some of the concerns you might have about neighbors who don’t take care of their homes and lawn, which can negatively affect your property value. HOAs will ensure everyone’s lawns are mowed, gardens are tidy, and the streets and sidewalks are clean and clear. 

■ In communities with HOAs, there are often recreational amenities which can include pools, playgrounds, golf courses, and tennis courts. A lot of HOAs also sponsor regular community events and get-togethers, so you have built-in social opportunities in your neighborhood. 

■ There can be less work for you if you’re part of a community with an HOA. For example, they’ll do things like cutting the grass oftentimes or shoveling snow. 

■If you have a dispute with a neighbor, you have some recourse when there’s an HOA. You can go to them and have them deal with the dispute and enforce the neighborhood bylaws and covenants. 

For a lot of people, knowing what to expect in an HOA community is worth paying the extra money and having to live with the rules. 

Of course, there are absolutely downsides as well. 

■ The fees are the primary downside of living in an HOA community. You’re paying for all those activities, administration, and those amenities. This means you have to budget to pay your HOA fees beyond what you’re already paying on your monthly mortgage. It may be that an HOA home simply isn’t in your budget when all is said and done. If you get behind on your fees, the HOA can have the authority to foreclose on your home. 

■ You might not like the idea of a cookie-cutter neighborhood. Everything is going to look the same, and you won’t even be able to have a complete say in the color of your house or your holiday decorations. 

■ Your neighbors are going to be watching you. HOA members are notoriously nosy and picky. 

■ A lot of HOAs won’t let you do things like run a business from your home or rent it out. If you’re going to sell your home in the future, the HOA might even dictate who can buy it. 

■ It’s going to be tougher to resell a home in an HOA community in many cases. You may have to sell it for less to make up for the fees the buyer will have to pay. 

■ If you go up against an HOA, it’s very difficult to win. 

Questions to Ask

If you’re considering an HOA community, the following are specifics to ask about and look into before making a decision:

■ What are the bylaws and rules? You should get a copy of them and go over them carefully. You may find that you aren’t able to live by the rules. There’s a lot of variance in just how restrictive homeowners associations are. 

■ How is it run? Most HOAs are operated by a board of volunteer homeowners, and you need to learn more about how the people in charge handle situations that arise. If there’s a meeting coming up, attending can be a good way to get a feel for the personalities of board members and how lenient or restrictive they come off as being. Some HOAs are run by a property manager or real estate developer, usually, if it’s a pretty new community. 

■ What’s the financial situation of the HOA? Look how often they raise assessments and how much those increases are. Does the  HOA have reserve funds and insurance to make repairs? Does the HOA have debt, or have there ever been legal judgments against it? You can request a copy of the financial statements of the HOA before you buy. You want to make sure the organization has working capital and reserves. 

■ What are the amenities? 

■ Are there any significant upcoming projects that could affect the community or the assessments? 

How Much Power Does an HOA Have?

If you’re wondering how much power an HOA really has, the answer is a lot. HOAs can:

■ Create rules and regulations that community members are required to follow. You agree to the HOA rules when you move into the community. You have to sign a homeowners’ contract before you can move in. 

■ The HOA, since they require new homeowners to sign a contract, can enforce their rules and regulations by law. If you get a request from the HOA, you almost always have to comply. 

■ The HOA can force your home into foreclosure if you don’t comply since you signed a contract. 

■ An HOA can put file a lien on your home if you don’t pay your annual dues. 

Once a homeowner becomes delinquent on assessments, an HOA lien can automatically attach to the property. 

The line will usually attach as of the date the assessments were due, and in some cases, the HOA records the lien with the county record to give public notice of the lien. 

The homeowner may be liable for a variety of charges in addition to the unpaid assessments, including late charges and reasonable costs of collecting, which can mean attorneys fees, fines, and interest. 

When there’s a lien on your property, it can prevent you from selling or refinancing, and the property can be foreclosed. 

In HOA foreclosures, the property is sold to satisfy your debt. 

The HOA can go through a judicial or nonjudicial foreclosure, depending on the laws of your state. To foreclose judicially, the HOA has to file a lawsuit against the homeowner. Then, they get a judgment from the court that gives them permission to sell the home. To nonjudicially foreclose, an HOA doesn’t have to go through state court but follows certain state guidelines. 

If the home has a mortgage and an HOA forecloses, the HOA line has priority, but you remain liable for the debt. 

As you can see, deciding to live in a community with an HOA isn’t a decision you should ever take lightly. They have a lot of power, and you can find yourself losing your home depending on the HOA of your community, so think it through carefully before signing anything. 

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