What is an HOA?
If you are thinking about moving, there are a lot of factors to consider aside from the house itself. Homeowners Associations are one example. An HOA can have its benefits but also its downsides. For those reasons, buyers should review a copy of the rules and regulations of an HOA before making an offer on a home.
An HOA is a governing body in a community, usually present in gated neighborhoods, planned communities and apartment/condo buildings. The HOA is funded and operated by residents, and there is a Board of Directors. This Board has meetings, creates budgets and is responsible for enforcing rules and regulations, which are legally set by them.
Fees vary by community and are meant to go towards maintaining the value of the community such as consistency in lawn care, maintenance of common areas like a clubhouse or pool, and creating certain standards to follow.
HOA rules are referred to as conditions and restrictions, or covenants. The majority of the rules are related to the exterior of the home; for example, you may be required to use certain chosen colors to paint the exterior. If you do not follow the HOA rules, you will initially be asked to comply. After the first notice, you may have to pay a fine, or as a last resort, face a lawsuit. If HOA dues are not paid, the Board has a legal right to put a lien on your home or even require you to foreclose in some states.
So, here are some ideas of what you should know before the purchase:
- Is the HOA in good financial standing? Otherwise there may be future assessments if work needs to be done in the community.
- Are there issues between the board and homeowners?
- Know what the HOA fees include and how it will affect a resale value.
- Will the rules fit with your lifestyle?; will you be comfortable with the control being exercised over your home?
- Over time, HOA fees can go up; will that create a financial hardship?
Having a Homeowners Association can be a great factor, but it is not for everyone. Be sure to know what you are getting into before you buy.