Whether you’re in the market for your first home or an investment property, chances are you’ll encounter a house within a planned development that comes complete with a homeowner’s association (HOA). What does this mean for you as a potential owner? Let’s take a look at the ins and outs of HOAs.
What is an HOA?
A homeowners association (HOA) is an organization in a subdivision, planned community, or condominium complex, that makes and enforces rules for the properties and their residents. Those who purchase property within an HOA’s jurisdiction automatically become members and are required to pay dues, known as HOA fees.
Why Do Communities Have HOA’s?
HOAs are established as a good way to ensure everyone within the community is on the same page. Likeminded people tend to work together to protect their collective interests such as maintaining and enjoying a clean and safe neighborhood. In 2017, microeconomist Wyatt G. Clarke identified that one in five Americans will live in a residence that’s part of an HOA.
How Much Do HOA Fees Cost?
HOA fees range widely and can be based upon things like the property development size and its physical location. According to American Community Survey, the average monthly HOA fee in American was $331 in 2015, with the lowest being $216 in Warren, MI, and the highest coming in at $571 in New York City.
Benefits of an HOA
An HOA provides some instant perks including peace of mind and security. Your neighborhood will generally maintain a standard look throughout the years and you’ll never have to worry about someone next door becoming a backyard hoarder. Sometimes landscaping and lawn maintenance is included with your HOA fees.
Disadvantages of an HOA
Restrictive HOA rules can include but are not limited to:
- building additional structures in your yard
- business use in your home
- exterior paint colors
- fence height/style
- flying flags
- holiday decorations
- home occupancy
- noise compliance
- parking spots for your residence and space for recreational vehicles
- pets, which may include quantity, size, and breed restrictions
- recycling policies
- satellite dishes
- solar panels
- the use of yard chemicals
- what type and how many plants you can have around your home
However, many homeowners find the rules of an HOA to be comforting while providing structure within the community. It’s sometimes good to know what to expect day to day especially during these uncertain times.
How Does an HOA Affect Property Values?
Leap Property Management states “Nine times out of ten, an HOA has a positive effect on property values.” Why? Because an HOA ensures your property will be well taken care of which helps to increase property value. At the very least, an HOA will help maintain the property value against physical decline. However, if you’re looking to refinance in the future, the presence of an HOA fee could mean you’ll be offered a lower approved amount in comparison to a property without any additional fees.
Questions to Ask Before Joining an HOA
- When and by how much will your HOA fees increase? What notice is provided? Are there local bylaws that restrict the amount the monthly fee can be increased?
- What’s included in the HOA fee? Garbage pickup, utilities, recreational facility use? Ask for a copy of the HOA’s covenants, conditions, and restrictions (CC&Rs).
- Is guest parking provided? Can guests use the rec complex such as a pool or tennis courts? Are you comfortable with shared amenities? Will you actually use the amenities provided?
- What additional fees could apply if the HOA faces an unexpected expense? Is there a reserve fund in place? Will you have access to the financial statements of the HOA?
- What insurance coverage will you be required to purchase? You may need coverage for personal property and/or catastrophe insurance for natural disasters like flooding or earthquakes.
- Are there future developments in the works that will cause your HOA fees to automatically increase? If the size and number of homes within the development increase, will there be a subsequent decrease in HOA fees?
- What’s the process for resolving an HOA conflict? Have there been any lawsuits against the HOA, including past, present, or pending?
- Does your HOA provide insurance coverage for common areas? This can vary from state to state.
- Will the HOA allow your home to be leased either short-term or long-term?
- Can you afford a monthly HOA fee on top of your mortgage payment?
The best way to discover what HOA fees and homeownership may entail in your marketplace is by consulting our DomiDocs list of trusted professional real estate brokers who can provide expert advice for your local area.
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Author – Connie Motz
