You found your dream home, but it’s in a community with a homeowners association, aka “HOA.”  What role, if any, should this play in your decision to purchase the home?

What Is a Homeowners’ Association?

A homeowners’ association (HOA) is an organization that sets rules for a given residential community and assesses fees to pay for common services and amenities.

Homeowners’ associations can be found in a housing subdivision, condominium communities, and high-rise luxury apartment or condo buildings. Fees vary from community to community but can range from very inexpensive to upwards of $1000 or more per month for luxury communities (particularly condo buildings).

The fees are generally set by the HOA based on an annual budget for services and amenities that are provided to the community. A small housing community may have a small annual fee to cover upkeep of common areas and snow removal, whereas a more luxurious community may offer maintenance-free living and upscale amenities that require a higher monthly fee. 

When considering a home purchase in a community with an HOA, the most important step you can take is to carefully read the HOA’s covenants, conditions, and restrictions (CC&Rs).

Typically the procedure for the delivery of HOA documents to the buyer is part of the contract.  The HOA documents should lay out exactly what the HOA is responsible for and what rules all homeowners must obey within the community. You can often find this information online. If you cannot locate the document or the online version is not current, ask your real estate agent to locate them for you. Do not agree to purchase a home without first carefully examining the CC&Rs.

Questions to Consider When Evaluating an HOA

Can I afford the monthly fee?

The HOA fees are not optional. When planning for the financial impact that a new house payment will have on your budget, make sure you include the HOA fee with your house payment.  Consider that depending on state laws, some HOAs have the power to foreclose on a property if the owner fails to make payments. HOA’s will rightfully pursue all legal means possible to collect HOA dues.

Keep in mind that special circumstances may also require a special assessment, which can be assessed by the HOA itself, or a local government body (for example, new streetlights or sidewalks which primarily benefit the community).

If the tennis court is in shambles or the entire community is ready for a new roof, then the HOA may assess a special assessment to cover these extraordinary costs if they do not have enough savings to cover the expense. Another common example with condos, is the replacement of siding. (This is another reason why it’s important to evaluate the financial health of an HOA before buying into the community.)

What amenities are included in the HOA, and are they of value to me?

All HOA fees are not created equal.  When choosing between one or more homes that come with an HOA, you should sit down with the CC&R to see exactly what you are getting for your money. Remember that HOA’s are typically providing valuable services, and in doing so, may help maintain property values.

Are there community amenities provided in by HOA that are valuable to you?  Is lawn service included? Just because your friend’s HOA provides a stunning fitness center and a community pool, do not assume that yours does as well.

Can I live with the HOA rules?

By buying a home in an HOA-governed community you are agreeing to follow the HOA rules set forth in the covenants and restrictions.  The rules may be ultra-restrictive including whether or not you can fly a flag, have a garden, make changes to the landscaping, or park a recreational vehicle on the grounds.

As a prospective homeowner in the community, you must carefully consider whether you can abide by the HOA rules should you purchase the home.

When comparing multiple homes with several HOAs involved, do not be afraid to ask your real estate agent for assistance. An experienced professional can help you understand the nuances of each HOA and compare the value you get for the association fees involved. If you have questions about your duties to an HOA as a homeowner, and any possible legal ramifications, always consult with an experienced real estate attorney for proper advice.