Buying a home is one of the most significant investments you can make, so it only makes sense to look into every aspect of the process. This is especially true when it comes to purchasing a home in an HOA community.
What is HOA? What Does HOA Mean?
HOA meaning: A homeowners association is a private organization that consists of members of a community. It is headed by an HOA board, who are volunteers usually elected into position. The HOA acronym stands for “homeowners association.”
Now that you know the homeowners association definition you must understand its purpose. The main reason for creating a homeowners association is to increase property values. Through maintaining communal areas and enforcing rules and regulations property values can rise over time. These keep the overall community looking nice and keep the homes somewhat cohesive.
How Do HOAs Work?
When you purchase a property in an HOA community, you automatically become a member and will be required to pay dues on a monthly, quarterly, or annual basis.
As an HOA member, you’ll be invited to vote for the board of directors who oversee day-to-day responsibilities of the HOA. This includes the maintenance and care of all shared amenities, collecting fees, and enforcing rules.
You will be encouraged to volunteer to assist the board with planned activities throughout the year or take a turn as a board member.
What Does the HOA Board of Directors Do?
The board members manage the two most important aspects of the organization: the finances and the rules.
Managing the budget is simple if your HOA’s only responsibility is to maintain a sign and landscaping at the entrance to your development. But suppose your board manages multiple common areas, such as recreation facilities, swimming pools, and party rooms, as well as the landscaping for the community. In that case, they will require input from the membership to set priorities appropriately and agree upon budgets.
Your board will have the authority to make and enforce community regulations designed to protect property values and the well-being of the community.
The HOA’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs) outlines all the community rules and regulations. As a potential homeowner in an HOA, this is an essential document that you will want to review before agreeing to buy a home in the community.
In addition to touring the home, it is a good idea to see how well the common areas are maintained.
Homeowners Association Rules
HOA rules cover a wide range of homeownership rights. When you sign your HOA membership form, you agree to abide by the rules. This agreement is legally binding, so it’s important to know what you’re signing.
Typically, the rules will include restrictions on your landscaping choices (such as the type of plants or trees that are acceptable) and on your external decor, including the color of your house, front door, or roof shingles.
There are often regulations regarding fencing type and height limits, the addition of outdoor structures, decks, or pools, home maintenance standards, and holiday lighting.
Parking can also be a focus of HOA regulations. This can include limiting the number of vehicles that can park on your property, regulations on street parking, or a ban on recreational vehicles, boats, lawn equipment, and bicycles from being left outside a storage unit or garage.
And finally, there may be pet restrictions, occupancy limits, renting or subletting bans, and noise criteria.
What Are HOA Fees?
In exchange for joining a community, homeowners must pay HOA fees. The association uses these fees to pay for the upkeep and maintenance of shared common areas. It can also use the money to pay for common utilities such as garbage disposal, water, electricity, and sewage. The fees might also cover other expenses such as insurance, HOA management, and reserve contributions.
While the fees typically cover only shared spaces and amenities, some HOAs may take care of your landscaping as well as painting and roof repairs. This is more common with townhouse developments where you share a wall or roof with your neighbors.
How Much Are HOA Fees?
HOA fees will vary for different associations. On average it is about $200-$300 per month, but this amount can increase depending on several factors. For example, a community with plenty of amenities will have higher upkeep costs, which will then result in higher fees.
The amount can also be higher if communities have large-scale projects on the horizon or if the association is trying to replenish its reserve funds. The board prepares an annual budget to determine how much to collect in association fees.
What Happens If You Don’t Pay HOA Fees?
If homeowners do not pay their dues on time, the HOA Board or management company can collect late fees or penalties.
These are necessary to keep the community’s budget on track. Depending on the community’s bylaws, homeowners who do not pay fees may be restricted from communal areas until they are able to settle their debt.
A homeowner who continuously does not pay HOA fees can be declared delinquent. In extreme cases, the HOA can place a lien on the delinquent homeowner’s property or file a foreclosure to settle unpaid bills.
Are HOA Fees Worth It?
Homeowners must weigh the pros and cons of HOA living to determine whether paying the fees is worth it. However, if homeowners see that their community is not being managed properly, they may feel the association fees are not worth it.
In these instances, homeowners must take action. They can speak to the board about low-quality service providers or even run for a board position if they see that current members are inefficient. HOA fees can be worth it if you get a beautiful, fun, tight-knit community in return.
Can an HOA Increase Property Values?
Purchasing a home that is part of a homeowners association can be an excellent use of your hard-earned money. But can an HOA increase property values? They absolutely can. Being part of an HOA is a huge asset when thinking about the future. Here are several reasons why HOAs can increase the property value of your home:
1. Creating a Desirable Community
One of the best features of a homeowners association is that an HOA creates a community that can be the envy of other neighborhoods.
Furthermore, within an HOA community, strangers turn into neighbors, who then
become like family. The presence of a safe, fun, tight-knit community can be a huge draw for potential buyers and can help improve the property value of your home.
2. Formulating a Beautiful Neighborhood
Even if a home itself is beautiful if the neighborhood around the home is unkempt property values can decrease. Homeowners associations exist, in part, to beautify the entire neighborhood.
Although too many rules can sometimes be a bad thing, the bylaws and governing documents of an HOA exist to make the quality of living better for everyone who lives in the community. These rules result in cleaner yards, freshly painted buildings, and a reasonable (but not excessive) amount of uniformity leading to a pleasing environment and higher property values.
3. Offering Emergency Services
It’s hard to deal with emergencies on your own. Something like flooding or fire can greatly cause damage to your property, especially when not addressed immediately. An HOA can help with something like this by providing emergency services. This kind of quick assistance can limit the damages and prevent them from worsening, thus keeping the value of your home from plummeting in a single swipe.
4. Enforcing Rules and Regulations
While it may not always seem like it, most HOA rules and regulations are there to keep property values up. Everything from what color you can paint your home to where you can park your vehicles, these rules and restrictions exist to maintain a certain image for the community.
It’s even part of an HOA’s job to resolve disputes between neighbors so that everyone can live in harmony.
5. Even Science Says So
According to a study conducted at George Mason University, an HOA can increase property values. In fact the study found that an average house within an HOA community sells for about 5% to 6% higher than a house that does not belong to one.
Are There Any Disadvantages to Belonging to an HOA?
In an effort to increase or stabilize property values in the community, homeowners will have to abide by the rules and regulations imposed by the association.
It is more expensive to live in an HOA community, this can affect how much your mortgage will be approved for and can be a strain on homeowners’ expenses.
Also, HOAs can impose special assessments. If an HOA needs funds for a major project, such as resurfacing a parking lot or replacing the roof of a condo building, it may need to charge residents an extra fee if it does not have enough money in reserve. That’s why it is prudent to look into the budget of an HOA before you buy to see if they have money in reserve for major projects or emergencies.
Is an HOA a Good Fit For You?
To decide if an HOA is a good fit for you, consider the following:
- HOA dues will add costs to your monthly obligations.
- The dues could hurt your maximum loan amount.
- Are the benefits and amenities of the HOA worth the extra cost?
- Do the HOAs rules fit in with your lifestyle as a pet owner, gardener, or outdoor enthusiast?
Before you decide to purchase the home, thoroughly read the HOA’s CC&Rs. Meet with members of the board of directors to get a better feel for the community and its goals and objectives to ensure they line up with your own.
Make the Decision
Living in an HOA community is not for everyone. The rules and monthly dues often put people off to the idea. But, you must recognize that both of these things contribute to the preservation of property values. If you can live with all this, then you can expect to reap the benefits of association living. In the end, the choice is yours.