What You Need to Know About HOAs

Get the lowdown on how a community is managed before you buy.
Get to Know Your Neighbors for a More Secure Home

Get to Know Your Neighbors for a More Secure Home

Photo by: iStockphoto.com/IS_ImageSource

iStockphoto.com/IS_ImageSource

Talk to anyone who owns a condo or a home in a planned unit development, and they'll warn you about the homeowners association (HOA). You shouldn't be scared, but realize it does wield a lot of power in the community it governs. So before you buy a home in a particular neighborhood, research the HOA.

When a developer builds a condo building or townhome complex, it creates a legal entity known as the HOA, which allows the developer to transfer ownership and management of the community to the homeowners after it has sold a predetermined number of units or lots.

Do the Research

The HOA manages the common areas and amenities, and it enforces what are called covenants, conditions and restrictions (CC&Rs), which all homeowners in the development must follow. Review each of these documents before buying:

  • CC&Rs. These rules can limit anything from what kind of improvements or alterations you can make to how many pets you can have;
  • Homeowners association bylaws. These dictate in fine detail how the association should operate;
  • HOA budget and financial statements. The budget should cover day-to-day operating expenses, such as maintenance costs, staff salaries and utilities. At least 3 percent to 5 percent of its gross operating budget should go into a reserve for occasional repairs, such as paint jobs or new roofs. If the budget is unrealistically low, you’re at risk for increased dues or special assessments. Study operating budgets and financial statements for the past several years to look for signs of poor monetary management;
  • HOA meeting minutes. Get up to speed on what the HOA is working on.

See What You Get

When you buy a unit or lot in the development, you become a member of the HOA and must pay monthly dues. A portion goes toward upkeep of common areas, and the rest goes into a reserve for potential repairs. Dues typically range from $150 a month to $600 a month, depending on the amenities you get.

Access to amenities makes up one of the most appealing reasons for buying an HOA-governed home. You'll get luxuries you wouldn't be able to afford on your own, such as swimming pools, tennis courts and fitness centers. Potential savings in home-related expenses holds another advantage over single-family homes. Condos, for instance, are usually cheaper to maintain as homeowners share the cost of upkeep and repairs. Since the HOA handles maintenance, not having to clean the pool or fix broken exercise equipment becomes another perk.

Know Your Restrictions

You've probably already heard the biggest complaint about HOAs: the CC&Rs. These rules are meant for the good of the community, but for some, they may seem too restrictive. CC&Rs and bylaws are extremely difficult to get around, so be sure to review these documents carefully before you buy a home. Be prepared for special assessments, especially in older buildings. If the roof needs to be replaced, the HOA will collect money from each homeowner to cover the cost.

Next Up

5 Things You Need to Know Before You Do a Reverse Mortgage

Reverse mortgages aren’t a trick, but they can be tricky. Here's how to know if it's the right choice for you.

What to Know About Fixer-Uppers

With patience and elbow grease, you can turn a dump into a dream.

What to Know Before Buying Your First Home

Buying a home is the most important purchase you’re likely to make. You want to get it right.

Money Stuff You Need to Do Before Buying A Home

You know how to look for a house, but the money part is trickier. Here's a step-by-step breakdown of the financial details of a home purchase that need to be worked out months before you want to move in.

Why You Need a Pre-Approval Letter

Read tips on why you must make sure you get a pre-approval for a mortgage, not a pre-qualification.

Q&A: A NYC Broker on the Benefits of 'Test Driving' Homes

On the fence about a prospective home? Some brokers are letting buyers try out homes before they sign on the dotted line.

Out the Door: Things To Do Before You Go

Moving day may be hectic, but don't forget to do these things before officially moving out of your old house.

What to Do When You Find a House, But Can't Sell Yours

Find a house you'd love to buy, but can't sell your current home? Get real-life solutions from real estate expert Tara-Nicholle Nelson.

Pitching In: How to Buy With Others

Make sure all parties are on the same page before co-owning a property.

My House is Worth What?

Before you sell your home, figure out its worth—and what it'll take for buyers to bite. Here's how.

Stories We're Following

Shop This Look

Found a living space you love in HGTV's Photo Library? Get the look in your own home with products from Wayfair.

Follow Us Everywhere

Join the party! Don't miss HGTV in your favorite social media feeds.