What Does An HOA Mean For Home Buyers?
Buying a house may be one of the most significant financial decisions you will make in your lifetime, so it's perfectly reasonable to be concerned about whether such a large investment will retain its value and grow over time. One of the most common ways to ensure this happens is to move into a community with a homeowners association (HOA). While HOAs may come with some extra responsibilities and fees, they can be a fantastic resource to ensure your home doesn't lose value due to situations outside of your control in your neighborhood.
What Is A Homeowners Association (HOA)?
An HOA is an organized group of property owners who live in the same subdivision, community or neighborhood. This organization creates rules for other homeowners in their jurisdiction. For many residents, these associations provide safety and peace of mind. Their work ensures the community is well-taken care of and stays valuable. Those who reside in a property within an HOA and benefit from this inclusion are required to pay HOA fees.
How Do HOAs Work?
HOA communities have a board of directors that oversees rule enforcement. HOA rules are defined in a set of documents known as the Covenants, Conditions and Restrictions (CC&Rs) which we’ll discuss in more depth below. A vital section of a CC&R defines how much money the board can collect in HOA fees from each homeowner. The board then decides how to utilize these fees to keep the community safe, maintain amenities and retain the value of the community as a whole. They may sometimes use them to improve common areas or provide services like lawn care, snow removal and pest control. In other communities, they may put them toward security measures. But their overall responsibility is to ensure the upkeep of the community.
HOA fees will vary depending on the priorities of the community and the choices of the HOA's board of directors. A low-involvement HOA community could have fees of less than $100 per month, while a community with many expensive amenities to maintain could be well over $1,000. Nationwide, the average monthly HOA fee is These fees can cover a wide array of amenities and services, but some of the most common are:
- Landscaping services: HOA communities with many common green spaces may pay a commercial landscaping company to cut grass, trim trees and maintain flower beds. This ensures that all community members can enjoy the beauty of nature without the hassle of maintaining it themselves. In some HOA communities, especially those designated for residents aged 55 and older, you may even have landscapers maintain the lawn on your property.
- Trash and recycling pickup: While sometimes the local government will be responsible for trash and recycling services, HOA communities often hire a private waste management company to take care of it for their residents. The board of directors and the waste management company will determine the pickup days and the price of the services based on the contract they agree upon.
- Common areas (pools, clubhouses, etc.): Elaborate common areas can be some of the most expensive things an HOA maintains. They can also be some of the most attractive amenities and the best way to unite a community. If your HOA community has a clubhouse with a pool, your HOA fees will go toward the maintenance of the facilities and the salaries for workers such as lifeguards or snack bar attendants.
- Parking: For communities without space for parking on private properties, such as condominiums or townhouse communities, the HOA board may determine how to assign parking spaces and whether they cost an additional fee.
Since HOA fees are usually paid monthly, remember to factor them in when calculating your mortgage payment.
HOA Structure And Governance
HOAs need effective governance structures to use their broad oversight powers fairly for the community's common interest. The two most common governance structures are:
- HOA board of birectors: This is the executive body that enforces the rules and regulations of the HOA. They also decide how much to collect in HOA fees and what to spend the money on. The board comprises volunteers living in the community who are elected by their fellow homeowners.
- HOA management company: Sometimes, a volunteer board of directors is not equipped to handle the day-to-day management of a large HOA, such as a condominium. In that case, the HOA board can hire a management company to take control of these duties. While this arrangement may result in more attentive community management, it also comes with higher HOA fees.
Rules In HOA Communities
HOAs define the rules that govern them in a set of documents known as Covenants, Conditions and Restrictions (CC&Rs). This set of rules may also be called an HOA's "bylaws.” CC&Rs cover the specific rules that everyone in the community must abide by, the HOA's power to enforce these rules and how much money each homeowner owes in HOA fees. Some of the standard rules defined in CC&Rs are:
- Lawn and decoration restrictions: Maintaining an acceptable curb appeal is a critical factor in keeping up the value of an entire neighborhood. CC&Rs may set standards based on how long your grass can grow or what kind of holiday decorations you can display in your yard.
- Home maintenance standards: Maintaining an attractive exterior to your home similarly affects the neighborhood's value. CC&Rs can mandate that you must fix broken or dirty siding, windows or other unkempt aspects of your home's exterior.
- Pet restrictions: CC&Rs may restrict the size or type of pet you can have or whether you can have a pet in your home at all. These are more common in condominium HOAs, where pets may affect your neighbors more.
- Rules for common areas: Since the HOAs are responsible for building and maintaining the neighborhood common areas, the CC&Rs will set rules for how and when residents can use them. These rules may include the hours during which the common areas can be used or whether and when members of the HOA can bring non-members to the facilities.
- Restrictions on renting: If you want to turn your home into an investment property, check with your HOA to ensure they allow it. Some CC&Rs prohibit non-owners from living in an HOA property.
Should You Live In An HOA Community?
It is important to consider all sides of living in an HOA community. Here are a few of the benefits and drawbacks potential homeowners should keep in mind.
Pros Of HOA Communities
- Common areas: One of the perks that may come with an HOA community is available amenities, like clubhouses and pools. They use monthly fees to maintain these spaces, so you can enjoy them without the work to keep them.
- Conflict intermediaries: Plenty of issues can arise between you and your neighbors. They may play loud music into the night or have an unkempt lawn that you worry may harm the value of the neighborhood as a whole. With an HOA, you won't have to deal with these issues alone. If a neighbor breaks HOA rules, the HOA can act as an intermediary to resolve the problems so you can get results without the hassle.
- Protection of property value: HOAs instill rules that everyone in the community must follow. In particular, they enforce regulations about caring for the home's exterior. Sometimes, they may also oversee a neighborhood watch or hire security. As a result, they protect the value of your property.
Cons Of HOA Communities
- Potential for restrictive rules: Some homeowners may prefer more freedom to determine an exterior style for their home that differs from the rules set by CC&Rs.
- Potentially expensive fees: Living in an HOA's community means paying regular fees along with your typical homeowner costs, including your mortgage. If you don't pay the fees, you could face legal consequences or even foreclosure.
- Varying levels of enforcement: Some HOAs can be poorly managed, whether they misuse funds or fail to support their residents. That can lead to community conflict and financial problems.
Homeowners Association FAQs
People are often curious about a few things when it comes to HOAs. Here are some of the most common questions.
Are HOAs bad?
The general purpose of an HOA is to maintain the condition and value of a community which benefits the community as a whole. However, certain HOAs may not uphold the rules set by their CC&Rs or stop providing services that homeowners pay for. That's why it’s essential to research the effectiveness of the HOA before you move into a community.
Can I refuse to join a homeowners association?
Some HOA communities give each homeowner the option of joining the HOA. If you already live in a community without an HOA that then organizes one, you may not be required to join. If you move into a community with a mandatory HOA, joining the HOA and paying HOA fees is a condition of purchasing the home that you cannot refuse.
Why do HOAs have so much power?
The amount of power an HOA has depends on the specific CC&Rs of a community. Some of these rules and regulations may give an HOA just a small amount of power to maintain a community's basic services and appeal. Other HOAs may have much more power to restrict what a homeowner can do to their own property. If you feel an HOA may be too restrictive with the powers given to them by the CC&Rs, you may want to consider searching for a home in a different neighborhood.
How do HOAs make money?
An HOA makes money by collecting HOA fees from homeowners in the community. These fees are used to provide the services defined in the CC&Rs.
The Bottom Line: Find Out As Much As You Can About The HOA Beforehand
HOAs can be fantastic resources to help you maintain the value of your home. But their effectiveness can vary widely. Before buying a home, research the governance structure, CC&Rs and HOA fees to ensure you can agree to live under certain restrictions. Feel free to ask your potential neighbors if they feel the HOA upholds its duties to keep the community attractive and valuable. If you find a community and an HOA that's right for you, we can help finance your purchase. Just simply fill out a mortgage application online to get started today!