Buying Real Estate

Read This First Before Buying Into An HOA Community

Written By: Adam Izzo
Reviewed by: Mike Reyes
Last Updated February 20, 2024

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a gate in front of an HOA community

According to the realty company Redfin, investors buy nearly one in seven homes sold in America’s top metropolitan areas. While many real estate investors are still looking to take advantage of the market, considering whether or not purchasing a home in a Homeowners Association (HOA) community can make for a difficult decision. From the benefits, fees, and potential drawbacks, here are just a few key elements worth knowing before signing the purchase agreement.

If you’ve never lived in an HOA, I would recommend doing some due diligence first. The following is a list of things to consider before moving to a homeowners association (HOA) community.

HOA dues

100 U.s. Dollar Banknotes

Homeowners typically pay HOA monthly or quarterly and cover the cost of maintaining common areas and amenities, as well as other expenses such as insurance and reserve funds. Make sure you can afford the HOA dues before you buy a home in the community.

When it comes to your obligations regarding HOA fees, it’s imperative to realize that as the homeowner, you will be responsible for paying these fees yourself, as you’re automatically a part of the HOA upon purchase. With that in mind, you’ll also be liable for ensuring that your tenants follow the HOA’s rules and regulations. And that means screening potential tenants with extra care to ensure they’re the right fit.

HOA rules and regulations

hoa rules

There are usually two categories of HOA rules and regulations: architectural controls and general rules.

Architectural controls govern the appearance of homes and properties in the community. This may include rules about the color of homes, the type of roofing materials that can be used, and the placement of fences and other landscaping features.

General rules govern the behavior of residents. This may include rules about noise levels, pet behavior, and parking. HOAs may also have rules about things like trash disposal, holiday decorations, and short-term rentals.

HOA rules and regulations are designed to maintain the aesthetic and property values of the community. They can also help to create a sense of community and promote good neighbor relations.

Here are some specific examples of HOA rules and regulations:

  • Architectural controls:
    • Homeowners must submit any plans for changes to their property to the HOA for approval.
    • Homeowners must maintain their property in good condition.
    • Homeowners must use only approved roofing materials and colors.
    • Homeowners must adhere to the HOA’s guidelines for landscaping.
  • General rules:
    • Homeowners must keep their noise levels to a minimum, especially at night.
    • Homeowners must pick up after their pets.
    • Homeowners must park their vehicles in designated areas.
    • Homeowners must dispose of their trash properly.
    • Homeowners may not decorate their homes for holidays in a way that is deemed to be offensive or unsightly.
    • Homeowners may not rent out their homes for short-term periods of time without the HOA’s approval.

It is important to note that HOA rules and regulations can vary widely from community to community. Homebuyers should always review the HOA’s rules and regulations carefully before purchasing a home in a community.

And don’t think the rules are for everyone else. HOA can enforce the rules and regulations in a variety of ways. HOAs may have a dedicated enforcement committee or hire a management company to enforce the rules. HOAs may also have a system of fines for homeowners who violate the rules.

If you have any questions or concerns about HOA rules and regulations, you should contact the HOA board directly.

HOA board

a large group of hoa board members and owners

The homeowners association (HOA) community has a group of elected volunteers who are responsible for the day-to-day operations of the homeowners association. The board is responsible for making decisions about the community, such as:

  • Setting the HOA budget and dues
  • Maintaining common areas and amenities
  • Enforcing the HOA’s rules and regulations
  • Overseeing the HOA’s management company
  • Hiring and firing contractors
  • Negotiating contracts
  • Approving changes to homes and properties
  • Resolving disputes between homeowners

The HOA board usually has a president, vice president, secretary, and treasurer. However, the size and structure of the board can vary from community to community. Some HOAs also have additional board positions, such as architectural control committee chair or security committee chair.

The community homeowners elect HOA board members. Elections are typically once a year, but the specific frequency and procedures for elections will vary from community to community.

HOA board members serve on a voluntary basis, but they may be reimbursed for certain expenses, such as travel and childcare. HOA board members are also required to disclose any potential conflicts of interest.

The HOA board plays an important role in the community. By making sound decisions and enforcing the HOA’s rules and regulations, the board can help to maintain the quality of life and property values in the community.

Specific duties and responsibilities of the HOA board:

  • Manage the HOA’s finances: The board is responsible for setting the HOA budget, collecting dues, and paying bills. The board is also responsible for investing the HOA’s reserve fund.
  • Maintain common areas and amenities: The board is responsible for maintaining all common areas in the community, such as streets, sidewalks, parks, and playgrounds. The board is also responsible for maintaining any amenities that the community offers, such as swimming pools, clubhouses, and tennis courts.
  • Enforce the HOA’s rules and regulations: The board is responsible for enforcing the HOA’s rules and regulations. This may involve issuing fines or warnings to homeowners who violate the rules.
  • Oversee the HOA’s management company: If the HOA has hired a management company, the board is responsible for overseeing the company’s performance. The board should review the management company’s budget and reports, and approve any major decisions that the company makes.
  • Hire and fire contractors: The board may need to hire contractors to perform various tasks, such as landscaping, snow removal, and trash collection. The board is responsible for hiring and firing contractors, and for negotiating contracts with them.
  • Negotiate contracts: The board may need to negotiate contracts with various vendors, such as insurance companies and waste management companies. The board is responsible for negotiating contracts that are in the best interests of the HOA.
  • Approve changes to homes and properties: Some HOAs have rules about what changes homeowners can make to their homes and properties. The board is responsible for approving any changes that homeowners want to make.
  • Resolve disputes between homeowners: The board may need to resolve disputes between homeowners. The board should strive to resolve disputes fairly and in a timely manner.

The HOA board is an important part of any homeowners association. By serving on the board, volunteers can help to make their community a better place to live.

The importance of an HOA’s financial stability

Side view of crop concentrated young ethnic female using touchpad of netbook and shopping online

The financial stability of an HOA is important because it affects the ability of the HOA to maintain the common areas and amenities, enforce the HOA’s rules and regulations, and pay its bills. A financially stable HOA is more likely to be able to hire qualified contractors, provide high-quality services to its residents, and avoid special assessments.

There are a number of factors that can affect the financial stability of an HOA, including:

  • The size of the HOA’s reserve fund: The reserve fund is a savings account that the HOA uses to pay for major repairs and replacements, such as new roofs for common buildings or repaving the community’s streets. A healthy reserve fund can help the HOA to avoid having to levy special assessments on homeowners.
  • The HOA’s budget: The HOA’s budget should be balanced and realistic. The HOA should have enough income to cover its expenses, including the cost of maintaining common areas and amenities, paying staff and contractors, and contributing to the reserve fund.
  • The HOA’s delinquency rate: The delinquency rate is the percentage of homeowners who are behind on their HOA dues. A high delinquency rate can put a strain on the HOA’s finances.
  • The HOA’s debt-to-income ratio: The debt-to-income ratio is a measure of the HOA’s ability to repay its debt. A high debt-to-income ratio can indicate that the HOA is struggling to meet its financial obligations.

Homebuyers can assess the financial stability of an HOA by reviewing the HOA’s most recent financial statements. The financial statements should include a balance sheet, income statement, and cash flow statement. Homebuyers should also ask the HOA board about the HOA’s reserve fund, budget, delinquency rate, and debt-to-income ratio.

Community culture

team, group, people in an HOA community

HOA community culture is the shared values, beliefs, and behaviors of the residents of an HOA community. It is shaped by the community’s history, demographics, and the HOA’s rules and regulations.

A positive HOA community culture can be characterized by a number of things, including:

  • Neighborliness: Residents feel comfortable and safe interacting with their neighbors. They are willing to help each other out and support each other.
  • Sense of community: Residents feel like they belong to something larger than themselves. They are proud of their community and want to contribute to its success.
  • Respect for diversity: Residents respect the diversity of their community, both in terms of demographics and values. They are welcoming and inclusive to all residents.
  • Commitment to the community: Residents are committed to maintaining and improving their community. They are willing to volunteer their time and resources to make the community a better place to live.

A positive HOA community culture can have a number of benefits for residents, including:

  • Improved quality of life: Residents who feel connected to their community and respected by their neighbors tend to have a higher quality of life. They are more likely to be happy and healthy.
  • Increased property values: Homes in HOA communities with positive cultures tend to have higher property values than homes in communities with negative cultures.
  • Reduced crime rates: HOA communities with positive cultures tend to have lower crime rates than communities with negative cultures.

HOA boards can play a role in promoting a positive community culture by:

  • Encouraging neighborliness: The HOA board can encourage neighborliness by organizing social events and volunteer opportunities for residents.
  • Celebrating diversity: The HOA board can celebrate the diversity of the community by organizing events that showcase the different cultures and traditions of the residents.
  • Encouraging community involvement: The HOA board can encourage community involvement by forming committees that allow residents to get involved in the decision-making process.
  • Being transparent and accountable: The HOA board should be transparent and accountable to the residents. The board should regularly communicate with residents about the community’s finances and operations.

Residents can also play a role in promoting a positive HOA community culture by:

  • Being friendly and welcoming to new neighbors: Residents can make new neighbors feel welcome by introducing themselves and offering to help them out.
  • Getting involved in the community: Residents can get involved in the community by attending social events, volunteering for committees, and serving on the HOA board.
  • Being respectful of other residents: Residents should be respectful of other residents’ property and privacy. They should also be mindful of their noise levels and behavior.
  • Following the HOA’s rules and regulations: Residents should follow the HOA’s rules and regulations to help maintain the community’s standards.

By working together, HOA boards and residents can create positive HOA community cultures that benefit everyone.

The benefits of HOA properties

There are many benefits to buying in a homeowners association (HOA) community. Some of the most common benefits include:

  • Amenities: HOAs often offer residents access to swimming pools, gyms, clubhouses, playgrounds, tennis courts, and golf courses. These amenities can enhance your quality of life and save you time and money, as you don’t have to pay for them separately.
  • Maintenance: HOAs typically take care of maintenance and repairs to common areas, such as landscaping, snow removal, and trash collection. This can free up your time and energy, and it can also help to keep your property value high.
  • Security: Many HOAs have security features, such as gated entrances and security patrols. This can help to deter crime and make you feel safer in your home.
  • Community: HOAs can help to foster a sense of community among residents. This can be achieved through social events, volunteer opportunities, and other activities.
  • Property value: Studies have shown that homes in HOA communities sell for more than homes in non-HOA communities. This is likely because HOAs help to maintain a certain aesthetic standard and to keep the community well-maintained.

In addition to these general benefits, some specific benefits may be offered by certain HOAs. For example, some HOAs offer insurance, legal assistance, or dispute resolution services to their members. Others may offer social events for residents, such as potlucks, holiday parties, and game nights.

The disadvantages of HOAs

The disadvantages of living in an HOA community include:

  • Cost: HOAs typically charge monthly or quarterly dues to cover the cost of maintaining common areas and amenities. These dues can range from a few dollars to hundreds of dollars per month, depending on the community.
  • Restrictions: HOAs often have strict rules and regulations about what homeowners can do with their properties. These rules may cover everything from the color of your house to the type of landscaping you can have.
  • Lack of control: When you live in an HOA community, you are essentially giving up some control over your property. The HOA can make decisions about your property that you may not agree with.
  • Potential for conflict: There is always the potential for conflict between homeowners and the HOA board. This can happen if homeowners feel that the HOA is being unreasonable or if the HOA board is not responsive to their concerns.

Here are some specific examples of disadvantages that you may experience in an HOA community:

  • You may be required to get HOA approval for any changes you want to make to your property, such as painting your house a new color or adding a new fence.
  • The HOA may have restrictions on the type of pets you can have, the number of parking spaces you can use, or the noise level you can make.
  • The HOA may have rules about how you can use your yard, such as whether or not you can have a vegetable garden or a trampoline.
  • The HOA may charge additional fees for special services, such as access to the pool or gym.
  • If you fail to pay your HOA dues, the HOA may take legal action against you, including foreclosure on your home.

It is important to weigh the pros and cons of living in an HOA community before you make a decision. If you are considering buying a home in an HOA community, be sure to read the HOA’s rules and regulations carefully and ask any questions you have.

Final thoughts about living in an HOA

Investing in a property in an HOA community can seem daunting, though there are plenty of aspects worth keeping in mind. Before making the jump, don’t hesitate to ask specific questions before buying a home in an HOA community:

  • How much are the HOA dues?
  • What are the HOA’s rules and regulations?
  • What amenities does the HOA offer?
  • How is the HOA managed?
  • What is the financial stability of the HOA?
  • What is the community culture like?

If you are comfortable with the answers to these questions, then you may be a good fit for living in an HOA community. However, if you have any doubts, it is best to look for a home in a non-HOA community.

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