If you’re on a house hunt now, there’s a good chance you may end up finding your dream home within a community association.
About 25% to 27% of the U.S. population lives in a community association – whether a homeowners, condominium, townhouse or co-operative housing association – according to the Foundation for Community Association Research. In all, there are about 347,000 community associations with 73.5 million residents in the U.S.
These associations are generally tasked with coordinating the upkeep of the common property of a building or planned or gated community. They do this by charging fees or dues and possible assessments to perform necessary repairs.
Of course, not all HOAs are created equal. Some are well-run and well-funded by a competent board and savvy management company. Others may be plagued with infighting, costly upcoming repairs or nosy busybodies.
“Some people love it, some people hate it,” says Bryce Pennel, a real estate agent with Coldwell Banker in Beverly Hills, California. “It’s partly who you are and what triggers you, if you like to do things solo or as a group.”
Here are the pros and cons of living within a homeowners association, or HOA.
Pros of HOAs
Amenities: Many neighborhoods with homeowner associations come with community amenities, such as pools, tennis courts, playgrounds or fitness centers that members in good standing can use, possibly saving them money on gym memberships and the like.
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Maintenance: The major benefit of HOAs is that they take care of the common grounds, so you don’t have to. That can be landscaping, roads and other common areas. They are also responsible for getting necessary insurance for community areas like pools and playgrounds.
Ownership: If you’re unhappy with your HOA board of directors, you can always run for the board and help set the agenda for your neighborhood. In that sense, you take ownership of your community along with your house.
Cons of HOAs
Dues: HOA dues, which can be charged monthly or yearly, increase the cost of living in a neighborhood or building run by an association. In Beverly Hills, some of the luxury condos can charge up to $3,000 extra a month for dues, Pennel says. Overall, though, HOA fees are typically in the low hundreds of dollars.
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Part of your dues goes to paying monthly expenses, while the remaining funds go into a reserve pool for bigger repairs or replacements down the road. Your HOA dues may also cover costs you would otherwise pay for yourself if you didn’t live in an HOA, says Vanessa Beneze, a real estate agent with Century 21 Frank Frye Real Estate in Licking County, Ohio.
“If the HOA is covering utilities, water and trash, then it can be a pro,” Beneze says.
No matter what your dues cover, it’s important to pay them on time. If you get behind without setting up a payment plan, the HOA can foreclose on your property.
Assessments: If the HOA doesn’t have deep reserves and an unexpected but immediate repair comes up, all homeowners in the association may be charged a one-time assessment to cover the cost of the repair. Depending on the expense, this could take you and your wallet by surprise.
Rules: Another drawback is the rules that the association sets for the common facilities as well as factors affecting your home and habits such as proper garbage can etiquette and approved paint colors or roof tiles, especially if you’re in a designated historic district.
If you want to renovate your house – especially if you own in a unit in a condo building – you may need to submit your plans for approval by the HOA before proceeding.
“These rules, in general, are put in place for everyone’s best interest,” Pennel says. “But when told there are rules, people can get frustrated.”
What to look for in a HOA
Before buying into an HOA, do you due diligence. That includes looking over the HOA’s covenants, conditions, and restrictions, or CC&Rs. There, you should find the community’s rules and regulations as they apply to your home and the community as a whole.
You should also get a peek of the HOA’s finances to see if it has a healthy reserves fund for emergencies. Ask for the minutes from past annual meetings. These aren’t always easy to get, says Beneze, who habitually puts it into the contract that her buyers get to see the minutes before closing.
Beneze also recommends asking those who live in the neighborhood about the HOA and how it’s run. You may get the most honest answers from people not interested in selling you a house.