What is Homeowners Association?
When it comes to real estate, you may have heard of the infamous acronym HOA before. For those who currently rent and are thinking about starting your homeownership journey or are already a homeowner looking to buy a home where HOA may apply, you should be well-educated on what HOA is and how it can affect you as a homeowner.
HOA stands for Homeowners Association. According to Investopedia, HOA is an organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and its residents. In our Rent vs. Own blog, we talk about how one pro of homeownership is the freedom to change the design or look of your home however you wish. If you are part of an HOA community, that pro may come with some limitations.
These limitations can be widely unfavored by homeowners, though they only cover a fraction of what HOA is all about. Nonetheless, their rules are there for a purpose. We’re not here to take sides, but rather keep you informed of what HOA is before buying a home in one of their communities.
Who is Part of HOA?
Every HOA community has a board of directors made up of voluntary homeowners who live in your distinctive area, just like you! Usually, these members are appointed either by the board or the community. When we say voluntary, we mean that these members operate without pay, but are still willing to oversee the overall maintenance of the community to ensure they adhere to HOA rules and regulations. It can be a daunting job as they have to deal with complaints and any issues that come from homeowners. However, if you are not happy with your current board, you, as a homeowner, have an opportunity to be on the board yourself and make any valuable changes that would be for the good of the community.
As for which homeowners are part of an HOA community, not every homeowner is a part of an HOA. HOAs are more common within more populated states, like California or Arizona.
When you are home shopping for your next home, carefully read the property description to see if it falls under an HOA community. Like the definition outlined, HOAs are prominent within condo buildings and planned areas. Another good way to find out if a property is in an HOA community is by asking your real estate agent.
Why is an HOA necessary?
Some homeowners may think that HOAs will have bad intentions, while this is not true. The purpose of an HOA is to maintain a harmonious and joyful community by enforcing rules that keep the entire community and its tenants at bay. This purpose may mean HOA having to put its foot down if a tenant refuses to follow the rules and regulations in place. While it may come off as restrictive and overbearing, the rules are in place for a reason.
Other homeowners perceive HOA as an indicator of the quality of life. They strive to maintain the condition of the community, so the units themselves don’t depreciate over time. Just as you wouldn’t want to see your town fail to maintain its streets and parks, homeowners can see the value in HOA as they continue to encourage a flourishing and thriving environment.
Pros of being in an HOA
Included amenities
The benefits that come with living in an HOA community are the sweet amenities available to you. These amenities may include access to things like a community pool, gym, common room, and more. In addition to these amenities, some HOAs will also cover the tenants’ utilities, such as trash and water. This benefit saves homeowners the hassle of having to deal with various monthly bills.
Unified appearance
Condominium buildings are similar in appearance to apartment buildings where each unit has a very unified look from the outside. Even if the individual units vary in square feet and number of bedrooms, you can visually tell that they all come together to create a uniform impression. The same applies to subdivisions and planned communities where HOA is present. If you’ve ever visited a friend or family member that lives in an HOA community, you may notice that the homes have a similar look to each other. The intent is to not have one home stand out over the other, maintaining a constant environment of a community.
Community Involvement
Community involvement may not be a priority for every homeowner, but it is a great way to get to know your neighbors, get comfortable with the area, and contribute to the overall environment. When you live in an HOA community, you are a part of that HOA, meaning your neighbors all around you are part of the HOA too. Other than sharing common ground, being a part of an HOA presents opportunities to leverage your communication with nearby homeowners and participate in community activities.
Maintenance
Maintenance can vary between HOA communities and are probably more common with condo buildings than planned communities or subdivisions. Maintenance refers to the upkeep of the areas surrounding the community. These areas will typically include shrubbery, trees, grass, and other common ground that isn’t occupied by a single unit. Since maintenance will sometimes fall under the HOA scope, any issues that arise won’t necessarily be your problem. For example, if you notice a bush needs trimming or a building door needs to be replaced, you can simply bring it up with the HOA. Any other public issues you see in your community are open field to discuss with your HOA, as it is their responsibility to address and resolve them.
Cons of being in an HOA
Dues/cost
Living in an HOA community that includes all these pros wouldn’t be possible if there wasn’t a cost factor on the other side. That being said, if you live in an HOA community, you will have to pay monthly dues that go toward the overall resources that we discussed. Keep in mind that HOA dues are not factored into your monthly mortgage payment and will typically be a separate payment to your property management. These costs can vary between communities. It’s also good to note that the HOA board does have the power to adjust the cost of your monthly dues if needed. You want to make sure that the value of the home and the amenities that come with it are reasonable for the overall cost.
Keep in mind that even though HOA dues are not part of your monthly mortgage payment, it is still a cost you need to budget for. If you plan to buy a home in an HOA community, do your due diligence and research the property carefully, or better yet, ask your real estate agent. They will do their research and let you know what the HOA cost is, so you can decide if it fits into your monthly budget.
Rules and Regulations
As we mentioned before, the rules and regulations set by an HOA can be an obstacle to your freedom that is homeownership. Unfortunately, if you choose to buy a home in an HOA community, you won’t know the exact rules until after your official move-in. If you become skeptical that your lifestyle may be obstructed by an HOA’s rules, we suggest walking around the community beforehand and simply asking tenants what rules are set in place. Some of these rules include the number of pets allowed, how short your front yard grass should be, what type of renovations are allowed or not, timeframes in which you can make moderate noise, and much more.
Limited Freedom
Limited freedom goes hand in hand with rules and regulations set in place because, in a way, your freedom to do what you want with your home can be restricted by these rules. You may have heard stories about homeowners disagreeing with HOA rules, which is very common to see. These stories may come from the fact that they own the home, so they feel they should have the freedom to do what they want with it. However, since those homes were likely part of an HOA before homeowners bought it, the regulations have priority over the homeowners’ personal opinions. That’s why it’s extremely important to do your research beforehand and find out what you can about an HOA community if you are planning to buy a home in one.
Should You Buy in an HOA Community?
The answer is all up to you. Homeowners will have different goals and tolerances when it comes to their home buying journey, which is why we can’t make that decision for you.
What you know now about HOA may be completely different than what you thought you knew before. In other words, it could change your initial perspective completely or strengthen your overall outlook altogether. No matter the way you perceive the HOA, one of the most important takeaways is to research all you can about an HOA community if the house you’re looking to buy happens to be in one. Remember to educate yourself on every aspect of your next home.
If you’ve decided on the home you want, get ready for your mortgage application by checking out our helpful tips.
