Homeowners' Association: What you Need to Know
So, what is an HOA and what are they all about? What do you need to know?
Boise Idaho's shrinking home inventory has prompted many to turn to new construction, and with budding neighborhoods come budding Homeowners Associations, organizations in a planned community or subdivision that create and enforce rules for all the homes and properties within their jurisdiction. What can you expect from these HOAs?
A Homeowners Association is a board that manages what is typically (but not always) a group of condominiums, townhouses or newly constructed neighborhoods. These associations are meant to both improve the quality of life for residents as well as maintain high property values. This is managed through a series of fees that the association uses to pay for services like caring for a lawn, shoveling snowfall, or maintaining upkeep on a pool or playground for the community. Some associations will also pay for water usage and cable TV. Depending on the amount of services that are being paid for, the cost of an HOA fee varies quite a bit -- generally the more services there are (or the larger the unit), the more expensive an HOA bill will be.
HOA fees will oftentimes be paid on either a month-by-month or yearly basis. However, regardless of when a payment is required, when you purchase a home controlled by a Homeowners Assocation you are required to pay the bill when it is due. Some associations have the power to cut off services from a household, including water or electricity. An HOA can even foreclose on a property, evicting tenants who do not pay. Before purchasing a home controlled by an HOA, be aware of the payment plan that you will be using, as well as where your money is going.
Consider the following questions:
- Does the HOA have a reserve fund? If not, you should be prepared to pay out of pocket when there are large repairs due.
- How large is the HOA's reserve fund?
- How often do increases occur, and historically how much have they been raised?
- How are the HOA fee increases set?
- Does the payment include things like water, trash pick-up, sewer services and cable TV?
- Has the HOA ever been sued?
Compare dues for the communityyou're considering to the average fees you can find in the area. If the community has amenities such as a fitness center or pool, you will have to pay for them whether you use them or not. There also may be rules about guests and their use of these amenities.
Learn the rules. You may be able to find this information online, and if you do, make sure it is up-to-date. If you cannot find this information that easily, you can ask your real estate agent or call the HOA yourself. In particular, you should be aware of what actions will cause you to be fined. Similar to how an association can evict a resident that has not paid their HOA fee, some of these organizations can foreclose your property due to accrued fines from violating too many CC&Rs. This stands for Covenants, Conditions, and Restrictions, which are the guidelines of living each resident must follow. Review these rules before you purchase the home. Sometimes, a home may already be out of compliance with the HOA CC&Rs. Be aware of any existing problems so you can fix it as soon as possible, or have the chance to look for a different property.
Sometimes, these rules can be changed or amended. HOA meetings are by practice open to any homeowner in the community. Participating in these meetings can help influence your neighborhood or complex for the better. You can even request a copy of minutes from the last HOA meeting or ask to sit in on one. This can be very telling to the policies of the HOA. You'll do well to know what, if any, current conflicts there are and what has happened in the past, and what their process is of solving conflicts. While we'd like to think that HOAs are devoid of drama and petty politics, it can still be an issue. It can be particularly helpful if you can talk to some of the current owners -- ones who aren't on the board. HOAs can be managed by a private company or by building residents who fill the position as volunteers. Either way, you don't want to end up getting into something you didn't bargain for.
Common HOA restrictions include:
There are some HOAs that dictate how you treat and care for your lawn. They may enforce the use of fertilizers, pesticides, sprinkler systems or whatever else they deem important to keep your lawn the picture of perfection. Certain things may not be permitted with the HOA. They may limit the size of your garden, disallow compost piles and so on. Whether these things are important to you or not, it's always wise to read the fine print. And again, HOAs vary. Some are much less restrictive than others.
Homeowners Associations will often dictate how many cars can be parked in front of a house at once, so as to prevent the homes from appearing cluttered.
This is especially true in condominiums, but some associations will not allow certain domesticated animals -- commonly dogs. More often seen, however, are the rules against pets over a certain weight and size.
With any HOA, it's important to consider what type of person you are. If you dislike being told how to maintain the exterior of your home, living in a community with an HOA might not be a positive experience for you. Furthermore, consider the financial impact of HOA fees on both your short and long term finances. For example, a condo with high HOA fees may just end up costing you as much as that dream house you thought you couldn't afford.
Homeowners' associations can both fill the role as your best friend, or your worst enemy. There are many pro's and con's involved with any HOA. The bottom line is that it's more important than ever to be well acquainted with the HOA rules and fees before it's too late to go back. Your agent will be a great asset to you if you're deciding to buy a home that is subject to rules.
Hughes Group is always available at 208.571.7145.