I think when you hear about HOAs, the types of things they control, and simply the fact that they exist, a knee-jerk reaction is along the lines of "wtf"? Why do we, as Americans proud of their freedoms, pay money to an entity who exists to limit our freedoms in relation to property that we ourselves own?
It used to baffle me, too. However, now that I'm working in real estate, I'm here to share with you the purpose of HOAs; how well they accomplish their overall goals can be questionable. I'm not here to say I'm a proponent of HOAs - I simply have a better understanding of why they exist in the first place.
What are HOAs?
I'm assuming most of you reading this have heard of an HOA or have some kind of understanding of what it is. HOAs, or Home Owners Associations, exist to help maintain the value of homes within the subdivision where the HOA is organized. When you are in the process of purchasing a house, one thing you must consider is whether or not you are open to purchasing a home within a subdivision which is overseen by an HOA.
HOAs essentially make rules that homeowners within their subdivision must follow. These rules are kept in the by-laws of the HOA, and by purchasing a home within their subdivision you are consenting to the rules as set by the HOA. Some HOAs are more involved, with more rules and restrictions on what homeowners can and cannot do. Other HOAs are more hands-off and are mostly concerned with the integrity of roads and other construction matters.
Examples of limitations placed by an HOA:
Types of lawn ornaments allowed on display
Age of cars in driveway
How tall grass is allowed to be
Types of mailboxes you can have
Whether or not you can use the property for renting/Airbnb
Each HOA has unique sets of restrictions that they follow.
Why do we allow these limitations to take place?
The hope is that, by setting restrictions to homeowners, that there will be more uniformity in the subdivision, and the integrity of the subdivision will be maintained, which will lead to increased or at least maintained home value. If the neighborhood has a certain uniformity and looks well maintained, the idea is that those homes will maintain their value and homeowners will be less likely to sell their homes at a loss.
Will my property value decrease if I don't buy a house with an HOA?
No! A lot of buyers do not want to purchase a home with an HOA due to the limitations placed on the homeowner. As long as HOAs exist, there will always be demand to live in a home without an HOA.
Let's talk $$$
HOA fees can go to different causes, so to get an accurate picture of what exactly your potential fees would be getting you, you would need to see the HOA bylaws to see what you are paying for. Some common things fees go toward:
Pool/playground/fitness center maintenance
Exterior home maintenance (lawn care, roof repair, fence repair)
Trash removal
Sewer/water
HOA reserve
Some of these are things that you as a homeowner would need to pay monthly toward anyway. However, fees can be quite hefty and beyond what you'd have to pay for those items anyway. Also remember that part of your portion is used toward reserve - ensuring that the HOA can afford any unexpected repairs or maintenance items that come up.
Should I purchase a house with an HOA?
Ultimately, this is a decision you would need to make during your home search process. If you really like a house, but it comes with HOA restrictions, are you willing to make that sacrifice? Can you afford a certain subdivision if you're paying your monthly expenses plus that HOA fee? Do you agree to the restrictions placed by the HOA?
If you like a house with an HOA, ask your real estate agent to obtain a copy of the bylaws so you can review them and determine if you find them reasonable or not. Compare neighborhoods with HOAs and without and see if you have a preference for how one is maintained versus the other. If the HOA uses money for maintenance of outdoor areas, or pools, are those things clean? Does it appear that they use their funds appropriately?Consider any fees you may have to pay.
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