Pros and cons buying a home in a HOA community
Updated: Apr 25
What is a HOA?
An HOA (Homeowners Association) community is an organization usually run by the Board of directors. They are homeowners elected by other residents and their responsibility is to set and enforce rules and regulations on the neighborhood. Certain fees are collected to manage the common areas of the community and the associated costs are shared. HOA communities are usually known to maintain conformity to look aesthetically pleasing with less maintenance, Some buyers prefer buying a home in such community. Some buyers doesn't like the fact that a lot of rules have to be followed and there might also be a lot of limitations on updating your home. It is very important to know and understand the rules, regulations, limitations of an HOA community before deciding to buy a home.
Covenants, Conditions and Restrictions
Usually the HOA's expect certain covenants, conditions and restrictions to be followed if you decide to buy a home and live in the community. HOA may be able to provide you with the copy of updated latest rules and regulations, you may also request your real estate agent to get a copy from them. If you are an investor and planning to lease out your property, it is also important to check with the HOA whether Rentals are allowed in their community.
Does the reserve fund have enough money?
It is also important to know whether there are any upgrades planned for the community in the near future and does the reserve fund have enough money to cover it. For example, if you are living in a condo and the roof needs replacement, they usually look into that year's reserves. If they don't have enough money, they check into the reserve fund. Reserve funds are funds that are taken for emergency purposes. If they don't have enough money in the reserves, then the condo owners have to share the costs among them. They may also charge special assessment charges or increase the HOA dues to cover the expense.
Can I read the meeting minutes before buying?
You may request the Homeowners association for the meeting minutes to know the current condition of the HOA. You may also know whether there are any lawsuits pending, whether there are lot of unhappy homeowners complaining about the maintenance and how the issues are being addressed and taken care of before deciding to buy your home in the community.
What does the fees cover?
Some HOA communities charge a few hundred dollars for the maintenance of the community and it is important to know what are the services covered in your HOA dues. The HOA fees may cover landscaping, certain exterior features like (insurance, painting, roofing) and some utilities.
Are home improvements allowed?
It is important to check with the homeowners association before buying a home as they usually like to maintain conformity and have certain limitations especially when it comes to the exterior of the home. You may not be able to decide on the paint color or roof color of your home. They usually have certain limitations on the home improvements as well. It is important to check with an HOA before buying home or making any changes to avoid heavy fines.
Pros of buying a home in a HOA Community
Common area management
The common areas are usually maintained by HOA. This includes the landscaping, tennis courts, swimming pool, playgrounds, picnic areas, Golf course, Walking trails. The buyers residing in the community may use all the amenities without the worry of maintenance. Some HOAs maintain the lawn and landscaping area in front of the home too, but the area of backyard fenced in are usually maintained by the buyers. Getting access to all these amenities improves the quality of life.
The HOA insurance policy covers the common areas, exterior features like exterior walls, roof and the areas around your home. It's important to know what is covered in your HOA insurance policy to better plan your insurance policy coverage. HOA policies usually cover property damage coverage and common areas liability coverage. There are two types of HOA policy and its coverage varies accordingly.
All in Policy - All in policy or Master policy usually covers all the common areas of the community along with the interior and exterior features of your home.
Bare Walls Policy - Bare walls policy usually covers all the common areas of the community along with the exterior features of your home.
Less expensive homes
Usually the homes in HOA community are comparatively lower to the similar sized homes present outside the community. This not only reduces the home price, but reduces the property taxes also. On the whole, this might result in less mortgage payments and increase affordability.
When the problems arise between the neighbors, Homeowners association may help find a resolution to the conflict through mediation. The three steps that are usually followed in conflict resolution are negotiation, arbitration and mediation. Instead of arguing the problems directly with the neighbor, the HOA might be able to take care of the problem and find a resolution for everyone involved.
Most of the HOA communities are gated and it provides an additional safety feature to the home. This reduces the public traffic and the entry is limited only to the people living in the community or the visitors of the people living in the community. This provides an added safety feature to the homes. Kids may be able to play outside freely as the speed limit is typically low inside the community.
Cons of buying a home in a HOA Community
High Monthly Fees
As the HOA is responsible for the maintenance of the common areas, the higher the number of amenities the HOA provides, higher the monthly dues will be. These fees usually tend to go up periodically and may also include occasional assessments if the reserves are not enough. These monthly fees add on to your home expense, so it is important to budget the monthly expense before deciding to buy a home in this community.
Rules and regulations
Some HOA impose a lot of rules and regulations and there might be a lot of repercussions if they are not followed. They might have a lot of rules regarding how the house may be maintained, what can be and can't be done in your home. The exterior features are usually controlled by HOA and they may even have restrictions on the holiday decorations on the exterior of the home. Some HOAs also have restrictions on parking the car in the driveway and guest cars have to be parked in a designated space. They usually have the authority to decide on the roof and its color, exterior wall and it's paint color, color of front door, type of doors and windows.
Limitations in personalization
If you wish to remodel your home in future, there might be a lot of restrictions and limitations in doing so. It is important to inquire HOA before buying the home. Some HOAs even have restrictions in the type of plants and furniture that you may have outside the home. If you are interested in remodeling and bring out your unique taste on your home or having a big back yard then buying a home in the HOA community might not be a good idea.
Most of the HOA communities have a town home or condo type of homes. The condo and town homes of the HOA have at least one wall shared and may be noisy and have a lack of privacy. Even if you buy a standalone home, the back yard space might be smaller when compared to the homes outside the community. Some HOAs also have restriction on the type of pet or number of pets they might own.
Some HOAs doesn't allow the homes to be leased out or might have a lot of restrictions on the leasing. If you are planning to lease out your home in the future, this is something that you must inquire HOA and understand its rules and regulations. Some might allow leasing but exclude short term rentals.
The best way to decide on buying a home in an HOA community is to weigh the pros and cons and figure out what best suits your lifestyle. Though it is a personal choice, it is important to know all the facts before buying a home.