Homeowners associations (HOAs) are often created to protect the value of the homes in an area – and sometimes provide extra amenities. For an additional fee, homeowners gain access to HOA protections and privileges, and must comply with HOA regulations and rules. Is this transaction worth it?
The Basics of HOAs
Let’s start with the basics of HOAs. HOAs in the United States are nonprofit corporations founded by real estate developers to market, sell, and manage properties within a certain area. After the properties in an area have been sold, the corporation is then managed under a Board of Directors (usually comprised of people who own homes in the subdivision).
Each HOA will have a set of rules and guidelines known as Covenants, Conditions, and Restrictions (CC&R). Depending on the HOA, these may be loose or strict; for example, in most HOAs, you won’t be able to own commercial livestock. In some, you may not be able to make additions to the exterior of your home or your yard without express written approval. Common points cover things like parking, pets, the exterior of your home, renting options, and penalties for violations of rules.
In some cases, the HOA is responsible for creating, managing, and improving amenities. For example, you may have access to a community pool that’s managed by the HOA, or access to a small park in the neighborhood.
It’s important to note that every HOA is unique. The rules may be oppressive or almost unnoticeable. The fees may be small or egregious. The amenities may be luxurious or nonexistent. It all depends on the neighborhood and the Board of Directors managing the organization.
Advantages of HOAs
There are several advantages of HOAs, including:
· Higher and more consistent home values. One of the main roles of an HOA is to keep home values in the area as high and consistent as possible. You won’t have to worry about a neighbor allowing their property to fall into total disrepair, thereby bringing down the value of your home – the HOA will guard against that. When it comes time to sell your property, you’ll likely be able to fetch a higher price for it.
· Fewer nuisances. If you’re the type of person who gets annoyed when a neighbor goes too long without mowing their lawn or if you’re woken up early by a crowing rooster, you’ll be glad the HOA exists. Thanks to the rules and proactive management of the HOA, you’ll experience fewer nuisances living in the neighborhood.
· Less work. Depending on where you live, the HOA may take care of things like lawn mowing and snow removal. That means less work for you, so you can spend more time doing the things you actually want.
· Amenities. Some HOAs offer impressive amenities. You could have access to a walking trail, a miniature nature reserve, a pool, a gathering area, or other additions, all right in your neighborhood. If that’s the case, it may be well worth the extra fees to join the neighborhood.
· Potential influence. You might even have the opportunity to join the Board of Directors for the HOA – or at least strike up a friendship with someone who’s involved. That means you could have direct or indirect influence over new rules that get rolled out, new amenities that are considered being added, and more.
Disadvantages of HOAs
However, there are some clear downsides, including:
· Extra fees. The biggest disadvantage most people notice is the extra fees associated with living in the neighborhood. Minimal HOAs, with few amenities, tend to be very reasonable, charging a few hundred dollars per year, if that. If you have an HOA that offers a lot of luxury amenities and additional services, you can expect to pay thousands of dollars per year.
· Restrictions on modifications and certain lifestyles. Of course, some HOAs are also highly restrictive when it comes to what you can do with your property in the neighborhood. You may not be allowed to have certain types of animals on your property, or you may be limited in what you can do with the exterior of the home. Depending on your lifestyle and creative urges, you may find this oppressive.
· Potential fraud. Unfortunately, HOA fraud, theft, and embezzlement are common. Though most HOAs are perfectly legitimate, the Board of Directors are in a position of power – and power can corrupt people.
So is an HOA worth it? That depends on the nature of the HOA and your personal values. Before committing to buy a house in an area with an HOA, do your research and get to know the HOA a little better. If it aligns with your interests and priorities, it’s worth it; otherwise, it may be better to find a property in a different area.