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All About HOAs

If you’re planning to buy a home in a community that has a homeowner’s association, there are a few things you need to know. A homeowner’s association (HOA) has one purpose – to protect property values, and it does so by instituting rules and regulations that encourage homeowners to keep the community more attractive and desirable. 

Each HOA offers different services at different costs. Some offer plentiful amenities, such as a community swimming pool, dog park, walking trail, security patrols, front yard maintenance, exercise rooms, spas, and much more. 

The HOA board collects a monthly, quarterly or annual fee to maintain those amenities and to protect the integrity and safety of the community for all homeowners. 

The main benefit of livingfe with an HOA is that you can enjoy the amenities you want at a lower cost because you’re sharing the expenses with other homeowners. Your HOA dues are used for property maintenance and improvements and for building reserves. Reserves are collected for future expenses like swimming pool resurfacing or condominium re-roofing, as well as unexpected expenses like fallen tree removal. 

HOAs can also be restrictive, with some rules you may not like, such as no yard signs, no political banners or flags, no glass in the pool area, no dogs over a certain size, no parking on the street, and so on. 

That’s why you need to see the governing documents of the HOA before you buy a home, including the aa Declaration of Covenants, Conditions and Restrictions (CC&Rs) which legally binds all the owners to compliance. These are the rules of esthetics, conduct, maintenance, and security the homeowners voted to have. You can then make the decision whether this particular community is right for you.

When the HOA board meets, it decides on budgets, allocates expenses and sets homeowners' dues. In some cases, the board will hire a property management company to handle administrativetion duties, maintenance, dues and assessment collections, security, complaints or other issues.  

The CC&Rs and Bylaws are usually recorded with the county.  This empowers the HOA to have legal authority in case of foreclosures or other penalties due to non-payment of dues and assessments or other non-compliance issues.  

The documents you should ask to see should also include the annual budget with planned expenditures and special assessments, as well as the most recent quarterly accounting. A good and well organized HOA should be able to quickly supply whatever documents you’d like to see. 

If you’re buying a condominium, you should know that your lender may have certain requirements for condos that don’t apply to single-family homes. For example, FHA-approved lenders insist that 80% of the condo owners are owner-occupants. The financial records of the HOA should show your lender how many owners are delinquent in dues, how many units are rented out, and whether the HOA has enough in “reserves” or savings to perform necessary maintenance such as replacing a roof for the entire building.  

Keep in mind that HOA boards are composed of volunteer homeowners like yourself and that they’re not professional property managers. HOAs typically hire third-party property managers so board members have fewer responsibilities and can enjoy the community, too.