When you purchase a condominium, townhouse or other type of property in a planned development such as a leased land property, a gated community, or even an ordinary subdivision, you are obligated to join that community’s homeowners’ association (HOA) and pay monthly or annual HOA fees for the upkeep of common areas. Investopedia’s Amy Fontinelle lists 9 Things You Need to Know About HOAs.
- Learn the HOA’s rules. You may be able to find an HOA’s covenants, conditions and restrictions (CC&Rs)online as well as information about what happens if you violate a rule.
- Make sure the home you want to buy is not already out of compliance with HOA rules. Buying into an existing problem can be a headache, so find out what the rules are and whether you would have to make changes to the home to comply.
- Assess environmental practices. If environmentally friendly livingis important to you, be aware that some HOAs may dictate that you use fertilizers, pesticides, sprinkler systems and whatever else it takes to keep your lawn picture-perfect. They may not allow xeriscaping (an environmentally friendly form of landscaping) and may limit the size of gardens, ban compost piles and prevent you from installing solar panels.
- Consider your temperament. Are you the type of person who hates being told what to do? If so, living in a community with an HOA may be a very frustrating experience for you. One of the major benefits of homeownership is the ability to customize and alter the property to suit your needs, but HOA rules can really interfere with this.
- Find out about fees. Fees will differ for each community. Because of this you should make sure to ask your HOA the following questions:
- How are HOA fee increases set?
- How often do increases occur, and by how much have they historically been raised?
- Can you get a printed history of HOA dues by year for the last 10 years?
- How large is the HOA’s reserve fund?
- Also, ask for a record of special assessments that have been made in the past and ask if any special assessments are planned for the near future. Note that economies of scalecan mean that special assessments are higher in smaller HOAs.
- Find out what the monthly dues cover. Will you still have to pay extra for garbage pickup? Is cable included?
- Try to get a copy of minutes from the last meeting or sit in on an HOA meeting before you buy. The meeting minutes can be very telling about the policies of the HOA. Be alert for potential drama. Power trips and petty politics can be an issue in some HOAs. Talk to some of the building’s current owners, if possible – preferably ones who are not on the HOA board and who have lived in the building for several years, Some questions to ask are:
- What are current and past conflicts?
- What is the process for resolving any conflicts?
- Has the HOA sued anyone? How was that resolved?
- Watch for under-management. Not all HOAs are over-managed. The opposite problem may be an HOA where no one really cares and where no one is interested in maintaining the building, making repairs, hearing resident grievances or being on the board. Residents may simply take turns serving as HOA president or randomly appoint someone, so be prepared to serve in this role whether you want to or not if that is the case with your community’s HOA.
- Find out what kind of catastrophe insurance the HOA has on the building. This is particularly importantif you’re considering a condo or townhouse purchase and you live in an area that is prone to floods, earthquakes, blizzards, fires, tornadoes, hurricanes or any other type of potential natural disaster – and that is virtually anywhere.
- Consider the impact of HOA fees on your short- and long-term finances. A condo with high HOA fees might end up costing you as much as the house you don’t think you can afford.
Lastly, read the horrifying tale of an HOA gone bad: “The Association” by Bentley Little. It will keep you up at night so you can finish packing.
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