Buying a home can be both rewarding and overwhelming by the amount of information that's out there. Once you've made your homebuying budget and the ideal community is selected, buyers have even more to consider. Some communities use a homeowners association (HOA) to provide certain services and enforce rules. Each HOA can be quite different, so even people who have owned a home in an HOA should take care when considering another. Here's what buyers need to know before they buy a home with an HOA.

What Is an HOA?

A Homeowners Association (HOA) is an organization in a subdivision, planned community, or condominium that creates and enforces rules for the properties and residents within its jurisdiction. Those who purchase property within an HOA’s boundaries automatically become members and are required to pay dues, known as HOA fees. The HOA is typically managed by a board of directors composed of property owners within the community and may hire professional management companies to handle its operations. The primary goal of an HOA is to maintain property values and enhance the living environment within the community.

10 Helpful Things to Know About HOAs

• HOA Fees: Members are required to pay regular dues, which can be monthly, quarterly, or annually, to cover the costs of community maintenance and services.

• Rules and Regulations: The average homeowners association has covenants, conditions, and restrictions (CC&Rs) that outline what homeowners can and cannot do with their properties.

• Board of Directors: The HOA is governed by a board of directors, elected by the community members, responsible for making decisions on behalf of the association.

• Maintenance and Repairs: HOAs often handle the upkeep of common areas, such as parks, swimming pools, and clubhouses, as well as landscaping and sometimes exterior building maintenance.

• Dispute Resolution: Many HOAs have procedures for resolving disputes between homeowners and the association, which may include mediation or arbitration.

• Special Assessments: In addition to regular fees, a homeowners association can levy special assessments to cover unexpected expenses or large projects not covered by the regular budget.

• Community Standards: HOAs establish community standards to maintain the aesthetic and functional integrity of the neighborhood, which can include guidelines on paint colors, landscaping, and property modifications.

• Enforcement: The homeowners association has the authority to enforce its rules and regulations, which can include issuing fines, placing liens on properties, or even initiating foreclosure proceedings in extreme cases.

• Meetings and Voting: HOAs hold regular meetings where members can voice their concerns, vote on important issues, and elect board members.

• Financial Transparency: HOAs are generally required to provide financial statements and budgets to their members to ensure transparency in how funds are managed and allocated.

What Are the Benefits of a Homeowners Association?

The benefits of a homeowners association make it easier to maintain the home and the surrounding landscape, thus preserving property values for the entire communtiy. Homeowners will know that they have the services they need in place, and the space around their home is going to be well-kept. With everyone following the same set of rules, homeowners can expect that their property is not going to go down in value because of a neighbor who doesn't take care of their home. It is the homeowners association that will deal with a difficult member of the community, and that has the power to enforce rules set by the association. Homeowners can have a say in what goes on by running for a spot on the association's committee. HOAs give everyone a set of rules to follow, making for a more cohesive community setting.

What Are the Downsides of a Homeowners Association?

There are pros and cons to homeowners associations. One significant disadvantage is the restriction on homeowners' freedom, as HOAs enforce strict rules and regulations regarding property appearance and usage, limiting personal expression and modifications. Additionally, the mandatory fees can be burdensome, especially if special assessments for unexpected expenses arise. Conflicts between homeowners and the HOA board can also create tension and stress, particularly if the board is perceived as overzealous or unfair in its enforcement of rules. Furthermore, the power to impose fines and even initiate foreclosure proceedings for non-compliance or non-payment can add a layer of financial risk for homeowners. Lastly, decision-making within the HOA may sometimes be inefficient or controversial, leading to dissatisfaction among community members who feel their voices are not adequately heard or represented.

What Do HOA Fees Cover?

The concept of a homeowners association may not be too difficult to understand. HOA fees range from $100-$400, and generally cover the cost of upkeep and upgrades for the community. They may also provide for certain services that the community controls, such as a swimming pool or clubhouse.

People should keep in mind that monthly HOA fees could vary between communities depending on the condition and age of the property, as well as local standards. Since these fees are non-negotiable and set at the time of the home purchase, they will usually factor into a buyer's maximum mortgage payment. People should confirm the HOA fees before making an offer, since this cost affects their potential buying power.

Can HOA Fees Go Up?

Although the fee is identified before the buyer even puts in an offer on the home, the monthly dues could change at any time. For example, the current fees might cover routine maintenance of exterior structures of a condominium complex, such as cleaning and minor repairs for the roof. However, if the community decides to replace the roofing material on all buildings, the additional cost could create a debt calling for a change in the fees. HOAs often ask for homeowners' input and a vote before making such improvements. This instance is more likely to happen as the community ages and needs upgrades to maintain property value.

What Is an HOA Reserve Fund?

An HOA reserve fund is a savings account set aside by a homeowners association to cover future major expenses and repairs that are beyond the scope of regular maintenance covered by monthly dues. This fund is essential for the financial health of the community, as it ensures that the association can handle significant costs such as roof replacements, pavement resurfacing, and major infrastructure repairs without needing to levy large, unexpected special assessments on homeowners. Properly managing and contributing to the reserve fund helps maintain property values and the overall quality of the community.

How Are HOA Rules Enforced?

The goal of an HOA to ensure compliance of the rules by homeowners. The only way this can happen is if homeowners know what the rules are. Before people buy a home, they need to invest the time to read the HOA guidelines very carefully. They can ask their agents for assistance on terms they do not understand. Buyers should ask for confirmation that the target property is currently in compliance with the rules, so that they do not inherit a series of rule violations once they take ownership. Violations typically come with a formal warning, and fees if homeowners do not follow the rules. Since the rules are set by a committee of homeowners in the community, they may change periodically to accommodate issues that come up for residents over time.

How Can Homeowners Influence an HOA?

Once people buy a home in a community with an HOA, they are committing to following the rules, whatever they are. Over time, they may decide that they would like to have greater influence over community guidelines and direction. There are a few ways they can achieve this goal, including:

• running for a spot on the HOA committee

• voting in periodic elections

• weighing in on proposed changes to by-laws

Taking an involved interest in the way the HOA is run is the best way for homeowners to ensure that their voices are heard.

How Is a Homeowners Association Different From a Property Owners Association?

A Homeowners Association (HOA) and a Property Owners Association (POA) serve similar functions but differ mainly in scope and membership. An HOA typically governs residential communities, such as subdivisions, condominiums, or townhomes, focusing on maintaining property values and community standards through rules, regulations, and fees that apply specifically to homeowners within the community.

In contrast, a POA has a broader scope and can include various types of properties, not limited to residential ones. POAs can encompass commercial properties, industrial areas, and even mixed-use developments, in addition to residential properties. The rules and regulations set by a POA apply to all property owners within its jurisdiction, regardless of the type of property they own.

Is Living in a Homeowners Association Community Right For You?

Buying a home in a homeowners association involves participation in a community along with protection of property values with a variety of services and standards. When home buyers understand what they must do in the community, they will be better prepared to make a decision about whether to buy a home with an HOA, and the kind of HOA that is ideal for them.