In 1965, fewer than 500 homeowners’ associations (HOA’s) existed nationwide. By 1970 there were 10,000. Today, although there is no official monitoring, experts estimate there are 250,000 of these governing bodies in the United States, and one of them may well play a significant role in a South Metro house hunter’s decision to purchase or reject a residence.
Simply stated, an HOA is an organization in a subdivision, planned community, or condominium that makes and enforces rules for the properties in its jurisdiction. HOAs also collect monthly or annual dues to pay for upkeep of common areas like parks, tennis courts, elevators, and swimming pools and can levy special assessments on homeowners when the association lacks sufficient reserves to pay for unexpected repairs.
While many residents sing the praises of HOA’s, many others warn of the negative aspects of such organizations, and potential buyers would be well-advised to thoroughly investigate any HOA associated with a property they are considering.
While the specifics of HOA directives differ greatly, there are some commonalities with which you should be familiar:
- Covenants, Conditions, and Restrictions (CC&Rs): These describe limitations (fencing, paint color, preapproval of changes, pets, parking, e.g.) placed on the homeowner and spell out the powers and responsibilities of the association and the way in which it is organized, financed, and managed.
- Fees: Once you are in an HOA, you must pay monthly or annual dues. A portion goes toward upkeep of common areas, and the rest goes into a reserve for potential repairs. Dues typically range from $150 a month to $600 a month, depending on the amenities. The directors must set and follow a yearly budget.
- Special assessments: Sometimes the HOA will need to impose a special assessment to collect extra funds from each homeowner to pay for larger (and often unexpected) expenditures for upkeep/maintenance.
If you discover that the property in which you’re interested has an HOA, you may immediately realize that your individual personality and preferences would not be a good match for such restrictions and decide to look elsewhere. If you aren’t sure, however, it is extremely important that you exercise due diligence before you buy into such an arrangement. Read the CCR’s and bylaws completely and fully, examine past and current budgets and meeting minutes, talk to residents, and personally contact directors. Carefully weigh the advantages and disadvantages of becoming a member of an HOA before you make your decision!