Pros and Cons of a Homeowners’ Association

by Lynnette Khalfani-Cox, The Money Coach on July 2, 2009

in Real Estate


An HOA, as a homeowners’ association is known, creates and enforces rules for the community and collects the monthly or annual dues. There are pros and cons to owning a home in a community governed by a HOA, which is often a nonprofit entity that is operated by a board comprised of homeowners, sometimes in conjunction with a management company.

The HOA’s purpose is to help maintain a certain consistency, conformity, capital improvements, and conveniences for the neighborhood, with an eye toward protecting property values. The collected dues are used toward the maintenance of the common areas or community property, or for other services. It is not meant to be a profit-making venture in most cases.

Is living in a community governed by a HOA right for you? Know before you enter in a home purchase agreement, as your decision affects your bottom line. Here are some positives and negatives to consider as you weigh your options.

Pros
Below are five ways in which a HOA is helpful and beneficial to a community.

  • Maintains and pays for the upkeep of common areas, such as swimming pools, tennis courts, play grounds, public gardens, golf courses and club houses. Without an HOA you may not have a community with these amenities within your neighborhood.
  • May provide services such as driveway snow removal or lawn cutting for each residence, ensuring a clean, well-kept look throughout the neighborhood at all times. You will not have to worry about hiring someone or taking care of these services yourself. It can free up your time.
  • Mediates disputes between residents. If there is a problem with your neighbor, the HOA should be able to help resolve it quickly and easily with hopefully little animosity left over, as it was the HOA making the final decision, not a complaining neighbor.
  • Helps maintain or raise property values by regulating things that help keep a neighborhood looking good, such as keeping garage doors closed, no cars left in driveways for longer than certain periods of time, no signs in front yards, etc.
  • Hosts annual parties, such as block parties and family nights, which helps build camaraderie in the neighborhood.

Cons
Here are 5 reasons some people don’t like HOAs.

  • It feels as if “Big Brother” is always watching you to see if your grass is mowed to the right level, if you planted the right types of flowers in your yard, or don’t have a pet that is oversize or of the wrong breed. For more on this, see this one homeowner’s blog entry, titled “7 Reasons You Should Decline a Home with an HOA.
  • Homeowners looking to rent out or sell their residences may need to have the new potential occupant screened and approved by the HOA board, thus hindering your ability to move on within your own time frame. Even how much you charge for rent can be regulated, and one what days or times a year the occupants can move in.
  • The dues you owe is just another added expense for you to consider when factoring how much home you can afford. And the dues typically will go up over the years, without much warning—this is something that you should budget for in advance.
  • An HOA can put a lien on your home or force a foreclosure on your property if you do not pay your dues within a set time frame. And if you fight them in court and lose, more than likely you’ll have to also cover the HOAs legal bill.
  • Some HOAs are poorly managed, in part because board members tend to be volunteers with a paying day job or other personal obligations and there is only so much time they can dedicate to overseeing matters. For this reason a management company is usually hired to also help set and guide the rules, which some worry is giving over control of their properties/community to a company that is managing several others and thus has no personal tie to the community.

Tip: If you are considering buying a home with a HOA, ask to get a copy of the rules, regulations and bylaws before you sign the purchase agreement, or make your offer contingent upon your receipt and acceptance of the rules. (The latter is harder to do). Also look at the budget, financial records and minutes from the board meetings. These will all help give you some indication as to how well run the association is, and if you can live with the rules that are already in place.

Please write in to share your experiences with an HOA or to give other readers tips on this matter.


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