HOAs: Good or Bad?

HOAHomeowners associations (HOAs) are commonplace in today’s residential real estate environment. If you are in the market to purchase a home, then it’s quite possible you may encounter a potential property that is a part of a HOA. You should educate yourself on the pros and cons associated with HOAs before making a decision to buy.  The information below will help you get started in your evaluation.

What is an HOA?

HOAs are generally non-profit organizations initially set up by the division or complex’s real estate developer in order to manage the marketing and selling of the units. After the properties are sold off, the ownership of the HOA is transferred to the homeowners for purposes of “governing” the development. The HOA accomplishes this “governance” through the Covenants, Conditions, and Restrictions (CC&Rs). The CC&Rs are a set of documents establishing the rules by which the homeowners must abide. Be aware – there is no option to decline membership in the HOA. If you purchase the property, then you are agreeing to the CC&Rs and are automatically in the HOA. As a result, you’re subject to its rules. Selling the property will cease your membership which, of course, will be passed along to the new owner.

HOAs: The Good

  • Neighborhood Upkeep – The HOA, if it’s being properly run, should maintain the community at a certain set of standards. For example, the HOA may employ landscapers/gardeners to take care of common areas or even your front yard. Or perhaps they’ll ensure all the streetlights are functioning properly. This type of attention to upkeep might not be found in a non-HOA neighborhood.
  • Give Access to Community Property – The HOA development might have a pool, clubhouse, or yard/park area for all to enjoy. This is especially so if you own a condo or townhouse. These amenities are usually not available to owners of non-HOA properties (except for perhaps a pool, but then the maintenance would be your sole responsibility).
  • Property Value Possibly Elevated – Theoretically, HOAs could increase or at least help to maintain a certain property value threshold. If the community is well-maintained and there other perks such as the aforementioned pool, clubhouse, etc. then this should have a positive impact on the value of your home.

HOAs: The Bad

  • Waste of Money – This is relative and a matter of opinion, but it’s likely not uncommon to feel as if your HOA fees are wasted. What if you love gardening and taking care of your lawn but the HOA requires the landscaping to be done by the company it hired? In such an instance, you might be frustrated that you are paying for services you don’t want.
  • Triple Taxation –  That’s right, triple taxation! Here’s how:
    • HOA Fees – You’ve got pay your monthly HOA dues.
    • Property Taxes – You’ll still have to pay the normal state/county/city property taxes assessed against your home just like all non-HOA homeowners.
    • Your Own Maintenance – A majority of your maintenance and repair expenses will also have to be covered by you. Sure, technically this isn’t a tax, but your HOA dues aren’t going to cover a broken window or a new A/C unit.
  • Not Tax Deductible – HOA fees are not tax deductible. Once you pay them, that cash is gone and provides no tax incentive.
  • Restrictive – CC&Rs can potentially be very restrictive. Want to paint your house a certain color? Sorry, you can’t. Maybe plant a tree in your yard? Not allowed says the HOA. We’ve all seen the headlines about some overbearing HOA not letting a military veteran fly a flag in his/her yard. It can get downright ridiculous in certain circumstances.
  • Forced to Associate with Neighbors You Might Not Like – In a non-HOA community, if you want to keep to yourself and not associate with your (possibly annoying!) neighbors then you can probably manage to do so pretty effectively. However, if you are in a HOA you might have to attend meetings or interact with fellow members during other HOA related events.
  • Waste of Own Time – Speaking of meetings, it’ll behoove you to attend to stay abreast of current issues and vote as necessary. However, you could very well find the these meetings to be inefficient and a waste of your valuable time.
  • Wasteful of Funds – Who is managing all that money collected through the HOA dues anyway? Are the HOA board members fiscally responsible? Could they be managing the HOA funds in a more prudent manner? I sure would hate to fork over all that money each month only to know the board spends frivolously.
  • The HOA Can Take Your House! – Here’s the real kicker, after dealing with all the other possibly negative aspects listed above, the HOA can foreclose on your house (in most states) and take it from you if you fail to pay your dues! Now, I don’t think this is all too common. If an owner is having troubles financially then most likely mortgage payments aren’t being made either. The lender will have a higher claim to the property than the HOA. Technically, though, the HOA has the right to proceed with foreclosure if warranted.

My personal opinion

I’m a former homeowner (you can read about that debacle here) and my house was part of a HOA. I hated it. I just felt like I wasn’t getting much of anything in return for my dues. Every time I wrote that monthly check and sent it in the mail, it seemed like throwing my hard earned money away. Another major aggravation were the HOA officers – they acted so superior and entitled. They wouldn’t hesitate to march down the street, knock on your door, and tell you that you were doing something wrong even for extremely trivial stuff. Even in casual conversation they carried an air of authority.

My poor experience with a HOA may just be an isolated example and it’s not necessarily indicative of all HOAs. I am fairly certain I won’t be buying a HOA property the next time around though. To me, the perceived benefits do not out weigh the hassles, annoyances, and waste.

What sayest thou? Do you own a HOA property? What are your experiences with it? If you are contemplating the purchase of a home, would you consider one with a HOA? Why or why not?

Image courtesy of Emilio Labrador at Flickr.

24 Responses to HOAs: Good or Bad?

  1. TB August 8, 2013 at 4:05 am #

    No I don’t own a HOA property, nor do I intend to in the foreseeable future.
    TB recently posted…Why “Made in U.S.A.” is Here to StayMy Profile

    • Mr. Utopia August 8, 2013 at 3:13 pm #

      That’s probably not a bad approach – we’re in the same boat.

  2. Daisy @ Prairie Eco Thrifter August 8, 2013 at 5:50 am #

    Some families love HOAs because it eliminates the need for outdoor upkeep. I’m not a fan. We expressedly said NO HOAs when we were house hunting.
    Daisy @ Prairie Eco Thrifter recently posted…Get Your Home Ready for Fall and WinterMy Profile

    • Mr. Utopia August 8, 2013 at 3:17 pm #

      I can see how some families might get a lot of benefit out of not having to do yard work. From my experience, usually only the front yard is taken care of though. So, you’ve still got to tend to the backyard (if there is one) or just neglect it which isn’t a wise option. I don’t have a green thumb and don’t particular enjoy yard work, but having that included isn’t enough to ever entice me to go with a HOA property again.

  3. Holly@ClubThrifty August 8, 2013 at 8:08 am #

    I thought that HOAs were all bad UNTIL my neighbor built the world’s ugliest shed. I don’t have a HOA, obviously, but I now wish I did. Maybe they could’ve stopped that tragic shed from being built.
    Holly@ClubThrifty recently posted…Overcoming Laziness: How I’m Cutting Costs in AugustMy Profile

    • Mr. Utopia August 8, 2013 at 3:21 pm #

      Ha, that’s hilarious, Holly! Maybe you don’t need a HOA to take care of that for you?Perhaps a “mysterious wind” (aka your sledgehammer) will just happen to knock it down one night!

  4. Michelle August 8, 2013 at 8:57 am #

    I definitely could not live in an HOA. All you need is one bad manager of it and you will want to move immediately.
    Michelle recently posted…Cheap Ways to Stay HealthyMy Profile

    • Mr. Utopia August 8, 2013 at 3:23 pm #

      So true, Michelle. It can feel like a dictatorship when that happens. Who needs that in their life? Not worth it to me, but to each their own!

  5. Michael | The Student Loan Sherpa August 8, 2013 at 8:47 pm #

    I’ve only had limited exposure to HOAs but like many things in life, I think they can be good if done right. It has to be the right mix of useful without being overbearing. Definitely worth considering BEFORE you buy any property.
    Michael | The Student Loan Sherpa recently posted…Things to Know Before You Co-Sign a Student LoanMy Profile

    • Mr. Utopia August 8, 2013 at 9:02 pm #

      Very true, Michael, although I would imagine sometimes it can be hard to ascertain whether the HOA will be overbearing ahead of time. In other words, you might get an idea by reading through the CC&Rs and chatting with some prospective neighbors, but that might not give enough insight to truly know. Or, perhaps things seem ok for a while, but new neighbors move in or the HOA board comes under new leadership. It’s a risky proposition although I do agree the possibility exists for it to “be good if done right.”

  6. Pat at Feeling Financial August 9, 2013 at 2:17 pm #

    I own a condo so I’m in an HOA. For now, it works for me (I love not having to do any work on the property) but I won’t miss some of the annoyances. We’re pretty low-key, but I understand that the single-family neighborhood HOAs can be pretty intense.

    I also don’t care for the meetings, and am torn on even going. You can even get a “freerider” effect going there (some people attend meetings to make all of the important decisions, and the absent property owners benefit from our efforts). I might rent my place out, move away, and freeride someday though…
    Pat at Feeling Financial recently posted…Why use a 401(k)? What’s the Point?My Profile

    • Mr. Utopia August 9, 2013 at 2:59 pm #

      Sounds like your experience is right down the middle of the road – taking advantage of the benefits but also mindful of the drawbacks. Dealing with a HOA as a landlord might not be as bad. You wouldn’t have to necessarily deal with some of the aggravations on a day-to-day basis. However, the politics, triple taxation, restrictions, etc. still can come into play.

  7. Pauline August 10, 2013 at 9:31 am #

    My last HOA was a complete waste of money, so much people stopped paying, then it was in debt, we had to pay even more to cover interest… a nightmare. You should always review it carefully before buying a place.
    Pauline recently posted…Blogging: How many hours are you willing to put in?My Profile

    • Mr. Utopia August 11, 2013 at 12:38 pm #

      Yikes, that sounds like a disaster, Pauline. Is it safe to assume that experience left enough bad taste in your mouth to not consider a HOA property ever again?

  8. Tom December 11, 2013 at 3:07 pm #

    I live in an HOA in California and I find discussions such as this one very frustrating, because they never address circumstances like the one I found myself in. This article says it all in one of the sentences: “The HOA, if it’s being properly run, should maintain the community at a certain set of standards.” There is so much discussion about the overbearing HOA, the terrible rules, the endless restrictions, etc. But what about an HOA like mine? It is a do nothing HOA, there are no rules. Think about how frightening that can be. The HOA, “if properly run,” should maintain the community. My HOA is about as poorly run as I can imagine. I quit the HOA board — twice. Once you smash your head into a brick wall over and over, you really should know when to walk away. I could get nothing done. The amount of deferred maintenance is shocking. You also have extraordinarily little recourse with such organizations, the state of California even has a special webpage telling you that it will not get involved in HOA problems. They recommend an attorney, who only work with HOA boards, not individual homeowners. The state will not even enforce the most rudimentary rules, such as the right to read meeting minutes. (I rarely see them.) The state is all too happy to sign off on the creation of these non profit corporations, but takes no responsibility for them. Stay away. You have no enforceable rights in an HOA and don’t know what you might be getting into. There are much worse problems than an overbearing HOA, try one that lets the rules go to hell.

    • Mr. Utopia February 25, 2014 at 12:26 pm #

      Hi, Tom. Yikes, your experience with HOA’s sounds absolutely miserable and I’m sorry to hear about such a frustrating nightmare. I still think the statement of “The HOA, if it’s being properly run, should maintain the community at a certain set of standards” is a valid one. The problem is, it seems like such a rarity to find an HOA like that. I’m certain they exist, but are likely few and far between. As I indicated in the article, I almost certainly will not get involved with another HOA governed property in the future. It seems like you’ll be staying far away too. That said, for some other people an HOA property might work out just fine and offer some advantages.

  9. krantcents December 12, 2013 at 4:27 pm #

    I have been Treasurer on my HOA board for 15 years. There are good and bad HOA’s! Whenever you buy with an HOA, you should check them their financials. Secondly, try to meet the board.
    krantcents recently posted…Being Rich or Poor Is a Choice!My Profile

    • Mr. Utopia February 25, 2014 at 12:26 pm #

      Good suggestions for sure. Thanks!

  10. Ben July 8, 2014 at 3:06 pm #

    You couldn’t pay me to buy a house with HOA, the one and only difference between HOA and gangsta thugs is the HOA can terrorizes you LEGALLY whenever and whatever they saw fit!

  11. Kayla Rogers April 11, 2016 at 4:23 pm #

    There are always pros and cons to every service that you sign up for. For me, the good definitely outweighs the bad in a homeowners association. If nothing else, the neighborhood upkeep is definitely worth it.

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