Homeowners 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?