What, exactly, is an HOA, otherwise known as a homeowners’ association? What is the purpose of an HOA? These are questions we hear often from our buyers, especially first-time homeowners. So let us give you a primer on HOAs and how they impact home ownership and buying a home!
Many homes or townhomes in platted subdivisions, particularly new construction and homes built within the last 30 years, are subject to Covenants, Conditions and Restrictions, commonly known as CCRs. CCRs impact your use of property and can include parking restrictions, recreational prohibitions (playground equipment, basketball hoops, RV parking), architectural design, paint colors and landscaping requirements, and directives to keep garbage containers concealed. In order to administer and enforce CCRs, however, there must be a homeowners’ association, or HOA. Otherwise, enforcement of CCRs requires court action. It is not uncommon for an older home to be subject to CCRs but not be part of a HOA.
If you’re buying a home that is subject to CCRs, you will first want to find out if there is an HOA. If there is, your next questions should include: (1) what are the HOA dues; (2) how often are the dues assessed; and (3) what do you get in return for paying your dues as part of the HOA?
Because answers to these questions should be considered before you make an offer, we do not advise waiting for a preliminary title report to be provided after escrow is opened. When you work with Marshall and Wood as your realtor team, Stephanie is a licensed attorney and will search official property records filed with the county clerk and will explain the scope of any restrictions on the property, whether an HOA has been established, and how it is managed. Documents to review typically include the establishment of the HOA, the original CCRs, amendments to the CCRs, HOA bylaws and potentially amendments thereto. We will get accurate, up-to-date information on current HOA dues and will help determine how the budget is allocated so you know what you will be paying for. Note that regularly payable dues may increase on an annual or even quarterly basis. As an automatic member of the HOA, you will get notices of meetings and will be able to participate in decision-making.
The HOA dues you are required to pay should be factored into your cost of homeownership, and lenders will also review the overall monthly cost of HOA dues for a particular home when processing mortgage loan paperwork. As far as what your dues pay for, these can range from general administrative costs (maintaining HOA records, paying taxes – if applicable – and required state filings) to specific capital projects, including installation of a neighborhood sign or gate, maintenance of easements or private community pathways/trails, and even attorney fees if necessary in some instances. Some HOAs provide snow removal of local streets, landscaping of entry areas or parking strips, sprinkler systems and watering of common areas. Transparent records of the HOA, including annual budgets should be made available to you as a home buyer. If they are not, that is another factor to consider when writing an offer.
The overall purpose of an HOA is to help ensure that the properties within the subdivision or other development are maintained in compliance with the CCRs which, in turn, are generally believed to protect property values of the neighborhood. Some people enjoy the predictable, well-maintained uniformity of a neighborhood governed by an HOA. Others enjoy more latitude in expressing themselves and enjoying their property in an area that is not subject to enforceable restrictions. Either way, we can help you find the perfect balance in your home search. Call us today at 541-390-7590!
