Buying A Home With An HOA: What Buyers Need To Know

For many, homeownership means independence. Homeowners can be free to decorate and delight in their property however they want. This freedom extends to everyone, so neighbors have the right to paint their homes deep purple, park jalopies in driveways, and plant exotic flowers in their garden. 

In a perfect world, everyone would be considerate of their neighbors, so these things wouldn’t happen. Unfortunately, there is no perfect world. Those who want to be certain that everyone’s personal freedoms do not clash often move to planned communities or condominiums that have homeowners’ associations (HOA).

An HOA is an official organization that governs the aesthetics and activities in an area, condominium, housing development, or planned community. Those who live in these places are obligated to abide by its rules. HOAs are usually run by residents, but there are also companies that manage them.

An organization’s actions are determined by its covenants, conditions, and restrictions (CCRs). These list specific details for life in the neighborhood, such as the color of curtains, noise ordinances, and prohibition of short-term rentals. Members must also pay fees, which typically cover insurance, maintenance, improvements, and repairs for common areas.

In exchange for living with HOA rules and paying monthly or quarterly fees, HOA members generally don’t have to shovel snow off sidewalks, contend with terrible neighbors, fix broken playground equipment, and other nuisances. They also get access to community amenities, like swimming pools, clubhouses, and landscaping.

People shopping for homes now have fewer non-HOA housing options. A little more than half of America’s owner-occupied homes are subjects of HOA, according to HOA-USA, a group of American HOAs. Plus, this year, 5,000 more condo communities and HOAs are expected to be created, according to the Foundation for Community Association Research, a subsidiary of the Community Associations Institute.

Contrary to popular belief, a retired Yale scientist found that membership in an HOA doesn’t automatically translate into a higher resale price than a non-HOA house. “The annual percentage returns on homes sold in homeowners associations were significantly less than those of homes in other neighborhoods statistically controlling for property characteristics and prevailing economic conditions at the time of the original purchase,” Leon S. Robertson wrote in the February 2019 edition of Critical Housing Analysis journal.

Because living under the aegis of an HOA doesn’t always impact sales price, people searching for a house to turn into a home should focus on other factors. Here is what buyers should know before buying a home with an HOA:

Learn all the rules and regulations in an HOA agreement

Buyers must make sure the HOA matches their personalities and expectations. Being familiar with all the requirements is the only way to be sure living in a particular community is a wise move. HOA members can’t claim ignorance when charged with a violation. HOA agreements often include punishments, including fines and liens.

Budget with HOA dues in mind

Lenders consider HOA fees when deciding the size of an approved mortgage. Higher dues may potentially lower the amount of money buyers will qualify for to purchase a home. Fees depend on location, quality and number of amenities, condition of the property, and other factors. They can start below $100 a quarter in a planned development and reach up to several thousand per month in larger condo associations and cooperatives.

Local, state, and federal laws

HOAs have the legal right to make regulations and enforce them. However, these rules do not outrank laws in general. These associations must comply with the Fair Housing Act, the Americans with Disabilities Act, building codes, animal control rules, environmental protection measures, and other government acts.

Problems can arise when homeowners don’t know their rights under local or state jurisdictions. HOA rules against displaying political signs do not violate the Constitution’s First Amendment. That right stops the federal government from censoring citizens, not private organizations. However, nine states, including New Jersey and Massachusetts, have frequently sided with politically-active homeowners.

The HOA’s reputation

Both laidback and more reserved buyers will benefit from a walk around a neighborhood or condo to meet their prospective neighbors and find out the personality of the association. Also, talk to real estate professionals, and longtime residents to discover what kind of people will be in charge of your future.

The HOA’s attentiveness to its contract

A stroll around the area will also give shoppers insight into how strict and responsive an HOA is. If the rules require white curtains but a few homes feature yellow window coverings, that’s a sign of an organization that doesn’t take the rules too seriously. For some homeowners, that’s a bad sign. Others find it welcoming.

Because a house is most Americans’ most valuable asset, buyers should arm themselves with as much information as possible before signing a contract.

Prospective homeowners can ask the HOA board and its president about:

  • Conflict resolution process
  • Short-Medium-Long-term plans for the development
  • How often fees are evaluated and raised (If fees haven’t gone up in years, major improvements may have been delayed)
  • Upcoming special assessments
  • How much money is currently in reserves
  • The results of past conflict judgments or lawsuits
  • History of any discriminatory charges or court cases against the association (in a 2021 survey by the Foundation for Community Association Research, one in four HOA managers reported a 24% increase in discrimination complaints)

Educated consumers will be able to secure a home in an HOA that matches their budgets, personalities, and aesthetics.

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