Pros and Cons of An HOA

Moving into a new home? Be sure you understand the requirements and restrictions of the Homeowner's Association.

When you move all the time, you are constantly dealing with the entire housing process.  Every two to three years, you have to go to know a new area, find the right place to live, and get settled.

Often, your new home is part of an homeowners’ association (HOA).  Whether you are renting or buying, HOAs have benefits and drawbacks.  HOAs can be anything from a voluntary group that organizes social activities to a large company that takes care of common areas and amenities such as pools and playgrounds.  There are thousands of variations of what is and is not covered by an HOA, so it is vital that you dig deep to make sure that you have a thorough understanding of the situation.  The important part is that you understand how the HOA affects your rights before you select your new home.  In one of my houses, we did not get the right information about the HOA before we purchased the property, and it cost us a significant amount of money.

If You’re Buying

As a buyer, the HOA can have a significant effect on your overall home owning experience.  It can also impact your finances.  I can not possibly get into every possible rule or regulation that could be in HOA rules, so be sure to read through the HOA documents before you buy.  There are three major factors when it comes to HOAs:  what they do for you, what you pay for, and what rules they have.

What They Do For You

HOAs can provide no services, or a lot of services.  For example, in my first home, the only thing that the small and voluntary HOA did was to keep our neighborhood sign in good condition.  In my sister’s neighborhood, her large and mandatory HOA includes access to several pools, miles of trails, numerous playgrounds.  My mom’s neighborhood includes some landscaping maintenance and snow removal.

How Much HOAs Cost

HOA dues, which can be monthly or yearly, can be teensy or huge.  $10 a year might cover the most basic association (like my first house.)  The highest HOA fees I’ve ever heard are $2,500 per month!  More typically, HOA dues in a community with nice amenities are $200 to $400 per month.

There is no such thing as a too low or too high HOA fees, it is all relative to what the HOA is doing with the money and your level of comfort with the fees and the amenities and services being provided by those fees.

It is important to remember that HOA fees will go up, sometimes sharply.  The more involved you are in the HOA, the more influence you may have on fee increases.  However, the HOA is also legally obligated to have enough money to fulfill its obligations.  It is also possible that state laws might regulate the fees and any increases.

What Rules They Have

Every HOA has Covenants, Conditions and Restrictions (CC&Rs.)  Once again, I have to emphasize that this article can not even begin to touch on all the possible CC&Rs, so read your documents.

Common rules include what colors you can paint your house, how you have to keep the property maintained, and where cars can be parked.  HOAs can also restrict changes made to your house, typically exterior but sometimes interior as well.

Very importantly, many HOAs have limits on how many units can be used as rental properties.  This can be a benefit, but it more often is a problem, especially for military families who may unexpectedly need to move.  If renting your property is not an option, you may be forced to sell or have a vacant house.

If You’re Renting

The good news is that you aren’t directly responsible for complying to the homeowners’ association rules.  Legally, it is the homeowner/landlord who is responsible for making sure that the rules are followed.  However, most landlords will transfer that responsibility to you through your lease.  Therefore, you should have a copy of your HOA documents included in your lease.  You don’t want drama with your landlord because of an HOA.

If you’re considering renting a house in an HOA, you may want to check with other renters in the neighborhood to see how they are treated.  There are some neighborhoods that treat renters poorly, and it is no fun to live in a neighborhood like that.

HOAs are neither inherently good or inherently bad.  The more you know about the HOA in a prospective neighborhood, the greater the chances that you’ll make a smart choice about whether the house and the HOA will work for you.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.