With homeowners associations on the rise, find out what are the impacts that this could have on homebuyers!
When searching for a new home, many buyers aim to avoid properties ruled by homeowners associations (HOAs). However, this can be challenging due to the growing prevalence of HOAs in the U.S. Understanding how these organizations operate is essential before making a purchase.
A survey by Frontdoor, a home repair and maintenance services company, found that 70% of homeowners would prefer not to live in an HOA community if buying a home in the future. The survey polled 1,005 homeowners in September, 85% of whom currently reside in HOA-managed properties.
HOAs are managed by a board of residents elected to enforce neighborhood rules and maintain shared areas like parks, pools, and roads. Members pay regular fees to cover these services. HOAs exist for various property types, including single-family homes, condominiums, rowhomes, and cooperatives.
Over the past few decades, these communities have expanded significantly. In 1970, only 10,000 of them existed, serving about 2.1 million residents, according to Foundation. Today, HOA or common-interest communities make up about 30-33% of U.S. housing, accommodating 75.5 million Americans, according to new data.
The rise of HOAs offers financial benefits to local governments. As Thomas M. Skiba, CEO of the Community Associations Institute, explained, municipalities save money by offloading maintenance responsibilities to these communities while still collecting full property taxes.
How HOAs Increase Homeownership Costs
Living in an HOA community comes with mandatory membership costs. According to the American National Bank of Texas, thee fees can range from as little as $100 per year to over $1,000 per month, depending on the community’s location and amenities. These fees often increase over time. According to the Frontdoor’s survey, 51% of HOA members experienced fee hikes, and 65% noted that such increases occur frequently.
Tips for Evaluating an HOA Before Buying
While many homeowners are satisfied with their HOA – about 60% reported positive experiences on the survey – others face challenges. Approximately one-third of surveyed homeowners had grievances, with 63% mentioning fees as a major issue and 53% pointing to inconsistent rule enforcement.
For those considering purchasing a home in an HOA community, here are steps to help you make an informed decision:
- Request HOA Documents: obtain copies of the HOA’s covenants, bylaws, rules, regulations, fee schedules, and meeting minutes from the past 12 months. These documents provide insight into how the HOA operates.
- Assess Fees and Budget: ask about monthly or annual fees, the HOA’s budget, and historical fee increases to understand potential financial commitments.
- Check for Unpaid Assessments: confirm with the real estate agent or seller’s agent whether the property has any unpaid HOA fees. Ensure these are resolved before the sale.
- Investigate Legal Issues: eeview any pending lawsuits, disputes, or judgments involving the HOA.
- Examine Reserve Funds: ensure the HOA has adequate reserve funds for major repairs or renovations.
- Attend a Meeting: if possible, attend a board meeting or annual general meeting to observe how decisions are made.