You might be considering purchasing a home that comes with something a little extra, like a homeowners association (HOA). If you’re a first-time homebuyer, you may not be familiar with what that means, but we’re here to help: Let’s dive into what an HOA is and whether it might be a good fit for you!
What’s a homeowners association (HOA)?
A homeowners association is a team of neighbors who work together to assume the costs of, manage, and take care of a condo building, community or subdivision. When you buy a home in an HOA, you become a member of the association and agree to follow certain rules and pay its fees. These fees help maintain shared spaces like parks, pools, and other common areas.
Pros of living in an HOA community
- Enjoying the amenities: Many HOA communities offer shared amenities like swimming pools, gyms, picnic areas or other recreational spaces. It can be like having a mini-resort right in your neighborhood!
- Maintaining curb appeal: HOAs generally have rules about how homes in their community or subdivision should look on the outside. This means your neighborhood will always look neat and tidy, which is a nice perk for everyone.
- Keeping the peace: If you have a problem with a neighbor, like noisy parties or an untidy yard, the HOA can step in to help resolve the issue.
Cons of living in an HOA community
- Fees, fees, fees: Being part of an HOA means paying regular fees on top of your mortgage and tax payments. These fees can vary a lot (see below), so it’s important to understand and budget for them.
- Rules, rules, rules: HOAs may have many rules that can include everything from what color you can paint your house to where you can park your car, or whether you can build a raised garden bed or storage shed on your property. Make sure you understand an HOA’s rules and decide whether you can live with them.
- Limited freedom: Some people find HOA rules too strict (again, this can vary depending on the HOA). If you like the idea of painting your house neon pink or parking your pontoon boat right in the driveway, an HOA might cramp your style.
How are HOA fees determined?
HOA fees are based on different factors and depend on the rules of the community. They are typically paid annually, although that can vary as well. Here are the main ways HOA fees are determined:
- Equal sharing of budget and costs: The HOA plans a yearly or monthly budget that includes things like maintaining shared areas, repairs, utilities, and more. They add up all these costs and split them among all the homeowners in the association. This means everyone pays the same amount, no matter the size or value of their home.
- Ownership percentage: In places like condos or planned communities, fees might be based on how much of the common property each homeowner owns. This is often decided by the size or value of their home compared to the whole community.
- Specific criteria: Sometimes fees are based on things like how big your home is, how many bedrooms it has, or other details that affect how much you use shared facilities.
- Management fees: If the HOA hires a company to manage day-to-day tasks, those fees are also added to the budget and shared among homeowners.
Beyond regular fees, during your tenure in the home HOAs might also ask for extra money (called special assessments) to cover unexpected costs or big repairs, like a new roof for a condo building. These extra charges are divided among homeowners.
It's important for prospective homebuyers to look at the HOA's financial papers, including the budget and fee details. This helps them understand exactly how much they would need to pay and what the money goes toward. HOA fees can vary a lot, so it's smart for potential homeowners to consider these costs when thinking about buying a home in an HOA community.
So, is an HOA right for you?
Deciding whether to buy a home with an HOA really depends on your personal lifestyle and what you value most. If having amenities and a well-kept neighborhood are important to you, an HOA could be a great fit! Just be prepared for the extra costs and rules that come along with it.
On the other hand, if you prefer more freedom and you don’t mind taking care of your own maintenance (and dealing with neighborhood disputes), you might be happier without an HOA.
Final thoughts
Buying a home is a big decision, and choosing whether to join an HOA adds another layer of complexity. Take your time to weigh the pros and cons before you decide. Or maybe even talk to people who already live in an HOA community to get their perspective.
Remember, the right home for you is the one where you feel comfortable and happy, whether it’s in an HOA or not. Happy house hunting!
-Published July 2024, Shelley Sines for ReadyNest.com
