Pros and Cons of an HOA

There’s a lot to consider when purchasing a home. One very important factor is the neighborhood. Many of us base this off proximity to a good school district, work, the grocery store, etc. You’re likely to come across at least a few properties that are part of a homeowners association, or HOA. These aren’t rare. In fact, over 26 million homes across the country are governed by them (CAI).

Of course, amenities like swimming pools, a groomed neighborhood or clubhouses can make it tempting to overlook the realities of living under an HOA – but it’s important that you don’t.

When you create your budget for a house, you likely aren’t considering monthly fees for an HOA, rather just your mortgage and utilities. It’s important to understand that an HOA can cost $$$. HOAs assess fees that help maintain common areas and cover community services, so knowing the size of the fee (and what it covers) can help you decide if you want to live in the community, or whether you can afford to.

It’s also important to understand the HOA rules, which you have to abide by if you purchase a home there. Association regulations are designed to protect property values. It can cover how you paint your home to where you park your car. But they can touch on anything from how you paint your home to where you park your car. Some HOAs have rules about pets, flags, outside antennas, clotheslines, satellite dishes, fences, patios and home businesses.

There are also other aspects of an HOA to consider. Here are some pros and cons of community living to help you decide if it’s right for you:

PRO: HOAs provide amenities

Buying into an HOA may give you access to amenities like a tennis court or fitness center that you might not otherwise be able to afford, or be able to enjoy in such close proximity to your home. But, not all HOAs will have these nice of amenities. Some may just cover the fees of gardeners pruning your neighborhood. However, this will result in a much more affordable HOA fee.

PRO: They reduce your responsibilities

The fees you pay to an HOA typically go toward services (like snow removal) and maintenance that you might otherwise have to perform or contract for yourself.

PRO: They help keep up appearances

HOAs typically have rules to prevent property neglect and resulting neighborhood decline. They can help to maintain the property values for the homes within the community. It also reduces having to look at someone’s unmanicured yard and dilapidated home.

CON: An HOA can foreclose on your home

If you get behind on your fees, the HOA may be able to foreclose on your home.

CON: They can spring assessments on you

If the HOA doesn’t have cash reserves to cover an expenditure, it can impose an assessment to come up with the money. That’s important since 70 percent of all HOAs are currently underfunded.

CON: They may limit you from renting your place

HOAs can put an array of rental restrictions in place. Some associations limit rentals to 15 percent of homes in the community, require HOA board approval of tenants, and say rentals must be on two-year leases.

So, consider the pros and cons against your own lifestyle and get familiar with the community rules before you buy – you just might find that association living is equally as satisfying for you.