A Homeowner’s Association, or HOA, is the governing body of the development or complex, usually comprised of homeowners who have volunteered to serve on the HOA board. The primary purpose of a homeowners association is to manage a neighborhood's common areas such as roads, parks and pools. Most HOAs have their own set of bylaws and regulations that all homeowners and their guests are required to abide by within the subdivision.
Here are some things you should consider before buying a home or condo within a HOA:
What Additional Association Expenses will there be?The majority of HOA/COAs have association fee structures. This will vary for each community. Knowing the fees you'll be required to pay will have an impact on your short and long-term finances. Because of this, you should make sure to ask these questions and compare fees against other associations and local cost:
- How are HOA fee increases set?
- How often do increases occur, and by how much have they historically been raised?
- Can you get a printed history of HOA dues by year for the last 10 years?
- How large is the HOA's reserve fund?
- Also, ask for a record of special assessments that have been made in the past and ask if any special assessments are planned for the near future. Note that economies of scale can mean that special assessments are higher in smaller HOAs.
- Find out what the monthly dues cover. Will you still have to pay extra for garbage pickup? Is cable included?
Research Rules, Regulations, Declarations, and BylawsAs previously pointed out, most associations have their own set of bylaws, declarations, restrictions and regulations. It's important for you to request a copy of those documents for review prior to purchasing. Here are some things you'll want to pay special attention to when reviewing these documents:
- Check the bylaws for things such as the voting rights of the members, meeting requirements, and budget and assessment procedures.
- Look especially hard at what actions of the Association (such as raising assessments or creating rules) can be done without a vote of the members
- If you plan to purchase for investment purposes, make sure to check the rental restrictions. Some HOA have restrictions that prohibit renting a property within the community or even restricts the length of rental terms.
- Check the rules and regulations for restrictions on owners’ use of private property.
Review HOA Financing and Meeting Minutes
- Are there any major maintenance issues that could potentially cause need for a future special assessment?
- Is there a history of under-management of building or lawn maintenance?
- What are current and past conflicts?
- What is the process for resolving any conflicts?
- Has the HOA sued anyone? How was that resolved?
- Do the financials reflect that the Association has been run too lean, or hasn’t collected enough assessments to meet the budget? This could also be a sign of potential future expense.
Get Information about HOA Amenities
- Do the hours of operation meet your peak use time or will you be paying for amenities that you can't use due to time restrictions?
- Is there extra cost to use the amenities or is the cost included in your dues?
- If you plan to have guests over often, be aware of the HOA rules about guest use for common facilities.
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