When you purchase a condominium, townhouse or single-family home in a planned development, you must join that community’s homeowners association (HOA) and pay monthly or annual HOA fees for the upkeep of common areas, shared structures and shared exteriors. About one in five U.S. homes belong to a homeowners association, according to a data analysis by applied micro economist Wyatt Clarke, and HOAs are especially prevalent in homes built in this century.
Living in a community with a homeowners association has its advantages and disadvantages. For instance, those HOA fees we mentioned could be steep and severely drive up the cost of your prospective abode. But paying the charges also entitles you to certain services — like, say, snow-shoveling in the winter or pool maintenance in the summer — that you would have to do yourself if you were living outside an HOA. Here we’ll break down the meaning of “homeowners association” and review their major pros and cons.
What Are HOAs All About?
When you buy a home in a managed community, you are actually buying a bundle of legal obligations and rights in addition to physical living space. The associated HOA dues reflect the management style of the homeowners association. For example, some associations prefer a large cash reserve on hand to meet maintenance, legal or management obligations that arise. Others have lower fees and rely on special assessments – funds levied outside of HOA fees – for repairs and maintenance.
The Bottom Line
HOAs can be your best friend when they prevent your neighbor from painting her house neon pink and your worst enemy when they expect you to perform expensive home maintenance that you don’t think is necessary or impose rules that you find too restrictive. Before you purchase a property subject to HOA rules and fees, make sure you know exactly what you’re getting into.
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