HOA's: Yes Please, or No Thanks?

When I'm working with buyers, we're generally going through a list of wants and needs. Unanimously, every buyer expresses interest around the topic of size, location, price, or condition of the home they want to search for.  Only on rare occasion however do I get a buyer who is adamantly opposed to a Homeowners' Association (HOA). But when I do, they have a horror story about an HOA they heard from their friends.  And so begins our home search which excludes any and every property within an HOA, which can otherwise exclude properties that are perfect for that buyer. 

Those that hate HOA's typically feel that the HOA is too bossy, controlling, or totally crazy as in the case of the Gladys Sharp, the HOA president of Rancho Camelot Estates.  There's really two things going on that those who object might not actually fully understand; the HOA merely enforces the rules of the community.  In effect, it's the rules themselves that are problematic, not the way they're being enforced.

What is an HOA?

An HOA is a formally organized and incorporated group of people who create and enforce codes, agreements, or limitations for homes and properties within a specific jurisdiction.  The rules they create are referred to as Codes, Covenants, and Restrictions (CC&R's).  The CC&R's are typically intended to restrict certain building activities, nuisances, or behaviors within the community.  It's fair to say that the overall intent of the CC&R's are to keep a community looking good, and preserve its value.  Some communities however have fewer restrictions while some are concerned about how long your garage door is open and the types of things stored in it.

Costs Associated with an HOA

Typically there is an associated monthly, quarterly, or annual fee each homeowner pays to the HOA in order to conduct its business.  The HOA fees are set and determined by the HOA and its members (the homeowners), and they're usually reserved for maintenance, repairs, and expenses associated with the community.  Things like community pools, recreation centers, parks, playgrounds, and common areas.  In the case of a town home or condominium development, the reserve account can be used to pay for larger exterior projects like parking and driveways

The Benefits of an HOA

Every buyer has their own specific needs, wants, and goals, so a property within an HOA might be a good thing.  Here's a short list of the benefits of an HOA:

  1. Amenities.  Many communities that have HOA's offer certain amenities like walking-paths, club-houses, pools, parks or common areas.  These kinds of amenities add value and a tangible benefit to the community.
  2. Maintenance.  If there are amenities in the community, the HOA is in charge of making sure they're taken care of, and, usually by a professional.  This ensures that the home owner's investment into the community doesn't decline.  Depending on the property type, lawn care and snow removal might also be covered.
  3. Property Value Protection.  Keeping an eye on properties and making sure that deferred maintenance of a neighboring property doesn't affect your value is a huge benefit.  Without an HOA, you're pretty much stuck if your neighbor turns their property into a nuisance.  You're only other option is to file a complaint with the City if they're violating a code -something to consider when it comes to resale.
  4. Updates & Upgrades.  Most likely this is only a benefit of a town house or condo owner.  HOA's have reserve accounts to pay for big projects like roofing, siding, or paving.  Typically, these are high cost projects that can put a financial strain on a home owner, but with the reserve account that the HOA manages, the project won't wipe out your cash reserves.
  5. Mediation.  In neighborhoods without HOA's, home owners are on their own when it comes to dealing with nuisance neighbors.  The HOA can serve as a mediator in a sense by responding to community complaints about home owners or properties that are an issue.  Sound cowardice?  Try knocking on your neighbors door and telling him to mow his grass.  No thanks. 

The Cons of an HOA

Simply put, I can't think of any.  Unless, you want to run a business out of your home, park 5 cars on the street, let your lawn go to seed or paint your home purple.  Remember, HOA's simply enforce rules, so if you want to live without rules, live where there aren't any.  Then you'll have nothing to complain about when your neighbors five dogs keep you up all night after you worked on your project hot-rod in your front yard the whole day before.

Consult an Expert

A home within an HOA isn't for everyone, but don't count them out either.  Every HOA is different and the restrictions or covenants they're trying to enforce could be very limited.  For instance some HOA's are simply organized to maintain the private road that enters into the community, or to manage a community well for irrigation.  In these cases, the HOA couldn't care less about what you otherwise do with your own home.  

So before you completely write off buying a home with an HOA, let me do the homework and find out just how restrictive it really is.  You might be surprised to find out that all they're interested in is keeping the neighborhood safe at night.