What Is An HOA? What Are The Benefits? - Northern Title Blog
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What Is An HOA? What Are The Benefits?

What Is An HOA? What Are The Benefits?

An HOA stands for a homeowners’ association, which is a group that helps maintain a property so that individual tenants or owners don’t have to take it upon themselves. The most common example of this happens in condominiums, where an HOA arranges for maintenance of lawns, upkeep of common areas, the tracking of finances, garbage collection, repairs, and other property needs.

Even a single-home development can offer an HOA, in which property owners can have their lawns mowed and snow shoveled. An HOA is common in many planned developments.

The association itself is most often made up of the property’s residents, who are usually elected.

If you are new to this concept, it’s very important for you to understand that most HOAs require a maintenance fee, usually charged to individual owners on a monthly or quarterly basis. In addition to this regular fee, there may also be an assessment fee, which covers larger repairs or maintenance such as roof repair or parking lot repaving.

The best way to keep from being unpleasantly surprised by HOA and assessment fees is to ask to review the bylaws of the community. This document should clearly define who is responsible for what (for instance, you may be responsible for repairing your own balcony). It should also clearly state the exact fees that will be collected from you (itemized, if possible) and exactly when they will be collected. You should also be aware if you can arrange to have the fees automatically deducted from your bank account on a certain due date; otherwise, you will have to submit a check on time, or possibly incur late fees or penalties.

Would an HOA be beneficial to you and your investment? You may be able to come to a conclusion by considering the following questions:

  • Can I afford the recurring fees?

Fees can range widely from property to property. Make sure the fees you are being charged will fit comfortably within your budget.

  • What exactly do the fees cover?

For instance, if your contribution goes to hiring 24/7 property security and monitoring, or a common area or pool that you know you will enjoy, then it may be beneficial for you to pay the fee. On the other hand, realize that you will be paying HOA fees whether you use the amenities or not.

  • How often do the fees increase?

Find out if the HOA fees and assessment fees increase on a regular basis (for instance, annually or bi-annually). This should be stated in the community bylaws.

  • Will more homes and owners be coming to the community in the near future?

The benefit here is that more owners may mean a smaller HOA fee for you, as more people will be sharing in the costs.

  • Do the HOA fees line up with other HOA fees in the area?

If not, you may want to continue to shop around to find a more affordable HOA fee. The reason for the discrepancy may be a result of a larger property, more amenities, or even more square footage.

  • Could a larger HOA fee interfere with my mortgage approval?

Yes. Banks consider HOA fees when reviewing your loan application. You may be turned down or offered a smaller loan amount if it appears that the fees could not add up to what you can afford.

  • Will the HOA interfere with my preferences and lifestyle?

Could be. The bylaws of the HOA could state clearly that you may not allow certain paint colors or bar you from a certain noise level after a certain time at night. You also may not be allowed to rent out your space to tenants.

  • Can an HOA foreclose on your property?

Quite possibly. Find out how the HOA bylaws state how any rule-breaking or discrepancy may result in lawsuits.

Bottom line:

Living with an HOA can allow you to let go of some of the stresses of property ownership, but it can also be costly and limiting to your lifestyle. Take a close look at the pros and cons of an HOA and see what you can live with, and what you can’t.