If you are looking to buy a condo, townhouse, or even a single-family home in a planned community development, chances are you will need to know everything you can about homeowner’s associations before you decide to buy. HOAs are not necessarily a bad thing, but they do come with their own pros and cons and they can hold a lot of power within your new community, so knowing what to look out for when looking to buy in a HOA community is important.
What is a HOA?
A HOA is legal entity setup by the developer of a condo, townhouse, or single-family home community that allows the developer to transfer ownership and management of the community over to the homeowners within the community once a certain number of units or lots have been sold. The HOA can manage and maintain many aspects of the community including the outside common areas, amenities such as pools, gyms, clubhouses, security gates, and more, and enforces its own set of rules that every homeowner within the community must follow. Because HOAs require everyone living in the community to join and comply with their rules, communities with HOAs tend to be nicer communities and homeowner’s home values are better protected. The HOA is run by the board which is made up of homeowners within the community that are selected by other homeowners within the HOA community.
You Will Be Required To Join
When you decide to purchase a condo, townhouse, or single-family home within a community that has a HOA you don’t get an option as to whether you want to join the HOA or not. Communities with HOAs require that you join the HOA and pay monthly or annual HOA fees to meet their budgetary requirements to maintain and upkeep the community.
What You Need To Know About HOA Fees
The fees you will be required to pay for an HOA can vary significantly depending on the community and the services that the HOA provides. HOA fees can range from $150 month up to $850 per month, and generally speaking the more services and better the amenities the community has the higher the HOA fee will be. A HOA can also raise their fees so it is important to look into the history of the community’s HOA fee increases to protect yourself for unexpected surprises. You also need to beware of a community HOA that may have unexpected fees. Your communities HOA should have a reserve fund that they put a portion of your regular HOA fees into for major, more costly projects they have coming up down the road. If your HOA community’s reserve fund are insufficiently funded or if they do not have a reserve fund setup, you will likely end up paying fees for special assessments to cover the cost of a major project that comes up unexpectedly that the HOA does not have room in their budget for. Special assessments are fees paid in addition to your regular HOA fees, not fees taken out of your regular fees like a reserve fund does.
If you are considering buying a condo, townhouse, or single-family home, whether it is in a community with an HOA or not, contact American Dream Home Mortgage today to speak with a professional about your mortgage options!