Homeowners Association (HOA): What It Means And How It Works

When buying a home, it’s important to consider all the details, including how much home you can afford. Additionally, you’ll want to think about the house size, style, number of bedrooms, available amenities and location.

Another important factor to weigh is whether the home you’re looking at requires you to join a homeowners association (HOA).

Understanding what an HOA is, how it works and what you can expect from living in an HOA-run community can help you decide whether a home connected to an HOA is right for you.

What Is A Homeowners Association (HOA)?

Homeowners associations, more commonly known as HOAs, are private organizations that oversee the management of certain residential communities. HOAs collect dues from member homes and establish sets of rules and regulations called bylaws for those living in the community to follow. They’re most often used to govern common-interest communities, such as planned neighborhoods, townhouses and multiunit apartment buildings or condominiums.

Living in a community run by an HOA can have its pros and cons. While the group’s governance might prevent you from doing exactly what you want with your property, the rules set in place are designed to preserve the neighborhood and help all the homes maintain their property values. The fees that HOA community residents typically pay are also used to maintain the common areas and keep the entire neighborhood appealing.

HOA Fees: What Do They Cover?

If you’re thinking about buying a house in an HOA community, you’ll typically need to pay HOA fees – also called HOA dues. These can vary widely based on the community’s location, the included amenities and any special assessments conducted.

HOA fees may cover the costs of the following services:

• Trash pickup
• Landscaping
• Community gym, pool or common areas
• Security
• Maintenance and repairs

When Do You Pay HOA Fees?

HOA fees are typically paid on a monthly, quarterly, bi-annual or annual basis. Depending on the terms on your home purchase, you might make your initial payment when you close on the house. Your lender may also let you know how much you need to pay as part of your closing costs.

Sometimes, the seller may have already paid part of the HOA fees and plans to prorate them, which will be indicated on your Closing Disclosure. You’ll also learn how these fees will be calculated on an ongoing basis as part of your mortgage payment, or whether you’re required to pay a lump sum at the beginning of the year.

Before buying a house with an HOA, you’ll want to calculate how much you’ll have to pay in HOA fees to ensure this extra payment fits within your budget. Also note that HOA fees may increase or decrease over time.

Examples Of HOA Rules

The HOA board that runs your community will include its rules and regulations in a Declaration of Covenants, Conditions and Restrictions, known as CC&Rs. You’ll want to review these community rules before buying a house with an HOA. Homeowners who don’t follow the policies in place may be subject to a fine.

An HOA community might enforce a wide variety of rules. Here are a few examples of common HOA rules:

• Structural restrictions: The HOA might require you to have a certain type of fence, or disallow certain landscaping features, like artificial turf. Other structural restrictions might include size and placement caveats for a garage or shed.
• Specified paint colors or other exterior design choices: An HOA board will often require you to submit your paint colors for approval. The goal is to make sure no one chooses a hue that’s too garish or that doesn’t blend with the overall neighborhood aesthetic.
• Noise level restrictions: HOA rules are designed to make sure everyone can live in harmony. If residents ever get too noisy, it’s often your HOA’s responsibility to issue warnings or even fines to those who can’t keep the volume down.
• Pet regulations: HOA rules might include limitations on the type of pets and how many pets or animals you can have.
• Rules for common areas: Some HOAs might have pools, parks, community centers, tennis courts, basketball courts and other gathering areas. The CC&Rs will explain who can use these amenities and any rules that pertain to reserving or sharing them.
• Home maintenance and appearance regulations HOAs may have regulations surrounding your lawn’s appearance, like making sure they’re no weeds or tall grasses. Home maintenance and appearance regulations might also require that you keep your vehicles in a garage.
• On-time payment of monthly HOA fees: You’ll find out exactly how much you need to pay and when you need to pay it. If you don’t pay your HOA fees, you might end up with a lien or encumbrance against your house, which can make it hard to sell when the time comes.

While these rules and regulations might seem overly instructive, they’re useful for maintaining the property value and livability of the neighborhood or complex. It’s also worth noting that these guidelines will often apply to renters if you have a rental property in an HOA community.

HOA Board Vs. HOA Management

An HOA board of directors and HOA management company are two groups that oversee the responsibilities of a homeowners association. While they’re somewhat similar, each group plays a distinct role in governing the duties and policies within an HOA community. Here’s a closer look at each group and their key differences.

HOA Board

The HOA board of directors consists of volunteers who live in the community and are elected by other homeowners. They’re the ones who oversee common area maintenance, shared services and other amenities. The HOA board members are also responsible for collecting the HOA fees, administering the reserve fund and enforcing the community CC&Rs.

As you become more at home in your community, you might consider becoming one of these volunteers. Most HOA boards hold regular meetings where residents can ask questions and get updates. The HOA boards may also plan social activities, neighborhood watch committees and other events.

HOA Management

An HOA management company, different from an HOA board, is a professional third-party firm that helps an HOA board fulfill its duties. If your community has an HOA manager, the board typically ends up being relegated to a decision-making role. While an HOA management company overseeing your community can be helpful, it often comes with an additional fee.

Pros And Cons Of Living In An HOA Community

Owning a home in an HOA community comes with its share of benefits and drawbacks. Here’s a balanced view to help you decide.

Pros

Naturally, living in an HOA community has some advantages. For example:

• You have access to well-maintained common areas and potential amenities like tennis courts, swimming pools and parks.
• The HOA may handle exterior repairs and services for homeowners, such as keeping the streets clear and sidewalks shoveled.
• HOAs often take care of and mediate neighborly or community disputes.

Cons

You may encounter some downsides of living in an HOA community – particularly if your preferred homeownership experience is different than that of your neighbors. Consider these potential cons:

• The rules on exterior design, pets, street parking and other concerns can be restrictive.
• Some HOA fees are expensive, and they can change without warning. Plus, if you don’t want all the amenities that these fees cover, you’ll still have to pay the fees.
• Residents can be fined for violating the HOA rules, so it’s important to make sure you have a clear understanding of the policies in place. Otherwise, you may end up paying your HOA even more money.

Homeowners Association FAQs

Here are some frequently asked questions about homeowners associations.

What does a homeowners association do?

An HOA is in charge of overseeing the management of certain residential communities. HOAs maintain sets of rules and regulations, such as noise level restrictions, the upkeep of amenities and home appearances.

What’s usually included in HOA fees?

While the costs covered by HOA fees vary depending on property location and other factors, these fees often include trash pickup, landscaping, community amenities, security, maintenance and repairs.

How much are HOA fees?

The amount you’ll pay in HOA fees depends on factors like location and available amenities. On average, HOA membership fees for single-family homeowners are about $100 – $300 per month. When purchasing a home, it’s important to factor your HOA fees into your budget so you know you can afford this regular payment alongside other recurring expenses.

What happens if I don’t pay my HOA fees?

If you’re a member of a community with an HOA and don’t pay your fees, you’ll likely face a late fee. If you continue to miss these payments, you could face more significant consequences, such as a lien, lawsuit or even foreclosure.

The Bottom Line: Determine Whether An HOA Suits Your Lifestyle

Having an HOA can benefit homeowners by enhancing neighborhood livability and boosting real estate property values. Make sure you’re well-informed about what your HOA fees cover and how to communicate with the HOA board if you have questions or concerns. Deciding whether a property with an HOA is right for you is just one of many choices you’ll make on your home buying journey.

Are you ready to take the first step toward buying a home? Start your mortgage application today with the Home Loan Experts at Rocket Mortgage^®.