Buying a house in community with an HOA has its pros and cons. This guide lays out the pros and cons and explains what to look for in an HOA.
Buying a property in a community with a homeowners association (HOA) can be a mixed blessing. The houses are uniform, and you can assume your neighbors value the same aesthetics and maintenance standards as you.
But you’re also agreeing to a strict set of rules for how you’ll use your house – and breaking those rules can get quite expensive.
It’s important to know all of the HOA pros and cons before you choose where you’re going to live for the next several years so that you know that the HOA contract is something you can live with.
HOA pros and cons explained
Homes in HOA communities are usually built to a similar style, and homeowners agree to maintain the property to a certain standard. That’s reassuring for homebuyers who are concerned about their home retaining its value over time.
Maintaining property value is at the top of the list of most HOA pros and cons lists.
Mediation for neighbor property disputes
Not everyone is comfortable confronting their neighbors over a messy lawn, unsightly cars, or a shed that’s been installed too close to the mutual property line.
Homeowners who don’t want to upset neighbors, or who don’t know the offending neighbor well enough to have a conversation about it, can report violations to the HOA, which will then address the problem.
Common area maintenance
If your development has shared amenities such as a pool, tennis courts, barbecue grills, picnic tables, or other community spaces, the HOA will likely maintain those. You get to enjoy those benefits as a community member without having to worry about their upkeep.
Violating the HOA agreement can cost you
When you commit to an HOA’s guidelines and covenants, you’re agreeing to maintain your property in accordance with those rules. If you violate those rules – even for seemingly minor infractions – there are consequences. This is major part of considering HOA pros and cons.
Oftentimes, the HOA will issue a friendly reminder or initial warning, followed by a fine. The fines are generally small at first, $25 or $50. But they can escalate quickly if you’re charged that fine every day until you fix the issue.
Let’s say your grass has gotten long because you didn’t have time to cut it. You might get an initial warning, and a two-week grace period to cut the grass. But you still don’t get around to it, so now you receive a fine of $25 per day until the grass is cut. It takes you another four days to get the lawn taken care of, and you now owe the HOA $100.
Of course, things happen and sometimes there’s a good reason why you’re not able to abide by the HOA rules. When that happens, it’s best to talk to the HOA board right away.
Although there’s usually a formal company administering the HOA, the board is usually made up of other homeowners. Every community is different, but if you explain your circumstances and offer a date by which you can remedy the problem, they may work with you rather than issuing a fine right away.
Some HOAs have the power to foreclose on homeowners
Not paying your HOA fines can result in dire consequences. In some states, HOAs have the right to put a lien on your property for any fees you owe plus any legal fees they’ve incurred trying to get you to pay the fines or fix the issue.
But in other states, HOAs can actually foreclose on your home if you don’t pay the fees – even if you’re making your mortgage payment on time.
It is crucial to understand the terms you’re agreeing to in an HOA contract.
Lots of people are happy to buy in HOA developments because they like the uniformity of the homes. They also like that there is a central authority to ensure that everyone keeps up their properties and doesn’t let them fall into disarray.
But there are downsides to that as well. Maybe your house was just right for you when you moved in, but you’ve since gotten married and had three kids. You really need another bedroom and you love this neighborhood, but the HOA forbids additions.
Or, now that you spend more time at home, you’d like to put in a new deck and pool – but the HOA doesn’t allow in-ground pools and won’t approve your plans for the deck.
People’s needs change over time, and an HOA can constrain your options for modifying your property.
Having said that, there’s no such thing as total freedom when you buy a home. Even in non-HOA communities, you’ll likely need zoning permits for any major renovation work. And there may be other covenants or restrictions on what’s allowed in the neighborhood.
You’ll have more flexibility than you would with an HOA, but you’ll still have to abide by the town’s and county’s rules.
How to make sure an HOA community is the right fit for you
Once you have weighed the pros and cons of buying into an HOA community, do your homework. There’s a lot you can learn about the development before you close on the home, and you don’t want to be caught by surprise once you’ve become an official resident.
Get a copy of the HOA covenants and restrictions before you buy
Ideally, you’ll be able to see the covenants and restrictions before you make an offer. But in today’s market, when you need to submit offers quickly, that’s not always possible.
If your agent can’t get a copy of the HOA documents before you submit your offer, ask them to include language in the contract stating that the seller must provide that paperwork within 24 hours of accepting.
You want to see those covenants as early as possible to spot any red flags or ask any follow-up questions during your due diligence period.
Here’s a hack: If there’s a particular community you’re interested in, look up the covenants and restrictions on your county website. HOA covenants are legal documents that must be registered with the county, so you should be able to look them up online.
If you’re looking at multiple homes in different HOA communities, you may not know yet which one you need to look up. But if there’s a community in which you’re especially interested in buying, you may be able to get the information you need without waiting for the seller to provide it.
Ask for the recent HOA meeting minutes and budgets
HOAs don’t have to provide budget documents or meeting minutes to prospective buyers, but they do have to give them to current owners. So ask the seller to provide those to you as part of your sale contract.
Look for budget shortages in key areas, such as property maintenance, and read the minutes for any recurring arguments. Are people not paying their HOA dues? Is there an ongoing argument about residents not taking care of their homes?
You can also get a glimpse of potential problems when you visit the neighborhood. How well kept are the properties? Is every other house badly in need of power washing? Are lawns overgrown? Do the properties appear uniform? If not, that may be a sign that the HOA is not particularly active in enforcing the covenants and rules.
Review the property restrictions carefully
Once you have the HOA documents, read the fine print carefully, especially when it comes to property restrictions. Every HOA is different, and when you sign your HOA agreement, you commit to abiding by that community’s rules.
A few common categories to look out for:
This is a big one. HOAs can restrict whether homeowners can put up a fence and what type of fences are allowed.
You might be looking forward to putting in a privacy fence once you buy the home. But are you sure those are allowed? One way to gauge whether a community is right for you before you even make an offer is to drive around and see what the properties look like.
If the only fences you see are wrought-iron – or you don’t see fences at all – then you may have to adjust your expectations or look at another development.
While you’re driving through the community, look out for recreational equipment as well. Do you see swimming pools, trampolines, playground sets, or basketball hoops visible on the properties?
Some HOAs require such equipment to be in the backyard or concealed from view by a fence. In my community, homeowners are allowed to have basketball hoops out during the day, but they can’t be left out overnight. They have to be stowed out of sight when they’re not in use.
You may find that the development does not allow on-street parking overnight. The community may require that all cars be in the garage or driveway, rather than allowing parking in front of the house or elsewhere on the street.
Typically, HOAs do not allow residents to keep RVs and other large vehicles on the premises, including on your private driveway. If owning an RV or another large vehicle is important to you, be sure to get clear on the relevant guidelines.
Now that so many people work from home and spend more time at their properties, sheds have become a popular way to add a home office or a little extra space to the house. However, you must check with your HOA before adding a shed. There may be restrictions on the type of the shed or where it can be placed on the property.
If you violate the HOA guidelines on things like shed purchases and placements, it can cost you – big time. I once saw a seller have to pay $18,000 at closing to settle HOA fines related to an unauthorized shed he’d placed on the property.
The deal couldn’t close until the fines were settled, since the buyer wasn’t going to take ownership of a house with an $18,000 lien against it.
It pays to know exactly what you’re signing up for before you purchase.
If you’re hoping to put on a new deck or an addition to the home, check the HOA guidelines for rules on the types of modifications that are allowed. Homes in HOA-governed developments tend to be fairly uniform, and the guidelines are in place to keep them that way.
Homebuyers who want more autonomy in how they renovate their homes may want to look for non-HOA properties.
Some HOAs restrict the types of decorative elements that can be added to a home. Decorative flags, for instance, are sometimes prohibited.
The American flag is typically allowed, but festive or seasonal flags may be outlawed in the HOA guidelines.
Bear in mind that the HOA can also mandate the colors you can paint your home and the type of landscaping you can choose. For instance, it’s unlikely that you’ll be able to pull up your grass lawn in favor of a wildflower patch or front-yard garden.
Think carefully about how you plan to use and modify the home, and then see how those plans might be affected by the HOA rules.
Community HOAs often cap the number of units in the development that can be rented out, either as long-term rentals or Airbnbs. In some cases, homeowners need to get on a waiting list for approval to rent their homes. So if you’re buying the property with the intention of turning it into a rental, know the rules before you close.
And if you’re thinking you can list the property on AirBnB and no one will find out, think again. HOA board members will often browse local listings to ensure there are no unauthorized rentals in the community.
Plus, your neighbors may be unhappy seeing a revolving door of renters and vacationers at your place, and they may tip off the HOA board.
HOA pro and cons: The bottom line
There are a lot of great properties in HOA developments and plenty of benefits to enjoy as a homeowner in those areas. But HOA membership is not for everyone, and you should weigh the pros and cons and know exactly what you’re agreeing to before you buy.