- While the search for new homes is already competitive, potential buyers should consider another factor when weighing the pros and cons of a particular property: homeowners’ associations.
- According to a study by the American National Bank of Texas, HOAs can have monthly fees of up to $1,000.
- Since these associations are becoming more and more common, potential buyers should check them before signing the deed of sale.
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Homebuyers are facing record high costs this year amid rising interest rates and shrinking supply.
As home buying becomes increasingly competitive, potential buyers should consider an additional factor when weighing the pros and cons of a particular property: the homeowners association (HOA).
Homeowners associations are governed by community residents who are elected members of the board of directors, which governs the neighborhood through a set of rules and regulations. Homeowners pay HOA fees for maintenance and repairs to common areas such as parks, streets and community pools.
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According to the American National Bank of Texas, mandatory membership in an HOA can cost homeowners a pretty penny, with dues reaching up to $1,000 per month.
If the board runs out of money or doesn’t budget properly, all it has to do is request a special assessment, said Raelene Schifano, founder of the HOA Fightclub organization.
“Unless association members have a 51% majority vote, they cannot overrule a budget,” she added. “I’ve seen budgets go from $300 per month to $800 per month.”
Since 84% of newly constructed single-family homes sold in 2022 were owned by condominiums, according to the U.S. Census Bureau, it will be important for potential buyers to ideally vet these organizations before signing the deed.
Different types of homes can be attached to an HOA. from single-family homes to cooperatives.
Single-family homes are separate units in which residents own both the land and the house on it, said Clare Trapasso, senior news editor at Realtor.com. They have their own entrances and access to the street and do not share utilities or other systems with other houses.
Townhouses and townhouses are somewhat similar; However, they share walls with adjacent units, although they are separated by a floor-to-roof wall, Trapasso added.
Meanwhile, condominiums, often called condominiums, and co-ops or co-ops are units in a common building in which residents share ownership of the common space, but their ownership structure is different.
In a condominium, residents own their individual units but share ownership of the property and common areas with other residents. Condominiums are managed by a board of homeowners association members who make decisions for the community, said Jaime Moore, a top Redfin broker.
In a co-op, residents own shares in a company that owns the building and have a board of directors made up of every member of each unit to create a community in which all parties have a say, he added.
“Co-ops are popular in places like New York and Boston, but condos are generally more common in the rest of the country,” Trapasso said.
According to Thomas M. Skiba, CEO of the Community Associations Institute, a membership organization of homeowners and condominium associations, a high percentage of new homes built nationwide are now part of HOA-managed developments because of the financial benefit to local governments .
“You don’t have to plow the road anymore [or] If they do all the maintenance, they still collect the full property tax,” Skiba added, referring to local authorities.
Homebuyers who want to avoid the additional costs associated with HOAs can look for older homes on the edge of developments, Redfin agent Moore said. If you have no choice but to buy in an HOA-affiliated area, here are some ways you can evaluate the organization.
While real estate agents nationwide are not required to tell buyers whether a property is tied to an HOA, homebuyers can take the initiative and check the organization themselves.
Some states, such as Nevada, require sellers to disclose to potential buyers all things related to the homeowners’ association, including its financial status and meeting minutes, Redfin’s Moore said. However, check local and state laws to be aware of your rights as a home buyer and potential homeowner.
These vetting tips may not apply to co-ops, and you may not have the time to fully investigate a particular HOA.
Here is a checklist from experts:
“The most important thing a buyer can do is ask questions of their agent, community association and neighbors,” Skiba said.
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