The Pros and Cons of a Homeowners Association (HOA)
If you’re shopping for a new house, you’re likely to come across at least a few properties that are part of a homeowners association, or HOA. Over 40 million homes across the country are governed by them, according to iPropertyManagement.1
Of course, amenities like swimming pools or club houses can make it tempting to gloss over the realities of living under an HOA – but it’s important that you don’t.
For one thing, there’s the money. HOAs assess fees that help maintain common areas and cover community services, so knowing the size of the fee (and what it covers) can help you decide if you want to live in the community, or whether you can afford to.
It’s also important to understand the HOA rules, which you have to abide by if you purchase a home there. Association regulations are designed to protect property values, according to Community Association Institute (CAI).2 But they can touch on anything from making improvements to your home to where you park your car. CAI suggests looking into rules about pets, flags, outside antennas, clotheslines, satellite dishes, fences, patios and home businesses before you buy.2
There are also other aspects of an HOA to consider. Here are some pros and cons of community living to help you decide if it’s right for you:
PRO: HOAs provide amenities
Buying into an HOA may give you access to amenities like a tennis court or fitness center that you might not otherwise be able to afford, or be able to enjoy in such close proximity to your home.
PRO: They reduce your responsibilities
The fees you pay to an HOA typically go toward services (like snow removal) and maintenance that you might otherwise have to perform, or contract for, yourself.
PRO: They help keep up appearances
HOAs typically have rules to prevent property neglect and resulting neighborhood decline. They can help to maintain the property values for the homes within the community.3
CON: An HOA can foreclose on your home
If you get behind on your fees, the HOA may be able to foreclose on your home, attorney Amy Loftsgordon tells Nolo.com. (The process of doing so varies by state).4 Though, CAI advises HOAs to only use foreclosure as a “last resort.”5
CON: They can spring assessments on you
If the HOA doesn’t have cash reserves to cover an expenditure, it can impose an assessment to come up with the money, the CAI says.6 That’s important, since many HOAs are currently underfunded, according to California Builder Services.7
CON: An HOA may stop you from renting your place
HOAs can put an array of rental restrictions in place. Some associations limit rentals, disallow certain pets, and screen prospective renters.8
So, consider the pros and cons against your own lifestyle and get familiar with the community rules before you buy – you just might find that association living is equally as satisfying for you.
Who is Answer Financial?
Deciding whether to become part of an HOA is just one of many important choices you make when buying a home. Finding home insurance coverage is another. While home insurance is usually a requirement for a mortgage, the buying process can be made easier and often less expensive with Answer Financial. Our mobile-friendly website lets you quickly compare rates and customize coverages from multiple insurance companies in minutes. Whatever your needs and budget, we’re ready to help you compare, buy and often save on insurance.
October 5, 2023
Sources:1.“HOA Statistics,” iPropertyManagement.com, https://ipropertymanagement.com/research/hoa-statistics
2. “National and State statistical review for 2016 Community Association Data,” Community Associations Institute, https://www.caionline.org/AboutCommunityAssociations/Statistical%20Information/2016StatsReviewFBWeb.pdf
3. “9 Things to Know About Homeowners Associations,” Investopedia, https://www.investopedia.com/articles/mortgages-real-estate/08/homeowners-associations-tips.asp
4. “I'm behind in HOA dues but not my mortgage. Can the HOA foreclose?” Nolo.com, https://www.nolo.com/legal-encyclopedia/im-behind-hoa-dues-mortgage-can-the-hoa-foreclose.html
5. “Foreclosure as a Last Resort,” Community Associations Institute, https://www.caionline.org/PressReleases/_layouts/15/WopiFrame.aspx?sourcedoc=%7BC566D53A-2154-42B1-8DC4-50AF326D8A91%7D&file=Foreclosure%20as%20a%20Last%20Resort.doc&action=default&DefaultItemOpen=1
6. “Community Matters: What You Should Know Before You Buy,” Community Associations Institute, https://www.caionline.org/HomeownerLeaders/ResourcesforResidents/_layouts/15/WopiFrame.aspx?sourcedoc=%7B7443511C-7080-4744-B62F-19D86E21F079%7D&file=CAICommMattersWEB.pdf&action=default&DefaultItemOpen=1
7. “Insight: Underfunded U.S. homeowner associations get heavy,” Reuters, https://www.reuters.com/article/us-homeowners-association-insight/insight-underfunded-u-s-homeowner-associations-get-heavy-idUSBREA0706N20140108
8. “Can an HOA Restrict Rentals? (Spoiler Alert: Yes),” MillionAcres, https://www.fool.com/millionacres/real-estate-investing/rental-properties/can-hoa-restrict-rentals-spoiler-alert-yes/