What Should You Consider When Purchasing A House Covered By A Homeowners Association?

If you're in the market for a new-to-you house, you may be looking in a variety of neighborhoods and school districts for the perfect home. Depending on your budget and ideal neighborhood, you may find that most of the homes you're browsing are covered by a homeowners association. What should you know about homeowners associations (HOAs)? What are the benefits and drawbacks of moving into a home governed by an HOA? Are there any documents you should examine or questions you should ask before agreeing to a purchase? Read on to learn more about HOAs. 

What is an HOA?

A homeowners association, such as Cornerstone Properties Inc, is a corporation that governs a group of houses in a neighborhood. Homeowners associations can have limited purposes—such as ensuring homeowners have rights when faced with abusive or non-law-abiding neighbors—or can contain stringent rules and regulations about the number of cars parked in your driveway, the length of your grass, the placement of trash cans and recycling bins, and any outdoor activities that may offend neighbors (such as shirtless car-washing).

Generally, all homeowners in the neighborhood will pay an annual assessment—similar to a property tax—to the HOA to fund enforcement of HOA rules and other governing activities. The HOA is governed by a board of directors, similar to any other corporation. This board purports to represent the interests of the majority of homeowners.

What are some advantages and disadvantages of an HOA?

There are several specific advantages to joining an HOA. First, due to their enforcement powers, these associations tend to ensure that property values remain high—you won't need to worry about drug dealers or hoarders moving in next door and deflating the value of neighborhood houses. You'll also be able to enjoy a clean, well-maintained neighborhood. 

Depending on the level of oversight of the HOA and the specificity of neighborhood rules, some homeowners find HOAs overly intrusive. If you are ill or on vacation and miss a week of cutting your grass, you may return to find a notice on your door. Once you've accumulated several notices (for the same or different offenses) you may be assessed a fee, which can even convert to a lien on your home.

What should you ask before purchasing a house covered by an HOA?

If you're considering a house governed by an HOA, you should ask to see the Community Code and Regulations (CCR) document, which sets out the community standards, methods of enforcement, and any penalties. You should also ask to see the HOA's financial statements for the last year or two—this will give you an idea of the fiscal health of the HOA and perhaps warn you whether HOA dues are set to increase after you purchase.