Everything You Need To Know About Homeowners Associations

Posted by Trent Corbin on Wednesday, August 22nd, 2018 at 1:09pm.

Know Your Community Management Before You Buy

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If you are thinking about buying a condo, townhouse, or a home in a planned unit development, you’ll want to research the complex’s Homeowners Association (HOA). The HOA holds a lot of power in its community, so it’s important to know what being governed by the HOA entails.

What is an HOA?

Homeowners Associations or HOAs, are organizations in condos, townhouses or single family residences that make and enforce rules for the properties within their complex. By purchasing property within the complex, you automatically become a member of the HOA and will be required to abide by set rules and pay membership fees.

HOAs are legal entities that allow the developer to transfer community ownership and management to the community’s homeowners after a certain number of units or lots has been sold. These organizations may have a significant amount of legal power over the property owners, with a lot of leeway in how they manage and very little oversight and regulations.

Each HOA has an elected board of directors that enforce and oversee the HOA’s governing documents. Rules or conditions the community’s owners must abide by and penalties for violating those rules are typically set in a document called the Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

Common restrictions set by CC&Rs are typically in regards to things like pets, architectural or landscaping alterations to the exterior of a home, resident behavior and parking.

Questions to ask before buying property in an HOA community

When looking to purchase a property that is governed by an HOA, be sure you ask these important questions and get all the facts so there will not be any surprises come move-in.

  1. Who is the HOA management company?

HOA management companies lead and teach HOA boards of directors, help with budgeting and collecting dues, and work with collections agencies. HOA management companies must be responsive, work full time, and care about the community to ensure the best experience for its residents.

  1. Is there an active termite bond? If so, when does it expire?

Termite bonds are agreements between a pest control operator and a person or entity (in this case, an HOA), that guarantees regular termite inspections protection from potential damage caused by termites. Also be sure you know when the agreement ends (and did it end with the previous owner?).

  1. Are there any confirmed special assessments included in the CC&R?

A special assessment is a fee that HOAs can charge homeowners in order to cover the cost of a special project or emergency that is not covered by insurance or within the budget. An HOA’s authority to impose special assessments will be included in the CC&R. Be sure to ask questions about your HOA’s special assessments and read through it carefully.

  1. Is there a transfer fee?

When a house in an HOA community is sold to a new owner, there is sometimes a transfer fee.

The transfer fee will cover the expenses of transitioning activities and paperwork between the buyer and the seller, including new documentation and paperwork, management’s time, and required actions. Per North Carolina contract, transfer fees are paid by the seller, unless negotiated differently.

  1. Is there a capital contribution fee?

A capital contribution fee is a one-time charge associated with the transfer of title on a property that is part of an HOA. It is normally paid to the HOA at closing and deposited into the capital reserves to fund maintenance activities.  

  1. Is there a monthly assessment or fee?

Monthly assessments and fees pay for the repair, maintenance, and upkeep of the community, as well as the insurance and salaries of the HOA employees or independent contractors.

  1. What utilities and pest control are covered?

It depends, but some HOAs will cover basic utilities such as water, gas, trash, sewer, and recycling. Pest control services might also be included and entail the spraying of properties or units for bugs.

  1. Who is the HOA manager? Who is the HOA president? What is their direct line/email?

It’s a good idea to have the contact information for both your HOA manager and president handy in case any questions or concerns arise.

  1. What will my monthly dues go towards?

You have the right to know exactly what your monthly HOA dues are going towards. Dues vary between communities but can vary in price of community.

  1. What restrictions might I face If I want to make changes to the property?

This is a particularly important question to ask if you’re buying a property with the intention of making a few changes here and there. Your hands might be tied when it comes to things like putting in a pool or adding an enclosed patio.

HOA pros!

It might seem like an HOA membership is nothing more than a costly and confusing hassle, but there are actually quite a few benefits associated with living in an HOA community. Consider these:

Unlimited access to amenities

An HOA usually offers and maintains community amenities which you’ll get to take advantage of as a member such as a pool, fitness center, park, children's playground and security gates.

Maintenance costs are shared

HOA dues go towards maintaining shared spaces including community lawn care, snow removal, and upkeep of common areas like the pool or fitness center.

An attractive community

Thanks to regulations the HOA enforces when it comes to homeowners maintaining the appearance of their home, and the money they collect to keep the appearance of the community’s common areas up, you won’t ever have to worry about having a neighbor that doesn’t cut their lawn or the entrance of your community looking overgrown and unkempt.

A built-in mediator

In an ideal world, you’d get along with all of your neighbors but in case you’re involved in a tiff perhaps over a big oak tree that should probably come down for safety reasons, it’s nice to know there is a mediator available to settle any disputes.

Opportunities to get to know your neighbors

Whether you decide to serve on your communities HOA board or attend an HOA organized community event, you’re sure to become better acquainted with your neighbors and might even make some new friends!

All across the U.S., HOAs are on the rise! Know everything there is to know about an HOA before you commit to one. A well-run and managed HOA can be great but it’s possible that you might come across a poorly managed HOA. Do your research, ask the right questions, and rely on your Realtor® for assistance.

When beginning your search for a house, your Realtor® will likely ask whether or not you’re interested in belonging to an HOA as part of their process in understanding your specific needs.

For more questions, you should anticipate, check out our Home Buyers Guide 101: The Top Questions Your Realtor Will Ask. This free eBook details other questions you should be prepared to answer when beginning your search.

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