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What is a homeowners association, or HOA?

A row of houses in a suburb.
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A row of houses in a suburb.
FStop Images/Getty Images

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The term HOA stands for homeowners association. A community that’s governed by an HOA can consist of individual houses, townhouses, high-rises or condos, often within a planned community. The responsibilities of the HOA can vary based on property type — for a condo development it may oversee management of the entire property, for instance, whereas for a townhouse community, it may only be in charge of common areas.

What is an HOA?

An HOA, or homeowners association, is a self-governing organization in “common-interest” communities where homeowners collectively pay fees to maintain the units or neighborhood. HOAs are typically run by resident homeowners, unpaid volunteers who are elected to a board of directors that oversees the HOA’s management.

Properties within an HOA are governed by a collective set of rules and bylaws that are enforced by the association. Each property owner is required to pay HOA fees that cover use and maintenance of common areas. These areas can include swimming pools, parks, parking lots and roads, as well as communal lawn maintenance and landscaping.

If you are thinking about living in an HOA community, there will be fees to pay and rules to follow. Here’s everything you need to know about HOA life.

How much are HOA fees, and what do they cover?

Homeowners should expect to pay anywhere from $200 to $2,500 or more per year in HOA costs and fees, or assessments. The amount depends on the amenities offered by the community.

At minimum, homeowners have to pay their portion of the cost to operate the association, which can include:

  • Landscaping and maintenance (including pest control)
  • Garbage pickup
  • Parking
  • Shared utilities (e.g., in common areas)
  • Safety and security

Neighborhoods with extensive amenities usually charge considerably more than those that just enforce rules and restrictions.

“I have seen assessments for single-family HOAs as low as $50 a year, and as high as $2,500 a year. The higher-assessment communities are generally tied to those with private streets and gates, and possibly personnel,” says Texas attorney Marc Markel of Roberts Markel Weinberg Butler Hailey. Markel is board-certified in real estate property owners association law.

From time to time, homeowners in an HOA may also need to pay for special assessments. This is common when a natural disaster or other unanticipated problem hits and the community requires significant unbudgeted repairs. In this case, the HOA has the power to levy a special one-time fee to cover the costs, explains Jackie Boies, senior director, partner relations for Money Management International, a nonprofit debt counseling organization in Sugar Land, Texas.

“Following a hurricane, a friend of mine was shocked to learn she would be assessed an additional $1,000 for rebuilding a fence around the entire community, which was not included, insured or part of the general HOA contract,” Boies says.

Pros and cons of HOA life 

Some homeowners love living in an HOA community. Others may find the rules to be too restrictive and cumbersome. Here’s a list of pros and cons to help you decide.

Pros

  • Your neighborhood will be neat and well-maintained, with minimal effort on your end.
  • Your property value will likely benefit from more stability due to rules governing the maintenance and appearance of homes.
  • You might gain access to exclusive amenities like a swimming pool, playground, clubhouse, gym or on-site security. You may also have opportunities to meet and socialize with your neighbors through HOA-sponsored events.
  • An HOA board will hear and mediate disputes between neighbors for property-related issues that violate the rules (for example, barking dogs, trashed yards or fence disputes).

Cons

  • HOAs typically have a lot of power over how you can maintain and live in your home. You might be limited to certain design schemes or paint colors, or even the number of and type of pets you are permitted to have.
  • HOA fees can stretch your monthly housing budget, especially if home prices are already steep in your area.
  • Some HOAs can be aggressive about sending violation notices for the slightest infractions.

A note about HOA rules

While all HOAs have rules, some are far more restrictive than others. For example, many will require you to get prior approval for home additions or a new roof. Others might prohibit you from renting out your home. Some HOAs may even restrict the number of plants you can have in your front yard, or the height of mailboxes or playground equipment. In the most extreme cases, a homeowner can be fined or have a lien put on their home for repeatedly failing to comply with rules or falling behind on HOA payments.

Questions to ask before buying in an HOA community

Here are a few of the top questions potential homebuyers have about HOA living. Make sure you know the answers before buying, so you don’t run into any unpleasant surprises once you move in.

What are the rules and bylaws?

Before you make an offer on a home, ask your real estate agent to request a copy of the HOA’s bylaws and its Covenants, Conditions and Restrictions. This document, often shortened to CC&R, outlines the community’s rules. You might also be able to find this information online. Read it thoroughly so you can determine whether you can live with the HOA’s rules.

How is the HOA run?

Typically, HOAs are operated by a board consisting of volunteer homeowners who reside in the community. It’s important to have a sense of how receptive those in charge are when issues crop up. If the HOA has an upcoming meeting, it might be worth attending to get a feel for how things are run.

You may also want to do some internet sleuthing to find out just how hands-on the HOA board really is. Check online community groups to see if people have posted about their experience with the HOA. Some also have online reviews on Google Reviews or Yelp.

Keep in mind that serving on the HOA board isn’t a commitment many are willing to take on, so the same board members often continue to get reelected. This can create conflict if the board and newer residents disagree on an issue.

Some HOAs are run by a real estate developer or property manager. Typically, the developer maintains control until a certain amount of units are sold. If the development is fairly new, find out whether a board has been established yet.

What is the HOA’s financial situation?

Inspecting the financials of an HOA is an important step. Check how often annual assessments are raised, and by how much. Look to see if the HOA has a sufficient reserve fund and insurance to make repairs if, say, a hurricane blows off the clubhouse roof or flooding damages the landscaping.

Also, find out if any debt has accrued and whether the HOA has ever had legal judgments against it. Ask about any recent engineering assessments, too, which can give you clues as to what repairs might be in store in the future and how much the repairs are expected to cost.

“If you’re looking to buy a home in a HOA, be sure to ask for a copy of its financial statements,” says Jeffrey Ducker, a principal in the audit department at MBAF, a Florida public accounting firm. “Look at what its liquidity is, if it has sufficient working capital to operate and if it has set aside reserves for future major repairs and replacements. If it doesn’t have reserves, that would be considered a negative factor.”

What amenities does the community have?

To fully understand what your HOA assessments are paying for, find out what’s included. For example, does the money cover trash pickup and landscaping of shared areas? A pool or clubhouse? Twenty-four hour security? What rules or restrictions are in place for using those amenities?

It’s also good to ask about whether the HOA has any significant projects in the works that may impact the community or the monthly assessments you pay. Is the community expanding its amenities? How will that project be funded? Knowing the answers to such questions and whether the projects will impact HOA assessments can help you budget for increased costs in the years ahead.

Bottom line

Living in an HOA community comes with some trade-offs. On one hand, you get the benefit of a well-maintained neighborhood that might have more amenities than a community without an HOA. On the flip side, you’ll have the added monthly expenses, and you might not get as much leeway to maintain your home as you’d like. Weigh the pros and cons carefully, along with the costs, to determine whether it’s right for you.

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Written by
Ellen Chang
Contributing writer
Ellen Chang is a former contributor for Bankrate. Chang focused her articles on mortgages, home buying and real estate. Her byline has appeared in national business publications, including CBS News, Yahoo Finance and MSN Money.
Edited by
Senior real estate editor
Reviewed by
President, Real Estate Solutions