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A homeowners association, commonly referred to as a HOA, is best defined as, “an organization in a subdivision, planned community or condominium that makes and enforces rules for the properties in its jurisdiction,” according to Investopedia.com.
One of the many decisions that is made when purchasing a piece of real estate is whether or not to purchase a piece of real estate that is part of a homeowners association or not. As there is with most things in life, there are pros and cons to homeowners associations.
Buying a condo or a home that is part of a homeowners association is a decision that only can be made by you, the purchaser. Before you decide to purchase a home associated with an HOA, it’s critical that you understand what the good things are about a homeowners association, what the bad things are about a homeowners association, and also what you should look for when deciding if a specific homeowners association is a good or bad one.
So, before you sign on the dotted line, make sure you understand what is good about HOAs as well as what is bad about them, which is outlined below in detail.
What Are The Benefits Of A Homeowners Association
Homeowner Associations May Include Municipal/City Services
When buying a home or condo that is located within a homeowners association, it’s likely that you will be provided services that many municipalities will provide. Some of the services that municipalities often provide for residents may include things such as refuse, water, and sewer use.
This can be a nice benefit to living within a homeowners association that includes these services since these services can be additional costs when owning a home. Certainly the costs of these services will vary from community to community. For example the average monthly cost for refuse removal for an Irondequoit, NY resident is $30.00 while the cost of sewer use is included as part of the yearly taxes.
Homeowner Associations May Include Insurance
Most homeowner associations include what is called, “master insurance.” Master insurance is an insurance policy that covers parts of the real property that is shared by all the homeowners. Master insurance policies often cover items such as roofs, common walls, structures, basements, elevators, and other shared items.
The master insurance is a nice benefit to purchasing real property that is part of a homeowners association, however, keep in mind that master insurance does not cover the entire piece of property. The homeowner, in most cases, is still responsible to carry a homeowners insurance policy that covers their personal belongings and other parts of the property.
Homeowner Associations May Include Maintenance
Another benefit to buying real estate that is part of a homeowners association is that many include maintenance. The majority of homeowner associations only include maintenance for the exterior of the property. This includes things such as exterior painting, roofing maintenance, and landscaping.
Homeowner Associations May Include Utilities
Some homeowner associations will include the use of electric and heat. While it’s not impossible that a town home or single family home that is part of a homeowners association to include these utilities, it is more common that they are included in condominiums. This is obviously a huge benefit for owning a piece of real estate in a homeowners association as the cost of electric and heat can often be very expensive, especially for those who live in climates that have extreme weather.
Homeowner Associations May Include Amenities
One of the biggest benefits to owning a home that is part of a homeowners association are the amenities that maybe included. Many communities that have homeowners associations include use of a common community center, frequently referred to as a “clubhouse.” This clubhouse is an area that the association residents can gather to relax and mingle with other residents.
Other amenities that are commonly provided by a homeowners association include a fitness center, swimming pool, or tennis courts. If the piece of real estate is a waterfront property, it’s possible the homeowners association will provide use of private decks and beaches.
What Are The Drawbacks Of A Homeowners Association
Homeowner Associations Often Come With A “Hefty” Price Tag
The above benefits of a homeowners association are great reasons to purchase a home that is apart of a homeowners association. These benefits however often come with a large fee.
A homeowners association fee, or HOA fee, is traditionally paid either monthly, quarterly, bi-annually, or annually. Depending on the number of amenities or services that are included in the association fee, the cost can be very expensive.
For example, during the recent sale of a Penfield, NY town home, the monthly association fee was $170.00 and did not include any amenities other than refuse removal, exterior building maintenance, and snow removal. The yearly cost of $2,040 is significantly higher than it would cost for a homeowner who is not part of a homeowners association.
Homeowner Associations Fee Can Increase
One of the biggest drawbacks to homeowner associations is that the HOA fee can increase. When a homeowners association decides to increase their fee, the homeowner has virtually no say in whether the fee increases or not.
The majority of homeowner associations will raise the HOA fees every couple years. Some increases are significant and some are relatively minor. It’s important that before you purchase a home that is apart of a HOA, you take into consideration what an increase in the HOA fee would mean to your budget.
Homeowner Associations May Have Many Restrictions
Restrictions in homeowner associations can be very frustrating to a homeowner. Many HOAs restrict the types of plants, shrubs, and bushes you’re able to plant. These are just a few examples of the restrictions that are common within a homeowners association. Other homeowners association restrictions include:
Homeowner Associations May Require Board Approval For Certain Projects
Another drawback to owning a property that is part of a homeowner associations is that many projects will require board approval. The process to get board approval for special projects can often be very tedious, time consuming, and unfortunately is frequently unsuccessful.
The most common first step to obtaining board approval for a special project is filing a variance request or special request. This normally is required to be submitted in writing several months before the homeowner associations next board meeting. Once your request is submitted, it may take several months to receive a response.
Tips To Determine Whether A Homeowners Association Is Good Or Bad
Review And Understand The Bylaws
When purchasing a property that is apart of a homeowners association, one of the most important steps is to review the association Bylaws, sometimes known as covenants, conditions, and restrictions (CC&Rs).
A common contract contingency for buyers who are purchasing a property that is apart of a homeowners association is the ability to review the bylaws within a specified number of days after acceptance. Not only is it a good idea for the home buyer to review the bylaws, but also it’s suggested their attorney reviews them as well to ensure they are not getting involved in a bad situation.
Know Who The Management And Maintenance Companies Are
Homeowner associations are often associated with management companies. The management companies are often responsible for the finances and other various day to day functions. It’s important that when determining whether a homeowners association is good or bad, you know if there is a management company overseeing the HOA. If so, it’s a very good idea to research the company to ensure they have a good reputation.
Homeowner associations are also frequently associated with maintenance companies. Obviously the residents aren’t completing the maintenance around the community, so it’s important to know who is in charge of maintenance. Finding out who is responsible for exterior repairs, roofing repairs, landscaping, refuse, and other services is important when determining whether the HOA is good or bad.
Review The Homeowners Association Budgets And Reserves
A popular saying, “Numbers Don’t Lie,” can certainly hold true when determining whether a homeowners association is a good or bad one. When determining whether a homeowners association is good or bad, it’s strong suggested you request the HOAs budgets and reserve fund information.
A good homeowners association should be able to provide their budgets in a clean and concise format so that you can clearly understand where the residents money is being spent.
Knowing how much in reserves a homeowners association has is also important. The reserve fund is important to determine the strength of an HOA, should there be need for a significant project in the future. An HOA with a small reserve fund could be reflective of a poorly run HOA and also the possibility that large sums of money maybe requested in the future.
Find Out If There Any Special Assessments Pending
A good homeowners association will be able to provide information relating to special assessments. A special assessment is a fee that is not planned for, however, requires additional money to be contributed by the residents of a homeowners association. Some special assessments are caused by natural disasters, such as a roof being damaged during a tornado or hurricane. This is not a repair that is able to be projected, however, a good HOA should have a strong reserve fund to cover the majority of the cost.
Even though some special assessments are not planned for, many are. Special assessments such as replacement of common area carpeting, windows, or old exercise equipment are often in the future plans. If a homeowners association has a huge list of special assessments pending, you need to consider the additional monies that maybe required in the future.
Homeowner associations are not for everybody, period. When purchasing a piece of real estate, one of the first decisions that should be made is whether you want to purchase a property that is part of a homeowners association or one that is not. If you decide that you do want to own a property that is part of a homeowners association, you must understand the pros and cons to HOAs.
In addition, it’s important to understand whether the homeowners association is a good or bad one. Buying a property that is associated with a bad homeowners association can be a big mistake and can be extremely costly in the future.
Other Top Resources & Articles Regarding Homeowner Associations
Are you thinking of buying a property that is apart of a homeowners association in Rochester, NY? Or are you thinking of selling your property that is apart of a homeowners association in Rochester, NY? The fact is, the homeowners association in which the property is apart of is extremely important. Obviously there are benefits and drawbacks to being apart of an HOA. If you’re not sure how to start your Rochester, NY home search or how to sell your Rochester, NY home, contact me, and I’d be happy to share my expertise!
About the authors: The above article “Homeowner Associations (HOAs): Good or Bad?” was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
Visit our website at www.HiscockHomes.com.
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