HOA or No? The Pros & Cons of having one

HOA or No? The Pros & Cons of having one

We get this questions a lot when working with buyers. Some buyers have very strong opinions one way or another; HOAs will either be a requirement or a deal breaker. Other buyers don't really have a good idea of what an HOA really is or what they do. And sometimes peoples' strong opinions about an HOA can be formed by a bad experience with one, so they feel like they are all bad. Well, I am hoping to just educate so you will understand in order to make an educated decision when it comes time to decide if a property is right for you.

First off... What is an HOA?

A Homeowners Association or Property Owners Association is a legal entity that must be established. It works as a nonprofit that is set up like a business or corporation. The job of the HOA or POA is to manage and maintain the community or neighborhood. It is kind of like a mini government and if you live in the Bryan ~ College Station area most HOAs are heavily backed by the cities. Whatever rules are set forth by the HOA or POA will be backed up & enforced if necessary by the city. There are definitely Pros AND Cons to having one or not having one; you can really look at it from both sides easily.

 

* Pros *

~ Ownership = Membership: Once you have purchased a home in an HOA you are automatically a member. This means you have a voice; should you choose to use it. HOAs are often set up by a developer and then passed to a board once the development has become largely invested by owners and they are able to do this. (When a residential real estate development is first starting to be built there won't be enough home owners to even have an HOA so at that time the HOA will be run by the developer.) Sometimes the Homeowners will elect to have the HOA managed by a company as well; this should not take away the Homeowners' voices, but it will add an extra step in decision making. 

~ Amenities: Many HOAs are able to offer amenities that you may not find in neighborhoods without one. Parks, pools, kept sidewalks and walking trails, lights, entries and gates, etc. If you do happen to purchase in a neighborhood with these amenities and no HOA, there is very little or no accountability for who is responsible for maintaining these amenities. The HOA is responsible for providing the necessary maintenance and insurance for neighborhood amenities and common areas.

~ Community: Many HOAs will have organized meetings that all members (owners) are invited to. Some even offer planned events for their neighborhood allowing for an improved sense of community and opportunities for neighbors to get to know each other; even if they don't live on the same street. Having this sense of community can offer some a better sense of security as well. 

~ Consistency: Most HOAs will have rules about how homes should be maintained and not allowing properties to fall into disrepair. Some HOAs will go as far as to indicate what kind of window coverings can be visible to the street, types of fencing, front door colors, etc. At the very least though most will discourage properties from becoming an eye sore. As well, the HOA may limit the number of cars that can be parked in front of a property, where cars can park, and where trash receptacles will be housed. Each of these items, when addressed, provide consistent expectations on the part of each home owner. 

~ Potential Improved Property Value: The previously mentioned Consistency has a lot to do with this. Property values can suffer when 1 or more home on the block or in the neighborhood is allowed to fall into disrepair. Consistent and improved exterior appearance will definitely be a benefit for the entire neighborhood and this can be difficult to enforce without the presence of an HOA. 

* Cons *

~ Money: There are dues and fees associated with being a member of an HOA. Yes, you are a member as soon as you purchase the property, but you will be expected to pay your annual dues, and sometimes there is a transfer fee associated with the sale of the property as well. 

~ Rules: All HOAs will have some rules, but not all HOAs have the same rules. Some HOAs are quite lenient on their rules or don't have many beyond the basic rules. Others will have very specific rules that can mandate if you can have your garage door open, or park your own boat or trailer in your driveway, or even park on the street at all. 

~ Fines and Fees: This follows the rules because many HOAs will very specific rules will also have very specific fines and a fee schedule to follow that. You may get a warning, but you may not as well. The HOA may expect it's members to read the covenants, by-laws and standing rules and understand they they are to be implemented. The fees will come after the fine if the behavior has not changed or per instance as well as if/when the fine is not paid. 

~ Government: Again, the HOA is kind of like a mini government. The rules were all put into the by-laws by the members of the government that may have been in place before you ever became a homeowner. Even though you have a voice once you own the home and a seat at the voting table, just as with any government, it can take a lot of time, energy, convincing, etc. to execute any change. 

~ Control: Did you know that your HOA is one of the few entities that can place a lien against your property? Yep, you read that right. Your HOA can place a lien against your property for dues, fines, fees that you owe. This does give the HOA quite a bit of control and often that sense of control can lead to a bit of a power trip with some (not all) HOAs that can also cause some to have poor opinions of them.

Some things to consider...

~ Regarding the dues, the fees, the fines, etc. This money all has to go somewhere and toward something right? When you are about to purchase a property in an HOA make sure to check those statements. An HOA without sufficient reserves will run into a problem when "life" happens. What happens to that pool if the pump breaks? Does your HOA have enough in reserves to cover it or will they be coming to the property owners and asking for more? What if there is a natural disaster that affects the common areas? Is the insurance going to cover what is needed or will additional funds be solicited from you?

~ Regarding the rules. READ THEM!!! Read them before you make a decision on your purchase. Don't be distracted by the pretty things & bells & whistles of the neighborhood. If you realize after the fact that your HOA does not allow you to park your boat in the driveway as you had planned all along it will still leave a bad taste in your mouth. Please don't count on your Realtor® to be a mind reader either, they are working very hard to make the sale or purchase of your home as perfect as possible. But if you haven't told them about your boat (or maybe you haven't even bought it yet) they will have no way of knowing to tell you about this rule.  

~ $$$ vs Amenities. One thing your Realtor® can tell you is if the HOAs dues are in line with what would be expected for what the HOA has to offer. Sometimes it may just be difficult to justify a very high HOA dues amount in comparison to what you get for that money. And this will be different from city to city so be sure to check on that with your Realtor®. 

Most HOAs really do have the value of the property as their focus. Yes, you may experience one with a power trip or one that has rules & regulations that have gotten out of hand & just need to be cleaned up, but that does not mean they are all bad. Conversely, there are some people that an HOA is just not "for". Maybe they do want or need to run that business out of their home, farm or ranch; the regulations set forth by most HOAs just will not allow this. In the end you need to make the best decision for you and your Realtor® is here to help! 

Michelle@TM5Properties.com