Certain residential communities have a homeowners association (HOA) that establishes and enforces regulations that ensure outdoor spaces and common areas are well maintained. Those looking to buy a home in one of these communities should look into what the obligations of the HOA will be. Every HOA includes an obligation to pay a monthly fee or due that goes toward maintenance; the question is how much it is. In this post we discuss some of the considerations to think about before making a commitment to buy property managed by an HOA.
Top things you should know about a homeowner’s association
A number or factors influence the amount of the monthly dues. One factor is the location with bigger cities typically commanding much higher fees. Fees was also higher in buildings with more units, more security features and more amenities like a club house or fitness center.
The majority of real estate listing services put HOA fees in property listings. A buyer can therefore get information on HOA fees through property listing sites like Relator.com, Zillow.com, Remax.com and other popular sites. Keep in mind that HOA fees are often increased annually to keep up with rising maintenance costs.
Obligations and responsibilities
What a homeowner gives and what they get from a homeowners association also varies greatly. In some cases, it’s as simple as a low fee and having maintenance and security taken care of. In other cases, fees are much higher because they also include access to a community pool or other amenities. Some homeowners associations are mostly hands-off while others require that home improvements are approved by the HOA or other restrictions. Getting a clear understanding of what a homeowner’s obligations and responsibilities would be before purchasing is a good idea.
Note that different HOAs have different approaches to financial management. Some charge high fees because they want a sizeable reserve fund on hand for emergencies as well as planned maintenance and improvements. Others have a low fee and periodic assessments done to determine maintenance and other costs. For emergencies like a faulty elevator, home owners would have to pay for the repairs within a given time frame.
Fees and mortgage approval
Mortgage lenders look at the HOA fee a homeowner will have to pay before approving the buyer for a mortgage. Properties with a high fee may result in a loan applicant being approved for a lower mortgage. Using an online mortgage calculator can help a prospective home owner estimate the mortgage payments they will pay for the amount of the loan but they will need to add the HOA fee on top of this to get the full picture.
It is important to have a good understanding of how HOAs handle conflict. For instance, are penalties like fines enforced and how is the amount determined? Also, if a homeowner is found to be at fault, are they given an audience and if they disagree with a fine or other sanction, what recourse is available to them? Looking at the records of past and ongoing cases will reveal how conflicts are handled. Talking to real estate agents and homeowners could also provide clues. While investigating how a HOA operates, it is also important to find out if it is compliant with the governing local authority.
With some housing developments, a homeowner assumes all the insurance obligations. With others, the HOA takes on partial responsibility. This is stipulated in state laws. Checking these laws will tell a homeowner what type/amount of homeowners insurance they will be required to purchase. Those buying in areas prone to natural disasters should find out if the HOA has taken out insurance for them and should get it for themselves if it is not provided.
Buying a house, condo or townhouse is a big commitment so it’s smart to consider all aspects of ownership before signing on the dotted line. This includes what comes with buying a home run by a homeowners association.
Son-Rise Property Management has been serving the property management needs of Bellingham and Whatcom County since 1996. Contact us today to see how we can help you find a rental property for your family or manage your rental properties.