Many buyers shy away from properties with homeowners associations (HOAs). Most often, they worry about the fees:
- What is the money used for?
- How are the fees set?
- What if they rise dramatically after I buy?
- How can I determine if the fees are reasonable based on the services provided?
In most cases, HOAs serve their homeowners well. They enforce community rules and protect the value of the property in a way that is fair and transparent. However, buyers considering properties with HOAs must understand and be comfortable with the rules, procedures, and fees before they buy.
Here are a few HOA tips based on my experience as a Realtor who specializes in townhome and condo transactions and as an owner (past and present) of multiple properties with HOAs:
1. Read the HOA docs. By far, a thorough review of the HOA documents is the best way to identify potential issues. These documents describe:
- Personal property vs. community property/amenities
- Policies and Rules: enforcement, appeals, penalties, notification timelines
- Board structure, policies and procedures
- Fees: what’s included and what’s not
What to look for: Are policies outdated? Are fees and amenities outdated? Does the HOA protect the value of the property? Do they allow owners to rent their properties to others? Does the HOA perform background checks on renters? Are the rules reasonable? Do the rules conflict with your lifestyle?
2. Make sure your loved ones are welcome. Whether you have two-legged kids or four-legged ones, make sure the rules welcome your entire family without unreasonable restrictions.
3. Read board minutes. Meeting minutes should include financial statements, notes about current and past business, approvals of major purchases, new rules, policy changes, etc. They may include notes about tenant disputes, rule disputes, crime, future expenses, etc. Look for complete and consistent minutes. Does it look like meetings take place at regular intervals, in public? Are all board members present at each meeting? Do the minutes indicate frequent sessions that are closed to the public? This might point to legal issues.
4. Understand the fees. Association fees vary dramatically by building. Factors that influence fees include:
- Age, prestige, or stateliness of building
- Community amenities: pool, spa, exterior, parking, roads, playgrounds, heating, cooling, cable. Wi-Fi, party room, fitness center, etc.
- Employees: Security, lifeguard, concierge, doorman, parking attendant, maintenance, custodian, etc.
What to look for: Older properties often have higher fees because maintenance costs (roofs, facades, foundations) are higher. New buildings may have lower costs because of minimal maintenance requirements and developers that underestimate the HOA budget, sometimes intentionally, to keep fees low and encourage sales.
5. Become a board member. If you want to learn more about your HOA and influence decisions, then join the HOA board.
6. Understand the value of professional HOA management. Many HOAs hire professionals to manage the HOA. This service increases HOA fees, but can dramatically improve HOA efficiency and operation. HOA management companies assists the HOA board with administrative duties, hiring, rule and policy enforcement, legal issues, bid processes for repair services, etc.
7. Major doubts, get out. Every buyer has 10 days to walk away after the seller accepts the purchase agreement. If you develop buyer’s remorse, take advantage of this option!
You don’t need to be afraid of HOAs, but you should be informed. Please give The Garatoni Group a call at 612.821.7456, if you have questions about the pros and cons of HOAs.