Many buyers have strong opinions on homeowners associations— they're a must for some and a hard pass for others. It's important to familiarize yourself with the basics of an HOA if you're in the market to buy. 53% of all homeowners live in HOA communities and 80% of homes built in 2020 belonged to an HOA. It's likely you'll come across listings in an association during your home search so you should be aware of the pros and cons beforehand.

what is an hoa?

Homeowners associations are governed by elected board members who are residents in the community. Properties within an HOA have covenants, conditions, and restrictions (CC&Rs) that are enforced by the board. HOA fees are collected from all residents to go toward common areas, maintenance, and subdivision amenities.

benefits

The main reasons buyers seek out HOAs are for the amenities and stable home values. Because there are strict rules about exterior design choices and unkempt yards, homes in an association sell for an average of at least 4% more than those that aren't in an HOA. Some subdivisions offer shared land, swimming pools, tennis courts, or clubhouses.

The maintenance that's included in dues will vary depending on the property type and neighborhood. Single family homes will include maintenance of common areas but generally don't include your home's exterior. Condos or townhouses might include some exterior maintenance such as roofs or landscaping. Fees sometimes include trash pick up and snow removal.

Another benefit of living in an HOA is having a tight-knit community with more opportunities and social events to enjoy with your neighbors.

restrictions

Living in an HOA limits what you can do with your property. Most homeowners associations have rules regarding landscaping, exterior paint colors, fences, sheds, basketball hoops, pools, holiday decorations, and yard signs. They generally dictate whether or not you can park boats and campers in your driveway, how many cars can be parked on your property, and designated guest parking. HOAs often regulate an owner's ability to rent out the property. It's also not uncommon for newer subdivisions to have rules on how many pets a household can have at a time.

The purpose of the restrictions are to make the neighborhood appealing and uphold property values, so it's not uncommon for anything that could be deemed an eyesore or nuisance to other residents to be included in the rules.

what happens if you don't follow the rules 

When you purchase a home in an HOA, you are legally bound to the CC&Rs. Breaking association rules can result in fines. Failure to pay the fees could lead to your HOA filing a lien against the property and, depending on state laws and governing documents, the association may have authority to initiate foreclosure. If the HOA is forced to take legal action against you, you will likely be responsible for late fees, interest, and the legal expenses incurred by the HOA.

Now that you know the basics you can decide whether you're open to living in a home with subdivision rules. Make sure you're familiar with the CC&Rs of the specific community you're interested in before making an offer. Your Realtor can help you obtain documents from the seller of a local title company.