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When purchasing a home, many buyers may want to avoid purchasing properties that are subject to a homeowners association.
But that may be easier said than done.
That’s because HOAs are on the rise in the United States. Therefore, it is important to understand the details of these organizations before purchasing.
According to recent data from Frontdoor, nearly three-quarters, or 70%, of homeowners surveyed said they would prefer a community without an HOA if they were to purchase a new home in the future. The home repair and maintenance services company surveyed 1,005 homeowners in September and found that 85% of them currently belong to an HOA.
Why HOAs are hard to avoid
Homeowners associations are made up of local residents who are elected to a board of directors, which governs the neighborhood according to a set of rules and regulations. Homeowners pay dues to maintain and repair common areas such as parks, roads, and community pools.
These organizations exist for a wide variety of real estate types, from single-family homes and row houses to condominiums and cooperatives.
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The presence of HOAs in the United States has grown in recent decades. According to the foundation, in 1970 there were 10,000 community associations with approximately 2.1 million residents.
According to the U.S. Census, approximately 65% of new single-family homes will be built within HOAs in 2023, up from 49% in 2009.
Today, HOAs, or common interest communities, make up about 30 percent of the U.S. housing stock and are home to 75.5 million Americans, according to the Community Association Research Foundation. This organization is an affiliate of the Community Associations Institute, a membership group of HOAs and other community organizations.
Common interest communities are becoming more common because they provide economic benefits to local governments, said Thomas M. Skiba, CEO of the Association of Community Associations, a membership organization of homeowners and condominium associations.
“They don’t have to plow the roads anymore (or) do all that maintenance and they’re still collecting the full amount of property taxes,” Skiba told CNBC, referring to local officials. .
In some areas, HOA membership is more common. According to data analysis by home improvement site This Old House, Florida has the highest HOA membership rate at 66.86%, with more than 4 million homes affiliated with an HOA.
“In many cases, it’s a real luxury to buy a home that’s not in your community,” said Steve Horvath, co-founder of HOA United, an advocacy group for homeowners in communities with common interests. speaks.
How HOAs increase home ownership costs
The prices associated with common interest communities vary depending on their location and the amenities provided by the association.
Mandatory coverage can cost homeowners anywhere from just $100 a year to more than $1,000 a month, depending on the community, according to the American National Bank of Texas.
These costs tend to increase over time and rarely decrease. In a Frontdoor survey, 51% of current HOA members said they had experienced an HOA fee increase, and 65% said increases occur frequently.
How to vet an HOA before purchasing
Many Americans are satisfied with their HOA. According to Frontdoor, approximately 60% of homeowners surveyed reported a positive experience in their community.
But some are dissatisfied. According to a survey by Front Door, approximately one in three people have had an experience that made them want to move. Of those seeking to move out of the neighborhood, 63% complained about fees and 53% cited inconsistent code enforcement.
“HOAs can be very onerous sometimes,” such as what color you can choose to paint the exterior of your home, said Jim Tobin, CEO of the National Association of Home Builders.
If you’re currently looking for a home and aren’t sure if an HOA community is right for you, here are some things to consider during the buying process.
Experts say ask your real estate agent or home seller for copies of the HOA’s documents, such as the covenants, bylaws, fee schedule, and rules and regulations. Horvath said he would also like to see meeting minutes, including annual general meeting minutes and board meeting minutes for the past 12 months. Such documents can provide a great deal of information about how an HOA operates, Skiba said. Ask about monthly and annual fees, the HOA’s budget, and how assessed values have increased over the years, Skiba says. Ask your real estate agent or seller. If there is an unpaid appraisal on the home you want to buy, contact your agent, Horvath said. Any such outstanding balance must be processed by the seller as part of the sale. Horvath said consider any pending litigation, disputes or existing judgments within the community. Check out community reserves to ensure repairs and renovations are made. Skiba asks whether the community has enough money set aside for large expenses or is funded by real estate, and if possible, whether they can attend board meetings or membership annual meetings. Please, he said.
