The Ins and Outs of Homeowners Associations - Service First Mortgage

If you’ve spoken to anyone who owns a home, they’ve likely brought up the boogeyman that is the Homeowners Association. The big scary organization that spends its days fining you for not mowing your lawn or getting upset that you want to paint your house.

Are homeowners associations really that bad though? They’re not! They actually serve a very important purpose, and it benefits you as a homeowner!

Let’s start by defining exactly what they are.

Homeowners associations, or HOAs, are organizations comprised of a neighborhood’s home owners that exist to protect the neighborhood’s common interests. They ensure that the neighborhood looks its best so that each individual property will hold, or grow, its value.

What Do They Manage?

If you are looking to buy in a condominium or master planned community, you’ll probably be amazed by some of the amenities – resort style pools, concierge services, community parks, and security, just to name a few. But who pays for these things? That’s where HOAs come into play. In exchange for access to these things, HOAs will bill owners in the neighborhood and use the funds collected for maintenance of those amenities.

The associations are managed by an elected board (comprised of fellow home owners) and typically meet on a regular basis to discuss neighborhood news and any concerns that home owners may have. In the event that new amenities or major repairs are being considered, the board will seek the vote of members during an association meeting.

How Are Associations Funded?

HOAs are funded by fees collected from home owners. On average, dues are around $150-200 per month, depending on location, home size, and number of amenities. For example, an association in a rural area that only covers landscaping is going to cost considerably less than a downtown loft with 24-hour security, a fitness center, and a pool.

About two-thirds of your monthly fee will go toward monthly maintenance, while the remainder is set aside in an emergency reserve fund. This fund is used to fund major repairs, such as a plumbing issue in the pool or roof damage in a condominium. In the event that the reserve fund runs out during a crisis, the remainder of the bill will be divided among the homeowners. In addition, you may be charged special assessments by the board in order to replenish the depleted fund.

Following The Rules

When you move into the neighborhood, you will receive a copy of the association’s rules, called Covenants, Conditions, and Restrictions (CC&Rs), and any applicable bylaws. These will outline the community rules that you need to adhere to. Be sure to review these carefully – the consequences for breaking these rules can range from fines to forcing you to sell your home for noncompliance.

Even though it may seem like a lot to deal with, there are a few things you can do to make sure you are set up for success.

  • Ask for public records and CC&Rs – Check with your Realtor to see if the HOA has public minutes and CC&R’s available for review. You can read these to see what fees are charged, how often they’ve risen, and what items they cover. In addition, if you notice any rules that you know will be difficult for you to adhere to, you can focus your attention on other neighborhoods during your search.
  • Get involved – Once you’ve purchased a home, you should take an active role in your association to get a first-hand look at what’s going on in your community and get context about some of the decisions being made by the board. The more you know, the more you can plan accordingly.
  • Get approval – if you are unsure whether or not an improvement you want to make will break a rule, ASK! The board should be able to give you insight before you invest too much money into a project that may end up causing issues for you.

By taking these small steps, you can start your new home journey on the right foot and ensure that your experience in your neighborhood is a good one! Have additional questions? Reach out to us – our Loan Officers are happy to help!