Realtor.com writes, "You’re looking through homes online and spot one you love. It looks great, it’s the perfect size, and the price is right. You scroll down to see it has a homeowners association with dues that total $150 a month. Do you click away as fast as you can? Or are you impressed?
Many buyers wonder if they should avoid, or seek out, real estate with an HOA. On one hand, HOAs can be expensive and buyers who’ve been scrimping and saving to afford a home probably won’t look kindly on the extra monthly fee. On the other hand, HOAs can do a lot of good, like taking the stress off of home and yard maintenance.
Amber Brown, a real estate broker in Waco, TX, notes that HOAs can keep neighbors in check, as well.
“I’ve seen homeowners build structures on their property to repairing race cars (extremely loud noise) or hoarding and having over 100 cats on their property that cause damage and bring an intensely bad smell to the area,” she says. “The rules and bylaws an HOA can create and enforce will not allow homeowners to do these kinds of things.”
For better or worse, HOAs are very common, says Realtor.com® senior economist Joel Berner.
Over 40% of listings are subject to HOA dues nationwide, he adds. New builds are especially likely to have HOAs, at a rate of nearly two-thirds.
But is this good news or bad? Berner says it depends.
“The median monthly HOA fee is $119. That’s roughly $1,400 per year, which can be a significant expense,” he says. “So prospective buyers would do well to investigate what services the HOA actually provides if they’re considering buying a home that’s part of one.”
Is an HOA right for you? Read on to see what experts say are the pros and cons of buying a house with an HOA.
Pro: HOAs provide amenities homeowners might not be able to afford otherwise
HOAs are designed to help your community look its best and function efficiently, often providing gardening services and repairs for common areas and parts of the residents’ homes (such as roof and exterior siding).
They also often provide community amenities such as swimming pools, security gates, snow and trash removal, and parking garages.
These amenities can be especially valuable for certain buyers. A family with kids, for example, might be glad to pay HOA dues in exchange for community playgrounds and a (gated) community pool they don’t need to maintain. Safety-conscious buyers might love the idea of a security gate and community security patrol.
If a buyer plans to get good use out of the amenities, it could mean big savings, Berner adds.
“Shared amenities, like a communal pool, may end up being cheaper than maintaining private ones,” he says.
Con: HOAs may provide amenities you don’t need—and set rules you don’t want to follow
On the flip side, some buyers simply don’t need, or want, the amenities offered by an HOA. In this case, experts ask: Why pay more for what you’re not going to use?
Ryan Bullock, strategic real estate adviser at Real Estate Bees, says that many people simply don’t need, or won’t enjoy, the amenities and services a certain HOA offers.
“If you don’t like shoveling snow, an HOA is handy,” he says. “If you don’t live somewhere it snows, paying an HOA is unnecessary.”
Plus, HOAs often enforce rules some people might not want to follow, like exterior paint colors that are allowed, permissible home renovations, and even how many pets a resident can have.
“Some homeowners will end up paying for services they don’t use just to give up some freedoms related to how they maintain their own property,” says Berner.
Still, he says, in some metros (e.g., Myrtle Beach, SC; Las Vegas; Orlando, FL; and Boise, ID), 75% of for-sale listings have HOAs, so an association is difficult to avoid.
In this case, he advises buyers to look for the HOAs that provide the most services and amenities that they’ll use.
Pro: HOAs can improve the look of a neighborhood—and improve your home’s saleability
Crystalle Guss, a real estate agent in Denver, says HOA upkeep and beautification can be a major asset, especially when it comes time to sell.
When buyers come to tour your home, they’re not just looking at the house, she explains. They’re looking at the neighborhood.
“You could have the most stunning house on the block,” she says. “But if your neighbor’s front yard looks a mess, that will largely impact the perceived value.”
Because of this, she’s seen homes in HOA neighborhoods sell faster, Guss says. “I always tell my clients: HOA neighborhoods can be like getting a neighborhood dress code. Everyone agrees to a standard that keeps the ‘bald-headed front yards’ to a minimum.”
So, is an HOA home a better investment? Do HOAs pay for themselves? It’s difficult to say definitively because all homes—and HOAs—are different.
In her experience, homes in HOA neighborhoods “tend to sell for more—sometimes more than you’d expect,” Guss says.
“People treat HOAs like the Grinch who stole their value, but it can actually be a contributing factor to building equity.”
Con: You run the risk of steep increases in HOA dues
Knowing your HOA could help you sell your home may make paying dues a little easier. But what happens when your fees go up? Many buyers don’t account for HOA fee increases, which often happen annually.
There are some limits to increases. For example, in California, the increase can’t exceed 20% of the previous year’s dues. And usually, these increases don’t even come close to 20%. According to reports, HOA dues generally rise about 3% to 5% per year.
But buyers have heard horror stories of HOA dues suddenly spiking and forcing residents to pay up or move. There are also nightmare situations of mishandling the budget, which means you could be paying more than expected and perhaps not seeing the benefits.
Guss says she once advised a buyer to avoid a certain neighborhood after she researched the HOA. As it turned out, the HOA fees had increased by $2,000 over six years.
Most HOAs are generally helpful and reasonable, but there are certainly some to avoid, she adds.
Pro: HOAs provide support for less-handy homeowners
Maintaining a home can be difficult. Pipes break, roofs leak, and driveways crack.
Ideally, a homeowner would be able to do some home maintenance themselves, but many people don’t have the time or physical ability to mow the lawn or clean out the gutters, let alone climb on the roof and patch a hole. Plus, homeowners need a professional when it comes to the more complicated jobs, like those that involve plumbing or mold.
It can be time-consuming to find a plumber or contractor every time you have an issue, plus, as Fred Goncher, a mortgage broker in Garnerville, NY, points out, hiring help can end up being pricier than typical HOA dues.
Con: Some HOAs are less efficient than others
That being said, not all HOAs are equal. Some are cheap, some pricey. Some are helpful and efficient, while others are mismanaged—and it’s hard to know what kind of HOA you’re getting when you buy a house.
Real estate agent Brown explains: “HOAs have very little governmental regulation and certain ‘Karens’ may get into positions of authority within the HOA board and overstep their boundary to create and enforce rules. They can sometimes turn into a policing authority, causing some homeowners to be fined for things as stupid as letting their grass grow a half-inch too long.”
But Goncher says there are ways to get a general sense of the HOA’s personality and patterns.
“Is there obvious deferred maintenance in the association? Are there active special assessments? Are they self-managed or use an outside manager?” he asks. These are all important things to know.
He also says buyers can ask their lenders for insight.
“When lenders make loans in condos, they request the last two years of financials and a manager-completed questionnaire,” he explains. “Ask your lender to explain the strengths and weaknesses of the association you are considering. If the lender has concerns about lending in certain projects, you should, too.”
Meanwhile, Max Carr, a real estate agent in Orange County, CA, suggests making time for a thorough review of the HOA documents before removing contingencies.
“HOAs are required to deliver buyers a full set of financial documents, which can give important clues as to the overall financial health of the community,” Carr explains. “Check the [covenants, conditions, and restrictions] of the HOA to make sure the authority of the HOA over the homeowners is acceptable to you, review the litigation disclosures to confirm the HOA isn’t tied up in any major lawsuits, etc.”
He adds that HOA documents are required disclosures for a reason: “There’s no substitute for thorough due diligence while in escrow—or sooner.”
So, HOA or no?
When it comes down to it, Guss says, it can make financial sense to go with an HOA house—as long as the fees are reasonable and the HOA is well-managed.
“It’s an investment in preserving your home’s curb appeal and market value,” she says. She advises buyers to review the CC&Rs, budgets, history of the fees increasing, and potential assessments before committing to a home with an HOA.
However, Bullock suggests HOAs aren’t worth the cost long term.
“Once you pay off a mortgage on your home, you are only responsible for taxes and insurance,” he says. “When you pay off your mortgage with an HOA, you will always be paying for that HOA along with taxes and insurance.”"
Source: Realtor.com
Written by: Jillian Pretzel
Published: December 3, 2024
Posted by Grossman & Jones Group on
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