HOA is an acronym for “Home Owner’s Association.” Homeowners typically pay their monthly/annual dues to this association in the community they reside.
Why is there an HOA?
HOAs are normally created when a developer builds residential property in a particular subdivision or multiple parcels of land. This type of “property” can appear in a number of ways; commonly in a condo building; a town-home complex; and also in a planned neighborhood of single family homes.
The Home Owner’s Association establishes a set of bylaws, which are a wide-ranging set of conditions for residents in the community. It provides the community with structure, detailing rules and regulations for maintaining common areas the residents share such as the pool, roads, parking, pets, decoration and so on.
What does an HOA Provide?
The HOA performs duties in the best interest of the community as a whole. HOA’s have “Covenants, Conditions, and Restrictions, or CC&R’s for short.” It’s a group of rules enforced by the HOA that manage the community.
They can determine various things you are allowed to do such as your home’s exterior paint color to additional expenses for roof replacement or renovations. They can even establish how many pets you are permitted to have with you and the size of vehicles.
HOA Budget: Your HOA dues help fund the HOA budget for maintenance of common areas in the community such as landscaping, hall lighting, security, pools, and any other amenities.
HOA Board: An elected board controls the HOA. The board is made up of external members and residents of the community to interview and contract new vendors to take care of the community. The board can take residents in the community to court or evict them if rules are not followed.
About Homeowner Dues
Dues determine if the HOA will be successful or not. The dues usually paid monthly, quarterly, or semi-annually – may vary a lot depending in the size of the unit and project. In an Anaheim town-home community, for example, your dues can be $275 a month.
In a luxury condo building in Irvine, your dues could be $1,500 a month! It is all based on the requirements of the community. Your dues pay for the maintenance and add to the “reserve fund” in the community. The reserves for a financially healthy community are very likely to range from hundreds of thousands of dollars to millions of dollars for a luxury community at any given time.
When you buy a home, condo, or townhome in a community with an HOA, you’ll want to know how much the dues are. How much they will be in five- to ten- years is extremely hard to know, but there are some red flags to examine.
In particular, if the reserve fund is low, multiple homeowners are late, a major repair is required, owners might encounter an out-of-the-blue “special assessment” that will run you an additional $200 to $1000’s of dollars each month. In the long run, the vast majority of HOA dues will increase to stay on pace with inflation.
Why buy real estate with an HOA?
HOA’s can be a benefit and a burden. Homeowners are protected from loud neighbors, external decorations, illegal additions and property expansions, but they can also seem very strict. Make sure when purchasing real estate in an HOA community to have precise knowledge what you’re in for from day one.
An experienced realtor will ask the seller’s agent for the management company’s information; after that, you can review a copy of the CC&Rs, hopefully discover more information about reserves and dues, and even learn if the HOA has pending litigation or upcoming special assessments for it residents.