Your clients must understand how a Homeowners Association works if they wish to buy or sell property overseen by such an organization. While each HOA has its own regulations and methods of enforcing rules, some things are standard to most HOAs.
Keep reading to learn about homeowners associations, how they typically work, and the pros and cons of buying a home in a neighborhood with an HOA.
What Is a Homeowners Association (HOA)?
A homeowners association (commonly called an HOA) is an organization in a residential community that enforces rules and guidelines for property usage and maintenance. HOAs are typically incorporated and regulated on the local, state, and federal levels. HOAs have their own governing documents, including Articles of Incorporation, Bylaws, and Declaration of Covenants, Conditions & Restrictions (CC&Rs).
The goal of an HOA is to ensure that the community remains attractive and functional, but its rules can sometimes be restrictive. However, members (homeowners) of the association typically have a say in decision-making through meetings and voting.
Many HOAs collect dues from members to fund shared amenities and services, such as landscaping, services, or recreational facilities.
How Homeowners Associations (HOAs) Work
Most HOAs require membership for those who own a home in the community. However, some HOAs offer voluntary membership.
Members often elect a board of directors to create a budget, make decisions, and oversee operations. The board typically organizes meetings to keep members informed of their decisions.
The board also ensures that homeowners pay their HOA dues. This money is typically used for landscaping, services (such as trash or security services), or shared recreational areas.
The board may also be responsible for ensuring the rules outlined in the CC&Rs are followed. An HOA might fine homeowners who do not follow the regulations or suspend their services or privileges to recreation areas. Additionally, an HOA could put a lien on a home for repeatedly failing to comply with rules or falling behind on HOA payments.
What Are Typical Amenities Provided by an HOA?
The amenities and services provided by an HOA vary widely. They may include the following
- Trash service
- Security service
- Landscaping
- Pool
- Recreation center
- Meeting space
- Playground
- Outdoor recreation areas
- Community events
HOA amenities and provided services can vary significantly within similar communities. As a real estate agent, you must understand how HOAs compare in your targeted area.
Related Article: How Can You Really Get to Know Your Local Real Estate Market?
Advantages & Disadvantages of Homeowners Associations (HOAs)
Some people would only purchase a home in a neighborhood with an active HOA. Others may avoid additional restrictions regarding maintaining or using their property. If your client has never lived in a community with an HOA, advise them of the pros and cons.
Advantages of Homeowners Associations (HOAs)
- HOAs help maintain property values. By enforcing standards and maintaining communal areas, HOAs help keep property values stable. HOAs ensure homes and yards adhere to community guidelines, contributing to an attractive neighborhood.
- HOAs provide community amenities. For example, an HOA may provide access to shared facilities like pools, gyms, and parks.
- Some HOAs provide services for members. Many HOAs provide gated access for increased security or trash services for its members.
- An HOA board can mediate disputes between residents. An HOA provides a structured process for addressing grievances.
Disadvantages of Homeowners Associations (HOAs)
- HOAs can have restrictive rules. For example, an HOA can require homeowners to choose an exterior paint color from a specific palette or regulate the number or kind of plants in their yards. An HOA may also have rules about parking, pets, and renting your property.
- Some HOAs can be aggressive in their tactics and may send out violation notices for minor infractions. Some HOAs fine homeowners who do not follow regulations.
- HOAs can put a lien on your home if homeowners don’t pay their fees. Unpaid fees must be paid before a property can be sold or bequeathed to heirs of the estate.
- HOA fees are an additional expense for homeowners. Some HOA fees can be very pricey in exclusive neighborhoods and luxury communities.
How Much Do I Have to Pay for an HOA?
HOA fees vary greatly, depending on amenities, services, and the community’s location. Forbes reports that the average HOA fee is more than $300 per month. Keep in mind that this is the average fee for HOAs, and the amount in your community can be much higher or lower.
What Property Types Have HOAs?
HOAs are formed for a variety of types of communities, including the following:
- Single-family homes, often in suburban communities
- Condominiums
- Townhouses
- Planned Unit Developments (PUDs)
- Gated communities
- Retirement communities
As a real estate agent, it’s critical that you have a deep understanding and knowledge of your local community. This includes a feel for how areas HOAs operate. This knowledge will help you advise your clients to pick the right neighborhood for them. For example, if your buyer client has a large RV, you might advise them to purchase a home in a community that doesn’t have rules against storing recreational vehicles in driveways. On the other hand, if a client is moving from a neighborhood because it has been aesthetically deteriorating, they may be more than happy to move to an area with a strong HOA.
Obtain a copy of each neighborhood HOA’s CC&Rs as a service to your clients. Find out how much the dues are so your clients can budget for this additional expense. And get to know which HOAs are restrictive and which are more lax in enforcing rules. Remember, a client who is happy in their new home will be more likely to recommend you to their friends and family. Find the right home in the right neighborhood for each client to grow your business.
Related Article: 10 Guidelines for Growing Your Referral Network
Learn your state’s HOA laws and regulations by enrolling in Colibri Real Estate School’s real estate courses. Our classes have been approved by your state’s real estate licensing commission and have been expertly designed to help you learn everything you need to know to pass your real estate licensing test and provide quality services to your future clients. Contact a licensing expert today to learn more.
Key Takeaways
- Homeowners Associations (HOAs) are organizations within residential communities that enforce rules, maintain communal areas, and provide services, often funded by mandatory member dues.
- HOAs help maintain property values and provide amenities but can impose restrictive rules and additional fees, which might not appeal to all homeowners.
- HOAs are common in various property types, including single-family homes, condominiums, townhouses, and gated or retirement communities.
- Real estate agents should understand local HOAs, their fees, and rules to better guide clients in choosing the right neighborhood.
Source:
Musinski, Bob. “HOA Fees: What You Should Know before You Buy.” Forbes, June 25, 2024. https://www.forbes.com/advisor/mortgages/hoa-fees/.
