There are plenty of considerations when entering the real estate market. Suppose you’re an investor or a developer. In that case, you’ll likely work with 3-D scanning companies and modeling experts to avoid time-consuming construction re-work and capture the details of an existing construction site. Meanwhile, if you’re planning to own a townhome or a condo unit, you want to ensure you’ll be working with a trusted homeowners’ association (HOA) before buying a property.
The HOA plays a vital role in what you want to do with your property. When buying a townhome, condo, or standalone home in a community with HOA, you’ll likely encounter a set of challenges. This includes the decision on whether you can rent out your property and who to rent it to. Still, communities with HOA enjoy a wide range of benefits and shared amenities, such as a park, playground, clubhouse, pool, and maintenance. But underneath, all of these perks involve an extra set of rules.
Although dealing with HOAs involves certain challenges, they also have a positive role in maintaining community standards. HOAs differ in composition and size, so it’s important to know who you’re dealing with. With that in mind, here are things you should know about HOAs and how to evaluate them.
The role of HOA
HOAs are often found at condominiums where unit owners or occupants don’t own the land their homes sit on. Every unit owner only has a partial share of the land managed by the HOA. You can also find communities with HOAs where properties aren’t condos, but townhomes, apartments, or single-family homes. These types of communities have shared amenities.
In HOA communities, occupants share several amenities such as the pool and clubhouse. But there is also a community with no shared facilities, but its HOA takes charge of the maintenance, waste management, repairs, and other common areas.
HOA members can also be unit owners elected by the community to fulfill various roles, such as president, treasurer, and secretary. They also work with the property management firm to identify the budget and how they will use the proceeds. During meetings, the HOA members represent the unit owners and make decisions or choices on their behalf. These decisions vary from minor ones such as deciding the budget for the holiday event to major concerns such as modifying the policies about renting units after owning the property for a certain period.
Depending on the community, HOAs have their own governing rules and charter. Some base their major decisions on unit owners, while others have the power to apply necessary changes without everyone’s consent.
The impact of HOA on unit owners
The HOA creates the policies for each property, which also require votes from the members and unit owners. They can also make policies that may affect your ability to earn from the unit you bought.
Besides finances, HOAs also govern the standards for tenant approval, period of rental, amount of deposit in the event of moving in certain furniture, application fees, and hours of using community amenities. This shows HOAs play a critical role in areas that affect the income generation of your property.
HOAs also handle the community’s budget. The HOA and the management firm will present the options, while the owners will vote based on their desired budget needs. The decision affects various areas, such as monthly HOA dues, type of maintenance, emergency fund, changes or additions to facilities, added assessments, insurance policy, and repair and replacement concerns.
Evaluating the HOA
One of the greatest challenges of buying properties in HOA communities is that HOA operations are often done in secret. Depending on the market, potential buyers can request a building financial report to evaluate how the HOA handles the community budget. Once you have access to it, you can determine whether the community has a cash reserve or operates by paycheck.
You also want to determine the special assessments. If they’re happening more often, this can be a huge concern. If you have a realtor or agent, ask them if the HOA fee is aligned with nearby, similar properties that offer the same amenities.
The quality of property also tells something about the HOA management. Is it clean and well-maintained? Are there any overlooked repairs? Do shared amenities are in great shape?
A great tip is to talk to unit owners about their experience with the HOA. The last thing you want is to work with associations that are difficult to work with or slow to accept changes, such as new flooring or paint colors.
Owning a property involves a lot of complexities, but dealing with the HOA is a different matter. Before you plan on relocating, make sure to consider our discussion above to avoid the pitfalls of working with inconsiderate HOA members.