What Is an HOA?
One in five Americans will live in a neighborhood with an HOA, yet many people have questions about what an HOA actually does. What do HOA fees cover? What is an HOA and how will it affect my daily life?
Whether you live in a neighborhood with a designated HOA or simply want more information about what HOA fees, we’ve got you covered with all the answers to your questions.
Everything you need to know about an HOA
Here’s the scoop on the function and cost of HOA’s.
What is an HOA?
Short for “homeowner’s association”, HOAs are implemented to ensure a safe, clean and consistent neighborhood community. Whether you live in a house, condo, townhome or apartment, the neighborhood or district in which you live decides whether or not you have a homeowner’s association.
If you live in an area with a homeowner’s association, you’ll need to pay fees for the services it provides. When considering moving to a new neighborhood, the HOA fees and its reputation might end up being a determining factor for you. Don’t be afraid to research the HOA and ask questions about their work.
What exactly does an HOA do?
What is an HOA when we get down to it? You can think of an HOA as the hall monitor of local communities. Enforcing rules to ensure safety and a sense of normalcy, HOA’s are responsible for everything from approving changes in house paint color to determining whether or not an R.V. should be allowed to be parked on a given street.
Shared amenities are also maintained through HOA fees, which can include tennis courts, pools, neighborhood parks, community recreation spaces and more. In addition to upkeep and maintenance, your neighborhood HOA also determines and enforces rules for these shared spaces. Your HOA fees cover and maintain these areas.
Are there drawbacks to an HOA?
Your experience with an HOA could differ greatly from one neighborhood to the next. If you don’t like strict guidelines, some HOA’s won’t be a good match for you. Rigid rules about pets, landscaping choices and whether or not you can sublet your property are all possibilities when you sign a lease covered by an HOA. In exchange for the conveniences and services of an HOA, you’ll probably have to play by their rules.
How much does an HOA cost?
HOA fees are typically paid monthly. The amount you’ll need to pay depends on the neighborhood you live in and can vary dramatically.
Expect to pay $100 monthly at minimum, though HOA fees can easily exceed $500 a month. It’s safe to assume that paying around $200 monthly is standard for many neighborhoods. If you have reservations about how much you’re paying in HOA fees, consider asking neighbors about their experience with the HOA and how much they’re being charged monthly.
If you decide to skip your HOA payments and live on property within an HOA zone, they can take legal action. Depending on your contract with your HOA, failure to make HOA payments can result in hefty fines, lawsuits, or even foreclosures.
Researching your HOA in advance
Since every HOA has slightly different rules and regulations, it’s important to get a good idea of how the HOA in the area you are looking to lease or buy operates.
Here are some important questions to ask your real estate or leasing agent, or the HOA itself.
Who is on the board? Are they easy to get to know?
Is there professional oversight to the board?
What is covered by HOA dues? Yard maintenance? Home maintenance? Trash pick up?
How often have HOA dues increased in the recent past? (You can find this by reviewing back copies of previous annual reports).
Does the HOA have an emergency fund in case of a natural disaster?
What are the rules and aesthetic of the community?
Is it easy for newcomers to get involved?
Budgeting for HOA costs
When you sign a lease or buy a home, you can think of an HOA as part of your monthly fixed payments. Include HOA fees when you calculate your living expenses. If you can’t afford the extra cost, you might want to find a different living situation that’s better for your financial situation.
If you think you can make HOA costs work with some budgeting, consider downloading a personal finance app like Mint or Goodbudget.
Another option for a more affordable living is splitting rent and HOA costs with roommates. Consider living with a roommate or two to split living costs, as it could make living in a neighborhood with an HOA possible for you and your friends.
Need help reworking your budget? Reach out to speak to a financial coach to get you on track today!