Affordable housing today in most urban real estate markets equates to properties where the homebuyer is part of a homeowners association or HOA. Condominiums, town homes and single family homes in planned communities make up the majority of consumers who benefit from the association providing some of the maintenance and management of their property or common elements. Mark Nash author of 1001 Tips for Buying and Selling a Home shares the ins and outs of being a member of a homeowners association. -The function of most HOAs is to manage the common elements (areas of the property that all owners use and enjoy) of the property. The common elements can consist of: the grounds, exterior of your home and in some buildings the mechanical systems, hallways, elevators, stairwells, swimming pools, garage etc. Most HOAs also are responsible for the financial management of the association and collecting assessments from all property owners in the association. -Assessments are the monthly, quarterly or annual payment from the property owner to the association in exchange for the services provided by the association. The property owners assessments are based on their percentage ownership of the common elements of the association. -Is a property under the management of a HOA right for you? If you like to close the door and forget about the day-to-day responsibilities of your home an HOA is a good choice for you. You have to be tolerant of other people who might have different needs and perspectives of a HOA. Over the years I have found living in three different HOAs an enjoyable experience. The majority of other association members were flexible, but you won't be able to control those other owners who could impact your home ownership experience. -The management style of your potential HOA is important and could impact your ownership experience. The management could be a professional property management company or self managed. Smaller HOAs find self-managing the day-to-day operations more cost effective and hands on. Some potential buyers dont like self managed associations because they feel it conflicts with why they are purchasing a property in a HOA, which is to compensate some one else to manage the day-to-day operations of the common elements. -The financial management of your HOA will impact your personal finances.How the reserves (the portion of each assessment being put aside for future planned or unexpected needs of the association) of the association are allocated. Property owners on fixed incomes dont like pro-active HOA boards to replace big ticket items like boilers, roofs, and windows because of the extra expense being passed back to them. Property owners who plan to move soon might not be long-term focused because they know that they will not derive all the benefit from the additional expense. If you are not a pet lover and move into an association that allows pets it could be a conflict, as you will might not be able to avoid pet noise or debris. -HOAs are managed by a board of directors or other entity specified in the declarations of the association. The board manages the financial and physical components at their control. If you are asked or are considering being on an association board, understand what is expected of a board member in your association. Determine if the association purchases insurance for board members. -You and your attorney should carefully review the declarations, rules, budgets, and by-laws before you purchase a home in a HOA to see if you are comfortable with them. One item that you should be aware of is the percent of units in the HOA that are leased to non-members of the HOA. There are pros and cons concerning rentals in HOAs depending if you will owner occupy, have an investment or seasonal rental interest. |
