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HOA Meaning: What Is an HOA and Is It Right for You?

An HOA, meaning Homeowners Association, strives to protect and improve property values for those living in the community. They do this by enforcing restrictions on what homeowners can and cannot do and guaranteeing the maintenance and upkeep of common areas.

It’s common to find a property that is part of a homeowners association or HOA while house hunting.

Currently, 58% of homeowners are HOA members and that number continues to grow.

Here are a few things to help you decide if living in an HOA is right for you before making an offer on a house.

What Does HOA Mean?

HOA stands for Homeowners Association.

An HOA is a non-profit organization made up of volunteers and a governing body that makes and enforces rules for a subdivision of homes, condominium complex, or planned unit development.

How Do HOAs Work?

When you purchase a property in an HOA, you automatically become a member and will be required to pay dues on a monthly or annual basis. 

As an HOA member, you’ll be invited to vote for the board of directors who oversee the day-to-day responsibilities of the HOA. This includes the maintenance and care of all shared amenities, collecting fees, and enforcing rules.

You will be encouraged to volunteer to assist the board with planned activities throughout the year or take a turn as a board member.

What does the HOA board of directors do?

The board members manage the two most important aspects of the organization: the finances and the rules.

Managing the budget is simple if your HOA’s only responsibility is to maintain the sign and landscaping at the entrance to your development. But suppose your board manages multiple common areas, such as recreation facilities, swimming pools, landscaping, and party rooms. In that case, they will require input from the membership to set priorities appropriately and agree upon budgets.

Your board will also have the authority to make and enforce community regulations designed to protect property values and the well-being of the community.

The HOA’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs) outline all the community rules and regulations. As a potential homeowner in an HOA, this is an essential document that you will want to review before agreeing to buy a home in the community.

It’s also a good idea to look at how well the common areas are maintained in addition to touring the home you’re interested in. 

Homeowners Association Rules

HOA rules cover a wide range of homeownership rights.

When you sign your HOA membership form, you agree to abide by the rules. This agreement is legally binding, so it’s important to know what you’re signing.

Typically, the rules will include restrictions on your landscaping choices — such as the type of plants or trees that are acceptable — and on your external décor, including the color of your house, front door, or roof shingles.

There are often regulations regarding fencing type and height limits, the addition of outdoor structures, decks, or pools, home maintenance standards, and holiday lighting.

Parking can also be a focus of HOA regulations. This can include limiting the number of vehicles that can park on your property, regulations on-street parking, and bans on recreational vehicles, boats, lawn equipment, and bicycles from being left outside a storage unit or garage.

And finally, there may be pet restrictions, occupancy limits, renting or subletting bans, and noise criteria.

What are HOA fees?

As an HOA member, you are required to pay monthly or annual fees to cover the maintenance of all shared amenities in the community.

HOA fees are disclosed as part of the general property information and will also be included on your Closing Disclosure. 

When approving your mortgage, your lender will include the HOA fee into your monthly mortgage payment to ensure it doesn’t cause you to go over budget.

The organization can also charge one-time home transfer fees when you purchase a property, as well as special assessments to cover the cost of unexpected repairs on shared amenities. Your CC&R document will also outline fines that can be imposed for not following any of these rules and regulations.

What do HOA fees cover?

HOA fees can cover a multitude of services. You will appreciate the small price you pay when you enjoy a manicured green space, a sidewalk clear of snow and ice, or a summer gathering with your neighbors.

While the fees typically cover only shared spaces and amenities, some HOAs may take care of your landscaping as well as painting and roof repairs. This is more common with townhouse developments where you share a wall or a roof with your neighbors. 

Benefits of a Homeowners Association

The mission of an HOA is to invest in the community, provide amenities, and maintain the appearance and curb appeal of the neighborhood. This often includes caring for the external aspects of your home, including your front yard landscaping or cleaning and painting your home’s exterior. 

Plus, if you’ve ever had to live near challenging neighbors, you will appreciate having a referee that can manage neighbors who fail to keep up their property or make noise late at night.

Most significantly, an HOA brings neighbors together through shared interests and organized social events.

Is an HOA right for you?

To decide if an HOA is right for you, consider the following:

  • HOA dues will add costs to your monthly obligations
  • The dues will hurt your maximum loan amount
  • Are the benefits of the HOA worth the extra cost and lower loan amount?
  • Do the HOA’s rules fit in with your lifestyle as a pet owner, gardener, or outdoor enthusiast?

Before you decide to purchase the home, thoroughly read the HOA’s CC&Rs. Meet with members of the board of directors to get a better feel for the community and its goals and objectives to ensure they line up with your own.

HOA FAQs

Here is a recap of frequently asked questions about HOAs:

What are HOAs supposed to do?

HOAs are designed to maintain a community’s aesthetics and amenities. This can help raise property values to protect your investment. They also manage community finances to create new services and facilities and maintain existing amenities. Finally, they make and enforce community rules to help keep the community’s appearance and quality of life.

Are HOAs good or bad?

They are great for homeowners seeking community amenities and low-maintenance common areas. However, HOA fees can be expensive, so this does come at a cost.

If you are willing to follow the rules and appreciate that your neighbors share similar goals, HOAs can be an effective tool. If you want more freedom and flexibility, an HOA may not fit your lifestyle.

What’s the difference among community and housing associations?

A community association is a general term used to describe a non-profit organization that manages services and regulations for condominium owners, cooperative housing owners, or homeowners in a planned community.

A condominium association manages the entirety of the building and property. Owners pay dues to the association for building maintenance as well as significant projects and updates.

A housing cooperative, like a condominium, is a shared building with individual units and common areas. However, in a co-op, the owners own a share of the building. They lease rather than own their specific unit. The lease payments cover the mortgage, insurance, taxes, and maintenance.

A homeowners association manages the shared land and amenities in a planned unit development. The homeowners own the lot on which their house sits but do not own the common ground.

What’s the difference between a property owners association and a homeowners association?

Although the terms property owners association (POA) and HOA are sometimes used interchangeably, a POA is different.

POAs usually include a variety of property types, including homes, apartments, and businesses. They exist to improve a neighborhood by sharing resources, seeking community support, funds, or investment for further development, and working with government entities on zoning and park development.

Final Thoughts

Understanding the HOA’s meaning and asking questions helps ensure you choose the right home in a neighborhood that will best fit your lifestyle, whether the home is in an HOA or not.

Lean on your real estate agent for details and have your pre-approval ready so you can make an offer as soon as you decide that a home is right for you.

Dan Green

Dan Green

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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