All About HOAs: More and more often, homebuyers are choosing homes in association-governed communities in order to have access to a greater number of amenities than they care to upkeep on their own.
Home Owners Associations
A homeowners association (HOA) is a legal entity of homeowners that manages the financial and property assets of the community. Its primary goal is to protect and grow home values. HOA-managed homes sell for higher prices than similar nearby homes, according to the Community Associations Institute.
About 20 percent of the nation lives in a community governed by some kind of homeowners association (HOA), condominium association or co-op. And the trend isn’t going away – three out of five housing starts since 2000 were under homeowner management. As land becomes more precious and cities sprawl outwards, public spaces (including parks, roads and community centers) are cost-prohibitive to provide. Cities are requiring developers and builders to provide services such as roads and streetlights. Communities are taking on services such as trash removal and managing amenities such as swimming pools, playgrounds, fitness areas, and more. Cities also require developer/builders to create a community association to manage these services. Once the development reaches a certain percentage of owner- occupancy, the builder/developer transfers management of all common areas to the homeowners.
How do HOAs work?
Homeowners operate HOAs. Homeowners elect a volunteer board of directors and committee chairs. These volunteers are responsible for the management of the community; this includes overseeing everything from landscaping maintenance to event planning, and more importantly, the HOA’s budget. The board creates the annual operating budget which handles the daily and monthly bills and salaries of the community. Another budget is created for reserves – money set aside for emergencies or toward large repairs and remodeling that may not be needed for some years. The community association collects assessment fees from home buyers, with the goal that each homeowner pays a pro rata share of the expenses. The board is responsible for collecting assessments and spending the proceeds wisely. If a homeowner doesn’t pay their dues, the board has strong legal powers, including using a collection agency or filing a lien on the property. The advantage to having a community association is that much of the drudgery and maintenance associated with homeownership is done for you. As a dues-paying member, you’ll have full access to documents, budgets and monthly operating costs to be sure the board is making sound decisions on your behalf. Before you buy a home that is under HOA management, ask about fees and when they are due – monthly, quarterly or annually. You can also ask to see the budget and finances.
