When you’re shopping around for real estate and checking out new neighborhoods to live in, it’s natural to want to make sure your future home has good amenities and retains its value.

Some homeowners choose to form homeowners associations, which own and maintain common areas in a community and create rules and regulations for the upkeep of homes. HOAs are popular, with 82% of new single-family homes sold in 2021 falling under an HOA’s jurisdiction.

What Is an HOA?

A homeowners association, aka an HOA, is a membership organization created by a real estate developer that applies to people who live in a geographical community such as a specific neighborhood.

HOAs own and maintain roads, sidewalks, and amenities like common green areas. They can also create and enforce rules that its members must abide by. These rules typically relate to the appearance of homes within the HOA, such as lawn maintenance and exterior paint colors.

In exchange for the services provided by their HOA, property owners pay regular fees.

HOAs vs. property owners associations

HOAs and property owner associations are similar, but they differ in a few specific ways.

An HOA typically governs residential homeowners in the same community. Property owners associations include anyone who owns property in an area, regardless of the type of property. This can include homeowners, business owners, and property managers. POAs tend to focus more on long-term real estate development than regulating community standards.

HOA board vs. HOA management company

The HOA board and HOA management company both play an important role in providing services to the community and keeping the homeowners association running.

An HOA board is composed of volunteers, elected by members of the HOA. This group manages an annual budget, creates and enforces community rules, and maintains common areas. Ultimately, the HOA board’s purpose is to keep the community a good place to live and maintain property values.

An HOA management company or HOA manager is hired to assist with day-to-day operations, such as handling administrative work, sending communications to residents, accounting, and coordinating with maintenance.

In short, an HOA board is responsible for running the community and making any necessary decisions, and the role of an HOA management company is to help the HOA board.

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What Does an HOA Do?

An HOA is like a government, but for a specific neighborhood instead of a city or town. Similar to a government, it enacts rules ⁠— called covenants, conditions, and restrictions ⁠— that determine what homeowners can do with their properties. Failing to abide by these rules can lead to penalties such as fines.

HOAs also maintain amenities for members. Some common amenities include:

  • Parks.
  • Hiking or biking trails.
  • Dog parks.
  • Picnic or barbecue areas.
  • Fitness centers.
  • Pools.

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How Much Are HOA Fees?

When you live in an HOA community, you don’t get all the amenities for free. You must pay a monthly fee to your homeowners association. The fee can vary significantly depending on the size of your home and the types of amenities that your community offers.

Typical HOA fees are between $200 and $300 per month. Luxury communities could charge significantly more, and some communities could charge less.

Occasionally, your HOA may find that it needs to raise money for unexpected expenses, such as repairs for damage from a natural disaster. When this happens, the HOA can charge a special assessment requiring homeowners to pay higher dues for a period or to make a lump-sum payment.

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Pros and Cons of HOAs

HOAs have many benefits for property owners.

“HOAs can help you maintain your property’s value. Due to deed restrictions, homes and common areas within an HOA must meet certain standards which ensures that they’re well-kept,” says Isaiah Henry, CEO of Seabreeze Management Company based in Aliso Viejo, California.

They can also create a sense of community. “There’s usually community gatherings such as movie nights, holiday parties, and summer festivals. The price to belong to an HOA is usually a worthwhile investment,” Henry says.

However, being part of an HOA means living with restrictions on how you can use your home.

“HOA rules often become overbearing and very restrictive … You are subject to decisions made by board members within the HOA,” says Eric Jeanette, president of Dream Home Financing based in Adelphia, New Jersey.

HOA fees could also make it more difficult to buy a home. Jeanette says those fees are factored into a borrower’s debt-to-income ratio calculation when they apply for a mortgage, which affects the size of the loan they can qualify for.

HOA advantages

  • Amenities like pools and parks.
  • Services like security, landscaping, and snow removal.
  • A well-maintained community that aims to preserve home values.
  • HOAs can mediate disputes between neighbors.

HOA disadvantages

  • Monthly HOA fees.
  • Additional bureaucracy when making certain changes to your home.
  • Restrictions on the use of your home, such as limited exterior paint colors.
  • An HOA may be able to initiate a foreclosure due to unpaid fees.

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6 Important Things To Know About HOAs

Before you consider buying a home in an HOA community, it’s important to understand what the experience entails. There are benefits to being part of an HOA, but it can limit homeowners in terms of how much control they have over their home.

The most common HOA rules

HOAs impose rules on homeowners to ensure a uniform, welcoming neighborhood. Common rules include:

  • Landscaping requirements, such as how high the grass can be.
  • Exterior paint restrictions.
  • Noise restrictions.
  • Home maintenance standards.
  • Limits on home occupancy or renting.
  • Parking restrictions.
  • Pet restrictions.
  • Trash and recycling rules.

Joining the HOA is likely mandatory

Most communities have mandatory HOAs, which means joining the homeowners association is a requirement of buying the home. Other communities could have voluntary HOAs, but they are less common.

If you already own a home and your neighborhood is thinking about forming an HOA, it’s possible you could opt out of joining. However, you should consult with a real estate attorney.

If you refuse to join an HOA, you won’t need to follow its rules or pay dues, but you also won’t have access to its amenities.

You probably can’t leave the HOA — unless you sell

If you buy property in an HOA community, it can be difficult to get out of the association unless you sell your home. Another option is convincing a majority of the members to vote to dissolve the HOA ⁠— but this is complicated and costly.

What happens if you break a rule?

If you break one of the HOA’s rules, you may face a warning, fines, and other penalties. Depending on the community, the HOA could suspend your access to common facilities, enter your property to examine or fix the violation, or enforce the rule in a different way.

What happens if you don’t pay your HOA fees?

If you stop paying your HOA fees, expect to receive notices about the failure to pay as well as late fees. You could also lose access to your HOA privileges. In some of the worst-case scenarios, the HOA could file a lawsuit or place a lien on your home, ultimately foreclosing on the property.

HOA insurance responsibilities

An HOA uses some of its budget to purchase insurance for community-owned property, which covers damage to common areas and liability for injuries that happen in HOA facilities. This is in addition to your typical homeowners insurance responsibilities.

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FAQ: Homeowners Associations

Check out the answers to frequently asked questions about HOAs.

Can an HOA raise dues?

Yes, an HOA board can increase dues when necessary to cover its budget.

Can you avoid paying HOA fees?

You likely can’t avoid HOA fees entirely, but there could be ways to cut costs if you’re willing to get involved. Requesting to review the HOA budget or joining the HOA board can give you an opportunity to evaluate where the money is going and whether certain expenses may be reduced.

Do renters pay HOA fees?

Whether the HOA fees are the property owner’s or renter’s responsibility is determined by their specific lease agreement.

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The Bottom Line on Homeowners Associations

HOAs can offer amenities and a sense of community at a monthly cost to homeowners. However, you must accept the drawbacks of living in an HOA to get its benefits. Some people may chafe at the additional rules and bureaucracy they must deal with. That’s why it’s important to research any HOA you’re about to join before you decide to buy a home.