What is a Homeowners Association? All you need to know about HOAs

When we hear about condominiums or residential places, indeed, the term homeowners association comes around. They are an essential way to preserve the community’s property values and ensure the maintenance or improvement of common areas. But what is a Homeowners Association specifically? What is their purpose, and how do they work? There are many aspects you should consider as a future real estate professional. Keep learning all about them in this blog so you can be exam-ready for this topic.

What is a Homeowners Association?

A Homeowner’s Association (HOA) is an organization that creates and enforces the rules for residential areas such as communities of single-family homes, condominiums, and multiple-unit buildings.

Every HOA has its own rules, for example, guidelines about the home’s aesthetics, landscaping, and use of common amenities like swimming pools and tennis courts. These guidelines are described in a document called Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

Also, learn as part of the homeowners association definition that they are integrated and run by the community’s homeowners, who elect a board of directors or governors to oversee the community guidelines.

So, what is the purpose of a homeowners association? In summary, it creates and enforces guidelines and rules in a community to maintain and improve the quality of amenities and ensure the community’s property values.

How Homeowners Associations Work?

When someone buys a house in an area within a HOA’s jurisdiction, they are often required to become a member. (In some places, it’s mandatory to join). As part of a HOA, once a member the property owner must comply with all the rules in the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). What does it mean? For example, if a rule says all houses have to be painted in pastel colors, they cannot paint theirs in neon green.

Homeowner Associations require members to attend meetings and elect their board of directors or governors. Fees are also a requirement. These organizations use the money collected as a budget to upkeep facilities. Is there a problem with the community pool or with the landscaping? The HOA is responsible for fixing it.

Another responsibility is enforcing the CC&Rs. Residents who do not follow these conditions receive various penalties, including fees and forced compliance, which can, in some severe cases, extend to litigation.

Homeowners Association Rules

Now, let’s explain further the authority of HOAs and which are their so-called regulations. As we said before, the homeowners association rules are registered in a Declaration of Covenants, Conditions, and Restrictions (CC&Rs). These CC&Rs are enforceable by law. If a property owner violates a restrictive covenant, the homeowners association or the developer may take legal action against them. Understanding them is an important part of knowing what is a homeowners association:

• Appearance: Keeping a uniform-looking condo or neighborhood is usually a standard requirement. All homes must maintain the same look, such as the same type of paint and fences, maintain a certain architectural style, or not build additional structures.

• Maintenance: Part of keeping everything looking good is maintaining your yard or garden in excellent condition, as well as the house facade. Your house exterior must be clean, so trash everywhere is not allowed.

• Amenities: Access to amenities can also be regulated, such as through a guest policy, working hours, operation rules, and dress code.

• Decorations: Holiday decorations may be limited in some CC&Rs to keep every property uniform and politically correct.

• Pets: Restrictions about the kind of pets that are allowed in a community are very common. Some have restrictions about specific dog breeds, don’t let you keep livestock, or don’t allow pets at all.

• Parking: These CC&Rs are about where it’s allowed to park. Some vehicles may have prohibitions on parking in certain areas.

• Conduct: Some HOAs can include rules about behaving and interacting in the community. For example, there usually are noise regulations; nobody wants a noisy neighbor disturbing their peace. Other guidelines may include proper and civil behavior, such as avoiding scandals.

• Business rules: There could be additional CC&Rs for businesses run in homes, such as environmental regulations or against the presence of too many strangers because of clients’ visits.

Homeowners Association Fees

HOAs usually collect monthly or annual dues from their members. The amount depends on various factors, such as property types, location, amenities, maintenance, and operating expenses.

These homeowners association fees are used to pay for up-keeping amenities and also contribute to a reserve fund in case of emergencies or renovations. Besides them, if a repair or improvement is too expensive and the budget doesn’t cover it, HOAs may impose special assessments to pay for them. The responsibility of the homeowner’s board is to collect fees and manage these finances. More importantly, homeowners who don’t pay their dues can receive a penalty in the form of a lien by the HOAs.

Fees are a vital aspect to consider when buying or selling a house in a community with an HOA; that’s why this information is accessible in most multiple listing services (MLS) and real estate sale websites like Zillow and Realtor.com.

Benefits and Risks of a Homeowners Association Membership

Anyone should consider some advantages and risks before buying a property in an HOA jurisdiction. As a future agent or broker, it’s part of your job to inform your clients about them.

HOAs Benefits for Homeowners

• HOA guidelines help keep the properties in good condition and according to zoning laws. These guidelines are great for maintaining and even enhancing property value.

• In exchange for fees, homeowners associations take charge of maintenance and additional services like landscaping, snow removal, and keeping common areas like swimming pools and parking lots in good shape. Some may also cover utilities and trash collection.

• Access to the facilities a HOA guarantees positively impacts the residents’ daily lives and interactions with community members. Not everyone can build a pool in their home and with a pool and maintain it operating. In that regard, HOAs are very useful.

• They keep the community united and offer a problem solver when there’s any issue within their authority.

HOAs Risks for Homeowners

• The high cost of association fees can hurt home finances and discourage prospective buyers.

• Board members are usually community residents and are not prepared for leadership, dealing with real estate problems, or managing finances.

• Consensus to improve or find solutions may be difficult if not every member agrees and there is poor leadership.

• Homeowner associations impose covenants, conditions, and restrictions that limit property owners’ rights of enjoyment and other liberties in various ways.

• HOAs can enforce penalties and take legal action when members fail to comply with CC&Rs, such as falling seriously behind on fees.

HOAs and Real Estate Agents/ Brokers: What You Should Consider

As a real estate professional, you must inform your principal about any HOA they may be required to join if they buy a particular property in an area. “If you’re representing a home buyer looking into a property that’s part of an HOA, you’ll need to know where to find the covenants, the by-laws, and the financial statements. Most buyers know nothing about the HOA till they move into the community and discover, ‘Oh my God, we just moved into our dream home in the neighborhood from Hell.’ The educated buyer should see the HOA’s financial documents, the profit/loss, the balance sheet, and the reserve fund before committing to a purchase.”, explains Joseph Dobrian, commercial and residential real estate specialist.

A piece of advice dealing with this kind of organization, says Dobrian, is to know them as best as possible. Dobrian says to study the HOAs rules and financials, introduce potential buyers to them, and ensure your clients understand what they are getting into by becoming a member. Some people might need to learn what a homeowners’ association is. You should be patient and explain everything.

Aspects To Learn Before Joining a Homeowners Association

Before a home buyer purchases a house with a HOA jurisdiction, make sure they know about this:

• Covenants, Conditions, and Restrictions: Explain the conditions for living in the community (for example, some may not accept kids or pets) and what members can and cannot do once they are members. Every HOA is unique, so make sure to reach out and learn all about the one your client is interested in.

• Homeowners Association Fees: How much is the annual or monthly fee? What does it cover? What happens if you’re late on dues? It would be best if you got these answers.

• Operations: Learn about the amenities your principal will have access to in addition to buying a house. What are the working hours of the pool? Can they invite family and friends over? What are the rules for doing so?

• Legal Powers: Find out how the CC&Rs are enforced and what the penalties are. Sanctions may be strict, including enforcing liens on property, lawsuits, and foreclosures. Review the HOA’s history on this matter, such as past lawsuits and their outcomes.

Summing-up

What a homeowners association is can be summed up as an organization of homeowners in a community that makes and enforces rules and guidelines to guarantee the peaceful living of neighbors, the up-keeping of property value, and the operation of public areas and facilities. They aim to create an attractive neighborhood with a clean, uniform aesthetic and good community values. That makes the properties desirable and the area in general as people would like to live in and buy a home.

However, HOAs can be strict or come with conditions and restrictions potential homebuyers may not want. That’s why it’s so important for real estate professionals to inform their clients about them before purchasing a property in an area and becoming a member.