The topic of Homeowner Associations in any circle is sure to bring up some heated discussions as most homeowners have very negative experiences with HOAs. In fact, I don’t think I have ever had a buyer tell me that they wanted to live in a neighborhood with an HOA and CC&Rs (covenants, conditions and restrictions). But HOAs are not all bad and buyers shouldn’t pass on a house just because it is in an HOA.
Here in Olympia, most newer neighborhoods will have an active HOA that will enforce the CC&Rs. If you want to avoid this altogether, you may be looking at old homes or homes not in a subdivision. If a home is within 25 years of being built, more than likely it will have an active HOA and CC&Rs.
What are the common rules?
Common rules and restrictions include:
Architectural restrictions
What color of exterior house paint you can use or if you can you have a shed in the backyard or rules about storing an RV, a boat, or other vehicles on your property would fall under this category.
Use restrictions
Common use restrictions would be not being able to run a business out of your home that would bring excessive traffic to the home or breeding animals from your home.
Landscaping rules
Rules about maintaining the front yard and its maintenance would fall here. For example, in Indian Summer, a golf course community, the HOAs ask that homeowners maintain their yards to similar standards of the golf course.
Parking restrictions
Some neighborhoods have narrow streets so they limit parking to only one side of the street. Other neighborhoods do not allow overnight parking on the streets.
Noise restrictions
Rules that coincide with the local ordinances will also be incorporated into the neighborhood CC&Rs and these could include regulations on firework displays and noise restrictions.
How do you know if the property is in an HOA?
When you are looking at listings online, can look under the Community Features section to see if there are CC&Rs, and then you can also see the association fee, which is the monthly HOA dues. By the way, this dollar amount shown is the monthly amount. You may or may not pay that monthly – you might pay it quarterly or annually but when looking online, this number is a monthly number.
Where can you get a copy of the CC&Rs?
I can get these for you. I will pull those CC&Rs from either the title report or the title company and get those to you.
Why do HOA fees vary?
When house-hunting, you’ll start to notice the wide range of fees for some properties over others. And it all depends upon what services are included. For example, some homes have a very nominal fee like $5 a month and that just goes towards maintaining the neighborhood entrance sign. Other neighborhoods have services like mowing your front yard or have a clubhouse.
We have a couple of 55+ neighborhoods in the Olympia area, and those fees can be a couple of hundred dollars a month.
I’d say that there is a healthy mix of professionally managed HOAs and those managed by volunteer homeowners. That can affect the cost, too.
By the way, your HOA fee is not paid as part of your mortgage – it is a separate bill you pay the HOA directly. HOWEVER, in many CC&Rs, it will state what happens if a homeowner is in default of not paying their HOA fees. Many times, the rules will state the HOA can assess fines and put a lien on the home.
Pros and Cons of HOAs
The pros of buying a home in an HOA are the neighborhood will be kept up and you’ll less likely have neighbors who are negatively impacting your home value like this guy:
Some HOAs include maintenance on your property such as mowing the front yard and maintaining the front gardens. That can certainly free up your time and upkeep of your home.
Other common area maintenance that can be very helpful to you can be during the winter months. For example, the HOA may have a contract with a snowplow that can come in when the streets are covered in snow.
Some neighborhoods have common areas like playgrounds, golf courses, or a clubhouse with entertaining space or maybe a gym you can enjoy. And you don’t have to maintain these.
The cons for some buyers are the costs. Some HOA fees are costly but for most single family homes in the Olympia area, monthly HOA fees range from $5/month to $75/month.
The restrictions and rules are a problem for some homeowners because to be told what you can and cannot do on your own property doesn’t sit well with many folks! And it may not necessarily the restrictions that is a problem for some buyers – it’s how they are enforced.
There are people who follow the rules and those who don’t. Neither of these two are happy with how the rules are enforced. And the fact that there are homeowners who take it upon themselves to police the neighborhood make matters worse. (Don’t get me started on that topic!)
Questions Buyers Should Ask
What do the HOA fees cover?
How often are the dues paid? – Monthly, Quarterly or Annually?
Are there any upcoming assessments? Are there special assessments? – On top of the regular HOA fee, the association may have special projects that are being funded by special assessments. In our purchase and sale agreements, this is addressed where the buyer can ask the seller to pay for the special assessment in full prior to closing or the buyer can agree to take on that assessment.
An example of a special assessment would be if the neighborhood had an unexpected cost and doesn’t have enough in the reserves account to cover it. Then the HOA could assess this additional fee, which could be a one-time fee or something that is paid over time.
Speaking of reserves, how much does the HOA have in reserves? – Some HOAs will have a reserve study done to determine how much an association should have in reserves. It is challenging to know how much is enough to have in an HOA reserve account so if there is a study, that will be more helpful to you to discern if there could be a future special assessment.
How is the HOA managed? By a property management firm or by volunteer homeowners? – There are pros and cons to both depending upon the neighborhood and number of homeowners. A very small neighborhood may be managed just fine without a professional property management company while a larger neighborhood could use the benefits of a property management firm. There are costs when hiring a professional firm however because of the rules that govern HOAs, how meetings are conducted, and the handling of dues to name a few, it is probably in the neighborhood’s best interests to have a professional firm.
Understand the HOA rules by reading the CC&Rs. -Many new homeowners in a neighborhood will want to know about parking, home-based businesses, animals/pets, noise policies, renting out my home, doing improvements of my home, etc.