At one point or another, many buyers (especially those in Florida) will be asking themselves whether or not they want to buy a home that's governed by an association or community. Should I buy a home in an HOA? There are a lot of unknowns if you've never dealt with the blessings and curses of association living. In our work, we are in constant communication with such associations, so we have an inside scoop on the things that new buyers are likely to experience -- good or bad. That's why we're bringing you...
Here are 3 Major Pros and 3 Major Cons of living in a Homeowners' Association (HOA), Condominium Owners' Association (COA) or other Common Interest Community (CIC):
Let’s get the bad stuff out of the way first...
1. The monthly fees that never end (even after you pay off your mortgage)
This is an obvious one. You will be required to pay a monthly fee (referred to commonly as dues, or assessments) to the association for as long as you own the property. (That is unless the association dissolves -- which isn't very common and doesn't mean that it can't be reinstated.)
2. Special Assessments, Capital Contributions, and other hidden fees
While the monthly dues might seem obvious, there are other fees to consider.
- Application fees are the first you will encounter.
- Transfer fees, also known as capitalization fees, are paid when there is a sale of the home, and it is “transferred” from the previous owner to the new owner. Sometimes a developer will charge a capital contribution fee to the first time buyer, which will be set aside for future community projects. These are one time charges that can range anywhere from a few hundred dollars to thousands of dollars, depending on what type of community the house is in.
- A Special assessment is an unpredictable fee you will be responsible to pay from time to time to fund special improvements in the community. It could be anything from a new roof because a storm caused damage or for an unexpected A/C Repair.
The amount an association's management company charges for all this will be written out in their governing documents as well as what sort of increase in fees you can expect in the future based on pre-determined and legally restricted formulas, so be sure to review it.
3. The Restrictions
If the price tag of the monthly dues doesn't scare you away, it might be the community by-laws that do. Every association is different, so it’s important to take the time to sit down and read them. Anything from the color of your home to the design of your mailbox may be heavily monitored. If you are caught breaking any of these rules, you could face steep violation fees.
Now for the good stuff:
1. Low to no maintenance
All those fees you pay are going somewhere! If you aren't too keen on lawn upkeep or fixing the exterior of your home, an HOA or COA may be the perfect solution.
2. The amenities
Tranquil, aqua blue pools, a gym with basketball and tennis courts, playgrounds, and a community center may be what enticed you to tour the house in the first place. You get what you pay for, and typically the higher the monthly dues, the nicer the amenities.
3. Improved Value for Resale
For most homebuyers, the issue of HOA or no HOA is not typically about money. Although buying in a community may reduce your purchasing power over the lifetime of the home loan, the amenities offered may more than make up for it. These amenities will also be appealing to buyers should you decide to sell in the future. Homes within an association typically have better upkeep, more uniformity, and fewer unsightly issues like gaudy decorations or litter, which makes the neighborhood a more desirable option for many buyers. Of course, for others, they may prefer more freedom and artistic expression in their neighborhood.
Your title agent or real estate attorney will be sure to obtain the association's certificate letter which will contain a break down of all money owed, past, current, and future, as well as the community by-laws, so be sure to review this information carefully when making your decision. Whatever you decide, remember that once you sign the closing documents, you are bound to the conditions within. While you will have professionals to guide you through the process, make sure to do your own real estate due diligence. After all, it’s much easier to address an issue before closing than after.