Homeowners Associations: Should You Avoid Them?

If you’re building a custom home design or shopping for lots within specific neighborhoods, chances are good that you’ve encountered a local homeowner’s association at least once. As of 2012, there were at least 323,000 communities (and nearly 26 million homes) managed by HOAs, according to Community Associations Institute. If you’ve done some research, you’ve almost certainly heard the horror stories about draconian rules and crazed association members. But is an HOA really that bad? Here are some of the pros and cons so that you can make your own decision.

What are the Benefits?

First and foremost, these organizations exist to keep property values up. Most HOAs ensure some measure of uniformity by regulating the colors and styles of homes they’ll allow. They’ll also put forth a set of standards governing the things you can and can’t do with your property. That means you won’t be able to leave Santa Claus out on the porch until July, and your neighbors can’t decorate their lawns with broken-down cars because the HOA wants to keep property values high by keeping things tidy.

If someone is doing something objectionable – such as letting their noisy dog bark all night long, or airing their politically incorrect views with crudely drawn signs – you’ll have a little more recourse than if you live in an unregulated community. The association’s management team should be able to mediate any disputes between you and your neighbors.

One of the main reasons people choose an HOA is for the amenities. In many communities, the dues paid to the association go towards things like trash pick-up, snow removal or lawn care. In other cases, the HOA uses these funds to build and maintain private gyms, community pools, sports fields, hiking trails or other recreational facilities.

So What’s the Catch?

Homeowner’s associations, by definition, are restrictive. Most have rules against garishly painted homes or home styles that break with the conventions they’ve established. You may also find that a particular HOA won’t allow you to display political signs or signs advertising a home business because they’re trying to avoid clutter. In some communities, the restrictions go even farther, regulating against things like open flames or vegetable gardens. Even though rules like this are meant to preserve property values and keep the neighborhood safe, you may find them cumbersome, particularly if you enjoy barbecues or homegrown veggies.

For many, the fees are the biggest issue – especially in high-end neighborhoods. The amenities that an HOA provides often come at a very steep cost, and those costs usually go up if you purchase larger lots of land. Plus, HOA dues aren’t like a gym membership – you can’t ignore them in the hope that they’ll cancel your membership. If you fall behind on your dues, the HOA can foreclose on your home.

There are also assessments to consider. According to Reuters, 70% of the HOAs in the United States are underfunded, which means that in many instances, they’ll levy surprise assessments to help shore up a deficit. Before you sign on the dotted line, it’s a wise idea to learn more about the HOA’s track record. Do they levy assessments often? How much notice do they give to homeowners? The answers to those two questions will help you avoid expensive surprises.

Homeowner’s associations offer many advantages, but sometimes the rules and fees can be a little harsh. Read the HOA’s rulebook cover to cover, meet with some of the managers and if possible, talk to your future neighbors to make sure that you and your family won’t be unawares by obscure regulations or hidden costs.