What you should know about Homeowners’ Associations
When you purchase a condominium unit, townhouse or a type of development in a gated community or subdivision, you are obliged to join a homeowner’s association (HOA). In the United States, the HOA is formed by the developer of the project. Its purpose is to market, manage and sell homes within the property. They also set the rules and regulations for the community.
What Is Involved?
When you own a condo, townhouse and other similar properties, you have no choice but to join a HOA. You also need to pay monthly dues that are used to cover upkeep of common areas and the building. Before buying a house, you should be aware of the rules and regulations of the HOA because aside from upkeep they also set the rules and regulations you have to live with. For example, many condominium HOAs have noise restrictions and some gated communities also restrict home owners from renting to third parties.
Fees
Fees for HOA differ depending on the type of property. Generally speaking, the more upscale the property is, the higher HOA monthly dues will be. In condo units for example, fees differ on the amenities offered by the developer. Some buildings have swimming pools, gyms and recreational areas. HOA fees could also be used to cover utility services and insurance premiums.
Policy Impact On Rent
Some HOA forbid their members from renting out their units or homes. HOA will usually only allow a certain percentage of homes or units rented out. In some cases, the HOA will require all new owners to live in the property (example at least 1 year) before allowing them to rent out the unit or home. This rule is to protect the homeowners themselves. A high number of renters can have a negative impact on the salability of the property. Another reason is because lender requirements for developers require a certain number of occupied units in a property. This is largely due to the high maintenance issues posed by a high number of renters.
Under Management
Living with lots of rules and regulations can be stifling for some people. But it is still better to watch out for under management. When nobody really cares about building maintenance or hearing about grievances, your building or community could fall into disrepair and tenants and homeowners could have a high turn around rate. This type of under management can be a problem since it could trigger property prices to fall.
Consider HOA in Your Budget
HOA fees are separate from your mortgage payments. A high HOA fee could be too expensive for you and end up costing as much as the property. Before buying a home, try to budget in the HOA fees to see if you can afford it.
The HOA can be your best friend. It can prevent your next door neighbor from renting out his place to strangers or from painting his house neon pink. Before buying a property, check out the HOA fees, rules and regulations to know what you’re getting into.
Are you looking to buy or sell your home in the Twin Cities area where HOA fees are applicable? Call Gold Path Real Estate today to discuss the options available to you at 612-758-0071.