Important Factors to Consider Before You Decide to Stay in a HOA Neighborhood

Apart from your monthly mortgage, there is an additional cost that you need to bear every month – your HOA fees. If we look at historical trends, number of Home Owner Associations have gained tremendously over the years. In the 1960s there were only 500 Home Owner Associations all over United States. Currently, Virginia alone has 8,600 HOA’s! 1.74 million Virginians live in 661,000 HOA administered homes.

So, what are Home Owner Associations? And, what is the reason behind their rising popularity? Let us do a deep dive into this interesting phenomenon that is affecting millions of homeowners across United States.

What is a HOA?

HOA or Homeowner’s association is a group of board members that come up with various rules for administering the community. Thus, essentially, a Home Owner Association neighborhood is a “community within a community”. When you sign on the dotted line, you will receive a packet of closing documents. These documents will contain important details of your association such as the name, fees and due date.

Many home owners feel restricted by the different rules and covenants. However, in order to administer a community properly, the association needs to determine a budget and stick to it. The Home Owner’s Association needs enough revenues to pay employee fees and other property management fees. Having strict rules and covenants helps a HOA budget their expenses.

Typically, Home Owner Association fees are dependent on your square footage. And if your complex is offering a plethora of facilities, that could bump up your HOA fees too. However, there are certain exceptions to the rule. For instance, I found a bunch of homes in Alexandria, VA on Zillow with zero HOA fees. These were all old brick homes constructed before 1975 (when HOA homes were less popular).

Because HOA’s spend regularly after the maintenance and upkeep, typically homes governed by Home Owner Associations are in better condition. Thus it is of little surprise then, that homes in community associations are valued 6% higher than those that do not belong to a community association.

The Different Kinds of HOA’s

There are 3 kind of HOA’s that you should be aware of.

A voluntary homeowner association or HOA has no legal bearing. Typically, the fees charged by a voluntary HOA are smaller and hence, much more affordable. It is not mandatory to join a voluntary HOA. Voluntary associations advocate issues that are for the greater good of the community. So this could mean blocking a neighboring development. Or, maybe lobbying against a road being built in close vicinity that can potentially create nuisance for homeowners.

If your community has a mandatory HOA, you cannot refrain from becoming a member and forking out the monthly fees. And sometimes these can be substantial. Association fees typically range from $200 – $1,000 per month. And if the association is doing a good job, it is certainly money well spent. Your Home Owner’s Association is responsible for maintenance and upkeep of common facilities like swimming pool and tennis courts.

Condo HOA’s are the third type of HOA’s. Condo HOA’s are “notorious” for charging extremely high fees. And arguably, there is a valid reason for that. You are responsible for the maintenance and upkeep of your condo interior only. Whereas, the exterior is “owned” and maintained by the Condo HOA. This includes the roof, windows and even the pavement. A quick search on Zillow showed me that HOA fees for condos in Alexandria and Arlington ranged from $250/month to $400/month. This was for properties ranging from $250,000 to $350,000. Roughly you will end paying between 1% -1.5% of your property cost every year as HOA fees.

Pro Tip – Many real estate investors do not invest in condos because the high HOA fees pushes up the ownership cost. If, you have the financial capability to buy out ALL condo units within a complex, you can do away with the Home Owner Association altogether – and hence keep your ownership cost in check.

The ADVANTAGES and DISADVANTAGES of staying in a HOA neighborhood

Advantages

Worried about loud neighbors? Prefer a quiet existence? Then staying in a HOA neighborhood is a great idea. You do not need to bother about dealing with unruly neighbors as the association will handle them for you – and ensure they abide by all the community rules.

Disadvantages

Because the purpose of a Home Owner Association is to administer effectively, they always demand conformity. So, don’t be surprised when you find out that you cannot paint YOUR house in the color of your choice. The HOA will also have a say in how you tend your front yard, and how you adorn your home on holidays. If you find the above suffocating, you are better off staying in a non-HOA home.

HOA rules are a part of public record – so, if you have need clarifications, you can always visit the county clerk’s office and pour over the minutiae.

Technology has made it possible to work remotely and manage business efficiently from the comfort of your home. However, many HOA’s do not encourage home offices. The rationale behind this somewhat strong stand is that HOA’s do not want clients walking into a home, causing traffic and inconvenience to neighbors.

Instead of placing a blanket ban, there is a need to instead, regulate business. Sure – if you are a realtor or a lawyer, you might need to meet a bunch of client’s every day. However, if you are a freelancer working from the comfort of your home, there is no question of causing nuisance to neighbors.

What happens if you are unable to pay your HOA fees? All you need to know about HOA liens and HOA foreclosures….

If you are unable to pay your  fees, the association has the power to attach a lien to your property. The Property Owners’ Association Act governs all Home Owner Associations in the state of Virginia. Whereas, all condominiums constructed after July 1, 1974 are governed by the Condominium Act. These two acts determine how liens are attached to a property. In Virginia, the Home Owner’s Association is required to mail a written notice at least 10 days before attaching a lien.

In Virginia, the HOA does not need court permission to foreclose your home – Thus, they have the authority to go for a non-judicial foreclosure. However, the law demands that the association send out a 60 day notice to the home owner asking them to pay their dues. If the homeowner is unable to arrange for funds in this 60 day period, the HOA are free to go ahead with the foreclosure sale.

If the homeowner wishes to prevent his home from being foreclosed, he/she will have to arrange for attorney fees and advertising costs incurred by the HOA in addition to what was originally due. If you are facing foreclosure, it is best to seek out expert guidance.

Conclusion

Staying in a HOA neighborhood has its shares of both Pros and Cons – If you feel that you are better off staying in a governed community with strict rules in place, then you will fit right into the community. Do not forget that you will paying HOA fees in ADDITION to mortgage payments every month. Failure to meet these financial obligations can even lead to property foreclosure.