By Damon Poeter
Imagine your kids frolicking poolside as you soak up the sun alongside friendly neighbors at the members-only park in your immaculately maintained, privately policed, pest-free community.
If that sounds idyllic to you, you’re not alone. Millions of Americans live in planned communities run by homeowners’ associations, or HOAs. But HOA living isn’t for everybody.
Some residents can’t sing the praises of their HOA enough. Other folks bristle at the idea of living in a subdivision that imposes strict rules about property maintenance and charges fees for services and amenities they might never use.
The services and amenities that an HOA offers vary. Some HOAs may provide the following for residents:
• Private security
• Private parks, pools, clubs, recreation facilities and athletic courts
• Basic community maintenance such as plumbing, landscaping, street cleaning and snow removal
• Pest control
• Community event planning
• Mediation in disputes with neighbors
An HOA may maintain a private gate that prevents unaccompanied non-residents from entering the grounds without a pass. Some of the priciest and most exclusive planned communities feature country clubs with golf courses, tennis clubs, restaurants and spas.
HOAs come in many shapes and sizes, and their fees run from relatively low to eye-poppingly expensive. Homeowner obligations range from fairly minor (keeping your lawn trimmed) to extremely strict (painting your home in only an approved color).
“They can vary by price, level of benefits and stringency of requirements,” says Matthew Angel, a USAA advice director and CERTIFIED FINANCIAL PLANNER™ practitioner.
Angel notes that HOAs:
• May be run entirely by residents
• May be administered by professional management
• May be run by a combination, with a board made up of residents and a professional manager
• Can be voluntary or mandatory
• It’s also important to note that if you buy property in a mandatory HOA community, you’re legally obligated to join the HOA. “It’s in your deed,” Angel says.
All of these amenities and services come with a price, as HOAs typically charge residents monthly or annual fees.
If you own a house in a planned community, you may be restricted in what you can and can’t do with your property. If you like to decorate your home and garden in your own individual style, you’ll want to check the rules before buying in an HOA community. The rules may include:
• The color you can paint your house
• The types of plants you can have in your yard
• Any changes you can make to the exterior of your house and possibly even to the interior
• Whether you can rent out your house or a portion of it
• How often you must perform maintenance on your house and yard
• How many guests you can have over for gatherings and when
“These rules can help preserve property values in a community,” Angel says. “In a non-HOA neighborhood, you might not be able to do anything about a neighbor who isn’t maintaining their property, decides to repair broken-down cars in the front yard part time or start raising noisy animals in their backyard.
“All these things can negatively affect your property value, but in a planned community, you can turn to the HOA to enforce the community rules.”
It’s important to read the fine print if you decide to buy a home in an HOA-administered community. Some HOAs reserve the right to increase member fees if there’s a funding shortfall or if your fellow members vote for a new service or facility you don’t necessarily want.
“You may not have a voice in what those fees are. For example, if the community wants to build a pool and votes for it, your fees might increase, even if you voted against getting a pool,” Angel says. “The more active you are in your HOA, the more influence you may have over the benefits and costs you see.”
HOAs may also be able to penalize you for unpaid fees and in some cases even have the power to foreclose on your house, he notes.
“You’re not going to get kicked out of your house for not mowing your yard, though you might get some nasty letters from your neighbors. But if you don’t pay your HOA dues, you can be taken to court,” Angel says.
The services and amenities provided by an HOA can be very attractive. But you should be realistic about your ability to keep up with your member fees as well as any property maintenance requirements.
“The biggest thing is, as you’re looking to make your home purchase, you want to get to know what the fees and obligations will be in an HOA and what value you’ll be getting,” Angel says.
First-time homebuyer? Brush up on the basics with Homebuying 101 in the USAA Home Learning Center.
Matthew Angel serves as an advice director at USAA for personal finance. Matthew holds professional credentials including a CERTIFIED FINANCIAL PLANNER™ designation, AAMS® and a Master of Business Administration degree from the University of Texas at San Antonio. Matthew’s history at USAA includes seven years serving members as a financial planner and leading teams of financial professionals to help members achieve financial security.
This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
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