What to Look For When Buying a Home in an HOA

Published: 02/10/2021

HOAs are formed to provide a common basis for the maintenance and preservation of the homes and property in the community. The houses within these communities are subject to the Covenants, Conditions, & Restrictions (CC&Rs). These are restrictions placed on each home in order to maintain uniformity within the community. Homeowners pay dues or assessments so the HOA can pay for expenses related to maintaining common areas in the community such as roads, gated entrances, pools, clubhouses, and drainage basins. They often provide various services and amenities such as trash removal, snow removal, security, landscaping, a fitness center, a swimming pool, a community center, and a playground.

Buyers interested in purchasing a home in an HOA should consider:

     Reserves. It’s important to make sure that the reserve funds set aside for maintenance of common areas are adequate to fund large scale capital improvement projects such as replacing a roof. If reserve funds aren’t enough to cover a project, owners will be issued a special assessment to pay for the project. The buyer should ask for a breakdown of the reserve funds before purchasing the home.

     Budget. Ask the HOA or the seller for a copy of the budget. Pay attention to any outstanding debts and liabilities and the percentage of homeowners that aren’t paying their assessments.

     Insurance. Ask for a copy of the HOA’s insurance policy to make sure the HOA’s coverage is adequate. This is separate from a homeowner’s own insurance policy. Ask your personal insurance agent to look over the HOA’s policy. Coverage should include but not be limited to general liability coverage with no general aggregate, director & officer liability coverage, environmental impairment coverage, guaranteed replacement cost coverage and employee dishonesty coverage.

     Number of investment properties. A high number of rental properties in the community could mean a low level of owner involvement in the community.

     Covenants, Conditions, & Restrictions (CC&Rs). Make sure if you were to purchase the home, you can live with the limitations imposed on owners in the community. Many HOAs will want the community’s homes to have a uniform appearance from the outside.

            Homeowners living in HOAs enjoy many benefits and amenities such as security, access to recreational facilities and activities, and fewer worries about property maintenance. Potential buyers will be able to determine whether living in a particular community is right for them by reviewing the contracts and asking questions.

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