Lots of housing developments and upscale neighborhoods have homeowners’ associations (HOAs) – and they do have their benefits. HOA can make sure that the community remains relatively stable, that the amenities that make the location so attractive are well-kept and that property values are maintained.
However, homebuyers make a big mistake when they fail to take a very careful look at the HOA contracts before they commit. The covenants, conditions and restrictions (CC&Rs) that go along with an HOA can ultimately control everything from where you put your mailbox to what color you paint your front door. If you violate the rules, the penalties can be swift – and expensive.
Here are three key things to examine:
HOA transfer fees
HOA transfer fees are charges imposed by the HOA when a property changes hands. These fees typically cover the administrative costs associated with processing the transfer of ownership within the community. You need to know how much these are and whether they’re coming out of the seller’s pocket or your own.
Pets, parking and other lifestyle issues
You need to consider the CC&Rs in terms of the lifestyle you have (or expect to have). If you have pets – or want them – you need to know if there are restrictions on the number, type, size or breed of animals in the community.
And what about parking? Are there rules on whether you can leave a “project car” in your driveway? Where are visitors allowed to park? You don’t want to rack up fines just because you have frequent guests.
In general, you need to look at all the rules with an eye toward exactly how well you “fit in” with the neighborhood vibe.
Policies on rentals
If you think there’s a possibility that you may eventually want to move on but keep the property as a rental, you need to know if that’s even possible. Many HOAs have restrictions on the duration and frequency of rentals – and some require homeowners to get permission before they lease. That could significantly affect the investment value of your new home.
Never assume that you can negotiate an exception to the rules after you’ve moved in. Legal guidance can help you make sure that you fully understand an HOA agreement before you sign.