So you’ve bought a home in an HOA community. Be prepared for LOTS to read and know what to look for to avoid future problems. The most common question I hear about Home Owners Associations is “what are the fees?”. You should be asking other essential questions before buying in an HOA community.
What do the HOA fees cover?
There is considerable variation in monthly association fees. It’s important to know what services are provided. Services can range from simple common area maintenance to water, sewer, garbage, electricity, cable t.v., roof repair and replacement. Some HOA’s provide exterior painting of the home, pest control, blanket insurance policies, concierge services, gym, clubhouse and recreation facilities, and more. That ridiculously high HOA fee may not be so high if you are saving on utilities, gym memberships, yard maintenance, pest control, etc. Make sure you ask this question before buying in an HOA community
How many HOA’s are there in this community?
Some communities have 2 or 3 separate HOA’s which provide different services and charge separate monthly fees. For instance, there is a subdivision HOA fee AND an Ocotillo master planned community HOA fee in subdivisions in Ocotillo in Chandler. The “Ocotillo” HOA covers the lakes, parks and other amenities in the larger Ocotillo area. Make sure you know ALL of the monthly fees and the services provided before buying in an HOA community.
What OTHER fees are involved?
Did you know that in order to purchase in an HOA community you will have to pay fees to the association for facilitating the transfer from one owner to another? Transfer fees and Resale Disclosure fees are often a part of closing costs that must be negotiated between buyer and seller. Other fees could include capital improvement fees which, if required by the HOA upon transfer, can range from $40 to thousands. Some cap improvement fees are recurring and must be paid annually. Recreation Center fees are often found in adult communities where there are recreation facilities geared toward “senior” residents. Pre-paid association fees are paid upfront as a part of your closing costs. It could be one month of advance fees or up to a year. The company that assembles the documents for the HOA condo certification required by the lender gets a $30 or so Condo Cert or Document fee. And finally, Assessments, or fees related to previous or up-coming special projects that the association has planned. If the parking lot requires re-surfacing or they’ve decided to add a security gate to the community, there might be a special assessment charged to each resident to pay for that project. Ask this question before buying into an HOA community if you don’t want to be surprised by an additional $200 monthly fee to pay off an assessment. Fortunately, the seller is required to provide all fee information, both monthly dues and transaction related fees, in an addendum to the purchase contract.
What are the CCR’s?
The Codes, Covenants and Restrictions detail the “rules” of the HOA and can vary WIDELY! While basketball hoops in the driveway are not allowed in one HOA, it’s ok in another. I’ve recently seen an HOA that restricts the number and breeds of dogs owned by residents in the community. You will likely receive the CCR’s within a couple of weeks after opening escrow on a home purchase. You will have 5 days to disapprove of those codes, covenants and restrictions. It certainly is a LOT of reading but well worth the time before closing on a home rather than being unpleasantly surprised after. Things you might want to know before buying into an HOA community are:
Can you run a home based business?
Can you park on the street overnight?
Does the HOA provide neighborhood security?
Can you place items in the front yard such as a basketball hoop, political yard signs, etc?
Are there pet restrictions?
How often must you paint your home?
Do you need permission to make structural changes (e.g.adding a pergola or porch)
Have your read the HOA Disclosure?
This is an important document that will arrive either with the CCR’s or separately and typically does NOT get sent to your real estate agent for review. It’s up to you to review and sign your approval of the disclosure to find out and agree to the following:
Are there HOA violations on the property that will be passed to the new owner after closing?
Are there assessments that the new owners will inherit?
Is there a lien on the property related to unpaid HOA fees?
Are there other fees involved with the transfer that have not been disclosed by the seller?
I had clients who signed off on the disclosure without carefully reading it early in my career. They found out after closing that the seller had a violation for not painting the exterior of the home in a timely manner. Shortly after moving in they discovered that they would have to pay to paint the exterior to be in compliance and they had to pay the violation fees. Had I known that, I could have counseled them on moving forward and negotiated with the seller to take care of what was required. I have made it my practice to invite my buyers to send me the disclosure when they receive it so I can look it over and explain any anomalies prior to them signing it.
There is a lot to be considered before buying in an HOA community. It may sound daunting. Most people, however, find it quite easy to comply with the rules and appreciate the consistency and services provided in the neighborhood.