Homebuyers

What Homebuyers Need to Know About HOAs

Homebuyers have a lot of options when it comes to choosing a home: how big it is, where it is, and if it is in a homeowners association.

Better known as HOAs, these are member organizations that maintain the appearance of common areas of the community and enforce rules that residents must follow. 

There’s a decent chance your new home could be part of an HOA, as 40 million U.S. households (53% of homeowners) live in HOA communities, according to ipropertymanagment.com, a site that tracks industry trends. 

Homeowners pay an average $300 a month to their HOAs, according to ipropertymanagement.com.

“Prospective homeowners should recognize that living in a community association offers numerous benefits, including well-maintained amenities, shared services, and a strong sense of community—all made possible through assessments that fund these essential services,” said Dawn Bauman. She is the chief strategy officer with Community Associations Institute, a Virginia-based authority on condominium associations, homeowners’ associations, and housing cooperatives.

What are HOA fees?

The monthly, quarterly, or annual fees charged by HOAs can vary and are generally dependent on the size and location of the community.  However, they are on the rise, according to a recent report from the Foundation for Community Association Research.

In 2024, 9% of homeowners are paying more than $500 per month, compared to 6% in 2020. Meanwhile, the percentage of homeowners paying between $101 and $300 remained consistent at around 26%. 

The increases are often a result of rising costs in services, maintenance, and insurance faced by community associations, according to the Foundation. 

These fees, often called assessments, typically cover the maintenance of common areas such as roofs, sidewalks, streets, and landscaping. They also fund extras like pools, playgrounds, fitness centers, and community events, according to the Community Associations Institute. 

Homeowners are responsible for paying these fees on time so the collective community remains financially stable. 

“They fund vital maintenance and improvements, from landscaping to infrastructure upgrades, helping to preserve property values and support the community’s long-term well-being,” said Bauman.

What do HOAs do?

Prospective homeowners should understand that living in a community association comes with several advantages, according to the Community Associations Institute. These include:  

Maintenance and amenities: HOAs manage and maintain common areas like pools, tennis courts, parks, and landscaping. These costs are typically covered through HOA fees.  

Property value protection: The rules and regulations set by the HOA help maintain uniformity and community aesthetics, which in turn protects property values. If homes must be kept in a certain way and homeowners can’t pile up things on their lawns, it can prevent homes from becoming eyesores.   

Conveniences: Many community associations take care of essential services, such as lawn cutting, trash collection, snow removal, and street maintenance, which are included in the fees. 

Security: Some communities offer security services, such as gated entrances or on-site security personnel.

A sense of community: The association may organize social events, neighborhood gatherings, and provide opportunities for residents to volunteer and get to know their neighbors.

Financial stability and governance: Homeowners have a say in how the community is managed, as residents typically elect board members. 

What are the rules and regulations set by HOAs?

Homebuyers should read the HOA’s rules and regulations, bylaws, and financial reports to understand the scope of HOA fees, reserve funds, and how the community is managed. They want to ensure this is the right fit for them.

According to the Community Associations Institute, the rules generally include:

Home modifications: Community associations may require approval before making changes to the exterior of a home, such as painting or adding structures. While this ensures any updates align with the neighborhood's overall aesthetic, it may cramp a homeowner’s individual style.

Holiday displays: Many community associations encourage keeping holiday displays within certain guidelines. These might include limits on the size of the display, how long it’s up, and what time lights must be turned off.

Flag displays: HOAs may have guidelines about the size, placement, or timing of putting up certain flags. 

Parking and vehicles: Some associations set guidelines for parking, including restrictions on commercial vehicles or RVs parked outside homes.

What are the worst-case scenarios associated with an HOA?

Anyone buying into an HOA or condo development should read the rules carefully to make sure they can live with them, recommended Evan McKenzie, head of the political science department at the University of Illinois at Chicago. 

Homeowners may be restricted on which colors or changes they can make to the exterior of their homes. Their HOA may also limit what they can display on their properties, such as signs, flags, and holiday displays. 

“Insist on reviewing the association’s financial statement so you know that the development is solvent and you are not going to get hit with a special assessment for major repairs,” McKenzie said. 

Generally, HOAs keep a reserve of funds to cover unexpected expenses. However, if an emergency happens, like a broken elevator or if the pool must be entirely retiled, there may not be enough cash in the reserves to cover these types of projects. That’s when the HOA may impose a special assessment.

This is when homeowners are asked to pay an additional fee to help cover the costs. The cost can be based on the number of units in the community, the scope of the project, and other factors. But it can be an unexpected expense that homeowners are forced to shoulder.

Homeowners will also want to make sure they pay their HOA dues on time. There have been foreclosures over small amounts of unpaid assessments and tens of thousands of dollars in attorney fees and penalties. 

“The worst abuses of power and mistakes always involve people’s money,” McKenzie said. “There have been many, many cases of embezzlement by HOA and condo association directors, officers, and property managers.”