Buying a home of your own is a fantastic feeling. A place of your own, a place to put down roots, and finally someplace you can paint the walls any color you want.

Yet selecting your home is a stressful process. You never truly know what you’re getting no matter how detailed of a home inspection you get. You’re thinking about how many bedrooms you need, price, school system, an of course curb appeal. There are a lot of variables to consider and over time all the homes you’ve seen start to blend together.

It is also easy to dimiss adding a few dollars to your monthly payment when you’re talking about a transaction in the hundreds of thousands of dollars range. You’re going to be paying on your mortgage for 30 (or hopefully 15) years, so what’s another $10, $50, or $100 per month?

This area — where you’ve got so many factors to consider and you’re spending tons of money — can make it easy to dismiss the added cost of living in a neighborhood with a homeowners association or HOA. Homeowners associations have significant pros and cons; the decision should not be made lightly.

Pros and Cons of Buying a House with a HOA

Here are some factors to consider as you weigh the decision of buying a home in a neighborhood with an HOA.

Potential Positive Impacts of a Homeowners Association

Have you ever seen a home that just looked out of place in a neighborhood? Maybe the yard was four feet tall and unkept. Or perhaps the shutters and trim had been painted neon pink. And we’ve all seen the homes with too many broken down cars in the driveway and front yard.

Living in a neighborhood with a homeowners association should solve all of the above issues. Lawns are maintained, architecture guidelines keep people from having crazy paint colors, and you can’t host a junkyard at home. The rules and regulation of each homeowners association will be slightly different, but in general the idea is to have a uniform look to all of the homes to avoid anyone dragging down the value of the properties.

Some HOAs even mow your yard for you and maintain your landscaping on a set schedule. It depends on what type of neighborhood you are in and what your HOA documents say. This might seem like a minor thing, but if you have never owned a home you have no idea how much work it is just to maintain the look of your property.

Further yet, you may get additional benefits from paying homeowners association dues like access to a community pool or community center to host parties, watch sporting events, and so forth. Again, this is dependent on the community you are living in as to which benefits you will receive.

Potential Negative Impacts of a Homeowners Association

Of course those benefits come at a significant cost.

First, there is the financial cost of paying homeowners association dues. Depending on where you live in the country your HOA dues might be a couple of hundred dollars per year hundreds of dollars per month in costs. You not only have your mortgage principal payment, mortgage interest payment, property tax, and homeowners insurance to worry about, but you’re adding additional cost on top of your normal home ownership costs.

And here’s the kicker on the financial side: if you buy a home in a neighborhood with a homeowners association, you’re buying into a club that you (usually) cannot revoke your membership from no matter what changes occur with the HOA. That means if half of the homes in your neighborhood are foreclosed on and empty (with no owners paying HOA dues) the homeowners association will find themselves with a significant budget shortfall. That isn’t their problem though — they can change the homeowner dues for the association as much as they want to make up the shortfall. Those added costs land on your shoulders, and you can’t get out of them. Even if something this drastic doesn’t happen, your HOA dues can (and likely will) go up in the future as inflation and your annual costs will increase.

Aside from the monthly cost that can rise on you, there is a second issue: your rights.

That might sound a bit extreme, but when you join a homeowners association in a neighborhood that requires every home to be in the association you are in essence giving up some of your rights.

How so?

Your HOA is allowed to penalize you for many infractions that you might find minor. The HOA can also add extra items that as long as they pass, will be added to the rules. So if you leave your trashcan visible from the road for more than 24 hours they can warn you and then fine you. If you have a few weeds in your yard you can expect a letter. If you fail to maintain the property the HOA will hire a landscaping crew to do it for you, and bill you the difference. If you fail to pay the bill they can put a lien on your house — that means they can sell your house in order to pay the bill.

Calculate the Value of your HOA Dues

Should you automatically rule out every home that has a homeowners association? Probably not. It is important to know what exactly you’re paying for and how stringent the rules are. (It can be really helpful to talk to some of your potential future neighbors as well to get their thoughts.)

If you’re okay with the rules that are in place with the HOA the next step is to calculate the value of what you’re getting. Total up what you would pay for a year’s worth of dues and then contrast that to what you would pay out of pocket for the services you get. If you pay $3,000 per year to get lawn mowing, new mulch twice per year, and access to a pool for 5 months out of the year you would need to compare the cost of hiring a lawn company to mow and place mulch, and what a local community pool (like the YMCA) might charge for pool access. Also consider how often you would use the services provided: it might be nice to be able to host 50 people for a football party in the community movie room, but if you’ll never do that it does you no good to pay for the service.

Also be sure to ask to see a budget from the association and what the balance of the current cash account is. You want to avoid buying a home in a neighborhood that is drastically low on cash. Again, any financial problems can be fixed by simply charging residents more each year in dues or having a “special assessment” to raise funds from current residents. A well run HOA will be able to provide you the information needed to avoid making a huge mistake.

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