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5 Tips for Buying into an HOA

Purchasing a home is a serious commitment with long-term implications. The immediate factors that can swing a buyer’s decision are costs, geographic location and amenities. With every major decision there is an underbelly of more important factors. It is no different in what one should look for when purchasing a home within a community association.

The Type of Community Association

The first deciding factor one needs to consider is what type of community association you are looking for. Homeowner associations or planned unit developments range from single family homes with zero common area, to townhomes with a pool and clubhouse to a condominium within a master association with a smorgasbord of maintenance responsibility. It is these types of factors that will affect the costs associated with assessments which is the lifeblood of the association being able to operate, offer these services and pay their vendors for the work done.

Financial Sustainability

The financial position of the association is crucial. Whether the association is adequately funded and the Assessments are equitable to what the owner is receiving as far as exterior maintenance, common area maintenance, upkeep of amenities. Ask your realtor to do some homework to verify the amount of the assessment and when it is collected. Well managed Associations, especially those with a laundry list of maintenance responsibilities, have a reserve study performed every three to four years. This engineering report assists the association’s board of directors and finance committee best plan the financial future of the association by determining the responsibility, costs associated with these services and creating an annual plan for exterior maintenance. There’s one thing to perform preventative maintenance, but routine maintenance ensures that the association’s funds are not misappropriated because of poor planning and counter productive maintenance.

Prepared for the Future

Reserve monies are vitally important. Depending on the number of projects the association will need to undertake in the future, it is always good to know that the reserves are adequately funded. Without reserves, owners are subject to special assessments which can put a tremendous amount of strain on an individual’s finances. Not to mention, board members and the management company’s ability to run the association come into question and can make for a very unpleasant special or annual meeting!

Community Insurance

Be sure to check what type of insurance the Association has on the buildings as well as common areas. More often than not, townhome structures are not covered by the association. condo insurance can be very complicated so be sure to check with the realtor that the association meets the insurance requirements set forth in the covenants as well as statutory requirements and that they have full coverage and what the deductible is. It wouldn’t hurt to check with a local insurance underwriter to determine what the premium costs are associated with insuring the dwelling as well as your personal belongings. There are several grey areas in insurance such as plumbing leaks. Be sure to establish whether the Association has a resolution for this kind of issue and who is responsible for what.

Governing Documents

Since Articles of Incorporation and Covenants are public records, be sure to read through them to see if there are any restrictions, which may conflict with your lifestyle. Many association’s boards of directors vote on and approve guidelines, whether they pertain to rules and regulations, architectural changes or basic day to day issues. For instance, if you have four vehicles and the association you are interested in has private streets, doesn’t allow for on street parking because streets are private and you only have space for two vehicles, you may want to consider an association that has more flexible parking regulations.

The dynamics and fundamental components to allow a homeowners association to function effectively are numerous. This small guideline should point you in the right direction, assuming you will have the flexibility to comply with the regulations! There is nothing more comforting than knowing that your property values are being protected and that the people behind the scenes have a vested interest and they treat you and your investment as if it were their own.

Mike Talmarkes, CMCA, AMS, PCAM