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Should you buy a home with a homeowners' association?

Yahoo Personal Finance· Getty Images
6 min read

If you’re looking for a community with unique amenities and maybe even someone else to handle your lawn care, buying a place with a homeowners’ association (HOA) could be for you.

As a resident with an HOA, you’ll have shared costs for certain utilities and community centers in your neighborhood or multifamily building. An HOA can be part of a small or large community of single-family houses, townhouses, or condos. It may also offer amenities such as a swimming pool, manufactured lake, or dog park.

However, you may give up freedoms such as what color you can paint your house or which pet breeds you can own. HOAs also may fine residents who don’t comply with rules. Several factors determine whether the positives outweigh the negatives.

Learn more: How to decide between a condo versus a house

Real estate developers create legal businesses called homeowners’ associations to manage the overall appearance, amenities, and external property of a community of houses, townhouses, or condominium units. Homeowners pay an HOA fee for this, typically monthly or quarterly. In paying the HOA for these services, homeowners agree to abide by the HOA rules or face fines for not complying.

The HOA is usually responsible for maintenance and utilities outside your dwelling. As the homeowner, you are responsible for the upkeep inside your unit and all or some of the utilities.

Before deciding to live in a community with an HOA, ask for a copy of the bylaws from the association or your real estate agent, along with the list of fees and guidelines for residents. If you’re trying to get a mortgage, the lender will ask for the HOA documents before finalizing the loan.

Check for any laws that might restrict your lifestyle — because you don’t want to agree to live in a community, then find out you can’t adopt your dream dog because the breed isn’t welcome.

You should also ask about which utilities are included and what your responsibilities are for property and neighborhood upkeep.

It’s critical that you understand the HOA budget. Some have reserves to cover emergencies like storm damage, while others don’t. If yours doesn’t, it may charge you a special assessment later for any damage. You should also ask when fees will rise. For example, some communities may increase costs to split garbage collection fees if there are a lot of vacancies in the community. Fewer residents mean fewer people with whom to split costs. Rates could also rise with inflation or at a specific annual rate. You can get charged late payment fees, too.

You’ll also want a list of fines for disobeying rules. If lawn care is your responsibility, how much will the HOA charge you if your grass isn’t mowed? Is there a date when holiday lights must come down or you face a fine? Is there a restriction on renting your unit as an Airbnb?

Dig deeper: 12 questions to ask when buying a house

An HOA fee is an ongoing payment to your homeowners’ association to cover its running costs and shared expenses. The national average is around $300 per month. Still, in major cities like New York, Chicago, and Los Angeles, the average is around $700, according to the 2021 United States Census American Housing Survey.

To find your annual fees and reasons they might change, look at your contract when you purchase the home. In extreme cases, HOAs can put a lien on your home or even force a sale if you refuse to pay your fees.

Remember, HOA fees are different from fines charged for violating association rules.

Dig deeper: How much money do I need to buy a house?

Homeowners’ association fees typically go toward shared property and public spaces. Depending on your association, your fees could include:

  • A dog park

  • Maintaining common areas

  • Access to clubhouses and swimming pools

  • Maintaining private streets

  • Construction of and access to human-made lakes and walking trails

  • Shared utilities such as garbage disposal and water or sewer bills

Your homeowners’ association can fine you for breaking an HOA rule. If you think you were charged unfairly or in error, you do have legal recourse. You or your attorney write and send a dispute letter to your association. You can also file a complaint through your state’s housing department website.

Before purchasing a home with an HOA, knock on a few doors in the neighborhood to ask whether residents enjoy the community and their experience with the association.

Not all HOAs make membership mandatory. However, if you live in a community with an association and don’t join, there could be drawbacks, such as not being able to use community centers or swimming pools. If you move into a community and an HOA forms later, you may also have an option not to join.

HOA fees are generally not tax deductible. However, fees can be deducted as business expenses if you are a landlord or work from home in the same way other housing expenses are associated with businesses.

Learn more: Home office tax deduction

Before purchasing a house that’s part of an HOA, you should weigh the advantages and disadvantages.

  • You may get to enjoy a well-maintained property and neighborhood without putting in the work yourself.

  • Attractive yards can improve curb appeal and increase home values in the neighborhood.

  • You could have access to amenities such as a community center, gym, and swimming pool.

  • There could be fewer individual bills for utilities.

  • There are fees, so housing costs may be higher than if you buy a home without an association.

  • You could lose freedoms such as having a certain type of fence or owning any pet you want.

  • The costs of fees and fines could rise.

Homeowners’ association fees typically cover amenities such as clubhouses and community centers. They can also go toward certain utilities like water, garbage collection, and maintenance of private streets.

HOAs often keep the neighborhood cleaner and have more common areas, like clubhouses.

Homeowners’ associations, or HOAs, may also be called property owners’ associations.

This article was edited by Laura Grace Tarpley