Buying a House with HOA: What to Consider Before Buying a House with an HOA
One thing you may want consider when buying a house in Phoenix area is homeowner association (HOA). If you are considering buying a home that governed by HOA, you need to know exactly what you are getting into. Most first time home buyer will only take monthly HOA fees into consideration. Read on and find out what impact it will have on your monthly and long-term expenses.
What Is a Homeowners Association?
An HOA is a legal entity that oversee the maintenance and upkeep of a neighborhood’s communal areas. That means servicing the pool if there is one, maintaining common area lawn care for residents and ensuring that security gates and lights are working properly.
On top of that HOA also creates certains rules called covenants, conditions, and restrictions (CC&Rs) that list what residents can and can’t do. These rules vary from one homeowners association to another and they can be general or very specific guidelines. For example, an HOA might have restrictions on the exterior house color the resident can paint the types of vehicles you can park on the street or in your driveway (no RVs, for example).
HOA sets the standards for your home
HOA gets to determine what is an acceptable appearance for your home. The paint color, where you park your car, how often you mow your lawn, the landscaping of your front yard and how you decorate your home’s exterior for the holidays may all be scrutinized by a homeowners association.
Buyer will or should receive the HOA’s CC&R during escrow process. Be sure to read all the CC&R during the 5 days after receiving the document. If buyer is disapproving the HOA bylaws, buyer may cancel the purchase and get the earnest money back.
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Find out about fees
When you purchase a home in a neighborhood that’s governed by an HOA, it’s expected that you will pay to cover the cost of maintenance and repairs. HOA fees are varies by neighborhood and the amount you pay can vary based on the amenities they cover. Homeowners associations have the right to increase these fees periodically.
Aside from the monthly HOA fees, you also find out about penalty fees that you might owe for violating one of the community bylaws. Something as simple as leaving your garbage can by the side of the road for too long after the trash has been picked up could result in a fine.
Reserve Fund
You also want to find out how much reserve fund the HOA has. A reserve fund is a savings account set aside for meeting the future costs of upkeep and any unexpected costs that may arise. You want to know whether the HOA is collecting enough dues to cover its expenses? How much of the HOA dues is going toward reserves each month? You don’t want hit by an unexpected bill because the clubhouse roof has fallen.
How much is HOA fees
HOA fees is varies depending on community and and community amenities. If the community has club house and community pool, the monthly fees may be over $100. Beware of gate community, some gated community in Phoenix has two separate HOAs.
How do I pay HOA fees
HOA fees normally are not part of escrow account. You will have to pay the fees separately. HOA fees are due monthly or quarterly, depending on the managing company.
Falling behind on HOA dues can lead to foreclosure
This is another reason buyer wants to make sure those HOA fees are in the budget. A HOA can move to foreclose on your property if you fail to pay its dues and/or associated late fees, even you pay your mortgage on time.
You might be interested: HOAs foreclosing on hundreds of Phoenix-area homeowners for as little as $1,200
The bottom line
Homeowners’ associations can be your best friend when they prevent your neighbor from painting her house neon pink, but your worst enemy when they expect you to perform expensive maintenance on your home that you don’t think is necessary or impose rules that you find too restrictive. Before you purchase a property subject to HOA rules and fees, make sure you know exactly what you are getting into.
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