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What You Should Know About HOAs

When you buy a house - whether for the first, second or third time - you don't just become a homeowner. You are also part of a community, composed of neighbors, schools, small businesses and the like.

Increasingly, communities throughout the U.S. have new members on the block. They're called homeowners associations, or HOAs, and according to the Community Associations Institute, an estimated 25% of the U.S. population is part of one. HOAs are particularly common in Florida, totaling 48,250, followed closely by California (48,150), with Texas in a distant third (20,050), Illinois (18,700) and North Carolina (14,000) rounding out the top five.

Not only that, but as many as 3,000 HOAs are poised to be created in 2020 alone, putting the total number overall at between 352,000 and 354,000.

Given their ubiquity, it raises a central question: What are homeowners associations? More to the point, what is it that HOAs do?

What are HOAs all about? 

Otherwise known as "property owners associations" or "community associations," HOAs are essentially groups of ordinary individuals that make various common-interest decisions for other people or families who live within the same general vicinity. Members typically live in similarly styled houses, apartments, buildings or condominiums. HOA board members - who are typically elected by homeowners within the organization - schedule meetings on a regular basis (usually once or twice a month) to discuss any number of issues owners may be experiencing, and how to go about addressing them. They also traditionally maintain budgets, make plans for upcoming events or projects and put together announcements that are relevant to other owners within an HOA.

A classic example of something a homeowners association makes decisions about is maintenance of a shared-use property. Say you live in a part of the country where heavy snow is common during the winter. An HOA may decide to hire an outside contractor to plow driveways and parking lots. Board members determine what provider to select and prepare the money needed to pay for snow removal services. They may also be responsible for landscape work or trash pickup.

Where does HOA funding come from?

Of course, none of these services are possible without money, which comes in the form of dues paid by all the members of the HOA on a recurring basis, be it monthly, quarterly or annually, as noted by Nerdwallet. These fees can run the gamut in terms of dollar amount. They can cost a few hundred a month to several thousand, but according to the most recent figures available from Realtor.com, HOA fees for a single-family home average between $200 to $300 per month.

In terms of what other things HOA fees pay for, this also can be wide ranging. Some take care of certain utilities, such as heating, central air conditioning or water; others may address the costs of maintenance for a shared-use fitness facility, pool or tennis court.

What are CC&Rs?

One of the primary roles HOA boards play is putting together certain bylaws everyone within the organization is expected to follow. These rules and regulations are called CC&Rs, or covenants, conditions and restrictions.

CC&Rs serve as guidelines everyone within an HOA is made aware of as to what decisions must go through the board before proceeding. For example, perhaps your windows are in need of replacement. Depending on the HOA's CC&R's, moving forward with this project may first need clearance from HOA representatives. Generally speaking, any decisions that affect the exterior of houses or condos requires the go-ahead from HOAs.

CC&Rs frequently also include rules regarding pets. For example, while an increasing number of HOAs allow homeowners to have a dog or cat, they may not permit households to have more than one of each or prohibit them from being larger than a given size or weight.

As noted by Realtor.com, just because certain rules are in place does not necessarily mean that they're hard and fast. While it is true that board members serve as the ultimate authority in terms of what is and is not allowable, each HOA member has a voice and their opinions matter.

As a result, you may want to consider speaking with someone on the board to discuss your concerns and see what, if anything, can be done to address the situation. There could be some wiggle room depending on the issue in question.

If you're thinking about buying a house where an HOA is in place, do as much research as possible. The more you know about it, the more informed you will be regarding whether the HOA's services, amenities and rules are in keeping with your lifestyle and budget.