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Consider This

Real estate represents the largest asset class in the United States. In fact, according to the Survey of Consumer Finances, about 26 percent of all household wealth is in personal real estate. Keeping in mind the importance of this asset class, some residential areas will try to create organizations that will help maintain the value of properties in the area.

These organizations are usually referred to as Homeowner Associations (HOA). Depending on who you ask, homeowner associations might be considered a great way to protect and maintain the value of your largest asset—they also might be considered an unnecessary nuisance.

If you are planning on buying a home in the near future, one of the most important things you’ll want to think about is whether you want to live in an HOA neighborhood. Below, we will discuss some of the most important things to know about HOAs, including the pros and cons of living in one.

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Homeowners Associations (HOA) Explained

 A Homeowners Associations (HOA) is a structure that helps provide services, establish rules, and otherwise regulate a residential area. HOAs are commonly found in condo and multi-family developments but can also be found among single-family homes as well.  

What's The Cost?

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Membership in the Homeowners Association might be a requirement that comes with signing the mortgage—the mortgage should make it very clear whether this is required and should also clearly explain what your initial annual fees will be. The cost of living in an HOA neighborhood can vary tremendously, with some HOAs costing less than $100 per year and others costing more than $1,000 per month.

What's It Worth

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HOAs will often be responsible for managing community resources, such as public grounds, a pool, security, and neighborhood events. They might also enforce certain building and maintenance standards. These standards are created to help maintain property values, though some opponents of HOAs might argue that’s not always the case. Currently, about 24.8 million homes in the United States are governed by an HOA, accounting for about 62 million residents in total (18 percent of the population). HOAs are typically more common among newer homes.

 

Benefits of Living in an HOA Community

Many people enjoy living in communities or neighborhoods that are governed by an HOA. Some of the most commonly cited benefits of living in an HOA include the following.


Though HOAs only control about 18 percent of all homes in the United States, more than half of all new homes are a part of an HOA. Additionally, about three-quarters of people who are members of HOAs believe their current costs are worth it.

  

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High Property Values

Communities with an HOA are less likely to experience large drops in property values.

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Access to Public Resources

There are many public resources that might be controlled by the HOA, including a neighborhood pool, community parking, tennis or basketball courts, public spaces, and more.

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Neighborhood Beauty

HOAs typically impose basic property standards that make the neighborhood look more beautiful.

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Access to Services

HOAs often provide a variety of different services, including standard yard care and maintenance, snow shoveling, neighborhood security, and more.


Drawbacks of Living in an HOA Community

 Of course, there are also several well-documented drawbacks of living in an HOA as well.


These drawbacks are all reasons why a majority of Americans still choose to live in communities without an HOA.


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High Costs

HOA costs, on average, account for about 17 percent of housing expenses (even more expensive than utilities). Living in an HOA will place a significant strain on your current housing budget.

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Strict Rules

Many people feel that HOAs tend to overstep their boundaries. The three “Most Hated HOA Rules” are strict lawn appearance policies, parking regulations, and pet restrictions. Be sure to see if any rules are for you.

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Limited Building Options

In addition to the actions mentioned above, an HOA might also limit the modifications you can do to your property. Building a pool, expanding your driveway, or even painting your house a new color are all actions that are commonly limited by HOAs.


Deciding Whether an HOA is Right For You

 Whether living under an HOA will be a good or bad thing will depend on many different factors. Before committing one way or the other, ask yourself the following questions.


Asking these questions should make it easier for you to determine whether you’d enjoy living with an HOA. Of course, in some situations, you might not have much of a choice—whether there will be HOA or non-HOA properties available will depend on where you are hoping to buy.


In Florida, for example, the HOA membership rate is over 44 percent. In Mississippi, HOA membership is just 3 percent. As is the case with all things real estate, exploring multiple possible options will always be a good idea.

 

Ask Yourself

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How much of my budget am I willing to allocate to HOA fees?

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What services and resources does this HOA actually provide?

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Have homes in this community been able to maintain their value? Has having an HOA made much a difference?

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What are my long-term goals as a homeowner?

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