Considerations Before You Buy in a Homeowner's Association

When you look at purchasing a property within a homeowner's association, there are several considerations that must be made beyond those of a property outside an HOA. You will have to consider the association dues, the covenants, conditions, and restrictions for the association, and the financial position of the association.

First, and probably the most obvious consideration, is the dues. Make sure you know what the dues are, don't believe the amount the seller states. A seller may not even know what the dues are, especially if they have not been living at the property for a while. Association boards can often raise the dues or charge special assessments without much notice. Make sure you or your agent contact the HOA directly and confirm what balance is due and what the assessments are going forward. Be sure you get the seller to pay the past-due balance at closing.

Another consideration when buying within an association are the covenants, conditions, and restrictions (CC&Rs). These are the rules for your community; make sure you know what they are. If you plan on having a pet, make sure the rules allow it. These rules can contain all kinds of things that you may or may not like, be sure you read through and understand them before you purchase the property.

Finally, you need to have an understanding of the association's financial situation. When you buy a property in an HOA, you are buying into the assets and liabilities of the association. Get a copy of their financial statements and see how they have been doing for the last few months or even years. If you see that they are barely scraping by, or have huge amounts of debt, you may want to look for a different place to buy. Check how much they have in their reserve accounts and consider whether or not that seems like enough. If you know they are going to have to replace the pool next year as well as repave the streets in the community and they only have a couple thousand dollars that is a warning sign that they aren't prepared to handle large upcoming expenses. When the association has to undertake an expensive project and doesn't have the funds available, they have to charge a special assessment to all the owners, make sure you know ahead of time if one of those owners will be you.

By checking these additional concerns, you can protect your investment in a new property within a homeowner's association.