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When purchasing a home, many buyers may be hoping to avoid purchasing a property that is governed by a homeowners association.
But that may be easier said than done.
That's because HOAs are on the rise in the United States. Therefore, it is important to understand the specifics of these organizations before purchasing.
According to recent data from Frontdoor, nearly three-quarters, or 70%, of homeowners surveyed say if they were buying a new home in the future, they would prefer a community without an HOA. The home repair and maintenance services company surveyed 1,005 homeowners in September, 85% of whom are currently part of an HOA.
Why HOAs are Hard to Avoid
Homeowners associations consist of community residents who are elected to a board of directors that governs the neighborhood through a set of rules and regulations. Homeowners pay contributions for the maintenance and repair of public areas such as parks, streets and community pools.
Such organizations exist for various types of properties, from single-family homes to townhomes to condominiums and cooperatives.
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The presence of HOAs in the United States has increased significantly over the past few decades. According to the foundation, in 1970 there were 10,000 community associations with around 2.1 million residents.
About 65% of new single-family homes were built within homeowner associations in 2023, up from 49% in 2009, according to the U.S. Census.
According to the Foundation for Community Association Research, HOAs, or community associations, now make up about 30% of the housing stock in the U.S. and are home to 75.5 million Americans. The company is an affiliate of the Community Associations Institute, a membership group for HOAs and other community organizations.
Thomas M. Skiba, CEO of the Community Associations Institute, a membership organization of homeowners' and condominium associations, said community benefit associations are becoming more common because they provide a financial benefit to local governments.
“You don’t have to plow the road anymore [or] If they do all the maintenance, they still collect the full property tax,” Skiba told CNBC, referring to local authorities.
In some areas, HOA membership is more common. According to a data analysis by This Old House, a home improvement website, Florida has the highest HOA membership rate at 66.86%, or more than 4 million homes in HOAs.
“In many cases, it really is a luxury to buy a home that is not in a community,” said Steve Horvath, co-founder of HOA United, an advocacy group for homeowners in community communities.
How HOAs Increase the Cost of Homeownership
The price associated with a community benefit depends on the location and the amenities the association offers.
According to the American National Bank of Texas, mandatory membership can cost homeowners anywhere from $100 per year to more than $1,000 per month, depending on the community.
Such costs tend to increase over time and rarely decrease. In the Frontdoor survey, 51% of current HOA members said their HOA fees have increased and 65% said price increases occur frequently.
How to Check an HOA Before Buying
Many Americans are satisfied with their HOA. According to Frontdoor, about 60% of homeowners surveyed said they had a positive experience with their community.
But others suffer from discomfort. About one in three people had an experience that prompted them to move, Frontdoor found. Of those looking to leave the area, 63% complained about fees, while 53% cited inconsistent code enforcement.
“Sometimes HOAs can be really intrusive,” like what colors you can choose to paint the outside of your home, said Jim Tobin, CEO of the National Association of Home Builders.
If you are currently looking for a home and aren't sure if a home ownership community is right for you, there are a few things to keep in mind during the buying process:
- Ask your real estate agent or the home seller's agent for a copy of all HOA documents such as agreements, bylaws, fee schedule, rules and regulations, experts say. Also ask for meeting minutes, whether annual meeting minutes or board meeting minutes from the last 12 months, Horvath said. Such documents can be very telling about how an HOA is operated, he said.
- According to Skiba, ask about monthly or annual fees, the HOA's budget and the history of how valuations have changed over the years.
- Ask your real estate agent or the seller's agent if there are any unpaid tax bills on the home you want to buy, Horvath said. Such outstanding amounts should be paid by the seller as part of the sale.
- Review any pending litigation, disputes or existing judgments within the community, Horvath said.
- Check out the community's reserve funds that ensure repairs and renovations. Check whether the community is setting aside enough money for large expenses or whether they will be funded through real estate, Skiba said.
- If possible, ask if you can attend a board meeting or the member's annual general meeting.