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3 ways to evaluate if a particular homeowners association is right for you.

The number of Homeowners Associations (HOAs) is growing and about one-third of homes in the U.S. are part of one. If the home you’re considering for purchase is part of an HOA, it’s important to vet the association before you commit. Here are three ways to evaluate an HOA.

(If HOAs are new to you, read these blogs on how HOAs work and their cost.)

Read all the documents

Every HOA has bylaws and rules that outline the association’s role and homeowner responsibilities. Ask for a copy of the Covenants, Conditions and Restrictions (CCR), bylaws and rules.
Some HOAs have extensive rules that many view as a way to preserve the community and property values while others see them as too restrictive. Read all the documents and determine if the requirements suit you.

Review the financials

When you buy a home in an HOA there’s no opting out of dues and assessments. You’re legally obligated to make the HOA payments. Not paying could lead to a lien on your property or even foreclosure. It’s imperative to review the association’s financials before you buy.
When you review the balance sheet and income statement, determine:

• Are the majority members paying dues or are there significant outstanding accounts.
• What’s the state of the reserve fund? Reserve funds are typically used for large, unanticipated expenses and future expenses such as roof replacement.100% funding is ideal but if there were recent expenditures it may be lower. An underfunded reserve fund could mean future assessment for HOA members or, at the extreme, bankruptcy of the association if faced with significant expenses.
• Is there a history of special assessments?
• Do budgeted amounts match or come close to expenditures?
• Is the association keeping up on routine maintenance and repairs?

If you’re not sure how to read financial statements, enlist an accountant or real estate attorney to help you understand them.

Get to know the board and community

HOAs are run by boards. Since the board members live in the community and volunteer to serve, they’re a good source of information. Find out as much as you can about the association by talking to the HOA president, treasurer and other board members. How transparent are they? How are complaints handled? How do they ensure rules are fairly enforced? Are there any pending lawsuits? Are long-term or short-term rentals allowed? If so, what percentage of homes are rented out?

If possible, attend one or more board meetings. This will give you a first-hand view of the dynamics on the board as well as between the board and homeowners. Also, ask the seller for minutes from prior board meetings to learn more about community finances, projects and legal issues.

Walk around the community and talk to the residents. People are often out walking their dogs and exercising in the morning and evening; plan your visit(s) then. Ask them what they like about living there and how they view HOA. As you stroll, inspect the landscaping, common areas, parking lots and the like—are they well-maintained or in need of repair?

When you find the right home in the right HOA

When you complete your due diligence—collecting and analyzing all the HOA information before making a decision—and are ready to buy a home, turn to Consumers for your mortgage. We’ll help you get the loan that suits you.

All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on credit worthiness, qualifications, and collateral conditions.

Consumers home loans

We’d love to help you with a mortgage or home equity line of credit.