Review These Homeowners Association Pros and Cons Before Buying Your Next Home

A home buyer's guide to the advantages and disadvantages of living in a neighborhood with a homeowners association.

Have you considered the pros and cons of a homeowners association before making an offer to buy a home with an HOA? There are advantages and disadvantages of living in a neighborhood with a homeowners association. It is important to know that there are additional expenditures, including association dues, assessments, and other fees, which you will have to pay if you buy a new home in North Carolina with an HOA.

In this Buyer’s Guide article, you can learn about the pros and cons associated with homeowners associations and decide whether or not you want to live in a home and neighborhood with an HOA. For first-time buyers and others unfamiliar with homeowners associations, we’ll start by looking at the basics of an HOA.

What is an HOA?

When you buy a home that is part of a homeowners association, you agree to live according to the association’s rules (CC&Rs – covenants, codes, and restrictions) and pay a fee that contributes to the overall maintenance and management of the community. The CC&Rs not only apply to the homeowner, but also to the home. An HOA Board, which is usually comprised of property owners, hold regular meetings and are responsible for overseeing the neighborhood HOA operations and funding.

Homeowner’s Association Pros

People that own a home in North Carolina often cite some of the following as HOA advantages. As you read this, remember, one property owner’s advantage is often another’s disadvantage.

Neighborhood / Property Maintenance Expenditures

If you buy a North Carolina home in a covenant-controlled development, part of your HOA fees go to paying for maintenance of common areas that can include: walking paths, pools, fitness rooms and other communal areas. Depending on whether you live in a condominium or townhome, the HOA may also be responsible for maintaining and repairing the exterior of your home. Other expenses that HOA dues cover include city utility services to the community and insurance premiums.

Community Appearance

The CC&Rs of your of your homeowners association set standards which every homeowner must meet or they will face repercussions, usually in the form of a fine. Some homeowners see this as a benefit of an HOA because it ensures that neighbors’ lawns and yards will be cut and tidy and their houses will be well-maintained. The CC&Rs often cover standards like what color you can paint your home’s exterior, how many and what types of vehicles can be parked on your property and what you can plant in your yard. These standards are often also used to regulate behaviors such as cleaning up after your pet, renting your home and enforcing noise restrictions.

Neighborhood Amenities

When you buy a home in a planned community with an HOA, unlike most older, well-established neighborhoods, you often have access to a range of amenities. Some of these amenities may include a fitness room, swimming pool, clubhouse, common area green spaces, walking/biking trails, sports fields, tennis courts and other neighborhood amenities. Homeowners pay for the upkeep of these amenities through their HOA dues.

Resale Value of Home

Another Homeowners Association pro cited by property owners and real estate professionals is that HOAs can have a positive effect on resale values of North Carolina homes. Because homeowners are required to maintain their homes and yards and pay dues work to keep the community in good shape, an HOA can work to preserve and enhance property values. Buyers can ask their real estate agent to run the numbers and see if this holds true in the neighborhood where they are thinking about buying a home.

Homeowners Association Cons

Not all property owners agree that the advantages of HOAs outweigh the restrictions. In fact, some buyers view the limitations placed on what color they can paint their home, what type of vehicle they can park in their driveway, what type of flags they can fly on their home and other HOA rules, as a deal-breaker. It doesn’t help that if you don’t follow the rules, pay your fines or keep up with your dues, the HOA can put a lien on your home. Below are some of the other disadvantages of a homeowners association:

HOA Fees are Not Tax Deductible

Unlike mortgage interest, certain mortgage points, some PMI and real estate property taxes, homeowners cannot deduct HOA fees from their income taxes.

HOA Dues are Not Set in Stone

The fact that an HOA Board has the power to raise dues for any number of reasons is another disadvantage of homeowners associations. This is especially true if you are retired and living on monthly fixed-income. The uncertainty of exactly how much you will have to pay year after year for HOA payments is a turnoff for many potential home buyers.

Unexpected Assessments

When you live in a community governed by a homeowners association, you also need to be prepared to pay for assessments. A few examples of why these one-time fees are assessed to homeowners include: higher than expected operating expenses, other homeowners not paying HOA dues, and catastrophes such as fires and hurricanes that may not be fully covered by insurance. The amount of an assessment depends on the funds that are needed, and the cost is distributed equally among homeowners.

Rental Restrictions

Are you relocating to a new city and need to rent out your current home until the real estate market recovers and you can list it for sale? You better check your CC&Rs first because your HOA may not allow rentals or may place restrictions on rental terms. Renting may not seem important when you buy a new house in North Carolina, but the future is unpredictable and leaving your options open is always a smart move.

Review HOA CC&Rs Prior to Closing

If you decide to buy a North Carolina home with a homeowner’s association, sit down with your real estate agent and carefully study the CC&Rs before you purchase the home. Do not wait until closing to receive a copy from the listing agent and seller. In fact, you should add a contingency to the purchase contract requiring that you receive, and have a chance to review the relevant governing documents well in advance of the closing. If possible, it is also a good idea to have your attorney review the documents as well.

Now that you have read pros and cons of joining homeowners association, what are your thoughts about buying a home in Raleigh, Durham and Chapel Hill, North Carolina that comes with an HOA? If you want to rule out purchasing a property governed by a homeowners association, make sure to make a note of that on your home buying checklist and inform your North Carolina real estate agent of your decision.

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