If you are buying any property, whether it is land, house, condo, or townhome, there might be a Homeowners Association (HOA) involved. Knowing as much as you can about the HOA will help you make a quality decision in the homebuying process.

Knowing as much as you can about the HOA will help you make a
quality decision in the homebuying process. (Photo: Brian Babb / Unsplash).
Duane Duggan, Realtor and Author, RE/MAX of Boulder
Duane Duggan, Realtor and Author, RE/MAX of Boulder

An HOA will provide a number of services and benefits to the homeowners they serve, but at the same time homeowners must pay fees to belong. The fees are not included in your mortgage payment so it’s important to understand these additional costs ahead of time.

What is an HOA? Anytime there are common ownership elements involved in a multi-family unit or neighborhood, an association is formed to administer the care and management of these elements. The cost of this administration is almost always divided among the owners.

Common ownership elements can include lawn areas, parking lots, playgrounds, greenbelts, swimming pools, community gardens and lake fronts. The maintenance expenses might include building insurance, exterior maintenance (e.g., painting, new sidewalks), hiring a professional pool maintenance company, hiring a lifeguard to patrol the pool, contracting with a snow removal company during winter, and replacing a roof when the time comes.

Associations usually have a board of directors, which consists of several neighborhood residents who have either been elected or volunteer to do the job. Depending on the size of the neighborhood or complex, the board treasurer will collect membership fees, or the job will be contracted out to a professional property management company. The board of directors will oversee the purchase of insurance and coordinate the establishment of rules and regulations, making sure every member gets a copy. This group also determines when exterior maintenance, such as painting, will be done. The association’s record books are usually available to any member at any time. Decisions are not arbitrarily made by the board; all members give input and vote on issues.

Some HOAs are optional, others are mandatory. Owners of townhomes and condominiums are almost always required to pay into an association because nearly every expense involved affects everyone living in the complex. In this case, your fees may cover everything from exterior maintenance to the cost of monthly water, trash and sewer service.

These HOAs don’t take your money and run. They are stewards of your dollars and if they do their job, they can strongly enhance your quality of life. In most cases, they are well worth the money you invest.

An HOA may have the right to charge what is known as a Working Capital Fee at closing. This fee is usually refunded to you when you sell your unit. You need to find out how much this fee is.

An HOA will usually charge a transfer fee and status letter fee to add the homeowner’s billing information into their system. On the contract, there is a check box as to who will pay for this. Transfer fees can vary widely, making it a good decision to know the amount before you write a contract.

When investigating an HOA it is important to review their financials carefully before purchasing a property which belongs to it. For example, if you notice the parking lot pavement needs replaced, but there are no dollars reserved for that replacement, there will very likely be a special assessment in the future.

By Duane Duggan, RE/MAX of Boulder. Duane is an award-winning Realtor and author of the book, “Realtor for Life”. He has been a Realtor for RE/MAX of Boulder since 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail Duane at DuaneDuggan@boulderco.com, call 303.441.5611 or visit boulderco.com.