Homeowners associations, or HOAs, have seen a huge surge in popularity over the past few decades. Over a quarter of the U.S. population today is part of an HOA, and 67% of newly completed homes in 2021 were part of HOAs, a massive increase over 2011, when only 18% of homes were part of them.
More and more, when it’s time to hire a real estate agent or browse a home-buying website, eager buyers are looking for a home with an HOA.
But understanding how HOAs actually work can be difficult. Maybe not as complicated as figuring out capital gains taxes, but still, there’s more than meets the eye. Homeowners associations can help communities flourish, but they also wield almost unlimited power over the properties within their purview, and the penalties for breaking HOA rules can be costly.
Let’s touch on 20 important things to know before you move into an HOA neighborhood.
1. Not all HOAs are the same
There are three main types of HOAs: homeowners associations, condo associations, and co-ops.
In a homeowners association (the most common type of HOA), each member owns a single-family home, and pays fees to cover common areas and services.
In a condo association (the second-most common type of HOA), each member owns their individual condo, but the COA owns the encompassing structure.
In a co-op, the building is owned by a corporation, and each member owns shares which give them the right to live in the building.
Each type of HOA operates slightly differently, so you should know exactly what kind of HOA you’re joining.
2. Read the HOA documents
When you first move into your new home, you may not feel like reading through the long HOA handbook. But it’s in your best interest to sit down and give it a thorough read, as it contains the rules that will define the borders and obligations of your neighborhood life.
Pay particular attention to two documents: the HOA bylaws, and the CC&Rs. The bylaws lay out how the HOA board is elected, who can vote, and how long their terms last.
The CC&Rs (Covenants, Conditions, and Restrictions) lay out the rules of the HOA — these will cover everything from what color and style your mailbox and trash bin can be, to noise and parking rules, to restrictions on types of pets. This section also outlines the punishments for breaking those rules.
3. You’ll have to pay fees
All members of an HOA have to pay monthly fees. These fees cover common areas, amenities, and common utilities like trash collection or snow removal. Generally, the more services and amenities you enjoy, the higher your HOA fees.
Average HOA fees in the U.S. range from $100 to $1,000 a month, but the average is $200 to $300 a month.
4. You’ll occasionally have to pay additional fees
But you may also have to pay additional fees, called “special assessments,” on top of your regular monthly dues. Your HOA board will collect these when they need to pay for large capital investments like a new HVAC system, road upgrades, or a swimming pool — or when they simply have a budget shortfall that can’t be covered by the reserve funds.
While we always like to say that, in real estate, everything is negotiable, including real estate commission, these special assessments are not negotiable. All members will have to come up with the money.
5. There will be a lot of rules
HOAs are known for rules governing things like the color of your home, the style of trash can you’re allowed to use, restrictions on type and number of pets, the type of landscaping you’re allowed to have, and occupancy limits.
Make sure you’re comfortable with all of your HOA's rules before you move in, because …
6. Rule-breakers are subject to steep punishment
If you break the rules of your HOA, you could be hit with a steep fine or even a notice to appear in court.
Although most HOAs are reasonable, there are a lot of horror stories out there, from someone being fined $375 for using an unapproved flowerpot, to someone being sued by their HOA for leaving their trash can out too long, to an HOA illegally towing a member’s car several times just because they had out-of-state plates.
7. Your HOA might be able to foreclose on your home over unpaid fees
If you fall behind on your HOA fees, and the HOA puts a lien on your home, they might be able to foreclose on your property.
In Colorado alone, which has around 10,000 HOAs, HOAs initiated foreclosure proceedings more than 2,400 times between 2018 and 2022. So while it may sound extreme, homeowners who are perfectly current on their mortgage payments can — and do — lose their homes over unpaid HOA fees.
8. HOA rules are intended to maintain property values
Homeowners associations aim to maintain a certain social and aesthetic environment, and they do this for one reason: to keep property values high.
Even if you may disagree with some of their tactics, they’re generally very effective. On average, a comparative market analysis will show that homes with HOAs have values 5% to 6% greater than comparable homes that don't have HOAs.
So while you might chafe under rules forcing you to, say, paint your mailbox a certain color, you’ll probably feel that it was all worthwhile after you sell your house.
9. The HOA will handle a lot of maintenance
Common areas like roads, cul-de-sacs, pools, playing fields, and sidewalks will be maintained by your HOA. In some cases, they may even handle services like trash collection and street lighting. These services are paid for with your dues.
10. But you’ll likely be responsible for maintaining your own property
However, you’ll almost certainly be responsible for maintaining your own home and yard. This can be a surprise to homeowners who are new to an HOA, and assume their monthly fees cover everything.
Also keep in mind that, while you’re responsible for your yard, you’ll have to maintain it to the standards laid out in the HOA rules.
11. Renovations or additions have to be approved by the ARC
Most HOAs have an ARC, or Architectural Control Committee. The ARC reviews all proposed renovations, and has the power to approve or reject the work, based on whether it’s compatible with the HOA’s desired aesthetic.
Your ARC could be manned by HOA board members or separate personnel. Although homeowners will usually have the right to appeal an ARC rejection, their final decision is almost always non-negotiable.
12. Keep the upsides in mind
HOAs have a lot of rules and can cost a lot of money — but they come with a lot of upsides.
We touched on the fact that homes with HOAs are worth more on average than homes that don't have HOAs, but there are other benefits, too. HOA communities are often cohesive, with a neighborliness that might be lacking in a community without a defined mission and set of shared values.
They’re also usually very nice to look at, since the HOA enforces a specific look across all homes. Homes that belong to an HOA are often so desirable that sellers can quickly and easily sell without an agent.
13. The board holds all the power
The HOA board usually consists of a president, vice president, secretary, and treasurer. There might also be separate committees, such as an ARC.
These board members oversee and carry out the HOA's regulations and penalties, and they’re generally elected by the other members of the HOA. The main exception to that rule is when you’re in a new HOA, and the board was appointed by the real estate developer. This can be a conflict of interest, however, if the aims of the HOA members aren't aligned with the aims of the developer.
14. But you can weigh in at the meetings
HOA boards usually hold regular meetings, either weekly, monthly, or quarterly, where all members can weigh in with concerns or complaints. If you want to change or protest a specific HOA regulation, this is where you should do so.
15. Ask to see the HOA’s financial plan
HOAs usually have a detailed, multiyear blueprint that lays out how it plans to use the collected dues on capital investments, repairs, and updates. It should include cost estimates for all work, as well as the projected balance of reserve funds.
When you look at this plan, pay attention to whether the costs seem realistic, and if the reserve fund balance is projected to drop to zero. Once an HOA exhausts the reserve fund, it will need to collect special assessments to bring in additional money. Speaking of which — you should also ask if the HOA has any special assessments planned in the future.
16. HOA fees will impact your mortgage approval
When your lender assesses how much of a loan you qualify for, they look at your income versus your potential financial obligations. Generally, they don’t want your financial obligations to eat up more than 45% to 50% of your monthly income.
If you’re looking at moving into an HOA property, your potential HOA dues will be included in your future financial obligations, which will increase the percentage of your income tied up in payments. So in a real sense, moving into an HOA community will decrease the amount of home you can afford. For that reason, many HOA buyers are interested in incentives like home buyer rebates to free up extra cash.
17. Do your due diligence before you move in
Look through online forums and websites like Nextdoor to see what people have to say about the HOA. You could also go door-to-door and talk to HOA members about how they feel toward the HOA’s policies and governance.
If you hear a lot of complaints, especially the same complaints over and over, give them serious consideration. You could also talk to the HOA board about the complaints you’ve heard to get their side of the story.
18. HOA insurance can come with quirks
Your HOA will carry its own insurance (paid for with your dues) to cover liability in common areas. If you live in a freestanding house, you’ll need your own home insurance policy to cover it. But if you live in a condo, it’s a bit more complicated.
When you own a condo, you only own a certain portion of the larger structure, so it can be difficult to determine when your insurance coverage starts, and when the HOA’s coverage takes over. Many HOAs may require condo owners to purchase a certain type of insurance, so that there are no coverage gaps between the homeowner’s policy and the HOA policy.
19. Make sure you’re in the loop
Most HOAs use community mass emails or private forums to communicate with members about issues like dues increases, repairs and maintenance, and board meetings. Make sure you sign up for these communications when you move in, so you can stay in the loop regarding all the latest developments.
20. Your HOA fees can (and probably will) increase
The HOA dues you pay on day one aren’t the dues you’ll pay in perpetuity. HOAs will raise your dues if they fall short of their budget, and have unlimited power to do so, unless there are specific limits outlined in the governing documents.
That’s why it’s important to read through the fine print on your governing documents before you sign. Some HOAs place limits on the amount or number of annual dues increases, but some don’t. In some states, there are state laws placing limits on HOA dues increases. For example, in Arizona, the law limits annual HOA dues increases to 20% or less.