4 Terrifying Things to Know About Homeowners Associations

By: Jon Dulin

May 21, 2018

4 Terrifying Things to Know About Homeowners Associations

If you never lived in a development with a homeowners association, you might think that having your lawn mowed for you and not having to take care of the swimming pool sounds great. You might even think you would save a lot of money.

But the truth is that homeowners associations can be a nightmare to deal with. From ever rising fees, special assessments and myriad of rules to follow, some homeowners wish they never bought a home that was in a development overseen by an HOA.

Before you buy a house that has a homeowners association, here are 4 terrifying things you need to know.

4 Terrifying Things To Know About Homeowners Associations

#1. The Fees Go Up….A Lot

When you are considering buying a house that has a homeowners association, don’t be fooled into thinking that the monthly or quarterly fee you would be paying now will be the same next year or even the next.

The fees you pay increase. And in some cases every single year. This makes sense when you think about how economics works. Every year, thanks to inflation, the prices for goods and services increases. Therefore a homeowners association has to increase the fees that homeowners pay in order to continue paying for the services it provides.

When I owned a condo in a development that had an HOA, my annual fees went up every year but one. That’s 8 times in 9 years. And the average increase was around 3% each year.

That might not sound like a like, but when you are getting a 3% raise at work, you will have a tough time getting ahead financially.

#2. Some Homeowners Associations Don’t Care

It might sound nice to have an HOA that doesn’t care. But I don’t mean that they don’t care about enforcing rules, I am talking about a homeowners association that doesn’t care about managing the development.

Grass won’t be cut as often as it should be and the landscaping leaves a lot to be desired. Even the units are slowly falling apart because regular maintenance isn’t being completed.

But they are still collecting your monthly dues. Before you buy in an area with an HOA, make sure they are keeping up with their duties. It might not sound like an issue now, but when you go to sell your house and the development looks like a dump, you are going to have a hard time selling or even be forced sell at a loss.

#3. You’ll Get Hit With Special Assessments

When I bought my house, I had no clue about special assessment fees that the homeowners associations charged. I found out though that winter. Even know the HOA had budgeted for snow removal, we got dumped on and the costs for snow removal exceeded the budgeted amount.

Guess who pays to make up the difference? The homeowners. In addition to my usual April bill, I had an additional $300 snow removal assessment to pay. In fact, I had to pay this special assessment 5 times I lived there.

And don’t think for a minute when the HOA doesn’t exceed the budget they give you money back. Nope, they keep the money for other improvements.

If you are not worried about this because you don’t live in a snowy climate, special assessments don’t end there. If the parking lot needs paving, you will pay for it. If your building needs a new roof, you will pay for it.

The bottom line is to put some money aside in a savings account, because odds are you are going to need it at some point.

#4. You Have To Follow Rules

Homeowners associations have all sorts of rules you have to follow. If you don’t, they fine you. In some cases, if they fine you enough times, they have the right to force you out! When I bought my condo, the rulebook was 80 pages long, all single spaced.

I couldn’t have a grill. There were certain pets I couldn’t own. My front door had to be a certain color. In fact, when I wanted to paint my front door because it was looking old and weathered, I had to buy the exact color red paint that the homeowners association approved. It wasn’t red, it was cardinal red.

So before you buy a home in a development with an HOA, make sure you get the rulebook ahead of time and read through it. It will save you a lot of potential headaches down the road.

Final Thoughts

So there are 4 terrifying things you need to know about homeowners associations. Don’t get me wrong, there are some HOA’s out there that are great. They manage the property well and they budget smart so you don’t have to deal with ever increasing fees.

Sadly though there are more bad HOA’s than good. So be sure to do your homework before you buy a house in a development that is overseen by a homeowners association. You will save yourself a lot of potential stress.

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About the Author:

Jon writes for Money Smart Guides, a personal finance blog that helps readers get out of debt and start investing for their future. He has been investing since he was 16 and has learned a lot through the years. He uses these investment lessons to help him be a more successful investor today. Also check out his contributions to Compounding Pennies and ETF Trends.

1 thought on “4 Terrifying Things to Know About Homeowners Associations”

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    Good post! I’ve never known anyone who was happy with the HOA where they lived, no matter what the quality or cost of the development. Two sets of friends of mine — both pleasant and agreeable couples — moved out specifically because of problems with the HOA — and moving is not cheap. And right now another couple I know is trying to deal with an unhinged neighbor — fortunately the HOA is on their side, but that hasn’t stopped several lawsuits from happening. And then there was my former MiL, who loved to do things like serve as president of an HOA: we sat down for Thanksgiving dinner one year…she hadn’t even settled into her chair before someone in her complex called to say they’d clogged their plumbing and demanded that she do something about it!

    LOL! Couldn’t pay me to live in one of the things. Save the money you’d have to pay the HOA to put toward a home in an area where neighbors show pride of ownership…without having a small-time Big Brother riding herd on them.

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