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Know Your HOA
Some friends recently wanted to purchase a property, however just before they were about to make an offer they wanted to know if the property was part of a homeowner association. In fact, there was an association, and because of that our friends elected not to buy. When is the right time to disclose membership in a homeowner association?
Whether a property is or is not part of a homeowners association is very important because membership can impact property values.
According to the Community Association Institute, homeownership associations include 29.9 million properties nationwide: “In 2012, association boards supervised the collection of close to $40 billion in annual assessments and maintained investment accounts of more than $35 billion for the long-term maintenance and replacement of commonly held property.”
If a property is part of an HOA, then there is an obligation to join the association and accept its rules as a condition of purchasing the property. That can be attractive if the association provides services that the homeowner wants or bad when the association does not perform. It could be intrusive or expensive relative to the services provided.
HOAs include condominiums, co-ops and planned-unit developments. There are important distinctions among them. For instance, with a condo, the buyer is getting title to a unit and the right to use common areas. With a co-op, a buyer is getting stock in a corporation that owns the entire property, plus the exclusive use of a particular unit.
HOA rules vary and such organizations can have great power. An unpaid HOA fee can be a lien against a property and potentially lead to foreclosure. A “special assessment” can be a huge one-time charge that must be paid.
HOA rules, fees, activities and special assessment issues should be plainly disclosed up front, in the same way that the existence of bedrooms and bathrooms are disclosed. For specifics, speak with local brokers, attorneys and association officials.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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