Home Buying in Morgan Hill>Question Details

shannon.pich…, Home Buyer in San Martin, CA

Hi, what are the pros and cons of buying a home under a HOA? I found a great house but its HOA and I am worried. Thanks!

Asked by shannon.pichler, San Martin, CA Tue Aug 28, 2012

Help the community by answering this question:


Hi Shannon,
Many newer communities are establishing Home Owners Association in order to provide for ongoing maintenance of the community's common areas such as parks and pools. Others have private roads that are not maintained by the city. There are also some that maintain the home owners' front yards. The key is to find out what you get for your monthly dues and if it seems worth it and you like the house, attempt to buy it. If you get in contract you will want to have your agent or title company order a copy of the HOA Documents which should include the rules, newsletters, budget etc. These are important to examine to determine the health of the HOA. If you are comfortable with what you see and the house fits your needs you can feel better about moving forward with the purchase.

I hope that was helpful. Good luck to you.

John Wunderlich
Broker-owner / Realtor
Wunderlich Realty - Morgan Hill
(408) 201-4007
1 vote Thank Flag Link Tue Aug 28, 2012
The first con most people see is the monthly fee, but make sure you examine what this fee covers. Depending on the HOA, it will vary greatly. It will usually cover common areas, parks, pool, community landscaping, and may cover exterior paint, roofs, fences. You or your agent can usually find out the important pieces of info like this from simply talking with the listing agent.

However, as previously mentioned, make sure to take the time to review the HOA docs to find out what's been talked about in recent meetings and the financial health of the HOA. You hear about the horror stories, but there are many more HOAs in great financial position. Keep in mind you often don't get copies of the HOA docs until you're in contract to buy the home.

HOAs have CC&Rs (covenants, conditions and restrictions), some people see them as pros and some as cons. They are designed to govern what goes on in a community with the idea of keeping values up in a neighborhood. For instance, they'll likely require that you maintain your yard and restrict what color you can paint your home. In general, the rules are to protect homeowners and home values, but if there are rules you don't want to live by, you should look elsewhere.

I heard a story once about a professional basketball player who bought a home in an HOA and put up a basketball hoop over the garage. This was a violation of the HOA rules and he was forced to remove it. Just one example.

You'll notice more and more new home communities incorporating an HOA as they see it as a positive thing. In some cases they don't have a choice because the city requires new parks to be built and that the community (HOA) supports it.
1 vote Thank Flag Link Tue Aug 28, 2012
Shannon read the rules and bylaws and see if it fits your lifesyl. Most rules protect the home owners. Next check to make sure the HOA is in good financial decision. Also get the miuntes from teh ast years meeting sto see what they are talking about. you will get a great feel if it is a good place to live by reading the minutes and see what their concerns or compalints are.
1 vote Thank Flag Link Tue Aug 28, 2012
It really depends on the particular property and the association. Some associations have very limited scope, like maintaining a common driveway. In that case the dues were around $120 a year. Other associations maintain all exterior of the buildings, pools, health clubs, landscaping, earthquake insurance, etc. It is really up to you to figure out what you are comfortable with. In any case, considering a home within an association make sure to check their docs including the financials.
Web Reference: http://talisrealestate.com
0 votes Thank Flag Link Tue Aug 28, 2012
I think there are pros and cons. An HOA maintains certain things that you would have to do yourself if they were not present. So, payments for landscaping, maintenance, roof repair would all be your responsibility. Great for the busy working professional who really doesn't have time nor inclination of home maintenance.

The cons are that if the HOA goes down, so do the homeowners. You are directly impacted by its management and fiscal policies. You are relying on other people to maintain your home and if they screw up in any way, you will pay the price.

I've seen buyers debate this issue before and I believe the decision should be made according to your lifestyle. What is the best solution for you and what fits in with your time demands the best?

Good luck.
0 votes Thank Flag Link Tue Aug 28, 2012

"CONS" to living with HOA: 1) The monthly dues can approach the size of a car payment. It could also have an negative impact on your qualifying: a $200 HOA dues, for example, reduces your purchasing power by roughly $42,000! 2) There may be some deed restrictions which would affect your use and enjoyment of the home.

"PROS" to living in a HOA: 1) Nice, uniformity of the neighborhood, 2) often, there is a nice entrance and perhaps recreational areas; 3) the HOA rules tend to help keep the "curb appeal" fresh due to restrictions of commercial or recreational vehicles on the street or, even in the drive way.

I would not worry about a home in a HOA project, if you can afford the dues.

I would be happy to provide you with the data on each of the HOA's you are considering.

Mike Walters, DRE #0466668
text/cell: 831/630-3717
email: Mike@CaHomes411.com
Web Reference: http://www.CaHomes411.com
0 votes Thank Flag Link Tue Aug 28, 2012
Hi Shannon:

Thanks for your post.

Sadly, Trulia gives me only about 1500 words to answer a questions, and, frankly, I could write VOLUMES regarding living in an HOA. In fact, I HAVE written a volume about HOAs called "Homeowners Associations: A How-To Guide for Leadership and Effective Participation" (don't blame me...the long title was my co-author's idea).

So here's the skinny regarding HOAs, and I'll make it succinct. If you need more information, work with a Realtor who is very very versed in HOAs or has a good working knowledge of these--not all Realtors truly understand these "animals", but, if they don't, they should have access to someone who can review and evaluate the HOA for you.

Here are some of the most common "negatives" of living in an HOA:

1. HOAs come in four different versions: a) condominium, b) planned development, c) apartment community and d) cooperative. We usually have only a and b here in Santa Clara County, but there are a few co-ops in the area.
2. An HOA's ability to "control" the homeowner is based on what the HOA owns. The most restrictive form of HOA is a condominium community because the HOA owns the building and you own only the air space. The other version, a Planned Development can be anything from a single family detached home to a single family home attached. Remember a "townhouse" is just a form or architecture and does NOT indicate who owns the building or the land--the CC&Rs should specify condominium or planned development.
3. HOAs live and die by the CC&Rs, and, in fact, these are "recorded" restrictions against your DEED. So if there are things in the CC&Rs that you can't agree to obey, then its best to find another place to live since the CC&Rs are--without being changed by a huge majority of the membership--inviolate.
4. HOAs have rules too--agree to live by these rules or find another place to live.
5. HOAs are highly political "animals" and policy, much like any governmental agency, is driven by politics in as much as it is by need. Boards of Directors are not always rational or equitable or worthy of the positions they hold. Conversely, there are many Boards that are highly deserving of praise. Knowing which type controls your Association is, as they say in the commercials..."priceless."

Now here are a few good things about HOAs:

1. The value of any home within a community is positively (or negatively) affected by the way the community is run, maintained and operated. A well run HOA and manicured grounds will add value to your home. Similarly a poorly run HOA with plenty of foreclosures and defaults will negatively affect the home. On the average, however, homes will maintain more value and be better maintained with an HOA
2. Homeowners can "expect" or budget repairs into the assessments. Unlike other owners who must pay for every repair and expense, the owners of attached housing within an HOA have the luxury of having a lot of the repairs managed and paid for by the HOA. HOA dues are like an "automatic" savings account for future repairs and major expenses.
3. HOAs provide an "expected" lifestyle within a community. In other words, each homeowner will be required to obey certain noise rules and restrict certain activities while at the community. In other neighborhoods without restrictions, you might have a neighbor who likes to store trash in his backyard, or who owns and regularly fires up loud and noisy machines or appliances or who likes to have parties that last 72 hours--these types of activities would not be allowed in an HOA and would help maintain value for your home as well as peace of mind for community members.

Most importantly, however, you and your Realtor should review ALL of the documents regarding the homeowners association--minutes, budget, financials, newsletters, governing documents--to determine if this is the right place for you. Because an HOA has such huge control over its membership, knowing that you can and will be able to live in the environment is the key to successful ownership within an HOA.

Good luck! Call me if you do not have a Realtor and need assistance in your sale!

Grace Morioka
Area Pro Realty
0 votes Thank Flag Link Tue Aug 28, 2012
Thank you so much for a detailed response! This will come in handy!
Flag Tue Aug 28, 2012
You should visit the enclave and talk to the residents:
They can tell you more than the CCR's;
Parking, Pets, Yard Keeping, Amenities, Noise, Security etc.

Also, we have heard of a lot of HOA's going BK: find out how efficient and stable it is.

Good luck and may God bless
0 votes Thank Flag Link Tue Aug 28, 2012
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