Part 3: Get Informed First!

(HOAs Part 1)

(HOAs Part 2)

(This is the 3rd and final article regarding HOA’s – Previously we looked at the advantages and disadvantages of living in an HOA community. Today we look at the importance for buyers to understand exactly what they’re getting involved in and the best way to go about checking it out ahead of time)

Most homebuyers are not immediately concerned with a community’s homeowner association (HOA) rules and regulations unless they’ve already had their “experience” — like my client who wrote me following the first article in this series. Because of how he felt he was treated, he may not ever own a home in an HOA again. I think it’s also fair to say that his experience in his community is NOT like most communities.

The main question I get is how much are the monthly HOA’s (dues amount)? The second question is typically, “what do the dues cover?” But honestly, one of the most important parts of our AAR Purchase Contract is the HOA Addendum. Every purchase of a property in an HOA is now required to follow the rules spelled out in this addendum (partially reprinted below) because the myriad legal problems surrounding HOA’s have now become legend. I think however that HOA’s do not provide everything they’re supposed to, so it’s good to make sure they do. (See the requirements below)

Along with the requirements below there is another bit of information which may tell more about an HOA than anything else – that is the meeting minutes. There is no formal requirement in the HOA Addendum for anyone to provide these — that request needs to come from the buyer in their offer. If obtained however, the minutes can reveal important information about the HOA including, but not limited to, future capital improvement projects and associated costs, lawsuits affecting the community, ongoing HOA violations, board member perspectives, quality (or lack thereof) of work being done in the common areas, such as landscaping, painting, etc. and much more.

By law, a prospective buyer in an HOA MUST receive from the HOA:

1. A copy of the bylaws and the rules of the association.

2. A copy of the declaration of Covenants, Conditions and Restrictions (“CC&Rs”).

3. A dated statement containing association contact info, the amount of the regular assessment, special assessments, fees or charges currently owed by the seller, insurance, reserves, current violations by homeowner, statement of seller alterations, case information related to lawsuits, current operating budget, annual report, most recent reserve study, and any other information required by law.

Most importantly, whatever community you choose to consider living in you can learn a lot about its character and history by talking with the neighbors. A good time to do this is on a Saturday morning. (Just make sure you do this before the end of your ‘Due Diligence’ contract period, talk to neighbors) Most folks will be pretty honest about living there, including their experience with the HOA. You can learn a lot that rules, regulations, and financials won’t show you. In some cases you might learn some things about the house and (owners) you’re buying from. Of course, it’s also possible you would have preferred NOT to have known some uncovered juicy morsel. As a caveat, take everything said with the proverbial grain of salt.

If after all that, there’s any reason why you don’t want to buy this property, excepting fair housing issues, you can elect to cancel the agreement without forfeiture of deposit.

Mike Bodeen