According to the Community Associations Institute, more than 56 million Americans’ homes were governed by a homeowners’ association last year.
If you’ve never lived with a HOA before, an “association” can be a strange and even scary concept.
An association is a legal entity that takes care of what you and your neighbors own in common such as roofing, garages, entry halls, and guard desks.
It’s usually run by a small group of owners in the building with titles like President, Secretary, and Treasurer.
If it sounds like an association is a small corporation, that’s because it is.
In the business of running the association, each property owner is responsible for annual dues called “assessments” that pay for services and features within the building(s). These may include doormen, landscaping, maintenance, utilities and/or cable television.
Typically, the annual bills for the services are added up and each owner pays a percentage equal to his percentage ownership in the building. A 2.176% owner, for example, will pay 2.176% of the overall fees of running the building.
The fees paid by the owners are determined by the association’s board and any prospective buyer of property governed by the association should ask very specific questions during their home search process.
It’s important to know what the assessments are and what services they cover. Like everything in life, you may find that the cost outweigh the benefit of the service.
Your real estate agent can help identify potential strengths and weaknesses of an association so be sure to ask for his/her insight. When buying in a building governed by its owners, it’s important to inspect more than just the unit — the association itself stands for inspection, too.