by Craig Markhardt, NMLS #7026

President, CAM Companies, LLC

 Home Owner’s Associations (HOA’s) have become an increasingly common term heard by home buyers during the normal course of business of a real estate transaction. Most buyers tell me that they dislike HOA’s, while at the same time not having any experience with them. HOA’s are also known as Community, Townhome, or Condo Associations, are now a standard part of a large population of properties on the market, since first being introduced in the U.S. a little more than 50 years ago.

The primary purpose of HOA’s is to manage a number of amenities on behalf of the home owner, rather than the individual owner solely being responsible for every item. Other purposes of HOA’s are to combine resources to fund capital improvements such as pools and entertainment areas in addition to regular upkeep. Many believe the existence of an association is a total waste of money.

This is true when the costs outweigh the benefits. Prospective buyers of properties that are a part of an association where monthly, or annual dues are required should not automatically disregard the property for consideration.

The first thing every buyer of a home (or current owner) in a development with an association should know is – membership in the association is a requirement. Why? The master deed to the development creates the legal obligation for the property, and owner, to be included in the association. What is not well known is that even though payment of dues to the association is also mandatory,  involvement is voluntary, and not an obligation.

HOA’s are notorious for having mismanaged operations, simply because the voluntary involvement of the board and committee members. This often results in poor financial management with dues that exceed, or are much less, than what is needed. In addition to reading all governing association documentation, careful review of association budgets and minutes of meetings is an essential part of evaluating whether or not to buy a home in a community.  Capture

What can be found is whether or not the HOA budget is properly funded, or underfunded per the covenants and rules for the community. Condominium associations often include many items that are normally a part of a typical home’s utility and upkeep costs and can actually reduce the housing budget.

Economies of scale are the important item to think about when evaluating the benefits of a home with an association. Careful review can help buyers become aware of significant, unknown cost savings that can increase to purchase power.

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