3 Things To Find Out Before Buying A Home With A Homeowner's Association

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If you are considering buying a condominium and have never lived in a home that has a homeowner's association (HOA), there are a number of different things you should find out before signing a purchase agreement. Living in a house with an HOA is different than living in a single-family home, and you should find out the following details before you decide to buy the condo you really like.

The HOA Fees

Every HOA community has its own set of rules, guidelines, and principles, but all HOAs have maintenance fees. A maintenance fee is a fee the homeowners must pay monthly, and the money is used to pay for a variety of different things. This can include yard work, snow removal, garbage pickup, community maintenance, and roof repairs. The difference in HOAs is the amount each requires from the homeowners.

This amount will be an additional expense you will have to pay each month, and it can be as low as $100 to $200 per month, or it could be more. Knowing the amount is one of the most important details to ask before you purchase a condo with an HOA, because this will affect your monthly budget.

The Owner-Occupancy Rate

You should also ask what the owner-occupancy rate is of the community. This refers to the number of units in the community that are owned and occupied by homeowners. One of the main reasons this matters is for the financing you will need to purchase the condo. If the owner-occupancy rate is too low, a bank may refuse to give you a loan to buy the unit. This is because lenders view HOAs with low owner-occupancy rates as risks.

When units are vacant or when renters live in the units, banks often see two problems:

  1. The HOA is not receiving enough fees, which may mean that maintenance is not being completed like it should be.
  2. Renters may not take good care of their properties, and this may cause the value of the homes to decrease.

The exact rate banks look for varies, but many loan programs will require the rate to be at least 51%. Other banks may have higher standards than this though. You will need to check with your lender to find out if this factor matters in their decision.

The Balance In The Reserve Fund

Chances are that you may not know what a reserve fund is if you have never lived in a home with an HOA, but knowing what a reserve fund is and its balance is vital when buying a condo with an HOA. A reserve fund is an account used to pay for long-term expenses for the community. Most HOAs save a certain percentage of the fees they collect each month, and this money is placed in the reserve fund. This percentage is usually between 25% to 35% of the monthly dues collected.

The money in this fund is often used to pay for new roofs, siding, and driveway maintenance. It may also be used to replace the liner or pump in the community swimming pool, or it may be used to update the paint and carpet in the common areas of the buildings. Finding out the balance in the account is important if you want to make sure the HOA can keep up with maintenance and repairs in the future.

Buying a home that is located within a community like this is different than buying other types of homes. If you want to make sure you know exactly what you are buying, you should contact an experienced real estate agent in your area to assist you with your purchase. For more information, contact a real estate agent like Aaron Lillie - Real Estate Sales Representative

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27 April 2016

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