The Pros and Cons of a Homeowners Association
Homeowners associations that nitpick about everything can be extremely annoying, but it could be much better than the alternative.
Everyone has their own opinion about homeowners associations (HOAs). Some people love them because they help the community have a uniform look and keep home prices higher. Others hate having anyone telling them what to do with their homes. Regardless of whether you like or hate the concept, if you live in a community with a homeowners association, you have to deal with it.
Not All Homeowners Associations Are the Same
In my first decade as an adult, I’ve had the pleasure — or displeasure — of owning homes in two communities that have HOAs. I’ve learned that some HOAs are incredibly strict, while others are much more lenient. You’d think the more lenient HOA would be the better one to live with, but I have a horror story to share that may change your mind.
Our Homeowners Association Could Have Blown Up Our Home Sale
When you sell a home that’s part of an HOA, it’s customary to verify that you’re up-to-date on your HOA dues. When we sold our last home, that almost didn’t happen because our lenient HOA had essentially self-destructed. It took much longer than the usual quick phone call to verify that we were up to date.
If it weren’t for a few dedicated homeowners, I may not have been able to sell my home.
Here’s what happened and what you need to watch out for if you have an HOA that doesn’t seem as if it does much at all.
Further Reading: “Think You Can Sell Your Home on a Whim? Think Again”
Our HOA Horror Story
Years ago, the homeowners association for my last home was extremely strict. Why? The HOA had hired a management company that actually enforced the rules and collected the owed dues. The homeowners got sick of the nasty letters citing violations and eventually jettisoned the strict management company. They hired a much more lenient company, and the letters eased.
Unfortunately, while our house was under contract to be sold, we learned that our homeowners association had fired our management company. It turned out that they weren’t doing a very good job of collecting HOA dues. In fact, members owed the HOA more than $100,000 in dues that were never paid. That’s a huge amount when you realize that dues were only $464 per year. While firing the management company was the right decision in our minds, what happened next was shocking.
Further Reading: “The Entrepreneur’s Guide to Small-Business Debt Collection”
Rather than have a new management company lined up before firing the old one, our HOA board decided to try to do everything themselves. They tried to dig through the mess the previous management company had left but had trouble with the enormity of the situation.
So one of the board members suggested hiring their personal lawyer to do some of the work. The problem was that the lawyer was being paid a lawyer’s hourly rate for clerical work. He quickly racked up a bill of more than $10,000. That’s a lot of money for an HOA whose members owed $100,000 in unpaid dues.
All of this happened without most of the homeowners’ knowledge. We only found out when board members started resigning and posting in our neighborhood Facebook group. This hodgepodge group was who needed to verify I didn’t owe money to the HOA so that I could sell my house. Thankfully, someone was able to verify we were paid up shortly before closing and we sold our home.
After we moved out, we read that the HOA board fired the attorney and hired a new management company. It took a while, but everything eventually got back on track. Sadly, the result was higher HOA dues for those that still lived in the community.
Further Reading: “6 Unexpected Costs When Buying a Home”
How to Make Sure This Doesn’t Happen to Your HOA
If you don’t want to deal with a homeowners association horror story like ours, there is one way to make sure it doesn’t happen to you. Get involved. Go to all the HOA meetings — not just the quarterly or annual ones. Ask to inspect the association’s financials. Heck, you can even run to be on the board of the HOA.
Whatever you do, don’t just sit by and assume that everything is going well. If you do, you could be in for a surprise down the road, as we were when we tried to sell our house.
Would you rather deal with an HOA that puts your investment in your home at risk? Personally, I’d rather deal with the HOA that sends me a nasty letter when I forget to mow my lawn.
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