Buying a home in an HOA: what to check first

With 78.1 million Americans living in community associations, according to the Foundation for Community Association Research, there's a good chance the next home you look at has one. Buying in an HOA means buying into its rules and its finances. Here's how to check both before you're committed.

Get the documents early

Ask for these as soon as you're under contract, or sooner:

• declaration (CC&Rs), bylaws, rules, and architectural guidelines;
• current budget and latest financial statements;
• the most recent reserve study;
• 12 months or more of board meeting minutes;
• a summary of the master insurance policy;
• any resale certificate, estoppel letter, or disclosure package your state requires.

Many states require specific disclosures to buyers, sometimes with a right to cancel for a short period after delivery. Ask your agent or attorney what applies in your state.

Check the money

• Dues history. Have dues risen steadily and modestly, or jumped?
• Reserves. Compare the reserve balance and contributions with what the reserve study recommends. See HOA reserve studies.
• Special assessments. Is one approved, proposed, or being discussed in the minutes? Who pays one approved before closing? That's something to negotiate.
• Delinquencies. A high share of owners behind on dues strains the budget.
• Litigation. Pending lawsuits can affect finances and lending.
• Seller's account. Confirm there are no unpaid dues, fines, or liens.

Check the rules

Read the use restrictions with your plans in mind: renting (including short-term rentals), pets, parking and vehicles, home businesses, fences, solar, paint colors, and landscaping. If you plan changes, read the architectural review process.

Check how it's run

Read the minutes for tone as well as content. Are meetings orderly? Do owners participate? Is the board stable, or does it turn over constantly? Ask a few residents how violations are handled and whether the manager responds.

Red flags

• No reserve study, or reserves far below recommendations.
• Repeated deferral of major repairs in the minutes.
• Frequent special assessments.
• Pending litigation involving construction defects or the association's finances.
• Rules that would prevent something you know you'll want to do.

After you buy

Keep the documents you received. Go to a board meeting, and read the minutes and budget each year. Our before-you-buy checklist prints everything above on one page, and our state law pointers link to the statute that governs your community.

Run the numbers before you offer

HOA dues and a possible special assessment belong in your budget alongside taxes, insurance, and repairs. The expense stack worksheet and the pre-offer checklist on Real Estate Investment Insights help you price them in. It's also worth adding a radon test during the inspection period: see radon when buying or selling a home.