How to Buy a House – Understand your HOA

Laura Andersen
Published on February 3, 2020

How to Buy a House – Understand your HOA

written by your favorite real estate broker, Laura Andersen

What the heck does HOA stand for?

You see the term in real estate a lot when buying a house; HOA.  It stands for Home Owners Association.  When you are at the closing table, you agree to abide by “HOA Governing Documents.”  Most of the communities in North Atlanta are part of an HOA.  

While it’s probably not a good time to be reading the mandatory HOA Documents at closing, most of the North Atlanta communities have their  HOA Documents on their website.  Reading them is beyond a snore; understanding them enough to know whether or not you agree with them is challenging.

In the meantime, let’s see if we can clear up some of the most confusing documents and terms that you’ll be asked to read and agree with.

What is an HOA reserve?

The HOA collects dues on a monthly, bi-annual or annual basis.   A portion of these funds is set aside in a “reserve” account to cover unexpected expenses. Examples of these expenses include spending reserve monies to repair a leak in the community’s clubhouse roof or to replace a faulty pump in the swimming pool or resurfacing the tennis courts.  

Reserve funds are separate from operating funds. The latter are spent on routine expenses, such as landscape maintenance in the common areas.

Every few years, the association should conduct a reserve study to forecast how much money they should have in the reserve fund. This study is conducted by experts and each homeowner should know the figure that is determined.

Most professionals agree that an HOA’s reserve funds should be no less than 70 percent of the reserve study’s recommendation.

What are special assessments?

When reserves are inadequate to fill a need, the association may levy a special assessment to cover the shortfall.  Think of this as unexpected expenses for the HOA.  

For instance, after a heavy storm, homeowners begin complaining of roof leaks. The condo community’s roof is at the end of its life and sustained too much damage from the storms to be repaired. It must be replaced.

The reserves are underfunded, so the HOA will go to the homeowners to get the money for the new roof.

What is the CC&Rs?

One of the most important documents you’ll receive when buying a house in a managed community is the HOA’s CC&Rs, short for “Declaration of Covenants, Conditions and Restrictions.”

What is included in this document dictates the rights and obligations of the homeowners governed by the HOA. The documents may include a description or diagram of the boundaries of the common areas and each unit.

It is also in these documents that you will learn how the HOA deals with enforcement of the rules, how it resolves disputes.

If the association doesn’t use a Rules and Regulations document, you may find the rules of the community within the CC&Rs.

The governance of the HOA corporation belong in the HOA bylaws, not the CC&Rs.

Rules and Regulations

This is a big one to watch out for.  Our real estate team recommends you know your HOA’s Rules & Regulations.  The HOA has a lot of power if you ignore the Rules and Regulations for your house.  

They may also dictate how the homeowners can use their property, such as landscaping restrictions, paint color restrictions, pet restrictions and parking rules.  In many North Atlanta communities, they will send you a letter to notify you of any issues you need to address.  

These letters from the HOA should be taken very seriously.  Read the letter carefully.  In most cases, the HOA will outline the violation, what is needed to resolve it and the timeframe.  Our real estate team recommends you e-mail the HOA to acknowledge you received it and what your plans are to resolve it.   

Why did I receive Association Meeting Minutes?

One of the most informative parts of the HOA documents package are the HOA meeting minutes. Here you’ll learn about common complaints and how the association deals with them.

Not only will they tell you a lot about the people who live in the community but also how well the association runs.

For instance, if the meeting minutes reflect homeowners’ continued pleas for rules enforcement, it’s a sign there may be problems with the association.

Living in a managed community isn’t for everyone. In the plus column, a well-run homeowners association helps maintain property values. Depending on the board, however, an HOA can become tyrannical and intrusive.

It’s all in the documents. Read them before you agree to live there.

Why you want to use our Team of Experts

Atlanta Home Listing has a team of experts to help guide you through the house buying process. There are no surprises using our real estate team with our professionals.

Give us a call today at (678) 462-1191. We’re here for you.

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