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What Is an HOA?: Understanding a Homeowners Association

While house shopping, let’s say you find a beautiful neighborhood with landscaped yards, freshly cut grass and houses that are tastefully painted and all seem to go together well. It’s suburban heaven—perfect and pleasant in almost every way.

Then your real estate agent tells you the neighborhood is part of a homeowners association or HOA. Maybe you overlook this detail at first—until you find out that buying a home there will cost you several hundred dollars a month to pay for the HOA membership!

That’s right! An HOA membership isn’t cheap—that’s why it’s important to know what it is exactly, how it affects where you live and how much it costs.

We’ll guide you through the answers.

What Is an HOA Exactly?

A homeowners association (HOA) is an organization that sets and upholds rules in order to maintain and enhance property value in housing communities like condos, townhouses and single-family homes inside a subdivision.

An HOA will usually have its rules in a document called a Declaration of Covenants, Conditions and Restrictions (CC&R).

A homeowners association is an organization that makes and enforces rules for condominiums, townhouses and planned communities. If you buy a property with an HOA, you agree to abide by the rules and regulations and to pay dues, known as HOA fees.

If you buy a property with an HOA, you automatically become a member—meaning you agree to abide by the rules and to pay dues, known as HOA fees.

How Much Are HOA Fees?

HOA fees or membership dues vary widely, with an average cost of $170 per month.1 You might pay a lot less than that or a whole lot more—some high-end HOAs can shoot up to thousands of dollars per month!

Housing Type Average Monthly HOA Fee
Single-family home $250
Condo $2902
High-end housing $700


The reason HOA fees range all over the place is mostly because they change based on different locations, amenities and types of homes.

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HOA fees might be charged monthly or quarterly and go toward paying for shared expenses like:

  • Security
  • Pool cleaning
  • Trash removal
  • Golf course maintenance
  • Landscaping

You get the idea: The more stuff the HOA provides, the more money it costs.

What Are the Pros and Cons of an HOA?

Since you’re likely to come across an HOA while house shopping, let’s cover the pros and cons so you know what you’d be getting yourself into before you join an HOA.

Pros

  • Possible increased home value. Many of those in favor of HOAs believe they help increase the value of your property by a few percentage points. But the data’s mixed on whether that’s true or not. You’ll need to do your own research about local HOAs to see if they have a good reputation for upping property values.
  • Pleasant living conditions. It’s the HOA’s job to keep shared living spaces clean and orderly—meaning you get to enjoy a well-maintained neighborhood at all times.

Cons

  • Membership dues. Paying HOA dues can be an expensive addition to your housing budget—especially on top of a mortgage. Plus, the price for dues can always go up—ugh!
  • Extra fees. If your HOA doesn’t have enough money on reserve to handle maintenance and upgrades, you can be hit with special assessments that require you to cough up that money. This is in addition to monthly dues you pay!
  • Sticklers. Just about every HOA has that one guy who acts like the HOA police—he makes it his business to get all up in your business. He’ll complain about your curtains, the color of your mailbox and how many guests you entertain.

With that said, be sure to talk to the HOA representative of your potential home before you buy. Learn as much as you can about the HOA because, once you buy, you’re a member—and you’re stuck with each other until you decide to move.

Types of HOAs

Remember, there are different kinds of HOAs for different property types. Let’s take a closer look at each.

Condo HOAs

A condominium or condo is like an apartment you own. You own the interior of your property, but the HOA owns the exterior and all common areas.

As an automatic member of the HOA, you’ll be able to vote on who serves on the condo board—the people who manage the finances and enforce the CC&R.

Condo HOAs tend to have the most restrictive rules—covering everything from where you park to what color your window treatments can be, to what type of holiday decorations you can display in your front windows or entryways (if you’re allowed to display any at all).

The HOA will also manage any fitness centers, swimming pools, parking garages and storage units.

Townhouse HOAs

A townhouse is a single-family residence with at least two floors and at least one shared wall with another townhouse. They’re most commonly found in urban areas where land is scarce and housing prices are high.

Townhouse HOAs usually provide the same types of features and amenities that condo HOAs do, but they’re typically not as restrictive. Because you also own the exterior of your townhouse, you have a little more control over what you can do with it.

While there may be rules about what types of landscaping you can have and what color your mailbox is, you can usually put up Christmas lights without having to fill out two or three forms.

Your townhouse community may also include a pool, clubhouse and fitness center, and the HOA will manage those.

Single-Family Home HOAs

Although HOAs are usually associated with condo and townhouse complexes, they’re becoming more and more common for detached single-family houses that are part of planned communities.

In fact, last year, nearly 65% of new, single-family homes built in the U.S. were in an HOA—up 15% compared to a decade ago!3

Keep in mind, popularity changes by region: HOAs for single-family homes are more popular in the South and West (around 70% of new-home constructions) than they are in the Northeast and Midwest (around 30–50%).4 

Some HOA communities provide safety in the form of gates or security guards. There might be a pool or a community center with a gym or a playground for the kids. Some communities focus on retirees and their needs. Others may be built around a golf course.

In a typical suburban HOA, you’re responsible for the upkeep of your own four walls, yard and insurance. But these HOAs can still be demanding about the do’s and don’ts of living in the community—especially in upscale neighborhoods.

They can regulate everything from what type of trees you can plant to whether or not you can leave your garage door up during the day. So, do your research up front.

Ready to Buy a Home?

Whether you want to buy a home that’s part of an HOA or would rather avoid HOAs altogether, get the help of a real estate agent.

It’s an agent’s job to be familiar with a ton of different neighborhoods. So they likely know which homes are part of an HOA and which aren’t—they can probably even warn you about any poorly run HOAs to avoid.

To find an agent we trust, try our Endorsed Local Providers (ELP) program. We only recommend agents who meet our high standard of excellent service—so you only get the best!

Find your real estate agent today!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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