4 Questions to Ask Yourself Before Buying Land with a Homeowners Association
If you’re planning to build a custom home, you may be considering a neighborhood with a homeowners association. Today, I’d like to dive into what this means, and how it might affect your custom build and your everyday life.
In the beginning, homeowners associations started out simply enough—different municipalities, counties and even states required a certain amount of green space in some neighborhoods, with a lot of development regulations and rules. Because it wasn’t owned by the city (meaning it wasn’t governed by any tax dollars), the community had to maintain it and have insurance for it.
After HOAs got a foothold, there were a lot of people who wanted more amenities, like a pool, golf course, clubhouse, and walking paths—all which needed to be paid for. In this case, your HOA is maintaining a lot of physical places to keep them looking nice. Eventually, the homeowners associations got to the point where they wanted to control what their communities looked like. Thus, design considerations for homes were born—regulating design of homes, regulating ongoing changes to your home fences, sheds, detached garages, etc.
This is where we are now with homeowners associations. Yes, there are many that still only cost $50 a year to maintain the grass and the landscaping out in front. But on the other end of the scale, you have HOAs that are regulating all of the design, personal landscape—everything.
Homeowners associations can be fantastic. They’re perfect for the people who want them and use them to benefit the way they live. However, problems arise when a person doesn’t understand, follow, or agree with the rules of the HOA. To avoid this, make sure you know what you’re getting into before signing any documents. Whether the book of rules is four pages or 125 pages, you need to read it thoroughly. Here’s what to consider as you read through these documents...
4 Considerations Before Purchasing a Lot with a Homeowners Association
If you still haven’t purchased a lot for your custom home, you’ll want to ask yourself if you want to live with an HOA in the first place. Let’s say you buy a lot with a homeowners association—keep in mind, once you get into your home, you can’t fight the system. You’ll have to live by their rules. So, it’s best to know what you’re getting into so you can opt in, or find a different lot. Here are four things to consider as you read through HOA documents before purchasing a lot.
What is your limit of personal control?
Before buying a lot for your custom home, you need to know what’s going to make you sick to your stomach regarding your personal control. For example, some homeowners associations have it written in the rules that if you change out a bush or a tree in your front yard, you have to pay $50, have it reviewed, and produce a cut sheet and a picture of the product with size requirements, like planting size, mature growth size, etc. Are you willing to go through this process? If not, you may want to reconsider.
Let’s look at another example. Although the times are changing, your HOA may stay the same. Say you want solar panels, but your homeowners association says absolutely not. That’s an uphill fight, right?
And sometimes it comes down to little details you wouldn’t expect. Maybe you have a car parked in your driveway, but you’re not using it, so you decide to cover it. Well, in the HOA, it may state ‘no car covers.’ Even if the car looks terrible and the cover looks better, these are black and white rules.
Bottom line? If you don’t like being told what to do, you may be miserable. It’s just not worth it, and you need to know where you stand with these rules. On the other hand, if you’re someone who doesn’t want to drive past a car cover every day, then you may love this type of community.
How much money is it going to cost you?
Next, let’s talk about HOA costs. This is all relative to how many amenities you get. Do you want walking paths, a pool and a clubhouse? How about beautifully maintained green spaces and a lovely stone entrance? If the answer is yes, and it’s in your means, it’s going to cost you some money.
Amenities aren’t your only concern, either. Some HOAs have unique closing processes. If you’re buying a raw lot, you probably won’t have much going on in terms of the closing process, but if you eventually sell your house, you may need to jump through some hoops. For example, your HOA will need to make sure you don’t have any outstanding payments or fines owed to them. Maybe you were supposed to stain your deck, but you didn’t. So, at the very last minute, the closing company tells you they received a letter from your HOA stating you need to stain your deck or take down your fence before closing. Now you’re in a scramble.
What are your design restrictions?
Design restrictions can be great—you just have to find the right fit for the home you want. For instance, your HOA may be a planned community with a very specific, traditional style of home. In this case, they may be super restrictive with defined roof pitches, materials, etc. If a traditional house sounds right up your alley, this may be the perfect place for you! On the other hand, if you want a modern home with a flat roof, tons of windows, openness, or asymmetry, the HOA will most likely turn it down.
You’ll also want to look into the ongoing design restrictions for certain homeowners associations. For instance, a lot of places have restrictions on sheds—whether you can have them or not, what design they can be, what color they can be, how far from the house, etc. Some neighborhoods are very explicit. For example, maybe the shed has to be on a full, concrete foundation, because when the HOA was created however long ago, they didn’t want sheds propped up on pillars. Unfortunately, this is going to cost you a few thousand more dollars to put in a shed.
Lastly, another design restriction to consider is an approved builder list. This is one of the very first things you should ask about, because almost every HOA has some kind of clause that requires this. Keep in mind, they don't always publish them, so not everyone knows. Sometimes they don't even enforce it, but you should definitely know what it entails.
Who makes the decisions?
Let’s say you’re moving into a community with a lot of different designs. The HOA has guidelines and some limitations, but for the most part, the houses are very broad with a lot of styles represented in the neighborhood. After designing your custom home with your architect, the house looks like something the HOA would approve. However, the developer—aka, the person making the decisions—just says no, flat out. After asking several questions about what the developer doesn’t like about your home, you find out that he’s concerned about the way it looks next to all of the other houses. Maybe your design looks too similar to the one next door, or maybe it just doesn’t fit.
In this case, you may need to give in to the developer’s wishes, change the way the outside of the home looks, and design the inside of your house the way you want it. Otherwise, you may take it to court. But in court, the document you signed said the developer has the final decision in the HOA, so you wouldn’t have a great chance of winning the case. This is why it’s important to know who makes the decisions. It’s more dangerous to have one person in charge (you never know which side of the bed they’re going to wake up on), which is why I recommend an HOA with a design committee.
Have any questions?
I hope these considerations help you navigate the rules of homeowners associations before purchasing a lot. The most important thing to note is that there is no right or wrong answer here! Some people love living in a traditional community, and others have a very specific style that requires non-traditional materials. It’s all about finding the right community for you. Everyone is different! You also have the option to not have an HOA at all (which is a little more difficult if you want to be in a development).
If you're in the process of looking for land, make a list of these four things and know where you stand. This way, you’ll know what you’re willing (or not willing) to compromise on. Remember, it's a balancing act.
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