I’ve noticed that more people seem to dislike deed restrictions and HOA’s than seem to like them. Many of my neighbors have received violations from our HOA for different reasons, to which their responses has been, “I’m not changing anything for them”. This usually ends up going bad for them and costing more money in fines later on.
So, why do we have Home Owners’s Associations in the first place? Many people think that it’s to keep the neighbors from starting an Auto Mechanics Shop in their front yard, but there is more to it than that. When you buy a home in a neighborhood with an HOA, you are given an HOA disclosure from your sellers that let’s you know there is an HOA. Unfortunately, this is not discussed in much detail in some transactions, which is why people are caught off guard when they receive a letter from their new HOA for something as small as putting a swingset in the backyard that was not approved first. If you have lived with an HOA for a while, you probably know how it works. For everyone else, it’s still new.
Here are some things you should know about an HOA. The members of the HOA are usually elected and they are legally liable to make sure that all deed restrictions are enforced. For instance, if I want to raise a goat in my yard, but goats are not allowed in my neighborhood, the members of the HOA could get personally sued for allowing, or not penalizing me for bringing in a goat. They are are hired specifically to make sure that the restrictions are enforced. When they’re persistently nagging someone to fix a violation, it’s not because they are mean people, it’s because they’re in a position of liability to make sure that the restrictions are enforced. If they allow me to bring in a goat, but don’t allow my neighbors, this too becomes a violation, so they have to be consistent on every property with ALL the restrictions ALL the time. This is why they are so persistent about their homeowners fixing their violations as soon as possible.
Now, here is some advice that some Realtor’s don’t talk about (most REALTORS I know are good about this though) HERE (click link to download form) is a TREC form 36-5 Addendum For Property Subject To Mandatory Membership In A Property Owner’s Association. When you are filling out a contract to make an offer on a house, you will be given this form if the property is subject to and HOA. Most of the time, box 3 is checked and the “fees” section is marked with “All” for all fees. This basically says that the buyer knows that there is an HOA and that they are taking full responsibility for obtain that information. They will usually receive the information at closing. If you look at the top of the page though, at the description of what “subdivision” means, it mentions a “resale certificate”. What’s this?
Here’s the scoop on the resale certificate. The buyer can request a resale certificate at the seller’s expense, which could be around $100 – $200. Some agents don’t like to deal with this because it’s just one more thing that might make the deal go bad, which is understandable to some extent. So why might someone need a resale certificate? Well, the certificate shows whether the neighborhood has any pending lawsuits, how much liability insurance they have, and whether they have any outstanding judgements against them, among other interesting information. Most neighborhoods (around Houston anyway) are ran by professional management company’s and they carry plenty of liability insurance, but let’s say that you are looking at a home in a very small community that has a locally ran HOA. What would happen if they got sued for 2 million dollars for not fixing something that caused someone else to get hurt? Your HOA dues are going to go up significantly to cover the cost over a certain amount of time. So, a resale certificate can be useful in determining the financial stability of your HOA at the time of your home purchase. Is this information that you would want to have prior to purchasing a home? Probably. This should be explained to you when you sign a contract.
HOA’s are statically proven to increase the value of a property and have many advantages to them. They help the neighborhood maintain a manicured image of consistency and safety. This creates an environment that is appealing to potential buyers, which allows seller’s to ask more for their home. If you are the type that needs space to do more than the average HOA allows, you really need to have your Realtor help you find a place that won’t restrict your needs. It’s good to get educated before hand.
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