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What You Need to Know About Homeowners Associations

Should having to deal with an HOA make you nervous?

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You're buying into a residential community — made up of condominiums or single-family homes — that is governed by a homeowners association. Is that a good thing?

See Also on Kiplinger: 5 Reasons You Hate Your Homeowners Association

The answer, unfortunately, isn't simple. Homeowners associations, better known as HOAs, do come with some significant pros, including giving you access to community amenities such as swimming pools, parks and fitness centers. But when you live in a community run by a HOA, you'll also have to follow the association's rules, which could limit everything from how many pets you can have in your condo or home to what type of alterations you can make to your property. You'll also have to pay an extra monthly fee to support the association.

Before you move into a residential community governed by an HOA, make sure you do your research: Find out exactly how much it costs to be a part of the HOA and what benefits the association brings to its member-owners.

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What You'll Pay and Why You'll Pay It

When most owners think of HOAs, they think of that extra monthly fee they'll pay. And it's true — HOAs can be expensive. Fees can vary widely, but you'll usually pay somewhere between $100 to $600 a month, though condos and housing developments with more amenities will typically charge more.

There's a reason for this monthly fee, though: It's what you pay to make sure that the common areas of your community, whether it's the lobby or parking lot in a condominium, or the swimming pool and community center in a housing subdivision, are maintained and repaired. The fees that homeowners associations receive each month from residents go into a fund. The officers running the HOA — who are typically residents of the community itself — use this money to fund landscaping, mowing, cleaning services, maintenance, and any repair jobs that come up.

A Special Assessment Can Hurt

There might come a time when your HOA votes for a special assessment. This can be a big hurt to your finances. Say your condo building's roof needs to be replaced. Instead of paying for this big expense from the pool of money collected each month from HOA fees, the association might vote to levy a special assessment to cover the replacement costs.

In an assessment, each household in the community will pay an extra fee to fund the repair job. These extra financial hits can be steep. Make sure, then, that your HOA has plenty of money in its coffers to tap when an emergency repair comes up. You don't want to be subject to a hefty assessment every time something goes wrong in your condo building or subdivision.

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See Also on Kiplinger: Homeowners Associations Are Short on Cash

The Amenities Can Make a HOA Worth It

There is a big positive that comes with HOAs: They make the amenities in subdivisions and condo complexes possible. You might not be able to afford an in-ground swimming pool or on-site fitness center on your own. But if you buy into a condo development or residential subdivision, the fees collected by the HOA give you the chance to enjoy these amenities.

Just make sure that the amenities themselves are important to you. Otherwise, you'll be paying a monthly fee for swimming pools, clubhouses, and business centers that you never use.

HOAs Do Place Limits on What You Can Do

Every homeowners association publishes its own set of covenants, conditions and restrictions, better known as its CC&R. These rules can severely restrict your activities while living in the community. Your association's rules might restrict you to just two dogs, for instance. They might prevent you from painting the exterior of your home your favorite color. The rules might forbid you from making certain exterior improvements to your home, too.

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Again, it's important to read a copy of an association's CC&R documents before you make an offer on a residence.

You Can Serve on the HOA Board

HOAs are governed by a board usually made up of residents of the housing community. If you want to have a say on how your association operates, run for office. Yes, HOAs run regular elections. Sitting on an HOA board can give you more power over how your condo development or subdivision is operated. But it also comes with significant responsibility; you are, after all, responsible for determining how to spend the money of your fellow residents.

This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website.

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This article is from Wise Bread, not the Kiplinger editorial staff.