While some single-family homes are also in communities with homeowner association (HOA) fees, most townhouses and all condos are part of associations. The monthly, quarterly or annual fees must be part of your housing budget. They will also be considered as part of your debt-to-income ratio, which compares the minimum monthly payment on all your housing costs and debt to your monthly gross income. A steep condo or HOA fee could be the tipping point that makes a loan approval a little challenging.
When comparing HOA and condo fees, be sure to find out what the fees cover. In some cases, you’ll find condo fees cover utilities in addition to some insurance and taxes. If the condo or HOA fee includes a fitness center or other amenities you no longer must pay for from outside sources, you could end up reducing some of your expenses.
But homeowner and condo associations aren’t all about money. They also have rules homeowners must abide by.
Condo and homeowner associations have what are called “covenants, conditions and restrictions” (CC&Rs). Buyers have three to five days to review the HOA and condo documents provided by home sellers. If you find something you don’t like in those documents before the deadline, you can rescind your offer and have your deposit returned. Your real estate agent can help you understand the documents and find answers to your questions.
While checking on the finances of the association is important, you should also check on the rules to see if you can live with them. Violating an association rule can result in warnings and sometimes in a fine.
Among the most common issues that create problems for homeowners are:
1. Pet rules. Even in a “pet-friendly” community, there are often rules about the number, size and types of pet you may have. Certain breeds of dogs can be restricted. In addition, there may be pet fees assessed.
2. Home businesses. While it’s common to work at home, some associations place restrictions on or ban businesses that require client visits, increase traffic or parking issues, or require an excessive number of deliveries.
3. Vehicle restrictions. Many associations ban boats, RVs and commercial vehicles from being parked within the community. Many also limit the number of vehicles you can have, or they may allow parking only in garages.
4. Occupancy rules. In the age of Airbnb and other short-term rentals, be sure you know the regulations established by the community. Even if the local government jurisdiction allows short-term rentals, an association can ban them entirely or limit them. In addition, there may be rules about how many people can live in a unit and rules about subletting or long-term rentals.
5. Smoking rules. Some associations ban smoking in common areas, which can be problematic if you want to smoke just outside your home.
6. Design rules. Most HOAs and condo associations have regulations in place that restrict changes to the exterior of your home or require special permission for changing windows, paint colors or adding a deck.
7. Decorations. It’s fairly common, particularly for condos, to establish a rule about how long you can display holiday decorations or where you can install holiday lights.
If you can’t live with some of these regulations, you’ll need to move on to another community. While it’s possible to change some rules within an association, the process can take years, and you can’t always count on succeeding.
Jon Coile, chairman of Rockville-based multiple-listing service Bright MLS (formerly MRIS), writes occasional commentary on the Washington-area housing market.