If your new community is governed by a homeowners’ association (HOA), it’s time to read the fine print. Not understanding the rules (or lack of) of your HOA can result in frustration, conflict and lower property values in the future.
In North Carolina, sellers are now required by law to provide buyers with an “owners’ association and mandatory covenants disclosures statements” prior to acceptance of a signed purchase contract. This includes information regarding restrictive covenants, HOA contacts, dues, services and judgments.
Generally, HOAs often lack restrictions – and professional management. If rules are too lax, i.e. parking, mailbox design, etc, and management is elected from the community, then each situation becomes a decision of neighbor vs. neighbor. Proper cash reserves are also necessary to maintain community amenities such as pools, landscaping, signage and common areas, or special assessments are likely.
Buyers should look for a professional management company (vs. a board of homeowners), clear guidelines, deed restrictions, policy on how assessments are enforced, and a detailing of proper reserves for capital investments.
Sellers should understand that they will need to disclose any HOA information to buyers, and that the HOA may charge a fee for current budget information, etc. Sellers may want to proactively obtain this information and play it up as a benefit to potential buyers.