HOA’s are big business in the United States. In 2016 about $88 million was paid to neighborhood community associations. There has been a lot of uproar over HOA’s and the level of corruption that is seemingly rampant.
Reddit users were up in arms recently about HOA’s, but that is not the only place posts about HOA’s are going viral.
What Exactly Is the Deal With HOA’s?
HOA’s “home owners associations” are groups that are supposed to keep up with common areas, ensure that everyone in the neighborhood is obeying the covenants of the neighborhood, and oversee the collection of fees and budgeting. Sounds pretty simple. However, there have been many examples of HOA corruption over the last few years.
Allegations of abuse and corruption are rampant. Some of the abuse points include widespread nepotism. Board members have been accused of hiring family, friends, and sometimes their own businesses at higher than average rates.
In other cases, accusations about outright thievery and mismanagement of funds make the news. While most HOA’s do the job as intended, there does seem to be an uptick in bad apples across the board.
The Majority Move With Integrity
In most cases, HOAs move with integrity. They are made up of homeowners that volunteer their time to make their community a better place to live. They are no more invested in the community than other homeowners, so there is no financial gain by being a board member.
The problems typically arise when there is a financial gain to be had. Most boards will use the community covenants and by-laws to direct their actions. While it does seem like there are a lot of instances reported of abuse of power and extreme actions, keep in mind there are roughly 370,000 registered HOA’s and only a small fraction are accused of corruption and abuse.
There Are Always Red Flags
There are some red flags that you can look for to avoid living in a neighborhood with an overbearing board or worse, yet one that will take your hard-earned dollars and misuse them.
When shopping for a house, many buyers are more concerned with closet space than about HOA problems. About 97% of realtors report that buyers are more interested in closet space than attic or basement storage.
Yes, it is important to get that closet space, but not at the expense of living in a neighborhood with a scandalous HOA. Look for these warning signs before you sign on the dotted line for that hard money loan with a ratio of 60%-70%:
- Lots of court actions. HOA’s, who are power mongers, will take homeowners to court for every dispute leaving a record behind of their actions. Do you really want to live somewhere where the potential to be sued over the height of your lawn is a real thing?
- Who is running the HOA? You can look up who is in charge of the HOA and make your decisions from there.
- What are community members saying about the HOA? There is no better way to familiarize yourself with an HOA than to ask the people that live under their purview.
HOA’s are a business and should be run like a business. The same way you would choose who to do business with you should apply to when choosing which HOA to do business with.
For example, if you read a review that said Business X,Y, Z was a rip-off and you read enough of like comments, would you consider doing business with that company or would you look for a business with better reviews?
HOA’s are not going away any time soon, but you can do your part to ensure you do not get tangled up with one that will make your life miserable.