• While shopping for new homes is already competitive, prospective buyers should consider an additional factor when weighing the pros and cons of a given property: homeowners associations.
• HOAs can carry monthly fees as high as $1,000, the American National Bank of Texas found.
• As these associations become more common, prospective buyers should vet them before signing the deed.

Homebuyers are dealing with record-high costs this year amid interest rate hikes and shrinking supply.

While shopping for homes is increasingly competitive, prospective buyers should consider an additional factor when weighing the pros and cons of a given property: the homeowners association, or HOA.

Homeowners associations are run by community residents elected to be members of the board of directors, which govern the neighborhood by a set of rules and regulations. Homeowners pay the HOA fees to have common areas such as parks, roads and community pools maintained and repaired.

What kind of home are you considering?
Different types of homes can be affiliated with an HOA, from single-family homes to co-operatives.

Why HOAs are becoming so common
A high percentage of new homes built nationwide today are part of developments managed by an HOA due to the financial benefit for local governments.

Homebuyers who want to avoid the additional costs associated with HOAs can search older homes on the outskirts of developments. If you’re left with no other choice than to buy within an HOA-affiliated area, here are a few ways you can evaluate the organization.

How to vet an HOA
While real estate agents are not required nationwide to disclose to buyers if a property is tethered to an HOA, homebuyers can take initiative themselves and review the organization.

Some states such as Nevada do require sellers to provide potential buyers a disclosure of all things that relate to the homeowners association, including their financial status and meeting minutes. However, brush up with local and state laws to be aware of what your rights are as a homebuyer and potential homeowner.

These vetting tips may not apply to co-ops, and you may not have the time to completely investigate a given HOA.

Here is a checklist from experts:

• Ask for a copy of all HOA paperwork, such as covenants, bylaws, rules and regulations, which serve as the community’s constitution. Also ask for meeting minutes to see what repairs have been done or discussed.
• Inquire about monthly or annual fees, the HOA’s budget and the history of how assessments have gone up year to year
  
• Look into the community’s reserve funds, which ensures repair and renovation. Check if the community is putting enough money aside for big expenses or if they are properly funded.
  
• Search the HOA on the county website to see how many liens, judgments and foreclosures have been recorded within the community’s lifespan
  
• Look at the financials and see how much in attorney’s fees is disclosed. This signals whether they are having a lot of issues
  
• Check for permits with the county for reroofs, electrical and plumbing services for the community
  
• Request to attend at least one board or annual meeting if possible. A meeting helps buyers understand who is controlling the finances and decisions of the community
  

The most important thing a buyer can do is to ask questions to their agent, the community association and neighbors.

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