Beware the homeowners association

Homeowners associations can help maintain the value of your home and neighborhood, and provide perks like parks and public pools. But those perks can come at a steep price.

By Trent Hamm,?Guest blogger / August 28, 2012

In this 2006 file photo, a completed home sits in the foreground as homes in another development await completion in San Diego. Homeowners' associations can provide a lot of perks, but at a price. Look at contracts carefully before signing.

Denis Poroy/AP/File

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On the surface, homeowners associations can be very good things.

Skip to next paragraph Trent Hamm

The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds ? we just want simple ways to manage our finances and save a little money.

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For one, they usually ensure a clean-looking neighborhood without anyone letting their property fall into disrepair. In an area with a homeowners association, people don?t have unkempt yards or sidewalks in disrepair.

Associations also provide for the maintenance of common areas. They?ll make beautiful road signs, maintain many of the sidewalks, and sometimes manage a village park.

In some neighborhoods, they enforce quiet hours. In the neighborhood of one of my readers, there was a local number you could call to report quiet hour violations, but they never had to call it because the neighborhood became pretty silent at midnight.

Associations also often provide perks, such as community pools, community parks, club memberships, and the like.

Their goal, in the end, is to preserve and maximize the property value of everyone in the neighborhood.

This can sound wonderful, but it comes with a price.

First, there?s the homeowners association fee. This can vary widely depending on the neighborhood. I?ve heard of fees as low as $30 per month, while others have had monthly fees approaching $1,000. The fees can often be greater than property taxes, believe it or not.

Second, there are often rules that you have to adhere to. This usually includes a list of lawn care and house care responsibilities, but can stretch into other areas as well (such as the aforementioned quiet hours). Some associations require a certain number of volunteer hours per year. Other agreements are very detailed, requiring you to plant certain amounts of certain types of plants in your yard.

Along with that, you have to get association approval for any significant change you want to make. If the change looks too different from the rest of the neighborhood, it won?t be approved, which means that you?ll be unable to do it.

Don?t like these rules? The association can start charging you fines if you ignore them. Ignore the fines, and they can put a lien on your house.

If you?re considering purchasing a new home, you need to find out about any association agreements that the house falls under. You need to make sure that you can afford it and that you?re willing and able to abide by the terms of the agreement.

My take is that there are benefits and drawbacks to associations. They?re great for some and provide a net benefit, but they?re not a great fit for others, particularly those who are really financially pressed.

Make sure you know all of the details before you take the leap into owning a home that participates in a homeowners association.

This post is part of a yearlong series called ?365 Ways to Live Cheap (Revisited),? in which I?m revisiting the entries from my book ?365 Ways to Live Cheap,? which is available at Amazon and at bookstores everywhere.

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