Buying a new home in Hawaii may mean that you’ll need to pay HOA (Home Owner’s Association) or association fees. Although Hawaii is not exclusive in that regard, it does seem that there are more properties in the state of Hawaii that have some sort of additional fee charged for these home owner groups. The fees are usually an additional charge on top of your mortgage payment and other bills. On the mainland, it is a pretty common practice to have this expense if you are buying a condo, or living in a gated community but that is changing in Hawaii and now can also apply to many single-family homes unlike similar properties on the mainland.
Why Do HOA Fees Exist?
Home Owners Associations are generally created when a developer creates a PUD – Planned Unit Development (sometimes refereed to as a subdivision). When developing the property, to create a system in which property values are held, they create rules (known as covenants) that all property owners must abide by. These rules may be that all homes are a certain size or all the homes will have a privacy fence. The rules are designed to keep a consistent look of the area as well as insure that all of the homes are built and maintained to a standard. That standard helps to insure that the property values of ALL of the homes in the area stay strong and provide a solid return on investment. This lets people buy a home in a particular area knowing that the homes built around you will be of similar quality and upkeep.
The homeowners association is usually made up of homeowners withing the subdivision and is put in place to enforce the rules. Although many of the rules have been put in place by the developer, the HOA will monitor what is going on, take in the dues and fine the homeowners that go outside of the rules. Once again, this is all done to help maintain a certain standard and ultimately property value.
These additional fees can potentially affect the client’s buying power and it is important to have a local Hawaii lender that is knowledgeable about these associations and the costs to help you navigate through the negotiations and the paperwork. A lender may approve a loan amount, but if they are not aware of the possible additional expenses of an HOA or association fee, you could run into an issue down the road. Make sure that you consider the HOA fees when making your budget. This way the lender can add the monthly fees to the top of the mortgage expense.
What Do The Fees Cover?
Associations and HOAs can vary greatly in their fee structures from almost nothing to large monthly or annual payments. Some of associations offer you a lot of buying power for the charges that could include water, and common area expenses that, when you break down the charges, make sense and offer you some real value. While another association might be looking into making major repairs or upgrades to the community. These types of fees can increase the fees and not provide much in the way of a tangible value for the home buyer. It is very important to research these charges before you buy so you can understand exactly what the fees are going towards.
Ask questions about the association. You need to know if they are healthy and have enough money in the reserves. Talk to other residents in the community and find out if they are happy with the fee structure. Talk to your agent. They know the local economy and they can answer a lot of your questions as well.
Living on the Big Island can be beautiful, but there are risks.
What Are The Rules?
In addition to their fees an association might have rules and/or a covenant. These can range from small items like what types of plants you can put in your yard they allow to larger rules that might govern the color of your house or whether you can park an RV in your driveway. Many associations have sub committees such as an ARC or architectural review committee, that are charged with reviewing and approving exterior changes to your property. They might also have a voice in the items in your yard. It is pretty standard that if it can be seen, it needs approval.
Associations might also have rules about what type of pet you can have such as breed restrictions or the number of pets you can own.
Again ask a lot of questions and read the paperwork carefully. Is there street parking? Will they tow your car? How long can a car be parked and left? These are all questions that need to be addressed in order to make sure that the new property and the association rules match your lifestyle.
The best way to ensure that you are getting into the right community for you and your family is to consult an agent that understands each association. As a buyer, you also need to do your research to make sure that the community fits you and your needs.
Contact me if you are interested in knowing more about HOA/Associations.
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