Things You Should Know About HOAs (Condos, Loans, Insurance)

Homeowners associations can be helpful, frustrating, and—right now—important to understand if you are buying or selling. Here is a clear, no-nonsense guide to the pros and cons, what trips up transactions, and how to protect yourself.

Fast facts

• Roughly a third of U.S. homes are in HOAs.

• Many owners say rules help preserve values, but dues and special assessments can be unpredictable.

• Since the 2021 Surfside, Florida condo collapse, lenders scrutinize condo communities much more closely, which can delay or block financing.

Pros of living in an HOA

• Neighborhood standards: Common areas stay maintained and most homes follow the same exterior rules, which helps curb appeal and, often, resale value.

• 3rd-party enforcement: Instead of confronting a neighbor, you can route issues like noise, trash, or parking through the management company.

Cons and common pain points

• Cost volatility: Monthly dues can rise. Special assessments for roofs, paving, insurance gaps, or litigation can be large and sudden.

• Rules and enforcement: Notices for paint, landscaping, or parking can arrive at the worst time, including right before closing.

• Insurance pressure: Master HOA policies have become more expensive and harder to obtain. If a community cannot secure adequate coverage, buyers using a loan may not be able to close.

The condo-financing reality check

If you are buying or selling a condo or townhome in a condo project, expect lender review of the entire community, not just the unit.

• Limited vs full review: Lower-risk loans with larger down payments may get a limited review. Smaller down payments or certain loan types often trigger a full review with a detailed condo questionnaire.

• What lenders ask for: Reserve balances, special assessments, insurance coverage, building reports, litigation history, deferred maintenance, and more.

• Why deals stall: HOAs may be slow to complete questionnaires or may not have old reports on hand. If answers raise red flags, lenders can deny the loan.

Tip for sellers: As soon as you list, ask the management company how they handle lender questionnaires and what the turnaround time is.

Tip for buyers/agents: Write into the offer that the lender will order the condo questionnaire on a rush within three business days of escrow opening.

What to review in HOA documents

Whether you are a buyer or a seller preparing to disclose, focus on:

1. Master insurance: Is the policy current, adequate, and not pending cancellation or non-renewal?

2. Reserves: Does the latest budget or reserve study show realistic savings for big items like roofs and paving?

3. Special assessments: Any approved or proposed assessments, amounts, and timelines.

4. Litigation: Active lawsuits can limit loan options and delay closings.

5. Rules and violations: Confirm any open violations on the home and how to cure them before closing.

   
   

Five HOA violations that appear most often

1. Landscaping neglect or unapproved plantings

2. Pet issues, including number, type, noise, or waste

3. Noise outside quiet hours

4. Trash and bulky items stored in view

5. Vehicle and parking restrictions, including RVs, boats, or trailers

   
   

Practical tips for smoother closings

• Sellers: Order HOA docs early, ask for an inspection walk-through before listing, and clear any violations now.

• Buyers: Get homeowner’s insurance quotes immediately and confirm the community’s master policy is in place.

• Everyone: Set expectations about condo questionnaires and insurance hurdles in the offer so timelines are realistic.