Most new homes for sale are in an HOA — do buyers care?
According to the U.S. Census, 82% of newly built homes sold in 2021 were a part of a homeowners association.
Key points:
- Some buyers like the idea of an HOA, while others are skeptical, having heard horror stories about draconian rules and regulations.
- As an agent, coming prepared with information on the specific HOA and laying out the advantages can help make buyers more comfortable with the idea.
When it comes to buying and selling newly built homes, real estate agents today are much more likely to be reviewing rules from homeowner associations than they were just a few years ago.
The latest numbers from the U.S. Census indicate that it has become increasingly prevalent for new homes to be tied to an HOA: A whopping 82% of new homes sold in 2021, the most recent year for which data are available, were in an HOA. That's up from 66% a decade earlier, according to the data.
At 87%, the South had the highest percentage of new homes for sale falling into the HOA category, followed by the West (80%), Midwest (72%) and the Northeast (62%).
The trend is expected to continue as growing cities have found that outsourcing new infrastructure — things like sewers, roads and parks — to developers of planned projects creates more housing without overburdening current city budgets.
Helping clients sell or buy a home in an HOA can make things tricky for agents, especially if they have potential buyers who have only heard horror stories about HOAs. However, most buyers will be open to the idea if they have an agent who lays out the advantages, said Darlene Hunter, vice president and regional Pennsylvania new home manager for Howard Hanna Real Estate.
She noted that the fees are mostly for maintenance and keeping the neighborhood looking nice, which helps with home values.
"If explained properly, most buyers see the value of the association, as it helps maintain the property values in the community, keeping consistency of what can or cannot be done, and the beautification of the neighborhood," said Hunter, who was a top-producing agent before taking the management position.
As for monthly fees, Hunter said they are generally higher in condominiums or other multifamily buildings because there are often added services like a pool, gym, clubhouse and additional landscaping.
"Most of these buyers can accept the higher monthly fees as they will not have to pay others to do these services for them," Hunter said.
As for the horror stories, yes, there are plenty, but they appear to represent a vocal minority. In surveys, a majority of HOA members are satisfied with their association. In its most recent report, the Foundation for Community Association Research found that 89% of those surveyed rated their association experience as either very good, good or neutral.
And if an HOA board tries to get overbearing and implement unpopular rules, there's a decent chance some of them may not be enforceable, and members have a right to submit objections.
For agents who have buyers looking at HOA homes, Hunter said it's crucial to make sure you have the most current HOA information available. Ask for the current budget as well as the association's history and frequency of raising fees. It's also important to see if the HOA is facing any legal or financial issues, such as falling behind on maintenance bills.
Perhaps most important, however, is knowing your client. Will their needs and preferences fit within the rules of the association?
"If you have a client who likes to have privacy and wants to live on five acres, a planned community with rules and regs will not be for them," Hunter said.