For many, homeowner associations are necessary for any neighborhood. They help keep everything organized. Today, many prospective buyers look solely for homes tied to an HOA. However, the pros and cons of HOA management companies still require consideration.
You might think that an HOA increases a property value due to its advantages. While it mostly does that, it’s somewhat more complicated.
What does a homeowners association do?
Essentially, HOAs keep neighborhoods organized. They aim to protect homes’ market values from damages and other adverse impacts coming from homeowners. They enact rules to guarantee a community’s cooperation and healthy relationships.
HOAs often impact neighborhoods’ curb appeal positively. Without them and their rules, keeping good-looking properties can be more challenging.
That translates into better communities
HOA rules usually hold communities to higher standards. Many homeowners admit to improvements in the neighborhood after creating or hiring an HOA. That goes beyond the moral and social implications, as property values usually improve as well.
HOAs often focus on property value
Most people believe that an HOA merely works toward harmonious neighborhoods. However, the financial benefit of HOAs is their value protection. Most HOAs focus explicitly on ensuring market values.
However, we’re still analyzing the pros and cons of HOA management companies. Therefore, we’ll dive into the negatives in a bit.
Value goes beyond numbers
When a home’s value, we need to consider more than its market numbers. Many people are willing to spend more on a home if they know they’ll get along with neighbors and won’t have to worry about property damages.
Speaking of damage, HOAs protect homes from deterioration—both from the surroundings and owners. HOA companies help guarantee that the property is in good shape for future buyers.
How does the price reflect this?
In the end, supply and demand drive market values. HOA management helps keep properties’ attractive, which entices more buyers. As such, an efficient HOA can benefit homes’ prices noticeably.
HOA and property taxes
When analyzing the pros and cons of HOA management companies, people tend to overlook taxation. The relationship between HOA and property taxes is relatively complicated, but we’ll do our best to summarize it.
Essentially, HOAs can result in double transactions due to common areas owned by the association. These organizations can avoid this issue by separating properties and alerting authorities about inequities.
The tax implications from HOA require study and legal consultancy in most cases. HOAs need to take several steps to ensure the community doesn’t suffer from double taxation, and the process can be lengthy.
Lower property value by law?
A primary law principle is that property values decrease with rights carved from the assets to benefit other parties or properties. The latter would acquire this lost value, and HOAs could account as said third parties.
What can communities do?
The best approach for communities is to appeal to property separation between what’s owned by individuals and the HOA. Additionally, appealing the transfer valuation can help lower property taxes in the community.