Homeowners Associations (HOAs) are common for condominiums, townhomes, high-rise units and also some communities of single-family homes that offer a selection of amenities for residents. An HOA is a collection of homeowners who create and enforce community rules (covenants), manage the financial operations of the community with dues collected from the homeowners, and help make decisions for the overall upkeep of the community. HOAs may use volunteer board members or they may opt to pay an outside management company to assist with the day-to-day tasks. If you are considering purchasing a home in an HOA-governed community, you will want to learn several details about the HOA to determine how it will impact your long-term expenses as a homeowner.

1. As a rule, HOA dues always increase over time. Investigate how often HOA dues are raised and how much. Aim to get 10 years or more of HOA dues history so you can plan ahead for how increases will impact your expenses in the long run.

2. Review auditing reports for several years to understand how dues are spent. Ideally, around 2/3 of the dues collected should be spent on services and upkeep of the community, with the other 1/3 of the dues being placed into a reserve fund. HOAs with a history of poorly managing money or not allocating it properly to regular repairs is a red flag. Another red flag is a reserve fund that is too low, putting you at risk of receiving a big unexpected bill for a special assessment.

3. Review the HOAs history of special assessments. A special assessment occurs when a major repair is required but there is not enough money in the reserve fund to cover the cost. In this case, a special assessment is done with the bill being split between all of the homeowners in the community - an unexpected expense that may range from a few hundred to a few thousand dollars.

4. Have a clear understanding of what the HOA dues do and don't cover. Typically, dues cover maintenance and upkeep of all communal areas and parking lots, the exterior structure of the building, insurance on the exterior of the building, operation of community amenities such as pools and recreation facilities, security, trash removal and many also cover water and sewer as well. Occasionally, you may come across an HOA that covers pest control and cable or internet access. Be wary of too many extras as each item in the list increases the expenses HOAs pay out and may result in more frequent and larger increases in dues for services you may not even use.

5. Find out whether the HOA has any pending lawsuits. Are they suing anyone? Are they being sued? Any lawsuit that doesn't go in favor of the HOA could incur costs for both the HOA's legal fees and those of the prevailing party - costs that would be passed along to homeowners.

6. Lastly, get information about how the HOA deals with homeowners delinquent in paying their dues. If they don't have a clear procedure laid out to recoup those fees, responsible homeowners end up footing the bill in the form of higher dues to cover that lost income.

Living in a community with an HOA can be a great experience, as long as it is well-managed. Benefits include less hassle for the homeowner for exterior upkeep, less bills to keep track of for things like water and trash, lower insurance as you're only covering the interior of the home, and useful amenities. However, when managed poorly, an HOA can contribute significantly to increases in your long-term expenses. Ask questions, review reports, gather information and ask more questions to ensure a home with an HOA is the right choice for you.  Your Century 21 Broadhurst agent can provide information on HOA's in Myrtle Beach communities.