Do You Know Why HOA Reserve Funds Are So Important?

Do you know why HOA reserve funds are so important? If you plan to buy a home in a community that has an HOA (Home Owners Association), then it is critical to understand some of the most important details regarding HOA’s. What are HOA reserve funds used for? Is the HOA reserve fund properly funded for future expenses?

The health of an HOA is imperative to maintaining and upholding future property values, so if you are considering buying a home within an HOA, then you may want to take time to investigate the financial health of the HOA. If the HOA has a drastically underfunded reserve account, then it is very likely that a special assessment will be required of each homeowner at some point down the road. HOA reserve funds are used to cover major expenses and long-term maintenance of the community and amenities (i.e. common areas, playgrounds, community pools, landscaping replenishment, replacement/maintenance of structures, fencing, etc). If the HOA is underfunded and the community appears poorly maintained, then that should raise a red flag and it is certainly something you should think about before buying a home in that particular neighborhood.

Gated communities are becoming more and more popular in the East Valley and the most important thing to consider with a gated community is that all of the streets within that neighborhood are considered private. Private streets are are not maintained by the city, but rather, by the HOA. When the streets need to be sealed and/or eventually re-paved, the expense will be the responsibility of the HOA and the cost can be substantial. If there are not enough reserve funds to pay for the street maintenance, then the HOA will be forced to apply a special assessment to each homeowner above and beyond the regular HOA dues. The other big item to consider in a gated community is the maintenance and eventual replacement of the gates and operating systems as well.

Every community “asset” has an estimated life expectancy and the HOA reserve fund is necessary to budget for the larger expenses so when the remaining life reaches 0 years, that asset can be repaired or replaced. A properly run HOA will keep an HOA Reserve Fund Study on file and will make sure the study is updated at least every 3 to 5 years. The reserve study will not only look at the physical aspects of the community and take an inventory of current assets, but it will also look at the financial status of the HOA and make recommendations for necessary adjustments to the normal operating budget as well as the reserves.

If you are interested in reading more about HOA’s, then please visit our blog: How Do HOA’s Work? 

If you are looking for a home in an HOA, then please don’t hesitate to reach out. There are many benefits to living in an HOA community that people find very attractive, and many HOA’s include fabulous amenities such as playgrounds, basketball courts, sports fields, walking paths, lots of wide open space and some even offer community pools and clubhouse facilities!

If you decide that you’d like to buy a home with No HOA, then we’d be happy to help you as well! Even though a majority of homes in Arizona are found in HOA communities, there are many properties with No HOA in and around Queen Creek and we can help you find what you are looking for!

View: Homes for sale with No HOA