From Temecula and Murrieta to Menifee, Homeowners Associations (HOAs) are a major part of the local real estate landscape. For homebuyers and homeowners, an HOA can impact monthly housing expenses, property rights, maintenance responsibilities—and eventually, mortgage financing.
But what exactly is an HOA, and why do they matter?
What Is a Homeowners Association?
A Homeowners Association, or HOA, is an organization created to govern and manage a residential community.
Depending on the community, an HOA may oversee:
- Common areas
- Community landscaping
- Parks and recreational facilities
- Pools and clubhouses
- Gates and security features
- Architectural rules
- Parking rules
- Exterior property standards
- Community maintenance
- The budget & spending for improvements, construction, and maintenance for common areas & structures.
Homeowners within the association are generally required to follow the community’s governing documents, know as CC&R’s, and may be required to pay monthly, quarterly, or annual HOA dues.
Long Beach vs. the Temecula Valley
The difference between older and newer real estate markets can be dramatic.
Take Long Beach, for example. Many neighborhoods contain homes that are 50, 75, or even 100 years old. A large percentage of traditional detached homes were built without an HOA.
In those areas, HOAs are more commonly found in:
- Condominium developments
- Gated communities
- Planned communities, which are rare there
Now compare that with Temecula, Murrieta, and Menifee.
A substantial percentage of newer residential communities are planned developments, including detached homes that look and function like traditional single-family residences—but are still governed by an HOA.
What Is a Planned Unit Development (PUD)?
A Planned Unit Development, or PUD, can look exactly like a traditional neighborhood of single-family homes.
The homeowner may own the home and typically own the underlying property, while also having rights and responsibilities relating to shared community areas.
Those common areas may include:
- Parks
- Pools
- Walking trails
- Streets or private roads
- Clubhouses
- Landscaping
- Recreation areas
Most importantly, a PUD is commonly governed by an HOA.
Many PUDs have monthly HOA dues, although there are smaller or limited-maintenance associations where dues may be very low or, in rare situations, no regular dues may currently be assessed. My prior home had an HOA, with no dues, and was owner-governed by the homeowners on the one street – kind of unique.
Common Property Classifications
When financing real estate, several common property classifications include:
- Single-Family Residence (SFR)
- Attached or detached PUD
- Attached condominium
- Detached condominium
A traditional single-family residence is often not part of an HOA—but a detached home can absolutely be located within an HOA-governed community.
PUDs and condominiums are much more commonly associated with HOA requirements.
PUD vs. Condominium Ownership
Planned Unit Development
With a typical PUD, the homeowner generally owns the individual structure and may own the land beneath it, while sharing rights and responsibilities for common areas.
Attached PUDs can have different ownership and maintenance structures depending on the community documents.
Condominium
A condominium generally involves a different ownership structure.
The homeowner typically owns an individual unit and an undivided or fractional interest in common areas, which may include:
- The overall building structure
- Parking areas
- Hallways
- Elevators
- Landscaping
- Pools
- Other common amenities
Because more components are shared, condominiums can create additional considerations for both the HOA and the mortgage lender.
The Positives of an HOA
An HOA can offer several benefits:
- Maintained common areas
- Community amenities
- Neighborhood appearance standards
- Potential protection against deferred maintenance nearby
- Pools, parks, and recreational facilities
- Gated or controlled-access communities
- Shared maintenance responsibilities
The Negatives of an HOA
There can also be drawbacks:
- Monthly HOA dues
- Special assessments
- Rules and restrictions
- Architectural approval requirements
- Potential HOA dues increases
- Restrictions on rentals
- Restrictions on parking or property use
- Financial problems within the HOA
- Some HOA’s dictate if you can have your garage door open for an extended period, what is parked in your driveway, color of your home, etc
And from a mortgage perspective, an HOA’s financial health can sometimes become extremely important.
What’s Coming in Part Two and Part Three?
In Part Two, we’ll dig deeper into HOA requirements for mortgage financing involving PUDs and condominiums, including how different loan programs may evaluate the property and HOA.
In Part Three, we’ll take a deeper look at some of the more complicated issues, including:
- HOA litigation – how your neighbor impacts you and vice-versa
- Reserve studies
- California SB 721 and SB 326
- Federal structural requirements
And maybe a Part Four, discussing the HOA Certification in-detail and things to look out for.
Buying a home with an HOA isn’t automatically complicated—but understanding the property classification and the HOA behind it can be critical when financing real estate in the Temecula Valley.
