4 HOA Red Flags Homebuyers Should Never Ignore (A North Carolina Lawyer Explains)

The HOA can be the most expensive thing about a house. Not the mortgage, not the taxes, the HOA. And there are four red flags that tell you, before you sign anything, whether you are buying into a well run community or a financial problem waiting to land on you.

The short version. Look at the reserve fund, not just the dues. Walk the common areas and see whether they are actually being maintained. Read the CC&Rs before you make an offer instead of during due diligence. And try to reach whoever runs the association, because if you cannot reach them now, you will not reach them later either.

In the video below, North Carolina attorney Tiffany Webber walks through all four, including the special assessment letter that can show up the Monday after you close.

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Red Flag 1: High Dues and an Empty Bank Account

When you are buying into an HOA community, you have the right to request the association financial documents. One of the first things to look at is how much money they actually have sitting in the bank.

Here is what most people get wrong. They see the monthly dues, say $400 a month, and they assume the HOA must be in great shape. That is a lot of money coming in, so the math makes sense on the surface. But high dues and a healthy bank account are not the same thing. If an association is collecting $400 a month from every homeowner and there is almost nothing in the reserve fund, you need to ask why.

There can be a legitimate reason. Maybe they just finished a major capital project, a full pool renovation, new roofs on all the townhomes, repaved roads throughout the community. Those are expensive, and that money had to come from somewhere. If that is the explanation, you want to see the receipts, literally.

But if there is no major project to point to, if the common areas look the same as they did five years ago and the account is still nearly empty, that is a red flag. It could mean financial mismanagement. It could mean the board is not collecting dues properly, meaning a significant number of homeowners are not paying and nobody is chasing it down. It could mean money is being spent in ways that are not well documented.

Here is why it matters to you specifically. When an association runs out of money and something needs fixing, a roof, a parking lot, a retaining wall, they have two options. Raise the dues, or issue a special assessment. A special assessment is a one time charge to every homeowner to cover a specific expense, and we have seen them at 5,000, 10,000, and more. You could close on your home on a Friday and get a letter the following Monday telling you that you owe $8,000 by the end of the quarter. That is not a hypothetical.

Red Flag 2: The Common Areas Are Falling Apart

This one you can see with your own eyes, and most buyers walk right past it. When you tour a home in an HOA community, you are looking at the house, the kitchen, the bathrooms, the backyard. That is natural. Also look at everything the association is responsible for maintaining.

Walk the community. Look at the pool, the landscaping, the fencing, the parking areas, the clubhouse if there is one. Look at the roofs if it is a townhome community where the association covers exterior maintenance. You are looking for things that clearly need attention and have not gotten it. A pool that has not been properly maintained, fencing that has been broken for a long time, common areas that are overgrown, safety issues that are obvious but unaddressed.

Every community has something that needs a little work. That is normal. What matters is a pattern. Multiple things clearly neglected, and a general sense that nobody is taking care of what they are supposed to be taking care of. That tells you either the board is not functioning or the association does not have the money, and we already covered where that leads.

Drive through the community at different times of day before you make an offer. If what you see does not match what the documents say should be happening, that is a conversation to have before you go under contract.

Red Flag 3: You Have Not Read the CC&Rs

This one is different from the others. It is not about the association being poorly run. It is about whether this community actually fits your life.

Read the CC&Rs, the covenants, conditions, and restrictions, before you make an offer. Not at closing. Not in the middle of due diligence. Before the offer.

That is not how most people do it. Most people find the house, fall in love with it, go under contract, and then somewhere in due diligence a stack of HOA documents shows up. By that point you are emotionally attached, you have already told the kids this is the house, and now you are finding out the restrictions do not work for your life.

You can usually get them earlier. Ask the listing agent. Ask the seller. In many North Carolina counties the declaration of covenants is recorded publicly and you can find it through the register of deeds. It takes some digging, but it is there.

What you are looking for is anything that conflicts with how you actually live. Pet restrictions cause more problems than anything else we see. Some associations have breed restrictions, some have weight limits, some do not allow certain animals at all. Home based businesses are another one, and that includes an in home bakery, a daycare, a salon, or consulting clients coming to your door. Vehicles are a big one too. Work trucks, commercial vehicles, RVs, boats, and what can sit in the driveway or on the street. If you drive a work truck home every night and the restrictions say no commercial vehicles, that is a problem you deal with every single day.

The restrictions are not a red flag just because they exist. Every HOA has them. The red flag is finding out after you are attached to the house. If you already own and the restrictions are the problem, there is a separate process for that, which we covered in how to remove property restrictions in North Carolina.

Red Flag 4: Nobody Can Tell You Who Is in Charge

This last one is subtle, but it tells you a lot. Try to find out who runs the association. Who is on the board. Whether there is a management company. How you get in touch with them.

In a small community, maybe twenty or thirty homes, the board might be pretty informal. They meet a couple times a year, there is not a lot going on, and that is appropriate for the size. But in a larger community where the board meets regularly, making decisions about fines, approving architectural changes, potentially recommending special assessments, you should be able to find out who those people are and reach them.

The red flag is when nobody can tell you. You ask the listing agent who manages the HOA and they do not know. You ask the seller and they shrug. You look for a management company contact and there is nothing, or you find a number and nobody ever calls back.

That disorganization does not go away after you close. If you have a dispute with a neighbor, if you need approval for a renovation, if you have a question about your dues, you need to reach these people. If they are unreachable now, they will be unreachable then. And if they are not responsive to a potential buyer, ask yourself how responsive they are to the homeowners already paying them.

This one is easy to check. Try to make contact before you go under contract. The response, or the lack of one, tells you what you need to know.

Watch the full video for the whole walkthrough, including what to ask for when you request the financials. There is also more on how associations operate in our breakdown of how HOAs really work in North Carolina.

Common Questions About HOAs in North Carolina

Can an HOA charge a special assessment right after I buy?

Yes. A special assessment is a one time charge to cover a specific expense, and it applies to whoever owns the home when it is levied. Closing on a Friday and getting the letter on Monday is a real thing, which is why the reserve fund matters before you buy.

Am I entitled to see HOA financial documents before closing in NC?

As a buyer under contract you can request the association documents, and North Carolina sellers complete an Owners Association disclosure as part of the sale. Ask early, because the useful documents are the budget, the reserve balance, the minutes, and any pending assessments.

Where do I find the CC&Rs for a North Carolina neighborhood?

The declaration of covenants is usually recorded with the county register of deeds, so in many counties you can pull it online before you ever make an offer. The listing agent or the seller can also provide it.

Can an HOA restrict pets, work trucks, or a home business?

Often yes. Breed and weight limits, commercial vehicle bans, and restrictions on client traffic or signage for home based businesses are all common. They are enforceable when they are properly recorded, which is why reading them first matters.

What happens if an HOA runs out of money?

They raise dues or issue a special assessment, and in the meantime maintenance tends to slip. Deferred maintenance in the common areas shows up in your property value and can make the unit harder to sell, because a buyer lender will look at the association financials.

Buying in an HOA Community Around Lake Norman?

At Thomas & Webber, the association documents, the recorded restrictions, and the title work are all part of what gets reviewed before you get to the closing table. It is a lot cheaper to find a problem before closing than after.

Our offices in Mooresville, Cornelius, and Denver serve buyers and sellers throughout the Lake Norman area, including Davidson, Huntersville, Sherrills Ford, Troutman, and Statesville.

Email your contract to [email protected] or call us at (704) 663-1600 to schedule your closing with us.