How HOA’s Can Affect the Value of Ohio Lakefront Homes
In the state of Ohio there are several types of lake communities that we actively work in and have discussed on several other blog posts. You have public lakes with state parks and reservoirs such as Hoover Reservoir; you have lakes run by the government agency known as the MWCD such as Atwood Lake and you have private lake communities run and managed by HOA’s, or home owner associations, such as Apple Valley Lake. We often discuss different ways to increase value in a lake home and how things such as view, location and lake rules and regulations affect the value of a home, but we have never before discussed how specifically the HOA’s can affect the value of your Ohio lakefront home. Now it is true that some public lake communities can have HOA’s in certain select neighborhoods in the community around the lake, but that HOA does not run or manage the actual lake itself, this only occurs in private lakes. And the number one thing to understand and realize when talking about how HOA’s can affect the value of your lake house is understanding how each HOA manages the actual lake itself. There are a few key items to look at, the first one being what is the HOA cost?
The actual cost of the HOA plays a large part in the value of your home in three big ways; the first is that it can affect desirability of the community. If an HOA is too expensive it can have a negative impact on the desirability of the lake community itself. Sometimes the HOA fee may actually be worth the cost if they are investing it into additional amenities such as tennis courts, swimming pools, etc. but the fact is that not everyone looking for a lake house wants to spend several thousand dollars on a new member fee and then several hundred dollars a month on an HOA fee. The cost of your HOA can push people away from the lake. The second part to understand about HOA cost is that if the cost is too little it can also negatively affect the value of your lake. This may seem backwards but the fact of the matter is that HOA’s charge a fee for several reasons, the most important of them is lake maintenance. Maintaining a lake isn’t cheap, things such as dredging, algae, and dam repair do come up and they are not cheap. If the HOA does not bring in enough revenue to handle these potential problems the entire lake itself could go under. And when it comes to lakefront property a large percentage of the value would disappear instantly if the lake became unusable due to algae or if a dam breaks and can’t be repaired. If an HOA has to file bankruptcy due to a dam breaking then the value of your lake house is in trouble. The third part to understand about how HOA cost affects value is to understand how well your HOA actually manages the money; they shouldn’t overcharge but they should be charging enough to maintain amenities and the lake. Make sure to look into the history of the HOA and their operations accounts and spending habits to make sure you’re not investing into a lake community run by people who are willing to let the HOA go under due to their own inability to manage finances.
Now once we have the cost of HOA covered, let’s talk about the actual management part of it. As mentioned above HOA’s need to be able to manage their finances. But there is a lot more to managing a lake then just money. You need to ask how the HOA enforces its own rules. If it does a poor job of enforcement is the lake safe? Check how many boating accidents have occurred at the lake in the past few years and how many occurred due to violation of boating rules and regulations. Boating accidents are inevitable, but you want to avoid private lake communities that have very high rates of accidents as this may lead to lawsuits and bankruptcy, not to mention a negative stigma that could later lead to a lower value for the community. On that note if an HOA is too strict it may drive away buyers who are looking for a fun lake house get away. Along with the management part comes the ability to actually get things done. For example several years ago a private lake community known as Hide-a-way Hills discovered a large slip in their earthen dam and essentially had to lower the lake for several years until it could be fixed. The fact of the matter was that they had some financing but had to take out a loan in order to pay for the 2.5 million dollar dam replacement. The HOA had to come up with an appropriate financial plan to fix the dam and had to pass a special assessment in order to get the funding necessary to bring the lake back to life. The assessment was passed but if it had not been the entire community would have suffered. You need to research into the history of the HOA at each specific lake and make sure that when big projects come up that need handled, that the HOA is able to get things done. These projects could range from dredging, water plant repair, dam repair, etc. All major projects that have to be handled in order to keep values up in the community.
To recap: HOAs at private lakes can affect the value of your lakefront home in a major way. They can do this by charging too much, too little or by mismanaging the HOA funds. HOA’s can also affect the value by their management ability. HOA’s need a history of both responsible and reasonable rule enforcement and good safety habits, as well as the ability to handle large projects.
Make sure to talk to your lakefront specialist about the different HOAs before making a decision.
Written by – Justin Shelton Lakefront Consultant – The Lake Team