It's 'almost impossible' to purchase a home outside of a homeowners association, according to an expert.

In 2008, when Jewel Inostroza purchased her home in Newnan, Georgia, she was filled with excitement.

The community appeared to be a tight-knit, friendly group, but then it transformed into a terrifying scenario.

Enrique, 48, shares financial responsibility of the home with Inostroza, who is the only one listed on the deed.

After relocating, they discovered that they had purchased property in a "common-interest community," which typically involves shared expenses for amenities and common areas, and is managed by a homeowners association.

HOAs, or homeowners associations, are self-governing organizations that enforce rules for homeowners and renters in common-interest communities. These organizations are run by a board of directors, comprised of volunteer homeowners from the community. The board has the option to hire a management company, many of which are for-profit, to assist with daily operations.

The cost of living is a significant obstacle to success for 53% of Gen Z. The Series I bonds rate may reach 5% in November. Student loan borrowers are facing challenges as their bills resume.

Homeowners associations are increasingly common for new homeowners, with about 84% of newly built, single-family homes in 2022 being part of an HOA, according to the U.S. Census Bureau.

It's nearly impossible for a homebuyer in most southern and western states to find a single-family home that isn't part of an HOA, according to Deborah Goonan, administrator of the blog Independent American Communities. Local governments in these areas often mandate that almost all new construction includes an HOA.

How a $200 annual HOA fee became a $12,000 burden

The Inostrozas' annual HOA fees are $200. Although their HOA membership appears to be financially insignificant on paper, their experience has been different.

After moving into their new property, the couple discovered an outstanding balance that included unpaid dues, penalties, and other charges.

When we moved into our home, we were fined for any outstanding balances and late fees, as well as any other fines related to lawn care or other home maintenance issues, according to Jewel Inostroza.

The Inostrozas were not willing to pay the fines and claimed that the HOA and its management company, Homeowners Management LLC, were unresponsive to their efforts to have the balance cleared. According to CNBC's documentation from 2012, the balance continued to accumulate. The Inostrozas stated that they communicated with the HOA prior to 2011 via phone.

In August 2015, the HOA filed a lien on the Inostrozas' home due to unpaid fees totaling over $1,600, as stated in court documents.

A lien is a legal claim against an asset that can be used as collateral to pay off unpaid debt. This can lead to an HOA or other complainant taking legal action, such as foreclosing on the home or garnishing wages, as seen in the Inostrozas' case.

In mid-2015, the HOA started deducting unpaid fees directly from Jewel Inostroza's paycheck.

She stated that the first time she became aware of it was when she received her first paycheck that had been garnished, and she did not receive any advance notice.

"Two weeks after receiving a notice, there was nothing sent," said Jewel Inostroza.

Although the HOA's invoices were garnished, CNBC's review did not reveal any reduction in the total balance owed by the Inostrozas by December 2016.

The Inostrozas paid off the $3,100 they owed to the HOA's attorneys by January 2021, as per the agreement reached with their lawyer in 2016.

"Enrique Inostroza stated that it appeared as though the deal never reached the management company or homeowners association, resulting in only fines and interest being added,".

The Inostrozas have paid approximately $12,000 in fines and garnished wages to the HOA, along with thousands in legal fees to their lawyer. As of Aug. 18, 2023, the most recent invoice from the HOA indicates that they owe nearly $8,000.

We tried to contact Homeowners Management LLC for comment but received automated responses directing us to contact the current management company, which changed hands in August 2023.

Sentry Management, the new management company for the community, has limited ability to comment on historical facts regarding the Inostrozas' case since it only recently took over.

If a homeowner has been referred to an attorney for delinquency prior to Sentry's involvement, the homeowner must resolve the issue with the association's attorney, as Sentry Management has no authority to intervene or settle the matter.

CNBC repeatedly requested comment from the attorneys representing the HOA, but they did not respond.

The former HOA board director, who led the association from 2020 to October 2023, declined to provide any comment.

The case for HOAs

Many HOA sales pitches emphasize that the presence of the organization contributes to higher property values.

Tom Skiba, CEO of the Community Associations Institute, stated that the board is responsible for safeguarding property values. He emphasized that for many Americans, their homes represent their largest financial commitment.

There’s mixed data about the effects HOAs have on property values.

According to a 2019 study in the Journal of Economics, HOA homes cost at least 4% or $13,500 more on average than non-HOA homes. However, a 2019 analysis from Critical Housing Analysis of three different U.S. cities revealed that home values in HOA areas were lower than those in neighborhoods without them.

HOAs can be beneficial for managing shared amenities or land, such as swimming pools or golf courses, and can provide value-added services to help homeowners maintain their properties in single-family home communities.

Skiba stated that there are associations that handle all landscaping in many over 55 communities, even if the property owner owns the lot. This allows individuals to avoid the hassle of maintaining their own landscaping. Skiba considered this a cost-saving measure.

‘They act as hyperlocal governments’

Some power dynamics observed in the HOA experience of the Inostrozas are reflective of patterns seen nationwide.

A 2023 survey by Rocket Mortgage found that more than half of homeowners with an HOA dislike the arrangement, and over 30% say their HOA has too much power. The lender surveyed 1,001 Americans with an HOA.

HOA United co-founder Steve Horvath stated that these communities function as mini-governments and often override other laws in operation.

Horvath stated that HOAs were established to enable municipalities to transfer their obligations for maintaining infrastructure such as sidewalks, roads, and sewers, which are typically associated with tax payments.

Official government channels are not always helpful for homeowners with HOA disputes.

Raelene Schifano, co-founder of HOA United, stated that homeowners have the right to take their grievances to civil court, but this approach is not always successful.

The professional management industry has faced opposition from lawmakers in several states, including Maryland, North Carolina, and Florida, who have introduced legislation to address homeowners' concerns about HOAs.

Currently, it is necessary for change to occur at the grassroots level, with homeowners utilizing both the court system and voting for a board that aligns with their interests.

American neighborhoods are being shaped by homeowners associations.