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A planned unit development, or PUD, is a community of single-family homes, and sometimes condos or townhouses, where each owner belongs to a homeowners association (HOA). If you are shopping for a home, you may need to know what a PUD is and how it works, as it could affect you during the mortgage eligibility process, as well as during the time you live in the home. .
Characteristics of PUDs
Property developers see PUDs as attractive and coherent places to live. A PUD can include a mix of owner housing with varying price points as well as convenient access to workplaces, shopping, education, and recreation.
You might find townhouses, single family homes, and senior residences in the same PUD, as well as grocery stores, restaurants, daycares, and office space. In a PUD, you can even find religious institutions and light industrial buildings such as warehouses and storage.
Identify PUDs in real estate ads
One way to identify that a house listed for sale may be part of a planned unit development is if the house looks like a single family home or townhouse but the property type is listed as “condo.” , according to real estate site Redfin.
Another way to find out if a property is part of a PUD is if it charges HOA fees. However, a house can be owned by an HOA without being part of a PUD.
Planned unit developments and owners associations
When it comes to lenders, here are the characteristics that define a PUD:
- Unit owners (owners) own both their residence (the structure) and their lot (the land).
- An HOA owns and maintains common equipment that all unit owners can use.
- Ownership of HOA membership is mandatory.
- The owner must pay the contributions and contributions levied by the association to maintain the common equipment.
Common amenities are those that the entire community can access and enjoy, such as swimming pools, tennis courts, parks, playgrounds, landscaping and security. These amenities are private, available only to community members and their guests.
Because PUDs include common amenities, a property in a PUD can be more expensive to own. As a homeowner, you will be required to pay monthly, quarterly, or annual homeowners association dues. HOA dues will affect how much house you can afford. You might not want to pay these fees unless you use the amenities enough to justify the extra monthly cost or love the community enough to pay the extra money anyway.
In addition to paying regular HOA fees for equipment, you will need to follow the rules on how you can use and modify your property. You may be limited to:
- Use your home for the short term rent.
- it, unless the HOA approves the color scheme.
- Parking cars at night on the street.
- Put political posters in your garden.
Any HOA can have rules like these, however, not just one located in a PUD.
PUD Finances and Rules
Get mortgage approval on a house in a PUD should be only slightly more difficult than getting a mortgage on a house that is not in a PUD. As long as the HOA is solid, this shouldn’t be a problem.
The lender will want to review the finances of the HOA as well as the terms, conditions, and restrictions of the PUD, or CC&R. You should too. You might even want to hire a real estate lawyer to go over these documents with you so that you understand exactly what rules you will agree to and whether the owners association is financially sound and well managed.
Important things to know about an HOA’s finances include:
- How much does he have in reserve to pay for major repairs or maintenance
- What percentage of homeowners are behind on their monthly dues
- If the HOA is involved in a dispute
If you or your lender doesn’t like the way the community seems to be run after reviewing the documents, be happy that you found out about the issues up front and never be forced to fix them. You cannot unsubscribe from an HOA in a PUD; once you’ve bought the property, you’re there, and the only way out of the HOA is to sell your house.
Why lenders care about PUDs
If your lender ever owes grab because you can’t pay your mortgage, the lender will own your property. It will be difficult to resell the property if the PUD HOA is not in good repair or has not taken good care of the common amenities in the development.
You should care about these things for the same reason: you might want to sell your house someday, and if you do, you’ll want your property to be desirable. And until then, you don’t want to own a property that comes with a bunch of headaches.
Your real estate agent can help you get the information your lender will want to review:
- Commitments, conditions and restrictions
- Budgets, financial statements and reserve studies
- Insurance policies for common equipment
You may be a sterling loan seeker and the house you want to buy could go through a Evaluation and inspection of the house without any problem. But if the HOA is a mess, you won’t be able to get a mortgage for a PUD property.
Final result
A planned unit development can be a great place to live. But amenities come with two major costs: you’ll have to pay HOA dues for as long as you own the property, and you’ll be limited in how you can use and modify your property. However, your neighbors will also be limited by these rules, which can help keep the community in good condition and preserve property values if the HOA is financially sound and well managed.
