What Does the Term PUD Mean In Real Estate? Your Questions Answered

While looking at potential neighborhoods for your home search, you might come across a community with uniform-looking homes, grouped close together.

Each house is a similar size and color and they’re surrounded by luxurious pools, tennis courts, state-of-the-art fitness centers and private parks. Nearby, there are grocery stores and shopping centers dotted along well-maintained roads and walking trails. Everything about this neighborhood makes it seem like it will cater to your every need.

What is this neighborhood? And when can I move in?

If you find yourself in this scenario, chances are you’ve stumbled upon a planned unit development (PUD). These are communities that have been carefully planned out before construction begins to provide comfort and convenience to their residents. They often include a mix of residential homes, retail shops, and private amenities.

Want to run to the gym or do a few laps in the pool before starting your day? A PUD makes that decision easy because these private amenities are only steps away from your front door. Out of eggs and need to run to the grocery store? It’s only a short walk or drive away.

Though PUDs can provide community and luxury, you may be wondering if they’re the right fit for you as a buyer. We’ve talked to real estate experts and carefully weighed the pros and cons of purchasing a home in a PUD.

What is a PUD?

PUDs are communities made up of single-family homes, amenities for homeowners such as pools, gyms and tennis courts, and occasionally retail stores and schools. All of these resources are planned ahead of time, allowing for residents to easily access both entertainment and the items they need for their daily lives. Fitness centers, shopping complexes, and grocery stores are all easily accessible to residents.

All homeowners within the PUD pay HOA fees to help maintain amenities and common community elements. Some communities will have more amenities and HOA management than others, and those many come with higher fees.

PUDs are often gated or 55+ communities, but not all of them are. They can be made up of townhomes, single family homes, or condos. These types of communities are particularly popular in Southern and coastal states, with Florida being home to many of the most popular PUDs.

Ed Kaminsky, a Los Angeles, California-based real estate agent with extensive experience selling townhomes and condos shares, “[In a PUD] all of the homes are of equal look, price point, style, and there’s comfort in that for some buyers.”

What’s the difference between an HOA and a PUD?

Wait, you might be thinking, what’s the difference between a PUD and a HOA-run townhome or condo? 

Simply put, a home can be in an HOA without being a part of a PUD, but most PUDs have an HOA (homeowners association).

PUDs are distinct from these other types of HOAs because of how they were built and who owns the land under the home. In a PUD, builders carefully plan the community to ensure residents have easy access to the many nearby amenities and retail complexes for residents.

In a PUD, the homeowner owns the land under their home, as well as the physical structure and has shared ownership of some of the common elements. In other types of HOAs, the association may own the land under the home. If you own a condo in a high-rise, for instance, the association will own the building (and land under it) and you’ll just own your individual unit.

How do you know if you’re buying a home in a PUD?

Buyers should be able to tell that a home is part of PUD just by glancing at the listing in the MLS. Homes in PUDs tend to be fairly uniform in appearance and it’ll be easy to notice the many amenities like sparkling pools and well-preserved nature and bike trails mentioned in the listing.

The listing description will probably mention the home is part of a PUD. If it doesn’t, the listing agent should tell your buyer’s agent that a home is part of a PUD up front. They should also share any HOA governing forms, financial documents, or information about the amenities with your agent, so that you can go over it before you decide to make an offer.

Pros of buying a home in a PUD

Amenities

For many buyers, it’s the amenities that really draw them to a PUD. From pools and tennis courts to shopping centers, restaurants, and even golf courses, amenities allow residents to prioritize convenience, entertainment, and luxury in their daily lives. However, not all PUDs will have these.

Here’s a peek at some of the possible amenities a home in a PUD might include:

• Parks, nature trails, and green space
• Bike paths
• Pools
• Lakes or ponds
• Fitness centers
• Shopping complexes
• Grocery stores
• Tennis courts
• Restaurants
• Golf courses and clubhouses

Safe and well-planned community

PUDs are designed to make their resident’s lives more pleasurable and convenient. Living in a community where stores, recreation centers, and restaurants are all a short walk away is something many people enjoy when they buy a home in a PUD.

Another feature of this type of community is safety and security. Many of the amenities are private and can only be used by homeowners and their guests. Some communities are even gated or have private security services that patrol the neighborhood. For older folks and families with young children, neighborhood safety is a priority and they may rest easier with a home in a PUD.

Well-maintained

It’s easy to fall in love with how stunning PUDs can be. Luxury amenities and private parks can really enhance the community’s curb-appeal. The Woodlands, one of the largest master planned communities in the country, sprawls over 44.5 miles and much of that land is dedicated to private nature trails and other greenery.

Your HOA dues will go toward ensuring that all community amenities, shared parks, or other common elements in a planned community are well maintained year round. But your HOA will also enforce rules and regulations that require others in the neighborhood to take care of their home’s outward appearance.

“You can be sure that your neighborhood is likely going to look the same five or ten years from now because there are a set of rules that require people to maintain their properties,” Kaminsky says.

When it comes time to sell, you might feel grateful that your HOA required neighbors to remove trash promptly, clean up after any pets, and keep their home’s outward appearance in good shape. A run-down home down the street or other badly-behaved neighbors are less likely to tank your home sale, with an HOA to step in.

HOA management services

In addition to taking care of common spaces and amenities, your HOA may offer private trash and recycling collection, landscaping services, and other forms of exterior maintenance that can help you maintain your home’s value.

“[The HOA manages] certain parts of the landscaping, keeping the neighborhood looking a certain way, road maintenance, things like that, and that’s a tremendous convenience,” Kaminsky shares.

Community

Chicago’s Riverside, one of the first planned communities in the United States, was built way back in 1896. But most PUD communities are on the newer side.

The push to start building them really took off in the 1960s when planners were brainstorming ideas for developments that could foster a sense of community among residents. Whether you wave a quick hello to neighbors as you pass them in the store, or if you spend all day hanging out together at the community pool, living in a PUD can help you feel closer to your neighbors.

Good investment

The HOA maintenance and regulations found in most planned communities can go a long way in protecting your home’s property values. Homes in an HOA were valued 4% higher on average compared to similar, non-HOA homes, per researchers at the University of California, Irvine.

In Kaminsky’s experience, PUDs tend to be recently constructed homes that have been well-maintained due to strict HOA oversight, making them a solid investment choice for buyers.

“They’ve been built recently and, and built to a certain standard,” he says. “You’re not buying an older home that has potentially had deferred maintenance.”

Cons of buying a home in a PUD

Less unique homes and HOA oversight

The uniformity of similar-looking homes surrounded by trees and private parks can make PUDs appealing to some buyers, but for others, the lack of individuality may feel stifling.

In a PUD, the HOA will likely have a set of regulations called covenants, conditions and restrictions (CC&Rs) that dictate how owners need to maintain their home’s exterior appearance.

“There could be rules about what you can do to the outside of your home,” Kaminsky cautions. “You have someone watching over you telling you what you can and can’t do with your own home. That can be a concern to some people.”

These rules can be as simple as requiring owners to bring their trash cans off the curb after garbage day or limiting whether buyers can paint their home a different color or add an additional room.

Some buyers may feel constrained by these limitations, but remember, a PUD’s restrictions can help protect your investment as a buyer.

Closer to your neighbors

There is such a thing as being too close to your neighbors. Lot sizes in PUDs may be smaller than your typical suburb and consequently, homes will be closer together. If your neighbor loves throwing parties or blasting music and you prefer quiet evenings in, you may find their behavior disruptive.

Though proximity can make loud or messy neighbors more frustrating, it’s important to remember that you can find bad neighbors anywhere. At least with PUD homes, you can count on the HOA to step in and mediate any issues that arise.

HOA dues

When considering buying a home in a PUD, it’s important to factor in if you can afford the HOA fees in your monthly budget. HOA membership is often mandatory for PUD owners, so if you buy a home in one of these communities, you’ll need to pay the fees.

Nationwide, average HOA fees are $250 monthly for a single family home, per 2022 data from iProperty Management. More amenities, such as gyms, pools, and fitness centers, will likely mean higher HOA dues since the community will have more to maintain. Sometimes fees can run you up to $1,000 per month.

HOA mismanagement

Typically, a well-run HOA can be a positive thing for a PUD’s property values. But, a poorly run association can be frustrating for homeowners.

One of the most common types of HOA mismanagement includes issues with collecting enough funds. Ideally, your HOA will have two accounts, an operating and a reserve account.

The operating account should cover routine costs like the association’s insurance policy and amenity upkeep. You can think of it like an account that covers expenses found in a monthly or yearly budget.

You should think of the reserve account, on the other hand, as an emergency or savings fund. This account saves money for emergency maintenance and long-term projects. If your HOA hasn’t budgeted properly and the reserve account is low on funds when an unexpected expense comes up, the association will have to do a special collection, which means you’ll end up paying more.

More complex financing

If you’re financing your home purchase with a mortgage, a PUD may come with more complex financing requirements.

Your lender may ask to see HOA financials and governing documents to make sure that the association is being run properly, amenities are taken care of, and there are sufficient reserves in case anything needs to be repaired. These documents are key to helping lenders understand the risk before issuing you a loan and protecting your investment.

Though your lender may need some extra information, these steps aren’t too difficult for buyers. You’ll likely be grateful that your lender took the time to review these documents because it can protect you from living in a community with a poorly run HOA.

In some cases, an HOA may charge for preparing these documents. Known as a document processing or HOA transfer fee, these costs vary depending on the neighborhood, but they’re typically between $200 and $250.

Should you buy a home in a PUD?

If you’re considering purchasing a home in a PUD, working with a top buyer’s agent can help you determine if a planned community is the right choice for you.

Kaminsky has found that “busy buyers,” like young parents or retirees with active social lives, benefit from the convenience of living in a PUD. He says they tend to appreciate how well maintained and move-in ready the homes are.

“You’re generally walking into something that you can move in and just start to enjoy immediately,” he explains. “It’s a big plus for buyers that are looking to ease the burden of homeownership, as far as time and money.”

Before you make an offer, your agent can also help ensure you have a copy of the CC&Rs, the HOA governing documents, and the association’s finances so that you can make an informed decision.

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