What to Know About HOA Fees

 

Most planned communities whether it be a condo, townhome, or single-family home in a gated community have a Homeowners Association (HOA). By buying into the community, you are agreeing that you will take part in the HOA, and the HOA fees that come with it. While it’s nothing to be nervous about, and for many, allow the community to remain in excellent care, it is important to understand what you’re getting yourself into. Treat the HOA fees as you would with any other aspect of home buying and do your research.


What do HOA fees cover?

HOA fees typically cover anything that affects the entire planned community such as the lobby, pool, landscaping, exteriors of housing, etc. Be sure to look into exactly what your HOA fee will cover. Typically this is found in the “Division of Property” and “Maintenance Responsibility” sections of the HOA’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

Depending on your community, the HOA fees cover more or less extensive services ranging from or minimal landscaping around the condo’s parking lot, all the way to 24-hour concierge service. Because of the range of services, the monthly HOA fee varies dramatically from community to community.

Each monthly fee gets split into two parts. One part goes into monthly upkeep of the amenities that are provided or maintained by the fund and the other goes into the “reserve” fund for emergency repairs, or larger projects such as roof replacement, exterior paint.



Pros

With an HOA, you have the opportunity to get access to expensive amenities, like a pool, fitness center or clubhouse for entertaining that you may not be able to afford on your own. In addition, even if you could afford certain amenities such as a pool, you don’t have to worry about upkeep or expenses that come with that. Typically city fees for trash removal and sewage, along with basic utilities such as water are included, as well.
Owning a home or condo within a community that has an HOA also takes less personal upkeep. With HOA fees, you likely won’t have to spend as time or money on home repair, and less to virtually no time or money on lawn care depending on the type of community you are in.
For those worried about the extra amount each month, banks often take into account monthly HOA fees when setting up your mortgage, for a little added help.

Cons

The most obvious downfall of an HOA fee is that it is simply an added expense each month on top of your mortgage. For the typical month though, you know the amount that you are planning on spending and can budget accordingly.

The downfall to that is that there are times where the HOA’s “reserve” fund may run out. The reserve fund is the money that is saved for disasters or larger repairs or renovations. When the reserve money needs to be added to for one reason or another, there will be a vote (exactly how varies by community) to determine what the monthly fee needs to be temporarily raised by, or how much residents need to pitch in for a particular repair.

There is also the chance that monthly fees could raise in subsequent years, and if you are unable to pay there can be steep penalties.


Do Your Research

With lovely planned communities, less maintenance and access to luxury amenities, many HOA fees are very willingly and happily paid. The crucial part of the matter is to do as much research as you possibly can before you buy. Here are a few steps to starting that research:

  • Review HOA bylaws to understand the rules and way that the community operates and makes decisions.
  • Request a copy of the financial statement to check that the HOA budget is able to cover maintenance costs, staff salaries, utilities (if included), as well as at least 3 to 5 percent funneled into the reserve fund. (Hint: look at the past few years to get a better idea of how the money and budget is typically managed and make sure there aren’t any red flags).
  • Look over HOA meeting minutes to get a feel for what the community is currently working on and discussing

 

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