While a strong homeowner’s association can provide many great benefits for individuals living in the community, it’s important to know what you’re getting into before you buy.
1. HOA fees aren’t uniform
Zillow and Redfin records show that the national average for HOA fees is $120.
Not too bad, right?
But a 2017 Trulia study conducted by data scientist Mark Uh, using data from a 2017 American Community Survey records reports a range of HOA from $218 in Warren Michigan to $571 in New York City.
Older buildings and complexes were shown to typically have higher fees due to the costs of upkeep. Amenities; their size and number are also factors in HOA fees.
What to ask
Ask the realtor or homeowner what the current HOA fees are and what they have been over time.
HOA fees are normally set out in the MLS, so it should come up when you search a property on Zillow, Realtor.com, etc.
If you get a history of the fees you’ll get an idea of how stable they are. Go back at least 10 years of possible to help you see what you can expect during the time you own the property.
Find out if an increase is planned. HOAs usually plan rate increases ahead, anywhere from 3 to 5 years in advance so it shouldn’t be a problem to find out.
Ask for a copy of the bylaws and read through them to help you understand not only your obligations but that of the association. Usually, fees shouldn’t increase more than once a year.
2. What your money buys can vary too
When you buy in a community with an HOA you’re also buying entitlements and legal obligations which can vary, depending upon where you live.
The exact services, rights, and amenities which the HOA will manage could be a something as simple as an agreement between homeowners to maintain the common areas or the HOA could have the legal authority to create liens and even foreclose if fees are unpaid.
What to Ask
Ask what your monthly dues will be paying for.
Find out what is and isn’t included that will contribute to your finances (e.g. garbage pickup, utilities, etc.)
Think about the amenities offered. Are they worth the cost to you or could you do without them?
Whether or not you use the amenities provided you will be responsible for paying towards their upkeep so keep that in mind when you see what’s being offered.
What are other communities providing and how do their dues compare to the ones in the community you’re looking at?
Note: An experienced real estate broker is a good source for much of this information.
3. You could end up paying more than monthly fees
An HOA can use different approaches to managing the association finances. This can affect not only how much you pay per month, but how much extra you may be required to contribute.
For example, some HOA’s like to keep a large reserve of cash to cover both regular and unexpected expenses (e.g. replacing an HVAC system).
Others, however, may offer low HOA fees, but when the need arises adopt a special assessment to cover things like maintenance and repairs.
These levies can amount to thousands of dollars, significantly increasing your costs of homeownership.
What to Ask
How large is the HOA’s reserve fund? Is there a record of special assessments issued previously? The HOA should be able to give you a list.
Keep in mind too that the smaller the membership the more you may be required to contribute.
4. Your lender will consider the HOA fees in their underwriting
Lenders include HOA dues into your overall expenses when they’re underwriting your loan application.
What to Ask
If you’re obtaining financing you want to be sure you understand what your overall monthly costs will be – including the HOA fees.
When you’re initially searching for a home there are many online mortgage calculators you can use to help you estimate your costs, and in some cases, real estate portals such as Zillow include HOA amounts in their listings.
While you want to confirm this with the realtor or seller the Zillow figure is a good guideline to help you narrow down the home that’s right for you.
5. Conflict Resolution
Conflict is not uncommon in many communities, so it’s important to understand how your HOA handles issues that arise between homeowners.
What to Ask
Find out what the penalties are for any rule violation.
Some common ways HOAs will deal with “lawbreakers” is to issue stiff fines, liens or even file lawsuits.
Finally, find out the process for how the HOA deals with managing or changing existing rules. Ask for a recent account of violations and other issues, including how the problems were resolved.