So, you’re looking into purchasing a new home in a gated community, in a multifamily building, or maybe even a condo, but when talking with your realtor you notice that the unit you’re interested in has a listing for HOA fees.
This indicates that the property you’re looking at has a homeowners’ association and that there are monthly fees that go beyond your mortgage that you must account for.
You’re probably wondering what these fees are, why they’re necessary, and whether or not they’re worth it.
In this article we’ll explain what HOA fees are and the pros and cons of having a Homeowner’s Association.
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What are HOA Fees?
HOA fees are a monthly fee determined by the homeowners’ association board of directors in that community. Each year, the board tries to ascertain how much money it will cost to keep the community looking beautiful and safe, and also try and determine how much to reasonably set aside for potential repairs.
When they have those numbers together, they divide by the number of units in the building/community, and this is how much they charge each month in HOA fees.
What Do HOA Fees covered?
In general, the maintenance and upkeep of any common areas such as lobbies, pools, and landscaping are covered by your fees.
Insurance on these areas and community-related dues such as sewer, water, and waste removal bills are covered.
This can also include the exterior of your home, including siding and roofing, and hazard insurance to cover these specific areas.
Typical items covered by HOA fees:
- Swimming pools
- Fitness rooms
- Community landscaping
- Pest removal services
- Snow removal services
- Security gates
- Housing exteriors (roofs, siding)
- City water, sewer, and refuse bills
Please note that while these fees may cover the exterior of your home (siding, roof, etc.), it will not cover the interior or any items inside. You will still need homeowners’ insurance to cover these.
In general, if it is deemed necessary by the homeowners’ association for maintaining a certain quality of living standard, and effects the community as a whole, it may be covered by these fees. Always be sure to ask the association for an up-to-date written copy of what is covered.
Pros and Cons
Obviously, before you buy a home or condo with these extra dues, you’ll want to weigh the pros and cons in order to make the best-informed decision.
Here is a list of some of the benefits and drawbacks of living in a community with homeowners’ association dues:
- Ensure access to a certain quality of living standard
- Exterior home repairs and maintenance are covered
- Association purchases insurance on the exterior of your home
- Access to community amenities such as fitness rooms, swimming pools, or security gates
- Landscaping, gardening, snow removal typically covered
- Certain city fees are included such as waste removal, water, and sewer
- Additional cost beyond your mortgage
- HOA may impose restrictions upon community
- Fees could raise in subsequent years
- Potentially stiff penalties for failure to pay
Sometimes unexpected expenses occur, and someone has to pay for the costs incurred.
As stated above, the homeowners’ association takes these into account and sets a portion of each member’s monthly dues aside in a reserve fund for such expenses. However, even the best-laid plans can fail, and the carefully planned reserves may not be enough.
For example, pipes burst in the community room causing a flood in that room and the adjoining parking garage, but the reserves have been spent on other repairs.
In this instance, the HOA board may impose a special assessment on the entire community, above and beyond the normal dues, as a temporary measure to cover repairs and rebuild the reserves.
What to ask the homeowners association
There are several important questions to ask the homeowners’ association prior to making an offer on a home that requires these dues.
First, you need to know what is covered, what isn’t, and what services you can potentially opt out of.
Next, you need to inquire about how often the fees are raised and how often the association asks for additional assessments for unexpected or large projects.
Finally, you need to find out what happens to homeowners who are late or fail to pay their dues, and how these homeowners can get back in the good graces of the association. After all, life happens.
Important information regarding trends
Homeowners’ Association fees are not a recent development, and groups have been studying the trends around these fees for years. They have uncovered some general trends that anyone interested in buying a home with these fees should know prior to making their decision.
- On average, the fees increase annually
- Newer buildings tend to have smaller fees, older building tend to have higher fees (for obvious maintenance reasons)
- A larger community tends to have higher fees, as they need to serve more people
- Location matters. Expensive cities like New York City or San Francisco have higher average HOA fees
- High growth cities experience more significant increases in fees, whereas stable or declining growth cities tend to see smaller fee increases
HOA Fee Frequently Asked Questions?
Are homeowners association fees tax deductible?
Homeowner association fees are not tax deductible unless you have a business that you run out of your home. You will be able to deduct a portion of the HOA fees equal to the amount of space your office takes up in your home.
What to do if HOA fees are too high?
The HOA fee is not negotiable, you have to pay the amount they ask for. If the fee is too high, you may want to look into other options. You may be able to buy that house you didn’t think you could afford with the money you would be spending on HOA dues.
Do HOA fees include lawn maintenance?
In some neighborhoods they do, usually in condo and townhouse communities. If you live in a community of single family detached homes most likely HOA fees do not include landscaping, but check with the Homeowner association to make sure what is and what is not included.
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