If you’re considering buying a home in a gated, planned, co-op, otherwise organized community, or condominium complex you’ll come across the phrase “Homeowner’s Association” (or its abbreviated form: HOA). If you’re unfamiliar with this term, here’s a quick explanation:
HOA’s oversee the management, upkeep and community standards of your neighborhood. Most often, real estate developers form the rules while building the housing, then transfer them to actual homeowners when units are all purchased. They’re built upon a system of written rules and regulations governing the community, typically one called a CC&R (Covenants, Conditions, & Restrictions). They also require monthly fees from anyone who lives in the community.
HOA fees can vary wildly depending on location, amenities, and even within a community based on the size and site of your home. A sprawling house in a high-end neighborhood with tennis courts, a pool, and beautiful dog park will require higher rates than a one-bedroom in no-frills condo complex. $200 is roughly the average for a one family home according to several sources. But costs can go as low as $100 and, in some ultra-wealthy areas, as high as thousands of dollars each month. Keep in mind that these fees typically go up every few years, or even annually, so ask what and when the next expected increase will be.
What they cover
The money your HOA collects acts as a combination of community insurance and upkeep coverage. Part of everyone’s fees typically gets laid aside into a reserve fund. This is used to pay for major upgrades or in case an emergency necessitates unforeseen repairs (say, in the aftermath of a fire or other natural disaster). The rest goes into maintaining the neighborhood/building itself and any of the included facilities, from common areas to parking lots. The exact details differ in each community, so find out what any potential HOA fees you’ll pay cover.
Other things to consider
The cost and coverage are, understandably, the biggest questions that likely cross the mind of a potential HOA joiner. But there are a few other small things to when it comes to these organizations and the related fees:
- You’re paying for these community amenities whether or not you use them. So if you don’t think you will you may want to consider living somewhere that doesn’t require you pay extra for such things.
- While HOA’s do cover some repairs your home may require, you’ll still need some form of insurance. Know which circumstances, exactly, the HOA includes and which you’ll need to insure on your own.
- Be aware of the results of a late or missed payment. If there are late fees, what are they? At what point does it go from being an internal community matter to a legal issue, potentially ending in lawsuit or foreclosure? It’s best to know the answers to these kinds of questions because, even if you never face this unfortunate situation, one of your neighbors very well might.
HOA’s and the associated fees have upsides and downsides unique to each and every community that requires them. While any sort of added cost usually induces groans and eye-rolls when buying a home, knowing what an HOA fee costs and what benefits it provides helps you decide whether or not one’s worth it to you and your family.