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What Do HOA Fees Cover: Homeowners Association Expenses Explained

By Bill Gassett | February 26, 2021

What is an HOA?

Are you confused about the meaning of an HOA? HOA is short for a homeowners association. Lots of people ask real estate agents how an HOA works and what purpose does it serve. Once they understand the purpose of a homeowners association they ask what the HOA fees cover.

An HOA is a group or organization in a neighborhood that makes and enforces rules and regulations for homes or condos for the benefit of its owners.

Buyers who purchase within an HOA become members and must pay association dues, known as HOA fees.

Before buying into an HOA, it is vital to understand the rules and regulations. You may find that some of the rules are not what you've been accustomed to. In fact, if the rules and regulations are overbearing, you could find yourself in the position of not wanting to live within the neighborhood.

On the other hand, you may love the thought of having guidance and uniformity. Some of the biggest advantages of living in an HOA are preserving and upkeep of the homeowners association's homes and neighborhood.

One of the most common questions home buyers have is what do the HOA fees cover? Let's take a deep dive into what you need to know about homeowners association expenses.

HOA Fees
How Do HOA Fees Work?

What Are HOA Fees?

Homeowners association fees are paid to maintain the common areas and shared spaces in your home and neighborhood. Being part of a homeowners association makes it a lot simpler to live in than having a home where you are responsible for all the maintenance.

So, if you have an expensive emergency in your house, you have to find the money to fix it. Where in the HOA, expenses are shared amongst everyone in the community.

An elected committee governs the HOA fees in your neighborhood. All of the expenses should be approved by those who reside within the community.

In larger HOAs, there is often a paid office team organizing contractors and paying bills. Other HOAs can be staffed by using outside contractors. Sometimes this can be a problem when work is not completed satisfactorily.

HOA costs depend on the neighborhood and type of project. It is not uncommon for HOA fees to range anywhere from a few hundred dollars up to $1000 in some luxurious settings.

Homeowners association fees are influenced heavily by what kind of perks are offered for living within the community. For example, neighborhoods that offer community pools, gyms, and tennis courts, naturally would cost more to maintain and operate.

However, a lower-cost townhouse without a pool, gym, or other amenities could be far less expensive. Costs can be as low as $100 per month in some locations around the country.

HOA expenses in a high-end city center may include concierge, spa, and gym, making them much more expensive to live in. You could potentially see fees as high as $3-$4 thousand per month. Think of the rich and famous.

How Are HOA Expenses Distributed?

If you live in an HOA within a condo or townhome complex, you may have underground parking, with a car space allocated to every apartment in the building. Part of the maintenance with this living style is security, as we all feel safer in a secure building.

Rubbish collection is another cost, as rubbish has to be taken down to the basement and removed from the building. Companies are often hired to fill this role.

The pool must be maintained, the ground manicured, plants pruned, and the gym equipment is cleaned. While these perks are probably the reasons you bought in, the cost can be a bit high for some retirees. Perks such as these are often standard in retirement communities. It is often a significant reason seniors downsize into a neighborhood that has an HOA.

Do Homeowners HOA Fees Go Up?

Of course, everything rises with inflation, and there will always be new projects or remedial work to be carried out on the homes and neighborhood.

Some HOAs schedule increments annually, so if you are preparing a five-year budget, you may want to factor in the cost. Doing so will be helpful to work out what your expenses will be projected at in the future.

It will be vital before buying to take a look at the homeowners association bylaws, rules, and regs, along with the latest financial state. You should make sure to have a contingency for document review in your offer.

What If You Can't Pay The HOA Fees?

You can be fined or taken to court, and a lien could be placed on your property. It can also be embarrassing not to pay because, in committee meetings, they often have nonpaying homes as agenda items and discuss strategies to recover the funds.

HOA expenses are very much worth paying, as in most cases, you do get your money's worth. Because there is power in numbers, you often get better value for money with more people paying to get the best deal for your HOA.

Before you move into a condo, townhouse, or home, check how your HOA fees will be apportioned, and make sure no special assessments are pending.

Special assessments would mean that you will have to come up with an extra lump sum to fix an unexpected expense. Nobody likes financial surprises, so it is essential to research any significant expenditures on the horizon.

How Do I Choose The Right HOA Neighborhood?

Form a working relationship with a high-profile local agent. Once they know what you are looking for, they will help you to find your perfect HOA.

The best buyer's agents will know most communities in the town or area. Real Estate agents have their ears to the ground and often hear positive or negative things about a particular neighborhood and the accompanying homeowners association.

Moving into an HOA is a terrific idea when it is a well-oiled machine. Living within a homeowners association can make your life more simple, especially from a maintenance standpoint. If you're the kind of person, who travels a lot, it really makes a lot of sense.

First-time home buyers who do business travel could find living in an HOA to be the perfect situation.

Final Thoughts on HOAs

In the area you are planning to live in, there hopefully will be a wide range of suitable HOAs to choose from. As long as you pick an HOA neighborhood that does not have strange bylaws or overbearing rules, you'll probably enjoy the living situation.

The key is doing the proper due diligence. Without that, you could make a bad mistake that you'll regret. Take the time and do the proper research. Hopefully, you have found this guide to HOAs to be useful. You should now know a bit more about what HOA fees cover.

Bill Gassett is an authority in the real estate industry with 38 years of experience. Bill is well respected for his informative articles for buyers, sellers, and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, the National Association of Realtors, Inman News, Newsbreak, Credit Sesame, Realty Biz News, and his own authoritative resource, Maximum Real Estate Exposure. He has been on of the top RE/MAX agents in New England over the last two decades.
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