What is an HOA?
Homeowners Associations (HOAs) are organizations that are designed to create and enforce rules for residential communities. While HOAs are most common in condominiums and townhomes, they are also prevalent in single-family home developments. When someone purchases a condo or a home in a community that has an HOA, the homeowner automatically becomes a member and must pay dues in the form of monthly fees. HOAs are responsible for the general maintenance of the community, as well as rules for parking, home improvement, and amenity usage.
What is an HOA fee?
An HOA fee is an amount of money that a homeowner must pay to the association each month. The association is then responsible for using this money to maintain and improve properties in the community, as well as provide amenities for residents. HOAs typically cover the costs of landscaping, clubhouses, swimming pools, garbage disposal, water/sewage, and possibly security. A portion of the money is also placed into a reserve fund, which is set aside in case significant repairs or upgrades are needed. The fee amount ranges from location, property type, and service. Homeowners can expect to pay anywhere from $100-1,000; however, the average amount is in the $200-300 range. A good rule to remember is that the more amenities a community offers, the higher the fees.
Are there downsides?
The main criticism of HOAs is the fee amount, which homeowners are sometimes reluctant to pay. Adding an extra $200-300 a month to mortgage payments, taxes, and utilities can create more pressure on the homeowner’s finances. If a homeowner fails to make the monthly payments, the HOA has the authority to take action depending on the contract between the homeowner and HOA. Action can include a lawsuit, a lien on the property, or foreclosure to collect payments. Homeowners may also find the rules to be restrictive since HOAs often regulate the exterior colors, landscaping, fencing, and detached storage of the home. An HOA can provide desirable amenities for residents and manage the neighborhood so it is a safe and welcoming environment, but at an additional cost to homeowners.
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