Homeowner association fees – often referred to as HOA fees – are a fact of life in some communities.
Condo and townhouse complexes are often governed by homeowner associations (HOAs), but many neighborhoods of single-family homes have homeowner associations as well. Indeed, the Foundation for Community Association Research estimates that 25 to 27 percent of all U.S. homes are now part of HOAs.
And HOAs charge HOA fees that support the maintenance and upkeep of the community.
HOA fees increase your monthly housing costs — sometimes by hundreds of dollars a month. If you’re considering buying a home in an HOA community, you may wonder what HOA fees cover and if they’re worth it. The answer really comes down to this: Whether you value the services and protections the HOA provides.
What are HOA fees?
HOA fees are costs homeowners pay to their homeowner association for certain services and protections within the community. If you buy a home in an HOA-governed property, the fees are mandatory and are used to cover the costs of the HOA’s responsibilities.
HOA fees pay for the services the HOA provides. Unused funds are kept in a reserve fund the HOA can tap into to cover unexpected expenses. The reserve fund prevents sudden hikes in HOA fees or the need for extra contributions from homeowners.
What do HOA fees cover?
An HOA provides neighborhood-level services that go beyond your local government’s services and protections. The exact services will depend on where you live. But they can include the following categories:
- Security: While your local government provides police, fire and emergency medical services, your HOA may provide a security gate, additional streetlights or even scheduled security patrols.
- Quality of Life: HOAs often offer swimming pools, tennis courts, nature trails and other amenities exclusively for HOA members.
- Property Use: Local zoning rules can keep your neighbors from opening an auto shop or a light industry down the street. HOAs are even more strict, regulating details like fence heights and noise pollution.
The HOA’s role includes upholding the community’s guidelines with regard to home maintenance, aesthetics and safety. Guidelines can vary widely depending on where you live, but they often cover things like how residents can use their properties and the types of animals they’re allowed to own.
Committing to the HOA guidelines helps to ensure that no homes in the neighborhood fall into disrepair and become unsafe or drag down the values of the surrounding properties. However, some homeowners may feel stifled by the rules, which can also limit things like the types of recreational equipment in front of their house or how many cars they can park at the home.
HOA guidelines can also stipulate the types of landscaping residents are allowed to do on their properties and the types of modifications they can make to their homes. Generally speaking, homes in HOA communities tend to have a fairly uniform look, and it’s the HOA’s job to ensure that that aesthetic is maintained.
HOAs may also manage things like snow removal, lawn cutting and maintenance of common amenities such as pools, parks, trails and fitness centers. The HOA may mediate disputes between residents as well.
The kind of services an HOA provides will vary a lot between different associations, and the HOA’s level of service will affect how much you’ll pay in HOA fees. For example, some HOAs may provide only signage and landscaping for common areas. Homeowners in these neighborhoods can expect lower HOA fees than a homeowner whose HOA runs a gym or staffs a guardhouse.
The more your HOA provides, the more you can expect to pay in HOA fees.
HOA fees may seem like a cumbersome additional expense when you’re already paying on your mortgage loan and property taxes. But an HOA can protect the value of your home while adding to your quality of life.
Are HOA fees worth it?
HOA fees can be worthwhile for homebuyers who want — and plan to use — the extra services an HOA provides. These amenities vary a lot by neighborhood, so be sure to read up on everything the HOA provides before you buy.
HOA fees may also be worth it for homebuyers who like neighborhoods with stricter property-use standards.
For example, a homebuyer who does not want to hear a basketball dribbling in a nearby driveway after dark — or a homeowner who doesn’t like seeing a neighbor changing the oil in their car after work — will probably find HOA fees worthwhile in a community with closely-adhered-to standards.
Again, be sure to read the HOA’s bylaws in advance so you’ll know what kind of protections the association can provide. If possible, talk to current residents to find out how active the HOA is. Just because their guidelines include a particular rule doesn’t tell you how strongly they enforce that standard. Find out whether they’re proactive about property maintenance as well and how they typically engage with residents.
How to find HOA fees for a property
Some home listings include the cost of HOA dues, just like they list things like school attendance zones and walkability scores. If the listing you’re looking at does not show the home’s HOA fee, ask your real estate agent. They can find out what the fees are and what’s covered.
Your agent or the seller’s agent should also be able to provide a copy of the HOA’s bylaws, along with minutes from previous HOA board meetings. Reading these can help you know what to expect from the HOA. You can also see how well the HOA handles disputes or rule violations.
It’s also a good idea to look up HOA fees for the past few years so you can see how often they tend to increase.
What if I fall behind on HOA payments?
State laws vary, but in the worst-case scenario, your HOA could start foreclosure proceedings if you fall too far behind on paying your HOA fees. Your HOA could also sue you or charge interest on the late payments.
The HOA could also simply insist you stop using amenities like the fitness center and pool until you get caught up on your fees.
This is yet another reason to learn about the neighborhood’s HOA rules before you buy the home.
The bottom line on HOA fees
HOAs can increase your quality of life, protect the value of your property, and make you feel more secure.
But HOA fees will also increase your housing budget, and they can even affect your mortgage eligibility by increasing your debt-to-income ratio,* a metric mortgage companies use to see how much home you can afford.
So should you buy a home that requires HOA fees? The answer is really up to you. But your real estate agent and a trusted loan officer can help you find the right house that is within your budget.
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*Debt-to-income (DTI) ratio is monthly debt/expenses divided by gross monthly income.
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