When you’re searching for a house, it’s not uncommon to find a few neighborhoods that could potentially be “the one.” So, what happens when you’ve found two equally lovely homes — and the size, features, and location of both are indisputably on point — but one is in a neighborhood with a homeowner’s association, and the other is not?
You’ll find arguments for both sides as to whether an HOA should be viewed as a pro or a con, but you’ll need all the facts in order to make your own fair assessment. While many folks can adopt a grin-and-bear-it approach to regulations they may not totally love for the sake of their dream home, it’s often the HOA dues that are the real difference between moving in and backing out of a deal.
That’s why we’re answering the most common homebuyer questions about HOA dues and what you can really expect in return for your hundreds (or thousands) of dollars in fees. We’ve also brought in Cassie Scramlin, a top agent in Battle Creek, Michigan, who works with 77% more single-family homes than the average agent in her area, to share her insights.
Remind me what a homeowner’s association is, exactly?
HOAs comprise people who own homes in a particular neighborhood, building, or development. Joining is typically not optional, as the whole idea is to maintain a certain standard of care and upkeep with the involved homes — but HOAs are not uncommon, with about 26% of the United States population living in a community association area.
Specifications for security measures, aesthetic regulations, community resources, and various other services are set forth and enforced by the HOA. We’ll get more into what HOA dues cover shortly, but (ideally) everyone stands to benefit from the added value and structure of the association.
So: What are HOA dues, and what do they cover?
These are the fees that you — and every other homeowner in the neighborhood — are responsible for paying. Whether these are paid on a monthly, quarterly, or annual basis will depend on your specific HOA.
HOA dues cover management, maintenance, and improvements around the community. These features will vary from one neighborhood to the next, but they typically include:
- Common area landscaping
- Common area utilities (electricity, water, and so on)
- Maintaining community amenities (pools, clubhouses, fitness centers, and others)
- Parking lot maintenance
- Trash removal
- Snow removal
- Insurance policies
- … And any number of other incidentals that may be unique to your neighborhood or building
Usually, the HOA will also maintain a reserve of funds for emergencies or major expenses. Details about how funds are collected, managed, and dispersed should be found in your copy of the HOA covenants, conditions, and restrictions (CC&Rs).
How much are HOA dues and how do I find out the details?
If you guessed that the answer to the first part of this question is “it depends,” you’re correct! If you’re looking at a modest condo building, where the amenities are limited to an elevator and a parking garage, your fees may well be along the lines of $200 per month. On the other hand, if the home you’re eyeing is located in a sprawling gated community with a pool, common area clubhouse, and a fully equipped gym, you could be looking at closer to $1,000 each month for your HOA dues.
HOA dues are usually paid along with your mortgage, but some associations may be set up for direct payments on a quarterly or annual basis. And there may be a further HOA buy-in fee due at the time of your home’s purchase — which, you guessed it, will vary depending on your HOA’s guidelines.
Scramlin also warns that, “just because you’re buying a home in an HOA doesn’t mean you’re automatically approved. Sometimes the association wants the buyer’s information ahead of time so they can approve them.”
If the idea of having to be approved by the HOA makes you nervous, don’t get too caught up on the what-ifs. The HOA board will have to evaluate your intent to purchase in accordance with the Fair Housing Act, and if you’ve been preapproved for the mortgage amount you’ll need to buy the home in question, there’s little reason to deny your application.
While it sounds like the variables are endless when it comes to HOA dues and regulations, the good news is that none of these details are kept secret until it’s too late for you to back out. In essence, you (as the homebuyer) also must approve the HOA, which is why it’s important to work with a skilled agent who is familiar with the communities in your area and can properly advise when you’re considering a home under an HOA.
If the CC&Rs are not already provided with the listing information, it’s critical that your agent request a copy early on in the purchase process.
“It’s always good to ask for a copy of the HOA CC&Rs and handbook within two days of an accepted offer,” says Scramlin.
In a competitive market where sellers are receiving multiple offers and there’s no time to spare, you may even want to ask for and review those HOA documents prior to making an offer. This way, you’ll know exactly what you’re potentially signing up for and can accurately determine if this home is, in fact, the one to pursue.
Can I opt out of paying HOA dues?
In short, no.
By purchasing a home in an HOA, you are contractually obligated to pay all associated fees, and failure to do so could result in the HOA putting a lien on your home. In severe cases, foreclosure can even result from defaulting on your HOA payments.
These associations are not something to take lightly, and disbanding an HOA is just shy of impossible. Be sure that you’re fully aware of and okay with all aspects of an HOA before committing yourself to a particular home, and don’t be afraid to ask questions if there’s anything on which you’d like further clarification.
I’ve skimmed the CC&Rs: What’s the difference between dues and an assessment?
While HOA dues are a regular payment meant to cover maintenance, upkeep, and minor repairs, an assessment is an additional payment to compensate for something that the HOA’s reserve fund can’t cover.
Assessments are usually made in the wake of major and unexpected work. This could be anything from a pipe bursting in a common area to a video surveillance system suddenly shorting out. If you (or other residents) feel that an assessment has been leveled unjustly, there should be protocol in the CC&Rs for filing a dispute.
How often can an HOA raise its dues?
Technically, an HOA can increase dues at any time. At the risk of sounding like a broken record, there should be verbiage on this in the CC&Rs, but it’s a good idea to inquire specifically about rate hikes before buying a home in an HOA if the terms aren’t clearly spelled out in the documents.
Are HOA dues tax-deductible?
Though there are certain tax benefits to owning a home, HOA fees are usually not part of the equation.
According to H&R Block, the HOA dues for your primary residence are not tax-deductible, but you can write off dues on investment properties. If you’re not sure, it’s best to err on the side of caution and speak with a tax professional.
What else should I know about HOA dues?
Ultimately, HOA living is a personal preference. Many people enjoy the security and convenience of being part of an established community where they won’t have to worry about the neighbor across the street suddenly repurposing their front yard into a parking lot, but others prefer the independence of homeownership without an HOA.
If you’re someone who cringes at the thought of facing fines if your grass is half an inch taller than regulations call for, or if you’d rather not have to seek approval to paint your front door burnt sienna, it may be worth utilizing your agent’s expertise and finding a home that doesn’t fall under the restrictions of an HOA.
Above all, be sure that you can comfortably afford to live in an HOA community. This means factoring in regular dues, as well as possible buy-in fees and unexpected assessments. Chat with your lender to learn more about how HOA dues may impact your purchasing power and your monthly payment to avoid possibly biting off more than you can chew.
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