Inside HOA Fees
What are HOA Fees?
According to the US Census Bureau the average HOA fees are $170 per month. A homeowners association plays a number of roles. They are an organization in a community that sets rules for its operation and jurisdiction, whether it is a condominium/townhome association or a neighborhood of single-family homes or a mix of both.
In order to maintain common areas, HOA’s charge fees that are usually assessed either monthly, quarterly or annually. These fees are paid on top of mortgages and taxes, so if you are looking for a new home, be sure to add these into your budget if you are looking at homes with HOAs.
What do Fees Cover?
When you are in process of purchasing a home with an HOA, be sure that you do not overlook reading the HOA governing documents. These outline specifically what the fees do, and do not include. The most common HOA fees may include pool maintenance, grounds maintenance and landscaping, snow removal, trash removal, electricity and lighting for common areas, fire alarm systems, gate maintenance and security guard, pest control, and valets and front desk if you are in a condominium. These should also include reserves for the enforcement of the rules by members as well as for capitol improvements
What about Assessments and Tax Implications?
Special assessments may be assigned when large works need to be undertaken, for instance redoing a pool, or fixing gates. It is really important to make sure that your HOA is in good financial standing and has reserves. Assessments can be one-time charges or can be implemented more regularly, there is no real rule on this, outside of the governing documents. Ideally if the HOA is being properly managed then there is no need for a special assessment. If your property is a primary residence, your HOA fees are not tax deductible, however, if you rent the property for income, they may be. If you are planning on renting, you will need to read governing documents since all HOA’s have different rules regarding rentals.
Most Important Considerations Prior to Purchasing Property with an HOA
If you are looking at properties that have an HOA, ask your Realtor to supply you with the fee schedule and governing documents for review. A Realtor will also be able to tell you how often special assessments come up or whether one is coming. Here are our top considerations for purchasing with an HOA
- Check how often the HOA fees increased in the last ten years.
- Check what services fees cover.
- Check the fiscal health of the HOAs reserves.
- Check the history of special assessments.
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