If you are shopping in new construction neighborhoods you will most likely encounter the term “HOA fees.” If you’re shopping for a condo or townhome, this may be called a regime fee. HOA stands for Homeowners Association, and these are fees paid by homeowners living in planned communities to an outside organization that helps to maintain and improve the property. Most often this pertains to common areas and amenities. It’s something you wouldn’t necessarily think about… who mows the grass in the common area, maintains the landscaping at the neighborhood entrance and keeps the pool clean? That all falls under the realm of what you’re paying for with your HOA fees. If you are shopping for a condo or townhome, this would apply to any shared central indoor space like lobbies and elevators and outside elements such as pool and landscaping.
The money that you pay, either monthly or annually, is typically allocated into operating and reserve accounts. HOA’s or condo associations will occasionally levy a special assessment. This assessment is an additional monthly fee to be paid by homeowners in the case that there are not adequate funds in reserve. Special assessments typically go to pay towards a large repair or investment like a new roof (in the case of condos) or a community amenity in single-family housing developments.
Homeowners Associations also typically establish the covenants and restrictions for a neighborhood. These guidelines set rules for a variety of aesthetic aspects of the neighborhood such as size and type of fencing, structures that you are or aren’t allowed to build, limitations to on street parking, etc. They can also be specific (particularly in multi-family dwellings) as to approved breeds of pets. The Covenants and Restrictions outline any fines that can potentially be levied for violation of these rules. Upon completion of all the homes in a neighborhood the HOA is typically comprised of homeowners from the neighborhood and meetings and minute meetings should be accessible to all neighborhood residents. These meetings afford homeowners the opportunity to voice opinions and implement change.
HOA fees are important to keep in mind when comparing neighborhoods. They are a big factor when trying to stay on a target budget since they are an amount you will be paying in addition to a mortgage payment and homeowner’s insurance. It’s important to make sure you can afford to pay your dues. In extreme cases, neglecting to pay HOA fees can result in a lien against property or foreclosure proceedings. Make sure the neighborhoods you are shopping in have fees that seem reasonable to you; they will be paid by all homeowners, regardless of whether you use the shared amenities. Also, feel free to ask the onsite agent questions about the covenants and restrictions, it is better to know what restrictions are prior to buying a home rather than after the fact. If you’re shopping for condos, feel free to ask the onsite agent questions about the balance of reserve funds and if there are any planned upcoming assessments.
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