Planning for homeowners association (HOA) fees is just as important as budgeting for other monthly costs, like your mortgage and insurance. If you move into a residence with an HOA, you may not get a choice in joining, so it's crucial to understand and prepare for it. Fortunately, HOAs usually give back to the homeowners, offering benefits like lawn care, building maintenance and snow removal. Your fees help pay for these services and many others that ultimately provide a better experience for residents.
Every HOA runs a little differently, so be sure to investigate a potential HOA before buying a property. To help you conduct your research, let's explore the basics of HOAs and some commonly asked questions.
An HOA fee is a monthly charge associated with belonging to a homeowners association. The fee covers the HOA-offered services that benefit the entire association, such as upkeep and maintenance for common areas and community amenities. Fees also support the management of the HOA, which is typically run by volunteer residents but may require professional services for financial planning and legal requirements.
While single-family homes can belong to HOAs, membership is especially common in condos, gated communities and townhome complexes. These spaces almost always have shared assets, such as a lobby, pool or the entire building. The HOA steps in to take care of them.
The duties of the HOA also include enforcing rules called covenants, conditions and restrictions (CC&Rs). This ability sometimes gives HOAs a bad reputation, but when enforced appropriately, CC&Rs can help keep property values high, ultimately benefiting all homeowners.
A CC&R might restrict things like the color you can paint your house, what kind of shingles you can use and whether you can add a fence to your yard. These rules can keep people from hurting the neighborhood's appearance by neglecting to mow their yards or painting their homes hot pink.
HOA fees can cover a wide range of services. A low HOA fee might cover some basics, like trash and snow removal for a neighborhood or maintenance for a high-rise building. Higher HOAs could include amenities like a pool, security gate or fitness complex. Here are a few of the different things your HOA might cover.
The most well-known benefits of an HOA include tasks that keep the neighborhood looking nice and make it convenient to live in, such as:
The HOA might only cover these services for common areas, like mowing the grass in a park, but it could also provide them to individual residences. Services like these are convenient for the residents and can help improve curb appeal for the entire neighborhood.
If you live in a shared building or have communal facilities in a neighborhood, your HOA fees might go toward maintenance. For instance, a high-rise HOA would likely handle general maintenance for the building, such as the lobby or elevators. The HOA would also cover utilities to keep the lights on in these spaces.
An HOA-run clubhouse for a neighborhood would generally use HOA fees for maintenance, such as fixing a broken air conditioner or repaving a broken section of sidewalk. Your HOA fees may also go toward fixing damage not covered by insurance, such as some kinds of storm damage.
Many HOAs fund valuable amenities for residents, such as:
Your HOA fees go toward funding these amenities. They might pay for cleaning the pool, adding new equipment to the gym or covering the salaries of security guards.
Your HOA needs its own insurance, and your fees help pay for it. HOA insurance primarily applies to liability and property damage that could occur in common areas. For instance, liability insurance supports the HOA during a lawsuit if someone slips and falls in the clubhouse. If a fire occurs at the fitness center, HOA insurance can cover the losses. Some HOAs also need flood insurance.
Although HOAs are mostly run by residents, they often enlist professional services to help with management. An HOA management company can help with financial planning, legal concerns, bookkeeping and other tasks associated with running a business. Other professionals on your HOA's payroll could include maintenance or janitorial staff, landscapers and security guards.
Reserve funds are funds that the HOA sets aside to cover unexpected or large expenses, such as storm damage or facility upgrades. Your HOA fees contribute to reserve funds.
HOA fees can vary widely. You could pay less than $50 a month or more than $1,000. In the United States, average monthly HOA fees are $191, but most people pay less than $100. Naturally, HOAs that offer fewer services or benefits typically charge less than HOAs with a wide selection of amenities.
HOA fees generally are not tax deductible for a primary residence. If you rent out your property, you might be able to deduct the fees for the months you rent it out. You typically cannot deduct special assessments, either.
Your HOA fees usually go directly to the HOA, so they cannot be included in your mortgage payment or escrow.
If you buy a house that belongs to an HOA, you typically won't have a choice when it comes to joining the HOA. You could, however, choose not to buy a home with an HOA. At the same time, many people appreciate the benefits of their HOA and find that the fee offers excellent value. Think about your preferences and the individual HOA you're considering.
Some deciding factors include:
Ultimately, the decision to join an HOA or not varies from person to person. They can be an excellent way to use the resources of a larger community and get more out of your home.
Deciding to join an HOA is just one part of the home-buying puzzle. If you're in the market for a new home, make sure you work with someone who can help you through the complexities. In upstate South Carolina, SK Builders and McAlister Realty are proud to be those partners.
Whether you're looking to build or move into an existing home, our team can help you find the right one and navigate the process from start to finish. Reach out today if you have more questions about HOAs or are ready to start your home search!