May 1, 2023
Nearly half of all homeowners in the United States live in a community with a homeowners association (HOA)—and that number is growing. Chances are high that house hunters will come across properties located in an HOA, so it’s important to have a thorough understanding of the benefits, cost, rules, and restrictions.
The most important thing to know is that each HOA is different. If you’re going to buy a property in an HOA, review the contract carefully to ensure it’s the right move for you.
An HOA is an organization that sets and enforces the rules for properties in its jurisdiction. HOAs are typically in charge of maintaining common spaces, such as a clubhouses or pools, within the area as well—all paid for with collected HOA fees.
Members of the HOA are usually elected by property owners within the community and run as a board. The rules and restrictions they enforce are different for each community/neighborhood. Some are extremely restrictive about what members can do with their properties and others are very lenient.
HOA fees vary depending on the property and community you live in, but the average fee is $200 to $300 per month. Fees are typically paid monthly, but sometimes are quarterly or yearly. These fees are paid in addition to your mortgage, property taxes, and homeowner’s insurance.
The funds the HOA collects go toward maintaining and improving the community. They commonly cover things such as:
If your HOA incurs a large, unexpected cost, such as repairing building facades after a natural disaster, you may be charged a special assessment fee.
HOA fees are paid directly to your HOA and are not included in your monthly mortgage payment. But keep in mind that these fees can affect your ability to qualify for a home. When you apply for a loan, your lender calculates what monthly payment you can afford based on your current finances. Adding an HOA fee may change that number.
Disciplinary action for unpaid HOA fees will depend on the contract between you and the HOA. Some charge late fees and others allow the initiation of a lawsuit. They could also place a lien on the property or foreclose on the property to collect delinquent payments.
Though it’s not everyone’s preference to pay them, HOA fees can be well worth the money. When purchasing a property located in an HOA, be sure to include the cost of the fees in your budget to avoid overextending yourself, and gain a thorough understanding of what is and isn’t included in the fees, too.