HOA Fees – How to Understand Them

High Home Owners Association fees are the most common objections that most homebuyers have when purchasing real estate in a community that requires regular Association dues and fees.  Depending on the neighborhood community, those Association fees can range from less than $100 per month on up to thousands of dollars per month for luxury living.  However, average HOA fees usually range between $200 and 800 per month. 

When these fees are taken out of context, the amount can really seem extreme for many homebuyers.  But when you consider the value of services that the HOA fees cover, you can sit back, relax and be certain that you are getting a great bargain. 

When determining how the Association came up with the HOA fees, there are a few things you should keep in mind.  What do the fees cover?  How was the number determined?  Can anything be done for less?   

The following are some examples of how the HOA fees work.

What do the HOA fees cover?

When determining what the fees are going toward, it is important to consider everything.  Amenities are a big responsibility and vary widely from property to property.  High-rise building amenities will cost more to maintain and operate than low-rise buildings. 

Another large responsibility associated with real estate ownership is maintenance and improvements.  Therefore, a large part of HOA fees will go toward these projects.  Some developments may also require landscaping maintenance, which means expensive labor. 

Common areas, such as pools, gyms, club houses, etc., also need to be maintained.  Your HOA fees will have to help cover these costs. 

Some HOAs include your utilities, but not all.  It is up to the homeowner to check with the management or President of the Association to see if utilities are included in the fees. 

How was the number determined?

Developers are well aware of the expense of HOA dues and try to keep them low through positive scenarios.  They do not want to discourage prospective buyers and know that a $400 or $500 per month Association fee will equate to an extra $100,000 that the buyer could be spending on the home.  So the higher the HOA fees, the less the buyer will be able to spend on the home. 

At the same time, the State also wants to establish a realistic budget that will allow for proper funding well into the future.  

Also, keep in mind that the develop will be paying Association fees on all the unsold properties in the community.  Therefore, the developer is not benefiting from high HOA dues and fees.

Can anything be done for less?

When you add it all up, you will see that the economies of scale allow for the high level of service that you will be receiving at a true cost of value for much less than what you could do yourself.

You also want to protect your investment and have great amenities that allow profitable reselling in the future.  If you feel that your HOA fees can be lowered, serve on the board and economize to get them lowered.  However, never lose sight of the fact that you are paying for quality services at a volume discount.  Most of the time, you just can't beat the price you pay for the great services your HOA dues and fees cover.

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