HOA Dues: Are you curious
of what your money will get you?

The HOA dues are usually paid monthly to the condo association.

It can be a management company as well.

In some areas of the country this is also called “assessment” or “monthly assessment” – please keep in mind this fees will be incurring every month for as long as you own the property including after you have paid for the home itself.

It is a permanent expense and there is no way out of it.

Now, many subdivisions will have “annual dues” – as it implies, it is a once a year “assessment.” You only have to divide it by 12 and fit in your “monthly escrow” to pay it when it becomes due.

Still, as I discuss on my page “HOA Assessment” – there are many occasions where a significant expense will come along that the amounts paid monthly will just no be enough.

In this situations you will be faced a “special assessment” – again, in some areas it is known simply by “assessment” – but does not matter the name they call it, be aware because the target is you wallet! Ouch!

So please, whenever you consider buying a home in a subdivision, town home, condominium or co-op - do ask if there is an “assessment being contemplated.”

You may be entering into a transaction that you might have to pay an appreciable amount of money to replace something that somebody else has “enjoyed.”

If there is an assessment coming up – or recently put in place, you should re-evaluate the situation: Either ask the seller to contribute to some of those costs and/or negotiate a price reduction or, in worst case scenario, walk away from the deal as I did some years ago.

What You Might Get For Your HOA Dues

Another thing that I always make sure is clear is what my buyers are getting covered for the money paid.

It varies wildly. Here is a mini check list of the possibilities – I doubt that you will come across on place that you will encounter them all …also be open to find some item I did not include here:

• Roof 
• Exterior walls painting 
• Sewer 
• Water 
• Trash collection
• Electricity for common areas 
• Insurance for common areas also referred as “exterior insurance” 
• Landscaping - that may include lawn maintenance & tree removal
• Snow/ice removal 
• Hallway cleaning and other maintenance like bulbs and carpet change
• Parking lot maintenance 
• Professional management 
• Long- and short-term replacement reserve
• Windows cleaning
• Doorman / courtesy officer
• Swimming pool maintenance / life guard / security
• Clubhouse maintenance
• Condominiums cash reserve is a huge item that many HOA s do not budget for. Yet without it FHA will not back financing in a complex.
• Repave streets inside development
• Repave parking area
• Newsletter
• Satellite TV and Broad Band Internet (I recently came across a building that includes these two items in the HOA fees ...so the list keep growing)

What Is NOT Covered:

HOA dues are NOT part of the mortgage payment [not of the principal nor the interest] to the bank or any other lender. 

It needs to be really clear as most people fail to make this distinction of that what is a big misinterpretation of the purpose of the funds.

On the other hand it is important to compute that cash outlay in your general budget.

I know that many of you reading this page are well off and does not matter how the economy winds blow the money will be there. 

Even so I think that a good level of preparedness does not hurt anybody! 

Now, another source of confusion, is when utilities bill is run in a “master bill” through the HOA. In my complex is a case in point:

Here is one invoice we received (It was a summer month, so gas bill is low ...winter the see-saw would show low electric amount):

• Association fee ………………….................……268.20
• Water ……………………...........……..………........51.27
• Gas ……………………………………......................30.00
• Trash ………………………………….......................2.48
• Cable …………………………………......................31.25
• Electricity (of common areas)....................36.00
• Electricity (of unit) …………………...............158.27
  
    Grand total ………………...............$577.470

People tend to say that the total “is” the HOA dues… “Wrong, again Watson!”

The association part is just the first line plus the common areas electricity (which is a sneaky way to disguise it and get some more money), all others items are utilities and services that come in a master bill.

Even the listing agents around here accept the 'grand total' as being the 'HOA dues' ...nothing farther from the truth… but that is what they end up putting in their listings. Evidently that makes a huge difference.

It also needs to be made clear that the HOA dues, once established, it is a fix amount for a while, where the utilities will vary with your usage pattern ...and with the seasons as I pointed up above.

We are very economical, so our bill almost never passes the middle $600s even at the height of the summer or the bottom of the winter...

However, the teenager son of one of our neighbors, just in one month he downloaded over $700 worth in movies …as a relief for his boredom…

I don’t think that there is anybody calling that as 'HOA dues.' ;-)

No payment of HOA dues can end up in foreclosure of your property! Do not let happen to you – please make sure to read my “HOA Foreclosure” page – please click here

An HOA can make your staying in their community an enjoyable experience …or it can make you to repent of ever having a thought of purchasing that home.

So the more you educate yourself about your future home owners association the better you can hedge yourself against future headaches – here are additional “pages of knowledge” that might prove valuable down the road:

JC Fagundes, Head Broker
EQUAL SERVICE TO ALL.
Residential. Commercial. Investments.
Ph: 404 801 4141

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