Is Buying an HOA a Big Mistake?
Disadvantage 1: shared resources
While there are a lot of advantages to buying into an HOA, there are also a number of disadvantages to consider – and shared resources are one of them. Shared resources can include anything from the common areas we mentioned (like a swimming pool or tennis court) to a well for drinking water, or even roads and trails. Because these things are shared, their use is also likely to be heavily regulated.
This means that you may not be able to do things exactly as you would like, or you will have to adjust your habits according to what the HOA wants. For example, sharing a well can mean conserving your water use, while sharing a trash can (also very common) can limit what you throw away and how much you fill the barrel.
There may also be additional rules about how trails or recreation areas are used, and what is acceptable versus what is not. Keep in mind that all HOAs are different and how they are run will largely depend on who runs them. That being said, it is good to have an idea of who your neighbors are (as much as possible) before purchasing an HOA. This brings me to the next point.
Disadvantage # 2: Forced Relationships
If you’re one of those lock-in recluse types, HOA life might not be your cup of tea. Since these community associations often hold HOA meetings to address issues as a group, you will almost certainly end up having some sort of relationship with your neighbors. In other words, you will at least have to coexist with these people if you don’t get along with them.
Some people (myself included) are lucky to have good neighbors, which makes all of these compromises and cohabitation easy. But if you don’t like your neighbors (or even the thought of never having to talk to neighbors), then the forced proximity of a HOA might not be for you. Again, every HOA is different.
The key is to look at what resources you are going to share and decide if you want to share these things at all, and if these are the people you want to share them with. If the answer to any of these questions is no, consider finding accommodation in another community, or even accommodation that is not owned by an HOA.
Disadvantage # 3: expensive
Last but not the least, there is something to be said for the HOA cost of living. Because here’s the catch: it’s not cheap. By some calculations, HOA fees can range from $ 100 to $ 700 per month, with the average falling around $ 200 per month. This works out to about $ 2,400 per year, which is not to be sneezed at. And unlike property taxes and other fees associated with home ownership, HOA fees are generally not tax deductible.
Again, the trick is to figure out what you are getting for the cost of your HOA. Maybe you have a safer neighborhood for your kids to play outside, or maybe your HOA fees include snow removal and road management. If you can run the numbers and put a value on that monthly fee, it might not seem so bad. But no matter what you do or don’t get, the fees are big enough to make you rethink the life of HOA, and a definite downside on this list.
Costs and fees of buying in an HOA
As we said, buying in an HOA is an added expense when it comes to buying a home. To give you a full picture of what buying an HOA could cost, we’ve calculated a few numbers using the average HOA fees. Here’s the breakdown of what to expect with low, medium, and high monthly fees.
HOA Fee Type:
- Low – $ 100 / month ($ 1,200 per year)
- Average – $ 200 / month ($ 2,400 annually)
- High – $ 700 / month ($ 8,400 per year)
Keep in mind that HOA fees are always subject to change. While many HOAs try to keep a reserve fund for special projects, sometimes they go over budget and need to increase monthly dues to make up the difference. Your HOA may also issue what’s called a special appraisal, which is an additional fee to help cover the cost of an ongoing or upcoming project. Just like monthly contributions, you will not have the option of opting out of paying these fees.
In extreme cases where HOA members are significantly behind on monthly dues or special appraisal fees, your HOA may be able to issue a foreclosure on your home, even if you are up to date with your records. mortgage payments. Since your house and property are in some ways owned by the HOA, the late fee is a big deal and you want to avoid it.
One way to mitigate the costs of your HOA is to simply be involved in the decision making. This means attending HOA meetings and voting on various projects or improvements the association wishes to make. It could also mean becoming a member of the HOA board of directors to have even more influence over how the HOA spends savings.
Another way to anticipate these costs is to do your research before you buy the home. Learn about the HOA’s plans, how stable monthly dues have been (and for how long), and if there are any expensive projects in the pipelines. Your real estate agent should be able to provide you with the documents and information you need to help you determine if these community goals align with your personal financial goals, or if you would be better off elsewhere.
The bottom line
Buying into an HOA is definitely not for everyone and should be a big part of your decision making when it comes to buying a home. No matter how much you love a home, buying from an HOA is a package that has more rules and community engagement than other neighborhoods.
Before signing a HOA house, be sure to do your research and decide whether or not that particular HOA is right for your lifestyle. While many HOAs can be great places to live, they will only feel it if they are right for you.