Why Are HOA Fee's A Good Thing?

Why Are HOA Fee's A Good Thing?
by Takara Alexis

HOA Fees are revealed to all home buyers prior to purchase. This term signifies that the builder/developer of the building or neighborhood legally filed some covenants, conditions and restrictions that run with the property and likely filed Articles of Incorporation and bylaws outlining the establishment of the Home Owners Association, their duties and voting rights.

The presence of an HOA will show up as an exception on your preliminary title report. Exceptions on the title report prove that there's some claim or limitation on property ownership. In the case of an HOA, the significance is that there are limitations to property use. Owners need to conform to the guidelines in the covenants, conditions and restrictions, which is sometimes loosely referred to as community rules.

When you order a set of HOA documents for review prior to purchase of property, especially newer property including condos and town homes, you could come to find that the HOA package is over an inch thick! The package will include all HOA documents of public records as well as minutes of meetings, financial studies, budgets and more.

Know that the financial stability of your HOA is important. In the event that cash reserves do not meet future obligations, there may be a special assessment levied on each home/unit. There are fee-based providers that will review HOA financial documents and provide an opinion of their stability.

HOA fees pay for upkeep, maintenance and amenities. Doesn't that seem easy? It is actually pretty complex. The HOA document package will outline the obligations of the HOA and the obligations of the homeowner. For the HOA to fulfill it's obligations it requires funding, and that is what HOA fees pay for. Various potential home buyers don't see the value in paying HOA dues. Yet, if people see that the fees are going to support the development and lifestyle amenities, it often makes sense. Building insurance alone is a huge expense for the association, as is a liability cost for insuring the common areas.

Establishing the amount of HOA fees is a fine balance, it needs to pay the current obligations and set aside reserve funds for repair and replacement expense. If the HOA is deferring maintenance items due to lack of funds or oversight, it can cost the homeowners much more in the long term due to increased repair expense. Failure to paint wood siding and seal it from moisture can cause decay. It's cheaper to keep it painted than it is to replace the siding!

Buyers, do your diligence on the HOA package. What do the fees cover? Do the items covered appear to be well maintained? If not, it may be a sign of deferred maintenance. Perhaps then look hard at the cash reserves and financial study in the HOA package. Deferred maintenance can be the precursor to a special assessment.