Most homes across the United States are part of an HOA, also known as the homeowners association. So what does this mean?
To summarize, an HOA helps make sure that your community looks its best and functions smoothly. If you are buying a condominium, townhome, or a free standing home in a neighborhood with shared common areas and amenities, odds are up these areas are maintained by a homeowners association. The number of American people living in homes with HOAs is on the rise, growing from a mere one percent in 1970 to twenty-five percent today.
Is buying a house with an HOA right for you? We will help you decide by laying out the pros, cons, and costs of an HOA.
What is a homeowners association anyway?
For example, the pump in the community swimming pool stops working. Someone needs to take care of it before the water turns green and toxic. Rather than expecting any one homeowner in the neighborhood to volunteer his time and money to fix the problem, homeowners associations are ultimately responsible for getting the job done.
You could think of the purpose of an HOA as similar to real estate property taxes that a homeowner pays for city and state services. With the exception of this case, these fees go to pay for amenities and maintenance in your own neighborhood or condo building.
How much are Homeowners Association Fees fees?
To cover these home maintenance expenses and repairs, homeowners associations collect fees or dues from all members of the community. For a typical single family house, HOA fees will cost homeowners around two hundred to three hundred dollars per month.
HOA fees could be lower or much higher depending on the size of your house or condominium and the services provided. The bigger the homeowner area, the more expensive the HOA fee. This makes sense because the family of four homeowners in a three bedroom condo is most likely going to be using the common facilities more than a single resident living in a studio condo.
Most HOAs pay property managers to oversee maintenance and deal with other real estate related home issues. HOA fees may also include insurance payments to cover common areas.
HOA fees are typically divided into two parts: One part goes toward monthly expenses, and the remaining cash goes into a reserve fund. This reserve fund usually serves as a safety net, to be tapped for emergency fees that arise when natural disasters or vandals strike—or just the unavoidable repair. They are also used to cover long-term repairs and replacements such as roofing, exterior paint, and plumbing.
What is the assessment?
Be aware that when your community is hit with a lot of maintenance expenses—just like a flood in the underground parking lot due to the broken water heater or a pipe bursting—homeowner insurance will cover a portion of it, but whatever is left will have to be paid by your HOA.
Do you have a question about HOA fees? Click here to contact Lending Corner today!
Courtesy of Cuselleration