Buying a new home is an incredible step in your life and the growth of your family, but it can be a daunting financial decision.
One cost that new real estate buyers may not be aware of is the HOA fee. A common part of condominium buildings, homeowner’s associations are also customary in planned communities and subdivisions.
How much are average HOA fees in California? On average, expect it to cost around $200-$300 per month, depending on a variety of factors. While it is easy to focus solely on the list price of a real estate property, you also need to budget for a whole host of other property owner costs and fees. Property taxes, utilities, and even furniture are all monthly housing costs things that you need to plan for – and this includes your HOA fees.
Read on to learn more about HOAs and their homeowners association fees below.
A homeowners association is an organization that is comprised of and run by residents within a certain living community or neighborhood. HOAs are typically established in multi-unit builds and communities or neighborhoods of single-family homes. This includes subdivisions, planned communities, and condominiums. By owning a property within a specific area, you automatically join the HOA community. As a part of your HOA membership, you are required to pay a fee.
It should be noted that not all homes and properties are necessarily part of an HOA. In 2020, there were about 355,000 HOAs in the United States, and estimates suggested that about 74.1 million American residents lived in a neighborhood or community featuring an HOA or related organization. That means that, if you purchase a single family home, there is a pretty good chance that you will be a part of an HOA.
HOAs are subject to state laws, and some states make a distinction between HOAs and condominium communities. The latter essentially comprises an HOA that is based within a condominium. Some states also make a third distinction with co-op boards, which govern co-ops.
HOAs are run by a board of directors and governors who are elected by the residents. This HOA board is responsible for overseeing and enforcing all the HOA rules and regulations, as well as managing all of the services rendered and making suggestions for changes and improvements within the community.
HOAs can be highly restrictive. The idea is to maintain uniformity within the community or neighborhood. That can mean regular maintenance of lawns and landscaping, but it can also be as minute as the types of fences that you can have and the colors of paint for the exterior of your home. Homeowners may also be limited in their outdoor décor.
Purchasing a vacation home or property within an HOA jurisdiction requires you to become a member of that HOA. While this can come with various duties depending on the organization, you are primarily responsible for paying an HOA fee. This is typically a regular monthly payment, though some HOAs may require an annual payment schedule.
The exact cost of an HOA can vary based on a whole host of factors, most prominently the amenities and services offered by the HOA within the community. HOA fees may even differ from property to property. The size, location, and orientation of your home may all contribute to a higher or lower HOA fee than that of your neighbors.
Estimates suggest that the average HOA fee in the country is about $200 to $300 per month. Overall, association fees may range from $100 to $1,000 per month. Generally, the more amenities and services provided by the HOA, the higher the HOA fees. Mismanagement of the HOA’s reserve fund may result in higher association fees. As California has a high cost of living and high property values, it is not uncommon for HOA fees to be higher than in other states. It is also important to note that HOA fees are not necessarily static either, meaning that they can potentially increase or decrease during the lifetime of your home.
Navigating HOA fees can come with its own complications, but most modern home listings will include HOA dues in the property listing. It is also a good idea to work with the team at Berkshire Hathaway HomeServices California Properties to help you find the perfect home and community that will work within your budget and personal needs.
What happens if you do not make your regular HOA payment? Failure to pay your monthly or annual fee, along with any special assessments, will typically result in a penalty. The exact action or penalty will vary based on the contract and the policies stipulated in the Declaration of Covenants, Conditions, and Restrictions (CC&Rs).
The CC&R is a document that states the various rules and restrictions for owners involving the maintenance of their properties. The document also outlines any payments for violating guidelines, including failure to pay HOA fees on time.
Depending on the amount of HOA fees owed, the penalty may be as minor as late fees. Continued failure to pay HOA fees or otherwise comply with community policies may actually result in litigation. This may involve further monetary fines, initiating a lawsuit, or putting a lien on the property. HOA liens present their own problems, but they can add further difficulty by making it close to impossible to sell the property until the lien is cleared. Depending on the severity of the situation, the HOA may actually foreclose on your property, allowing them to collect on any delinquent payments.
In general, what do HOA fees cover? Monthly housing costs like HOA fees can seem high, exorbitantly so when you factor in all of the other monthly costs involved with owning a home. However, the money that you put into an HOA is not wasted. In fact, you likely see and experience all the things that the fees pay for on a daily basis. What HOA fees exactly pay for will vary based on your particular community and the organization’s responsibilities, but the fees go toward essentially every amenity and service outside your immediate property.
Whether you live in a single condominium building or in a gated community, you likely have common areas that are shared by everyone within that community. This can include:
None of these common areas stay pristine or perfect on their own. Much like any part of your actual home, all of these areas require regular maintenance and cleaning and occasional repairs. The HOA pays for all of that, from deciding if a home inspection is required, replacing carpets in hallways to furnishing the lobby.
While you are still responsible for the utilities that you use within your own property, the HOA pays for certain shared utilities. In a multi-unit building, for instance, your HOA dues might go toward heating, air conditioning, and hot water. In some communities, association dues may also pay for water, sewage, and garbage services. Some communities may even pay for internet and cable television.
All of the services that your HOA provides are paid for through the HOA dues. That includes much of the maintenance stated above. HOA dues pay for the pool service to keep the swimming pool clean and safe, as well as the landscapers who maintain the lawns and make sure any trees and shrubbery do not overgrow.
If you live in any sort of shared community, you also likely have maintenance people on-site to take care of any immediate issues. Part of the HOA payments is what pay for the maintenance people’s salaries. The dues also pay for the general management of the association itself.
Part of your HOA fees is saved in a reserve fund. Much like an emergency fund or rainy day fund, the reserve fund is a long-term account that collects money for any major repairs or emergencies that crop up, like replacing an elevator or patching up a damaged roof.
If there is not enough money in the reserve fund to pay for emergency repairs, the HOA may levy a special assessment to cover the repairs.
When it comes to HOA fees it is important to ask questions like “how does earnest money work?” and “how often will my HOA dues go up?” HOA fees are an extra expense that may contribute to further financial complications during your home search. However, HOA fees do pay for some necessary services, some of which you would still pay for otherwise. It is important to include HOA fees in your budget when considering any property.
Sources: Investopedia, Investopedia, Home Guides
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Very interesting. HOA’s in my operion are socialism at its best, if not communism.
A. being run by comrades who have limited knowledge and foresight.
B. being run by comrades who rely on a managment company’s know how
C. being run by comrades who have no idea if the managment company; provides good services
D. being run by comrades who adhere to the Davis Stirling Act……..the socialist’s document for reference but no accountability involved
When HOA fees are raised who determines it? From what I have gathered from my HOA, it’s the board members who make this decision. Isn’t there supposed to be a vote by the homeowners? Thanks!