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HOA Fees: What Are They and What Is Covered

Dana George
By: Dana George

Our Mortgages Expert

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Homeowners seem to either adore or dislike the homeowners association (HOA) that oversees their neighborhood. Some don't care for HOA laws and regulations covering everything from the color a house can be painted to the size of fence that can be installed. Others appreciate the fact that HOAs protect the value of a neighborhood and that homes in HOA communities sell for 5% to 6% more than similar homes in non-HOA communities. Still, HOAs raise questions, and we're here to address those questions.

What is a homeowners association fee?

Every HOA has a different set of priorities and a list of covered services. Some charge members a monthly fee, while others send an annual bill.

Before you take out a mortgage on your dream house, find out if the community is part of a homeowners association. If you're moving into a condo or townhouse, you'll likely pay HOA fees, so ask about these before you buy. Make sure to request a copy of the HOA rules, commonly referred to as "Covenants, Conditions, and Restrictions." These are the governing documents that spell out everything you'll need to know, from community rules and regulations to which services are covered by HOA fees.

Understanding HOA fees

Each HOA community is a legal entity unto itself. That means each community offers different services. If you move into a neighborhood with few amenities and an HOA that offers one or two services, your HOA fee will likely be low. However, if you move into a full-service HOA community in which everything outside the four walls of your dwelling is taken care of for you, expect to pay more.

To complicate matters a bit, the HOA assessment can be tied to the area where you buy a home, as well as the size and age of the property. HOA fees are not linked to one type of property but spread across the spectrum of property types.

What do HOA fees cover?

At the very least, HOA fees cover services believed to maintain the value of the community. For example, some pay for gardeners and general maintenance. If you live in a building shared with other tenants, dues will likely cover an insurance policy in the event of structural damage as well as care of the common area. Other HOAs include concierge services, pools, spas, gyms, and other luxuries.

Most HOAs put a portion of fees into a reserve fund (their version of an emergency fund), an account that can be used to pay for large-ticket items as they arise. Let's say there's a swimming pool and clubhouse in your community. When it's time to replace the roof on the clubhouse or make repairs to the pool, the HOA will draw money from the reserve fund.

Who pays HOA fees?

Property owners pay HOA fees. Typically, if a home in an HOA community is leased, the owner pays the fee. That's because if a renter fails to make the HOA payments, the HOA can foreclose on the property. Frequently, landlords figure the cost of HOA fees into the rent.

How much are HOA fees?

You would know for sure how much HOA fees are if they were based on something as simple as a percentage of your property's value. The fact is, HOA fees run the gamut, from as little as about $10 a month to as much as $4,000 a month. According to iPropertyManagement, the average HOA fee for a single-family home is $250 per month. Once you know the HOA fee of a property you're looking to purchase, you can easily plug it into our mortgage calculator to see how it will affect your total monthly loan costs.

If you are house hunting, don't immediately reject an HOA with high fees. It may be that the HOA provides services that will save you money in the long run. For example, if your HOA pays for trash pickup, pest control, lawn care, exterior maintenance, and a fitness center, your fees may be less than what you would pay for each of those services and amenities separately.

Are HOA fees worth it?

If you want to live in a certain desirable area of town, that area may require a higher homeowners association fee. It's a matter of deciding whether being in your dream spot is worth the money. The answer will be different for every home buyer.

Whether HOA fees are worth it depends on what you want. For example, if you're a runner but don't enjoy spending time in the gym, you may not want to buy into a community that charges for an upscale fitness facility.

Are HOA fees negotiable?

Typically, you can't negotiate HOA fees. Since the HOA is a legal entity, it has scores of legal documents that apply to all community members. Association fees are no exception.

If you're in the middle of buying a home, there is one way to save on HOA fees, and that is to ask the seller to cover a few months of fees on your behalf. This negotiation tactic only works in a buyer's market. If a seller knows that other potential buyers are interested in the property, they're unlikely to sweeten the pot by throwing in any HOA fees.

What happens if someone doesn't pay HOA fees?

Purchasing a home in a community with a homeowners association means agreeing to the rules outlined in the Covenants, Conditions, and Restrictions. When you buy in an HOA community, you're promising to pay dues. According to AllLaw, HOAs have several options at their disposal for collecting fees. They can make collection calls and send demand letters. They can file a civil suit, or they can foreclose on your property. In short, skipping HOA payments is serious business.

Are HOA fees tax deductible?

The short answer is no, HOA fees are not tax deductible. While the interest paid on home loans is tax deductible, the fees paid to these privately held organizations are not.

Final thoughts on homeowners association fees

Approximately 53% of all homeowners live in an HOA community. While the idea of paying dues may not be attractive, HOAs can improve the value of your home. An HOA all but ensures that your next-door neighbors won't raise sheep in their backyard, paint their house the colors of the rainbow, or build a "fence" out of railroad ties. The fact that the same regulations cover every member of the community means continuity in upkeep.

The decision to purchase a property -- whether it's a condo, townhouse, duplex, or single-family home -- in an HOA community should not be entered into lightly. Just as you delve into mortgage rates, schools, parks, and other issues that are important to you, look into HOAs and make sure you understand all that is expected of you.

Still have questions?

Here are some other questions we've answered:

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  • HOA fees typically cover services like snow removal and landscaping. They may also include amenities like swimming pools, fitness centers, and concierge services.

  • They could be. If the services provided are things you would pay for anyway, HOA fees may save you money.

  • A homeowners association is a legal entity that draws up and enforces rules and regulations for a specific community. It also oversees services and amenities.

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