Should I avoid purchasing a home with a hefty HOA fee?

Question

My wife and I are considering downsizing to a smaller home, but many of the available options are in established subdivisions overseen by a homeowner’s organization (HOA). So far, the locations we’ve looked at and loved the most had quite exorbitant monthly fees – several hundred dollars. We want to remain in this house until we retire, but should we be concerned that the costs will continue to rise?

Answer

You are correct to consider homeowner’s association costs while purchasing a house. They indicate your continuous commitment as an owner to contribute to the expenses of constructing and maintaining common spaces, as well as, in certain situations, components of your own property, such as a shared roof or walls.

And, certainly, there is a chance that these costs may grow. The problem is that such potential exists whether or not the fees are currently high. In reality, exceptionally low fees might indicate that the organization hasn’t been able to persuade the owners to pay for necessary upkeep, repairs, and renovations. When they can’t put it off any longer, you could have to pay some hefty additional assessments on top of the regular expenses.

Of course, excessive fees may be a concern, especially if they surpass certain owners’ capacity to pay, leading in disputes and foreclosures.

When contemplating purchasing a house in a HOA, you need do more than just accept the current monthly costs at face value. Look into:

1. the percentage of owners who pay their dues (if more than 15% fail to do so, the HOA may already be in difficulty).

2. the monetary sum held in reserve by the HOA (it needs money to draw on if a sudden repair or emergency arises)

3. Under what conditions may the HOA levy special assessments or other fees, and has it done so recently?

4. Whether the HOA is now or soon will be involved in any financial or legal conflicts.