When you move into a house in a homeowners association (HOA) neighborhood, you might want the fees they charge to be as low as possible. Buying a home is a significant expense, and you might want to reduce costs where you can.
But are low HOA fees a good idea? You might assume smaller bills are better, which will be the case in many situations. But when it comes to homeowners associations, there are more downsides than you might imagine.
We will examine what an HOA fee is and the pros and cons of low HOA fees.
What is an HOA fee?
The homeowners association charges fees to owners within the neighborhood they are responsible for. The association maintains the common areas in the development, which costs money. HOA fees will almost always be present when buying a condo or townhouse.
If there are better facilities like a pool or gym, these expenses will be higher. If you buy a home within one of these communities, you will want to determine the HOA fees for the development before making an offer.
Lower HOA fees can attract potential homebuyers and current owners, but saving money isn’t always the best option.
The cons of low HOA fees
There are many situations where cheaper isn’t better, like if you are buying something that you need to last a long time or for safety equipment. But with HOA fees, it might not be as clear whether paying less to the association is a good idea.
These are some of the downsides to low fees:
Less maintenance
The HOA can cut maintenance to reduce costs for a while, and residents might like this choice. But without regular maintenance, problems can be worse and more expensive when they are dealt with.
Small maintenance tasks can prevent bigger problems and improve the community for residents. It is better to make minor updates than wait until there is no other option and major infrastructure repairs must be made. This will take longer and cost more.
Property values
If there isn’t enough maintenance in the community, it can negatively affect house prices. If this has been going on for a long time, there’s a greater chance that the condition will put off buyers and make selling a home more difficult, leading to lower values.
Potential buyers will notice the low maintenance levels when they arrive in the community. This reduced curb appeal will affect their initial impression of the home, and they are likely to see the property in a worse light. This will make it more likely they won’t decide to make an offer.
Emergency costs
If fees are low, there is unlikely to be much money saved for emergencies. So when something does inevitably happen, a special assessment is more likely.
A special assessment is a way to pay for unexpected expenses, and an HOA that has low fees could rely on this to fund costs. It is better to have consistent fees than pay a surprise bill.
When buying a condo, one of the most essential questions will be understanding the amount in the reserves and whether a special assessment is on the horizon.
Inflation
Prices gradually rise, so standards and maintenance could slip if the HOA isn’t increasing fees appropriately. The HOA can’t suddenly increase fees by any amount they like either, with restrictions in the governing documents, and there could be state limits as well.
Minimum Standards
There are state and federal regulations for minimum standards within an HOA. If the association doesn’t follow its legal duty, there could be additional costs to homeowners.
The Pros of Low HOA Fees
The only real advantage of low fees is happy homeowners. Nobody likes paying bills, and anything that reduces outgoings will make people happier.
The board of the HOA will be more popular with residents, but this won’t last forever. If there isn’t enough money to cover maintenance costs, the association might rely on reserve funds, but this will run out.
With low fees, it will become impossible to maintain the common areas, and special assessments are likely to be more frequent. The community will get worse, and property values will suffer.
Avoid low HOA fees
While you might want to save money on paying the HOA, it is a cost that is essential to maintain the community and your property’s value. Though owning a home isn’t cheap, with mortgage payments, property taxes, utilities, and maintenance costs, choosing a home in a community that doesn’t charge enough could give you more problems.
Before you decide to buy a home within an HOA, check what their fees are. And if they seem low, it is better to continue searching for your next home.
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 35 years.
