Condo Fees & HOAs, What Do They Mean and What do You Get?
So you’re looking to buy a home in the near future. Currently you are more than likely researching neighborhoods and the type of home that will suite your life, which is great. Sooner or later during your research you will come across properties that have either a condo fee or HOA fee. These added costs may be the difference to whether you purchase or not. In order to make the best decision, you must first understand what these fees are and how they affect you.
Condo Fees Vs. HOA Fees
HOA (Homeowner Association) fees: These fees are associated with single-family homes on planned development made up of lots typically with a yard. HOA developments are commonly found in rural or suburban areas.
Condo Fees: Are a collective ownership of property where common elements or areas are jointly shared while the units are individually owned. A condominium is created by record of a declaration of covenants and restrictions, bylaws, and a condo plat in the municipal land records or local county.
What Do They Cover?
HOAs- Every Homeowners Association’s policy on what is covers varies as does the price. Depending on the size of the home, lot as well as amenities and location the fees vary in range. Whatever the fees are the coverage details should be made available by the seller. For whatever reason the seller cannot provide HOA docs, ask for the contact information to the property management company that looks after the development.
Although there aren’t universal guidelines to what HOAs include, the following are typically covered:
- City Services- These services include things such as trash removal, water and sewage.
- Insurance- It’s important to note that HOA insurance only covers the exterior of the property as well as any damage done to the property around the home. If you want the interior as well as belongings to be insured than it is highly suggested to take out an individual policy.
- Lawn Care- HOA’s are usually meticulous when it comes to lawn care and exterior keep-up. This includes snow removal, landscaping as well as general lawn care.
- Pest Control- In an effort to avoid pest infestation, many HOAs will conduct monthly inspections/pest service.
- Maintenance/Repairs- Issues such as leaking roofs, exterior painting, driveway or pavement repairs, etc. Amenities such as gyms are typically included as well.
Condo Fees- Condo fees are the price to maintain the building in which the units are located in, divided among the number of units. However, the size of the unit, the floor in which it is located as well as the views all play a factor to the amount that a condo owner will have to pay. For instance, a studio on the first floor with a parking lot view will pay less in condo fees than a 3 bedroom unit on the top floor with sweeping city views.
Again there is no universal pricing on condo fees but they typically over the following:
- City Services-These services include things such as trash removal, water and sewage.
- Utilities– In some cases condo feels will cover some utilities such as heat or cable.
- General Maintenance– Common areas such as hallways, landings, courtyards etc. are typically maintained.
- Amenities-Depending on the building, condo fees can also cover things such as concierge service, gym and fitness training, pool, rooftop/patio access as well as security and or doorman.
Will They Go Up?
Very possible. Both your condo and HOA fees are subject to change each year due to the increase in the cost of services as well as value of the property. If the value of your home or condo building increases, the insurance costs will also increase which in turn will drive up the price of HOA and condo fees. Keep in mind that HOAs and condo fees are not for profit meaning the governing boards of these fees do not see any type of gains but rather every cent is accounted for and either goes towards the upkeep of property or in reserves for future maintenance.
Are They Negotiable?
No. Condo fees are not negotiable because HOA’s & condo fees are in placed by legal documents. This legal document specifies how much each unit/property pays in assessment and is not negotiable. The only way to change the fees would be to amend the document which requires consent from a high percentage of owners within the association. Other ways to avoid paying a fee would be to negotiate with the seller to pay say the first month of fees as part of the initial negotiation.
How Do They Affect My Purchase?
Budgets are everything when it comes to a purchase. Although it may appear that you can afford the home or condo in regards to the asking price, depending on the HOA or condo your total monthly fees may exceed your max budget. So say you can afford to pay $1,500 a month without being house poor, if the mortgage is calculated to be $1,200 but the condo fees are $700 a/month your budget is automatically busted. Lesson here is to always factor in the the HOA & Condo fees when house hunting.