What Do HOA Fees Pay For?
No one likes paying their HOA fees, but that pesky bill comes every month! While you may despise this fee, it could come toyour rescue. So, next time you have to fork up several hundred to your Homeowners' Association, try to remember everything it's doing for you
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You don't have to be Ruler of Rubbish
HOA fees often cover some basic expenses, such as trash removal, water, and sewage upkeep. I don't know about you, but I'm more than happy to pass any sewage-related hiring along to my Homeowners' Association. Not sure what your fee covers? Simply ask!
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Things always look lovely
The cost of your HOA likely goes toward shared upkeep. Own a single-family home? Your HOA fee pays for neighborhood-wide landscaping. Live in a condo? Your fee covers landscaping, shared space cleaning service, carport snow removal, and a plethora more!
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The fee can get you out of a pickle
If your HOA has been budgeting wisely, they have a reserve to pay for unexpected building costs. If the building boiler goes down, not to worry! The HOA reserve will cover it. Without an HOA to have your back, you could be paying thousands for replacement. If your neighborhood park floods, the HOA will cover that too.
How Do You Know If Your HOA's Finances are in Good Shape?
Yes, HOAs can save the day, keeping your wallet from imploding in one fell swoop. But, it can only do that if the HOA fund is in good repair itself. Investigate the health of your potential home's HOA by following these tips (especially if you're looking to purchase an attached home).
Check the HOA's Reserve
You'll avoid special assessment (fees above and beyond your monthly HOA) in an unexpected situation if your association's reserve is sufficient. In other words, you won't have to pay out of pocket if your HOA has put enough money into savings for a rainy day. To know the exact amount your HOA should have in reserve, ask the association for their most recent reserve study. The standard rule of thumb states that the reserve should contain at least 70% of the reserve study recommendation - and if the study wasn't completed in the last 5 years, you may want to think again about purchasing in this building.
Evaluate Spending and Cash Flow Over Time
Review the HOA's yearly balance sheet to check for adequate funding over time. If you notice repeated peaks and dips in spending vs. equity, you'll want to run! This means that the association is spending when they need to, depleting their cash, then charging residents through special assessment in order to replenish their finances.
Paying your monthly HOA fee can feel tantamount to walking through your neighborhood with a pebble in your shoe. But, if your Homeowners' Assocation is running operations smoothly, your HOA could turn out to be the cushioned insole your feet have been aching for.
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