Part of living in an HOA community is paying the fees that go along with it. These costs are something that homeowners should consider when buying a home to ensure that they budget accordingly. Finding the HOA community with the lowest fees is not always the best option, nor is the one with the highest fees. It’s important to look at the bigger picture and see how these funds are being managed.

HOA fees cover a wide range of operations that keep the community safe and well taken care of. These funds are used for insurance, maintenance and repairs, capital improvement projects, emergencies, landscaping, pest control, trash removal, security, and more. The board must have a strong grasp of financial management – or partner with a property manager or financial professional who does – in order to set fees at a level that effectively supports the community.

When Fees are Too Low …

You might feel like you’re getting a great deal if you move into a community where the HOA fees are low. Less money out of your pocket, right? Not necessarily. Low fees can indicate potential problems such as:

  • Not enough money to cover emergency repairs or even regular upkeep of facilities and the neighborhood. Look around and see what state the property seems to be in.
  • Costly special assessments may be leveraged if there is a shortage of funds.
  • Minimally funded reserves. Ideally the HOA wants its Reserve Fund to be 100% funded, but many vary between 30% and 70%. The lower the percentage, the more you may end up owing later through special assessments or rate hikes when money is needed.
  • A large jump in fees later. Many communities slowly increase their dues to adjust for changing costs and maintain adequate coverage. If rates stay too low for a long period of time, a large increase may be necessary to make up for shortfalls over the years.

When Fees are Too High …

At the same time, some communities have very high costs. This may be due to the nature of the community or the types of amenities it offers. For instance, one neighborhood may be notably more expensive, but it may also offer a plethora of amenities, activities, and services for its members. However, there can also be other concerns:

  • Poor management of funds. Rates may be higher because the money being collected is not well managed or used as effectively as possible.
  • Budgeting that does not align with the actual costs of running the community.
  • Paying too much for services. Contracts should be regularly reviewed to see if more affordable prices can be negotiated and to compare options with other providers.

Before jumping into buying a home, do some research. Find out exactly what HOA fees cover, what the history of special assessments has been, and what future plans look like. Don’t compare neighborhoods just on cost alone – compare what you’re getting in return.

Working with a property manager like Kuester can help HOAs to keep fees more affordable and better manage funds. This can keep the community looking great, functioning well, and prepared for future expenses. Strong financial management and strategic planning are essential for HOAs. If your HOA could benefit from professional support with these issues and more, contact Kuester today to find out how we can help.

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