When it comes to buying a home, one aspect you don’t want to overlook is the HOA fees. This is important to factor into your budget and what you can afford. Though no one especially likes paying these dues, they are integral to running a successful homeowners association and maintaining the property. But you may be wondering who decides how much you pay and where do they get this figure from?
It is up to the board of directors to set annual HOA fees. They look at the overall operating expenses of the community – things like utilities, vendor services, overhead costs, maintenance, insurance, etc. – as well as contributions to the reserve fund. Once they have a total cost, they divide it up equally among all homeowners, board members included (they pay the same dues as everyone else).
Proper management of funds and regular review of expenses to identify opportunities for cost savings can help to keep fees more manageable and reduce rate hikes. However, it is important to remember that when fees are kept too low, it can actually backfire and increase the risk for special assessments. Special assessments are fees that are assessed when the HOA has unexpected expenses and not enough money to cover them. Homeowners must pay up to cover the difference.
It can be beneficial in the long run to have a slightly higher fee increase one year in order to keep dues more stable for the next few years. Paying more now can help offset fluctuations in the economy. It can also allow for more fully funded reserves to cover major and long-term projects.
If you’re concerned about rising HOA fees, you can:
· Review financial and budget statements to see exactly how the HOA is spending and saving these funds. It may make more sense once you see everything that must be taken into consideration. Fees often go toward much more than you realize.
· Come up with recommendations to lower costs. Look at where spending occurs and try to develop strategies for cost savings. Instead of complaining, try to help come up with solutions and get more involved with the HOA.
· Attend HOA meetings and stay abreast of changes occurring in the community. What are upcoming projects and how will they benefit homeowners and the association? What is the board doing to keep fees more manageable or address challenges?
Though you may not be responsible for determining HOA dues, you can keep yourself educated about how and where your money is being spent. Looking at how the HOA operates, how fees have changed over the past several years, and what is included can help you to determine whether a community is a good fit for you and your current financial situation before buying a home.
If your homeowners association is having trouble creating an effective budget, managing collections, organization meetings, or maintaining communication with members, it may be time to consider partnering with a property management company like Kuester. Contact us today to learn more about the wide range of services we can provide your community.