So you’ve thought of constructing a home at a location that looks beautiful and is well-connected to the city.
But is that all you should be considering?
As you might have heard, home is a feeling that relies on the people around you at all times and the community you’re a part of. If you’re constructing a house in a community that is planned well, there might be chances that this specific community is managed by a Homeowner’s Association (HOA).
HOAs are responsible for setting rules and regulations that increase the valuation of the neighborhood you choose to live in. They also promote a sense of belonging and try to increase community involvement through difference activities. Because of this reason, an HOA can be an integral element of any neighborhood.
But with that being said, would an HOA fee be necessary if you’re constructing a new home at a well-maintained neighborhood? Well…
Because of the shared amenities and common areas, an HOA fee can be essential in some areas if you’re constructing a new home. However, because you’re giving in to the system and contributing to the HOA, you can get several amenities that make your move-in easier.
Understanding an HOA and Its Purpose
An Home Owner’s Association is an association that is built by the community and mostly it is a not-for-profit entity that operates to preserve the neighborhood you live in. To put it simply – they make your life easier. These associations are run by the residents who volunteer at will. The people who govern the HOA are the board of directors and initially, it might be governed by representatives of the builders.
As the association slowly starts to grow and its purpose becomes more clear members of the community start to join. Some communities also prefer hiring a professional management company to handle a specific duty, or every duty. For example, to landscape a certain area in the community, many people prefer hiring an external resource.
Necessary Assessments and Essential Documents
However, even though almost every neighborhood might prefer getting an HOA, they are one-size-fits-all. Determining whether the HOA will be beneficial for you depends on two factors:
- The HOA fee you’ll be entitled to pay
- The rules and regulations you’ll have to follow once you’re a part of the HOA
Every resident of the community has to pay their share of the costs of the HOA via a necessary assessment. To make sure if you’re getting the right deal or not, we would recommend that you ask what the assessment covers and what it doesn’t cover.
And as for documents for the government, take time to review them so you can understand all the rights you have and the rules you need to follow. This also depends heavily on the home you have because this can change the amount of changes you can make, your parking spaces, and the pets you can keep.
Constructing a home in an area and finding out later that you aren’t allowed to change stuff can be annoying.
Budgeting and the Reserves of the HOA
It would also be beneficial for you to understand where the HOA fee is going that you keep contributing. The HOA you’re contributing to should have a healthy fund that can save it from an unexpected expense. If an HOA goes into a crisis without having a fund, the residents might be asked to contribute further for the special assessment.
Because of this reason, not only should the HOA keep tabs on the residents, but the same has to be done by the residents as well.
However, if you haven’t made the mistake of moving into a location that has an annoying HOA, there are a few considerations you can make before you move into one. As much as you’d like to think that HOAs can work just because you’ve paid them a certain fee – it’s never that simple.
This depends on your tolerance for the rules the HOA has set, your acceptance of the shared services offered by the HOA, and whether you’re okay with self-government.
Dealing with a Homeowner’s Association
1. Fees Can Differ Greatly
According to a study based on the American Community Service Records, the HOA fee in 2015 was around $331 a month. This study showed that while Warren, Michigan had a low of $215, New York City had a high of $571:
|$331 per month
|Average across America
|$215 per month
|$571 per month
|New York City
The study also showed that as the buildings got older, their HOA fee increased, and the regulations got increasingly complex.
The number of services offered by the HOA and the quality of these services can have an impact on the fee, too. For example, if you choose to live in a development that has a guarded gate, a golf course, and a club house, you’re going to have to pay a larger HOA fee.
The HOA fee you pay can also vary depending on the variations that occur due to square footage, the orientation of the area, and the location you opt for. All of these factors have a direct impact on the upkeep your house will require.
However, before you move in, also try to know how much the fee has increased over the last ten years. On most occasions, the HOA fee is usually planned three to five years in advance. If these projections are available to you – examine them.
2. The Amenities You Get Can Vary, Too
Constructing a home at a certain location comes with specific costs and benefits. While the cost can be the HOA fee and the number of resources required to build the house (apart from several others), the benefits can be the HOA provides to you.
The services the HOA is supposed to provide to you can change too. Consider the options that are included and try to understand how often they will change. Are the services that you require available? Are there any utilities included? What about the internet?
Also – if the community has recreational opportunities that you might not use, you’ll still have to pay them because you have the option to use them. Some communities can have tennis courts, swimming pools, basketball courts. If you do intend to use them, figure out their schedule and determine the number of people that are allowed to use these services from a household.
If you want a good idea of how the HOA around your region can differ, consult a professional real estate agent.
3. Additional Charges Can Apply
The choices the HOA will take will ultimately decide how it will deal with the unexpected expenses that ultimately turn up. These could be capital investments or getting a new HVAC system.
Some HOAs prefer keeping a large sum of cash in their hands so they can meet the challenge of maintenance and other obligations easily. While others have a lower HOA fee and depend on special assessments.
How this Works
If a major expense has come up for the HOA like replacing the roof of a community building or getting a new elevator the association will charge the residents an extra fee for that special repair. So even though the HOA can charge a minimal fee on the regular, special repairs can take the HOA fee up to thousands on some occasions.
What If You Can’t Pay the HOA Fee?
If an owner in the community or a property owned by someone has not contributed to the association (this goes for special assessments as well), HOA can take strict action against the designated homeowner. The actions in this situation depend on the contract that was signed between the HOA and the owner of the house.
According to some contracts, the HOA can charge a late fee, which can be an additional expense. While some contracts give the HOA the liberty to file a lawsuit, or foreclose the owner’s property to get the payment the HOA needs.
Living in a community that is managed by an HOA can be a blessing that leaves a sour aftertaste. Even though you can enjoy certain luxuries at one point, you also have to follow a strict set of rules and regulations that can limit the number of things you can do with your home. However, people who buy into the deal are the ones who have done prior research before and are okay with the sacrifices they have to make.
In the end, it’s about having a tradeoff that favors you. Consider all the clauses you can see – and then close the deal if you like the benefits you’re getting.
Q: Do all new construction homes have HOA fees?
A: Not all new construction homes have HOA fees. Whether or not a new construction home has HOA fees depends on the specific homeowner association (HOA) that governs the community where the home is located. Some new construction communities may have an HOA that requires homeowners to pay fees for the maintenance of shared amenities and common areas, while others may not have an HOA at all.
Q: Are HOA fees tax deductible?
A: In general, HOA fees are not tax deductible for most homeowners. However, there may be certain exceptions for rental properties or home-based businesses. It is recommended to consult with a tax professional to determine if any portion of your HOA fees can be deducted on your tax return.
Q: What are the benefits of living in an HOA?
A: Living in an HOA community can offer several benefits. Some common benefits include access to amenities such as community pools, clubhouses, and parks, as well as the maintenance of common areas and landscaping. HOAs also often enforce certain standards and regulations that can help maintain property values and ensure a pleasant living environment for residents.
Q: Can an HOA foreclose on a home?
A: Yes, an HOA can foreclose on a home if the homeowner fails to pay their HOA fees or violates the rules and regulations set forth by the association. However, foreclosure is typically a last resort for HOAs and is generally only pursued after multiple attempts to resolve the payment or violation issue.
Q: Can I opt out of an HOA if I don’t want to pay fees?
A: If you buy a home in a community that is governed by an HOA, you are typically required to pay the HOA fees associated with the property. Opting out of paying these fees would likely result in violating the terms and conditions of the HOA agreement, which could lead to legal consequences.
Q: How can I find out the HOA fees for a specific home?
A: To find out the HOA fees for a specific home, you can contact the real estate agent or the listing agent representing the property. They should be able to provide you with the current HOA fees associated with the home you are interested in.
Q: What are closing costs associated with an HOA?
A: Closing costs associated with an HOA may include fees such as transfer fees, governing document fees, and prorated HOA dues. These costs can vary depending on the specific HOA and the terms of the purchase agreement.
Q: How can I get involved in my HOA?
A: If you want to get involved in your HOA, you can consider running for a position on the HOA board or volunteering for various committees or projects. By actively participating in the HOA, you can have a say in the decision-making process and help shape the community.