When you are out looking at homes you may come across some that are part of an HOA or home owners associates. Typically, when you buy a condo or townhouse you will be a part of an HOA which will require you to pay monthly payments called dues. Your dues will vary depending on the building amenities and your percentage ownership of the building. Your monthly dues will cover building maintenance, amenities and reserves. These payments are not optional so make sure that the monthly HOA is within your budget and has been accounted for in your monthly payment. This mortgage calculator will help you see a full payment picture. This article will highlight 4 things to know about HOA’s before you move in.
The first thing you should understand is how your monthly due is calculated. Percent ownership is used to determine the dues and each building has a different way of calculating that ownership. Typically, this is done by total square feet owned so if you owner a 1,000 square foot and the total square feet of the building is 100,000 then you own 1% of the building therefore you are responsible for 1% of the yearly budget. If the yearly budget is $200,000 then your monthly dues would be $166.67. While the budget may change over time your percent ownership will not.
Special assessments are projects that are done by the building to improve overall conditions or repair damaged components of the building. The cost will be split between the owners of each of the units based on your percent ownership. A special assessment is decided by the board of directors of the building and once the vote has been approved the board will levy the assessment against each unit. Typically, each unit owner will be offered the option to get financing for the project, especially if the project is a large one. Most often the homeowner will have 6 months to 2 years warning about the special assessment and will be able to prepare for the expense but the financing option is always a good option. Typical special assessments include a new roof, a new deck or building-wide plumbing work.
Rules and Regulations
Each person in an HOA should know the rules and regulations of the building. When you are part of an HOA you are responsible for being a member of the community and with that comes following the rules of the building. You should understand what you can and cannot do because breaking the rules can be accompanied by fines which the individual who broke the rules will have to pay. I recommend reading the rule and regulations provided by your building before you move in so that you know what is okay and what is not.
Board meetings vary depending on building but usually a board will meet every month, quarter or year depending on the size of the building. These meeting are a time for you, as a homeowner, to speak your mind about what you think should be changed. If you are unable to attend the meeting make sure to read the meeting minutes so that you know what is going on in the building. Far too often people don’t read the minutes and then get surprised when a special assessment that has been talked about for a year hits. Each year elections will be held and seats on the board will be up for a vote. If you would like the opportunity to affect the direction your building is headed, run for office. You can get the power to help guide your investment you should do so.
Being a part of an association can be very great and rewarding. Meetings are a great place to meet your neighbors and many of the projects you would be responsible for with your own home are tended to by the board. Although you have monthly costs, they help to take care of the building and your home so make sure to pay them. Don’t be afraid to join an HOA building as they can be a great home to live in.