If you're looking at homes for sale, you should be aware that there are a number of fees and expenses related to the purchase aside from the mortgage. Depending on where the home is located, you might be responsible for homeowners association fees. If you are uncertain about what this monthly expense entails, here is what you need to know.
What Are Homeowners Association Fees For?
A homeowners association, or HOA, consists of a board of directors. The board is responsible for setting a budget for the year that helps to pay for expenses related to the upkeep of the neighborhood. Expenses can include landscaping, maintaining buildings located in common areas, and security.
The board also takes into account long-term expenses that the community will be responsible for paying, like replacement fees for a new roof at the clubhouse. These funds are added to a savings account for the HOA.
Once the board has a budget for the upcoming year and has determined how much they want to put away in savings for long-term expenses, they will divide the costs by the number of homeowners involved in the HOA.
What If You Do Not Pay Your Fees?
Whether you do not agree with the fees or you simply cannot afford them, your responsibility for them does not go away. Each homeowner is expected to make his or her payments on time.
If you do not, you could face serious consequences. The HOA could add interest and a late fee to the amount that is due. You could also be restricted from using common areas, such as the pool or clubhouse.
The HOA could even file a lien on your property. If that happens, you could possibly lose your home in a foreclosure to the HOA.
How Can You Avoid or Manage HOA Fees?
If you are concerned with paying HOA fees, talk to your real-estate agent. He or she can steer you toward properties that do not have fees.
In the event that you are considering a property that does have HOA fees, you need to reassess your budget and projected financial situation for the next few years. Realistically consider whether or not paying fees is manageable. You can work with your agent or a financial planner to get a more accurate picture of your financial capabilities.
You also need to find out exactly what services are provided in exchange for the HOA fees. Knowing that there is real value in paying the fees can make paying them an easier decision for you.