By Ali Donoghue
What do Homeowners Association (HOA) dues, insurance premiums and car payments have in common? No one particularly likes them, but everyone recognizes their necessity. And everyone wants to pay less.
But, before you howl that your HOA dues are too high, you need to understand what causes dues to be higher and lower, and then decide for yourself whether what you pay matches what you get. It’s hard to put a dollar amount on what’s fair, since different associations have different amenities and responsibilities. Here’s what to consider:
• Size of the unit. Many associations apportion dues by square footage. The bigger the place, the more you pay. This makes sense, since you own a larger portion of the building. But this also means that, if you’re looking at a larger place, you may be paying more in dues.
• Size of the building. All condos have HOAs, but smaller buildings (think eight or fewer units) generally have less to take care of, making it likely that informal, smaller associations will charge lower dues and sometimes will ask members to help out with things like snow shoveling, lawn maintenance and hallway cleaning. If a building is large enough to be overseen by a third-party property management company that extra cost will be baked into larger HOA dues – but you won’t have to take your turn shoveling the front walk.
• Amenities. Some luxury condo buildings offer complimentary dry cleaning service, swimming pools, rooftop tanning decks, 24-hour doormen and commercial-grade gyms. Other HOAs (particularly in small buildings) simply take care of the basics, like garbage collection, lawn mowing and maintaining the front buzzer. Expect to pay more if you get more.
With amenities, the question isn’t just whether the price is fair, but also whether it’s worth it to you. For example, if you don’t work out, how much extra are you willing to pay per month for an in-building gym? Or, will you really go swimming in the pool more than a few times a year? For some people, that extra money is better spent elsewhere, whereas for others the amenities are what make the condo.
• Landscaping. Does your building have a shared deck with all manner of potted plants and topiary? Or an expansive courtyard with espaliered pear trees and a tulip garden? How much lawn? How many sidewalks and uncovered parking spaces? This is going to factor into your HOA dues – hiring a regular landscaping and snow service (or including it as part of the property manager’s duties) can be expensive.
• Reserves. Particularly with informal, smaller associations, you may run across an HOA that keeps very minimal reserves, with the expectation that members will pay a special assessment (a one-time out-of-pocket payment) for any major unexpected repairs. If there are minimal reserves, expect to pay minimal dues – but be aware that you may be dinged frequently with special assessments. An association that keeps a healthy amount of reserves may charge higher HOA dues, but will also be far less likely to levy a special assessment – which many condo owners appreciate.
• Age. New buildings probably won’t require as much maintenance at first because they’ve had less time to wear down. So, for example, a five-year-old building (hopefully) won’t yet need a re-shingled roof, a resurfaced parking lot or new fencing. Very new buildings (especially smaller ones) may have artificially low HOA dues, simply because they’ve yet to get to a point where they need to cover regular planned maintenance. Be wary of this – and expect your dues to rise eventually.
• Past problems. Occasionally a building will have experienced a catastrophic problem, such as an unstable foundation, that requires an immediate fix – and massive amounts of money. If an association had to take out a loan to fix the problem, members may be paying it off for years. This will raise the HOA dues, with little benefit to the incoming buyer.
Every association claims that its dues are fair. Whether you believe it is another story. Compare dues in several buildings and consider what each HOA offers – and whether it’s worth it to you to have the extra amenities. Before you buy a condo, you should be comfortable with the building’s HOA dues.
Ali Donoghue is a Redfin real estate agent in Chicago. She’s an expert negotiator who loves educating her clients about all aspects of the real estate process. In 2013, she was named a Top 1% Producer by the Chicago Association of Realtors. While she’s studied in London and speaks Italian, Donoghue is a lifelong Chicagoan who has enjoyed watching the Windy City’s neighborhoods transform over the years.