As of 2024, around 75.5 million Americans live in a community governed by a homeowners association (HOA). That’s about 30% of the population! And that number is only expected to grow, as more than 3,000 new HOAs are expected to have formed this year alone.
Are you unfamiliar with HOAs? Then you may not have wondered anything about them until just recently, and only are now because you’re considering purchasing a home governed by one. We’re not going to teach you how to start an HOA, or delve too deeply into the organization’s legal implications. We’re going to give you the basics so you can decide whether an HOA is right for you!
How Much Are HOA Fees?
Let’s begin with the least savory aspect of owning a home managed by an HOA: the fees. Generally speaking, a home’s monthly HOA dues are proportionate to its market value. For example, at the time of writing, a $170,000 lakeside condo in Detroit Lakes, MN likely has an HOA fee in the ballpark of $275. In contrast, a $530,000 lakeside condo in the same city should have an HOA fee of approximately $650.
The amount you should expect to pay also depends heavily on the community. High-end neighborhoods can easily charge four-digit HOA fees. It’s effectively a community’s way of ensuring it only has a certain “class” of people.
What Do HOA Fees Typically Cover?
Fortunately, much of the money you spend on HOA fees will go directly toward your cost of living. In other words, if you hadn’t spent money on HOA fees, then you likely would have had to spend it on living expenses anyway. With that said, HOA fees can (but don’t necessarily) cover:
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HOA fees also cover the costs of insurance associated with HOA property, including sidewalks and other common areas, as well as the direct costs associated with managing the community. Money may also be held in reserve, to be spent on repairs for common property as the need arises.
Do People Like Living Under HOAs?
Most don’t. According to a recent poll, most people who live under an HOA dislike it. The fees play a large part in that, and the fact that HOAs can charge special assessments on an as-needed basis doesn’t help.
HOAs are also widely disparaged for their restrictive rules. If you’re like many Americans, the thought of someone telling you that you can’t paint your house a certain color probably doesn’t sit with you. HOA rules can also make simple maintenance inconvenient. If you want to replace your storm door, then you may have to wait over a week for someone in an office to acknowledge that Home Depot is capable of doing the job.
HOAs often hire professional managers. They can be competent. They can be less so. But many HOAs are exclusively comprised of volunteers. Like professionals, some take their roles very seriously. Others don’t, and make playing by the rules nigh impossible. All of this is to say that people have legitimate reasons for disliking their HOAs. But just to be sure, they aren’t all bad!
Does an HOA Increase Home Value?
Yes! Homes in HOA communities tend to be worth 5-6% more than comparable homes that aren’t. This is because people genuinely do appreciate what HOAs provide (despite their potential shortcomings).
Nearby and exclusive amenities like parks, pools and security all add to a home’s value. Because they are eager to maintain property values, HOAs usually do a good job maintaining common grounds. And although it is frustrating to know that you can’t paint your home any color you please, don’t forget: that restriction goes both ways. It’s reassuring to know that your neighbor can’t decide to paint their home a color that you hate, erect a fence tall enough to destroy your view, or take up beekeeping as a hobby. Likewise, an HOA can save you from living across the street from a driveway packed with 13 cars, a vacation rental, or someone who doesn’t believe in doing yard work.
Do HOA Fees Affect Your Mortgage?
They do. If you’re purchasing a home in an HOA community, your mortgage lender will factor that monthly expense into their decision-making. If it determines that HOA fees would have too great an impact on your finances, it may decline to approve the loan. HOA fees are like property taxes in that regard: one more expense that may leave the borrower incapable of repayment.
What Happens If You Don’t Pay HOA Fees?
HOA fees aren’t a suggested donation. It doesn’t matter if you have a good reason for failing or refusing to pay. An HOA may still decide to retaliate by fining you, suing you, placing a lien on your home, and possibly foreclosing on it as well.
Remember to always do your own research! If you’re considering moving into a neighborhood governed by an HOA, consider checking out its online reviews, asking current residents what they think of it, and speaking with one of its representatives one-on-one. If you discover anything unpleasant, then you’ll be glad to have discovered it before moving forward.
Are you looking for a new home in the greater Detroit Lakes, MN area? Contact Action Realty of Detroit Lakes today to make it happen! We’ll make sure you know what you’re signing up for before moving into an HOA community – or make certain you don’t move into one at all, if you so please.