When you buy a house, everyone focuses on the dollars needed to get through the closing. There's the down payment, closing costs and the all important, how big a loan the lender says you qualify for. If you're buying a house, you're front end ratio covers the mortgage, taxes and insurance. If you're buying a condominium, the homeowner association or HOA fees are also included in this ratio.
Many home buyers look at these HOA fees as a financial burden, another monthly expense they have to pay along with their mortgage. They forget that many of the expenses covered by the condo association, would be theirs to pay out of pocket … plus the time required to manage the services like lawn and pool care, cable and Internet services, trash removal and more.
Benefits & Risks of Owning a Condominium
Condominium's offer homeowners many of the benefits of home ownership, without the day-to-day responsibility for maintaining their home's exterior. This is a great benefit for people that are too busy, or lack the motivation to roll up their sleeves and mow the lawn each week. If pushing a lawn mower is something you enjoy, then buying a condo might not be a good fit for you.
Here are the primary advantages of buying a condominium:
- Protect home values by insuring that homes and the surrounding landscaping are maintained.
- More amenities like tennis courts, a golf course, club house and pool. Homeowners get to enjoy these without spending time maintaining them.
- Volume discounts for things covered by condo fees, like landscaping and Internet services.
- Fewer home contractors to find and manage, as services like lawn care and exterior home maintenance, are covered by your HOA fees.
- Less time and paperwork, with fewer bills to pay when they're covered by HOA fees.
Where there are benefits, there are also risks involved in owning a condo:
- Condo associations have rules, like the colors you can paint your house and the plants you can use. For some homeowners, these rules aren't worth the benefits.
- HOA fees can increase, based on cost increases in the services paid on your behalf. There are also assessments that can be added on top of your monthly fees, to cover unexpected expenses like damage from ice dams that hit large swaths of New England in 2015.
- Financing for condominium buyers can be negatively impacted when the ratio of renters to owners gets too high, or the reserve account for unplanned expenses falls too low.
There is a lot of controversy around HOA fees. They vary widely as this graph from Tulia.com shows, but until you know what costs are covered by the fees, you really can't compare them. Take New York as an example. If you look at the cost of cable TV, Internet access, a health club membership and concierge service, plus maintenance of your heating, cooling, plumbing and electrical systems, $575 might not seem so high.
Don't confuse how much the HOA fees are with how well the community is being managed. If you're getting real value from the services delivered, the fees should make sense. And don't forget that you as the homeowner, have a role in making sure this happens. (Read: Tips to Keeping Condo Fees in Check and check Trulia's website for updates as buy vs rent comparisons change over time).
HOA Fees Cover Many Homeowner Expenses
Here are the most common expenses covered by HOA fees:
- Government services – including water, sewer and trash removal.
- Insurance – covering common grounds like driveways and walkways, plus the building exterior which is huge when you consider the weather damage caused by hurricanes and blizzards.
- Landscaping and lawn care – so you can be proud to drive up to your home, but don't have to spend time planting and caring for your home's landscaping.
- Pest control – based on your location's requirements. This can include monthly spraying in states like Florida, to avoid pest infestations.
- Exterior maintenance and repairs – is a major homeowner responsibility and expense, which often is the primary motivation for buying a condominium. When I owned my handyman business, we did work for quite a few condo associations, and repairs included:
- Roof repairs, to extend the life of the existing roof to it's full life.
- Gutter cleaning is an annual maintenance task, especially challenging with buildings that are 3-story on sloping land.
- Siding and trim repairs – from replacing rotted clapboards to painting trim, doors and more.
- Exterior features – from resealing driveways, to repairing sidewalks, fencing and maintaining gyms. Decks are a major condo expense covering cleaning, staining and sealing, in addition to repairs.
- Major renovations – like replacing the community water pump (versus a private well), roofing or decks.