Every month, the time comes to pay bills. Hard earned money going towards the things that help you make more hard earned money. You’ve paid your mortgage/rent, internet, garbage, utilities, car payments and whatever else is in your bill pile, and the last thing you want to think about is paying another bill. This is the common (and understandable) way to think of HOA dues. As if you aren’t paying enough to live already, dues seem like another way to take more money from your ‘fun fund’ or 401k.. HOA dues get a bad reputation for a good reason. It’s hard to see where the money is going. This is why many would-be condominium owners opt for a house instead.
The truth about HOA’s is that they are a necessary bill to pay if you live in a condominium or a townhome. HOA dues go to what is called a reserve fund. Think of the reserve fund as the community’s piggy bank. Every condominium or townhome community consists of property, and a building or buildings that make up the community. The principal focus of the reserve fund is to fund the upkeep and upgrades to the property and building(s) as well as pay for any employees the community may require. For many condo shoppers, low HOA dues are a plus because they see it as it is less money out of their pockets. But low HOA dues are only a plus if it is a result of a healthy HOA. If it is a result of a poorly run HOA, the results can be disastrous.
A healthy HOA means the repairs and maintenance are accounted for and up to date, the residents are held accountable for missing HOA payments, and the reserve fund is kept neat and tidy. Understanding if an HOA is run well is more complicated than looking for low dues, or a well kept property. Low dues doesn’t always mean it is run well, (it can even mean the opposite) and while a well kept property is a good sign, it is nothing certain either.
A poorly run HOA may not go to the trouble to collect on delinquent HOA dues, or lower the amount of the dues because residents don’t want to pay so much per month. The association makes short-term decisions out of laziness, or a poor understanding of what the future may bring, and the result is an insufficient reserve fund when the time comes to make necessary repairs to the property and building(s). When this happens, community members will be forced to make a decision. Raise the dues (often exponentially) to compensate for the lack of funds, or cut their losses and sell their unit. All too often, the original owners sell quickly at a ‘great’ price, and the unsuspecting new owner enters a failing condominium community, assuming all of the financial responsibility of the irresponsible HOA without knowing until it is too late.
The only way you can truly find out if the condominium community you are looking to purchase a home in is run well with a healthy reserve fund is by conducting a reserve study. A reserve study is an in-depth look at how the condominium community is being run, including minutes from community meetings, how much cash the community has for future projects, and what the plans are for the community. Kappes Miller Real Estate Services is capable of providing expert reserve studies, and taking the time to explain every word to our clients. This means that when you choose Kappes Miller Real Estate Services, you will have an in-depth understanding of exactly what you are buying, down to the minutes.