Those HOA dues — Don’t Hate Them So Much!
The first thing almost all buyers say when they are looking for a condo:
“I don’t want the HOA dues to be high!”
Ah — but beware those low HOA dues!
Knowing how a building stands financially is one of the most important aspects of buying any condo. A portion of the HOA dues goes to pay monthly utility bills and insurance, and some goes towards maintenance reserves. Condo associations are supposed to have an independent review of their reserves every few years to see if they have enough money for painting, roof and elevator repairs, waterproofing the balconies, and so much more.
Ideally, the reserves are 100% funded, meaning there is plenty of money!
Full funding would make it a very dreamy condo building, yet you would be surprised how many don’t meet the mark. I’ve looked at many reserve statements, and can rarely recall seeing this in twenty years as a realtor — occasionally a building is OVER funded, thanks to very on-the-ball residents and property management, which enables them to even reduce the dues — Yay!
Buildings with good reserves maintain good value and a great reputation in the brokerage community. More frequently though, reserves are below 50%. When you get below 30% or so, the question is: Where is the money going to come from for repairs and maintenance?
A building with low reserves either does not get the necessary maintenance, or the HOA board may have to raise the dues. What is even more more likely is the board will levy a special assessment on all the homeowners.
Annual special assessments of $5-$10K and up to $35K per unit are not that uncommon if the HOA dues have been too low for too long. At some point, owners have to pay for maintenance, and deferred maintenance is always more expensive — remember “ A stitch in time saves nine”?!
Worst case, the homeowners association takes out loans to do critical repairs, which does not make for a pretty financial situation.
So don’t automatically hate those higher HOA dues!
As a buyer, you should review the reserve statement. If the HOA dues appear on the low or the high side, dig further into the financials and see what you are paying for.
If the dues cover additional amenities you done see the value in, pool, gym, doorman, then maybe the building is not for you!
Condo ownership, even with what may feel like higher dues, is still less costly than painting and reroofing an entire house of your own; or refinishing your own swimming pool if they have one of those!