In this article, we’ll answer all your questions regarding HOA fees. But before we dive into the nitty gritty of what HOA fees cover, why you pay them, and whether they are tax deductible, we need to address what a homeowners association is and why they charge you a fee.
What is a Homeowners Association?
A homeowners association (HOA) is a group of volunteers within your community that establishes rules regarding renovations to your property, and the management and maintenance of common areas in your community such as swimming pools, tennis courts, and security gates. While the governing body of HOAs consists of volunteers, they are typically elected to serve for a fixed period of time.
What is an HOA Fee?
An HOA fee is a regular payment that your home association collects—quarterly, annually, or monthly—that covers some of the stuff mentioned above. If you live in a condominium or townhouse, you may have a lawn service that cuts your grass. If you reside in a subdivision that has a swimming pool, your HOA will hire a third party to clean it.
In essence, HOA fees help maintain and enhance the quality of life in your community. These fees are in addition to your mortgage, property taxes, and homeowners insurance. Like property taxes and insurance, you will pay them regardless of whether or not your mortgage is paid off.
What Do HOA Fees Cover
We’ve already mentioned some of the things HOA fees cover. If you pay HOA fees, your homeowners association has documents regarding restrictive covenants—what you can and can’t do with your property for your neighborhood to maintain its appeal for potential buyers—as well as what your fees cover.
If you’re interested in examining these documents, you can reach out to your HOA governing body or President, but some of the things they might cover include:
- Landscaping and Maintenance of Common Areas
- Pool Maintenance
- Snow and Trash Removal
- Fire Alarm and Security Systems
- Gate Security Guards and other Community Employees
HOA fees may also be used to enforce community rules and regulations.
How Much Are HOA Fees?
According to Census reporting, the national average for HOA fees is $170 per month. But this number varies widely, depending on where you live and how many amenities your community offers.
For example, in New York City townhouses, HOA fees average $1,500 dollars per month. Some subdivisions in Greenville, South Carolina charge an annual fee of less than $500 per year—yet another reason to move from New York to Greenville.
Some HOA fees are charged by the square footage of your property, while others are uniform across all residences.
What Are Special Assessment Fees?
Depending on your covenant, your HOA may reserve the right to charge special assessment fees to cover unexpected expenses. Typically, special assessments are authorized when your community or building needs major repairs following incidents such as natural disasters or making locally mandated property improvements.
If you need to bring your building up to code in New York City, HOAs have been known to levy charges for their buildings’ tenants—still want to live in NYC rather than South Carolina?
HOAs have a lot of freedom when it comes to charging special assessment fees, so don’t be surprised when the board of your New York condominium complex arbitrarily decides to charge you a hefty fee on top of your regular dues.
Are HOA Fees Tax Deductible?
HOA fees are not typically tax deductible. If you pay HOA fees as a part of the cost of your primary residence, you will not receive any breaks from the IRS. But if you rent out your property, your HOA fees may be deductible as part of your property rental expenses.
What Happens If You Fail to Pay Your HOA?
The answer to this question is highly dependent on where you live and your homeowners association. In most cases, your HOA will allow you to go on a payment plan to help you pay down your fees. Simply ignoring your HOA fees is never a good idea. Lesser penalties might include restrictions on the amenities you can access in your community.
But if you live in a more upscale neighborhood, your HOA has the power to evict you from your property and place a lien on your mortgage to recoup the loss in revenue. It’s important to remember that you agree to pay HOA fees when you buy a residence in a community that has them. Not paying them is similar to not paying your mortgage.
That said, your homeowners association consists of members of your community. They are typically more lenient than your mortgage lender when it comes to making special accommodations for homeowners who are unable to pay their fees. It’s important that you be upfront with your HOA about your inability to pay because they will usually work with you.
What Questions Should I Ask My Wilson Realtor About HOA Fees?
At Wilson Associates, we understand that HOA fees are as important as your mortgage and property taxes. You should ask your realtor the following questions about your HOA:
- How often have HOA fees increased in years past?
- What do my HOA fees cover?
- What services will I have to pay for myself?
- Does this HOA have a reserve fund to cover emergency expenses?
- Has your HOA hired experts or investigated ways to cut costs on your community’s services?
- Does your HOA have a history of charging special assessment fees?
Examining a community’s HOA fees is an important part of the home-buying process. At Wilson Associates, we will give you the most up-to-date information about everything related to your potential home purchase—property tax assessments, sales comps, as well as HOA fees.
For more information about HOA fees in Greater Greenville neighborhoods, give us a call at 864.640.8700.