So, what are Home Owners Association (HOA) Dues and how do Buyers assess their relevance in their purchasing decision? Are low HOA Dues better than high HOA Dues, the dilemma!
Home Owners Association Dues are typically assessed to condominium units on a monthly basis to pay for; Common Area Maintenance (CAM), Water/Sewer, General Property Insurance, Property Management and hopefully an amount to pay for future Capital Improvements and Repairs. HOA Dues may also include Earthquake Insurance, basic cable or internet access, natural gas, heat and air conditioning, or other items. Exactly what the HOA Dues cover is dictated within the original legal documents used to establish the Home Owners Association.
Even though low HOA Dues allow a Buyer to purchase a more expensive condominium unit based upon their available income, low HOA Dues may not necessarily be good. Low HOA Dues will undoubtedly cover the monthly fixed costs like; CAM, Water/Sewer, General Insurance and Property Management but, they may not contribute enough to the Capital Reserve budget necessary for future Repairs and Capital Improvements. Those Repairs and Capital Improvements will then be subject to Special Assessments which could be substantial.
The amount collected each month that goes towards future Capital Improvements and Repairs is recommended by the HOA Board of Directors and typically voted on by the majority of owners of the condominium units. Lower HOA Dues are typically favored by owners of investment units, owners with fixed-incomes, new owners with limited additional cash available and, owners who are considering selling their units in the near future.
Buyers of condominiums should be concerned with low HOA Dues. They should research the Re-Sale Certificate and supporting documents in detail and confirm the Capital Reserve Amount will pay for the future Capital Improvements and Repairs identified in the Capital Reserve Study. The Capital Reserve Study is one of those supporting documents.
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