How To Evaluate HOA Fees Without Letting Them Scare You Out of a Great ZIP Code

Imagine you find the home of your dreams, only quickly find out that a hefty HOA fee is attached to it.

At first, you may be a bit bummed about the additional cost. You may even consider passing on an ideal property because of it.

But experts agree that HOA fees may actually be worth it, especially if the home is in a neighborhood you love and has the kind of amenities that you'll actually use. 

“An HOA can keep a neighborhood nice while allowing its home prices to rise and making resale more desirable,” says Teri Smith, broker and real estate agent at Newport Properties in Mooresville, NC.

Still, it’s up to you to weigh the benefits of an HOA against the costs so you can ultimately decide whether the home is a good fit for you and your family. Here's what you should consider.

The purpose of HOA fees

HOA fees are recurring charges homeowners pay to maintain shared spaces and amenities in a community. They’re common in condos, townhomes, and planned neighborhoods, which have become increasingly popular properties for first-time homebuyers and retirees alike, given their price points.

“Besides landscaping, security, and amenities like pools, HOA fees may cover building insurance for common areas, utilities, community management, legal or accounting costs, and reserve contributions for future repairs,” says Stephen Lockard, litigation attorney at J&Y Law in Los Angeles.

This can be especially appealing to those who prefer to let the onus of the exterior of their home be someone else's problem. For example, your HOA fees will be funneled into a reserve, saved for repairs like roof replacements and siding refinishing.

Typical HOA fees

In most cases, HOA fees are paid monthly, but amounts can vary significantly. Modest communities or those with few amenities may charge a couple hundred dollars each month or less. Luxury high-rises or neighborhoods with extensive services, on the other hand, can cost thousands of dollars. 

“It really comes down to amenities, the level of service you receive, property values, and the age of the community,” explains Lockard.

According to Marcus Sturdivant, advisor, managing member and chief compliance officer at The ABC Squared² DBA All Bases Covered in Charlotte, NC, it’s a good idea to use the 1% rule, meaning your HOA fees should not exceed 1% of your home’s value. 

For example, if you’re buying a home for $450,000 you should pay no more than $4,500 per year or about $375 per month in HOA fees.

How to decide whether they’re worth it 

When considering a home in an HOA, experts recommend these considerations to determine if the fees (and property itself) are a good fit.

Understand what the fees cover

Request a copy of the HOA’s Covenants, Conditions, and Restrictions (CC&Rs) and find out what the HOA fees would pay for. 

"If they include utilities, maintenance, or insurance, they could offset other bills,” says Lockard. 

If most of the fees go toward the community pool and gym, ask yourself whether you’ll actually use these amenities. 

Compare the fees and assess potential increases

See how the HOA fees compare to similar properties nearby. You may even be able to check the history of fee increases by asking the seller or listing agent for records. Determine if the fees are fair and whether you feel comfortable with them rising.

“If HOA fees are unreasonably high, or the association raises fees too frequently, be careful. That could be a sign of overall poor financial management,” explains Lockard.

Do your research

Read the CC&Rs carefully and check out online reviews of the HOA. You can even talk to residents of the community to get firsthand perspectives. 

Your goal should be to understand how the association operates and how the rules are enforced. Are they strict and controlling or more relaxed and flexible?

“Make sure the HOA's culture aligns with your unique lifestyle and preferences,” says Sturdivant.