HOA fees can become a budget buster

When you’re buying in a mandatory homeowners association (HOA), fees that seem reasonable today could skyrocket quickly.

Two generations ago, there were almost no condos in the U.S. and no mandatory HOAs. Today, we are closing in on a third of Americans living in a mandatory HOA community of some kind.

Some people consciously choose to avoid HOA communities. They don’t want somebody telling them what kind of paint, shingles, etc. they can have on their home.

Others love the rules of an HOA because they protect values. In an HOA, you don’t have to worry about a yahoo ignoring their home to the point where it starts looking like a haunted house.

And then with the back to urban movement, people are more likely to live in a condo or some other community with a mandatory association.

Whenever I’ve talked about HOAs in the past, I’ve focused on the rules. But the issue I’m hearing now is about people who live in HOA communities who can’t afford the mandatory fees.

The Washington Post reports those who are older and on a fixed income are particularly burdened by the fees.

Here’s a little secret if you’re buying new construction in an HOA community: The developer always keeps fees artificially low upfront to attract buyers. Then when the building goes to management, the fee has to escalate quite rapidly.

So never believe the initial fee if you’re buying new construction.

Another thing to consider if you plan to stay put indefinitely in an HOA community: Think about how that HOA fee can grow over time. Fees that seem benign now could wind up being a budget buster down the road.

For further reading:

• Can you still get a deal on a home?
• Save thousands on a mortgage or refinance
• First-time homebuyer guide