Associations and Those Pesky Monthly HOA fees

Every condo and loft building will have an association that mandates the rules and regulations of the building as well as assess the monthly HOA fees.  Many purchasers don’t realize that they should thoroughly investigate the association when buying a loft.  This is critical and very important step when purchasing a loft because you can quickly find out whether or not you’re buying into a good building or not.  “Good” meaning that the building’s association is not being mismanaged and the building doesn’t have current or upcoming repairs that could raise your monthly HOA fees.

Let me go back and first explain what is typically included in the Monthly HOA fee which are Exterior Liability and Fire Insurance, Pest Control, Reserve Fund and Exterior Maintenance. If you are in a building that has extra amenities like concierge, swimming pool, fitness center, and club house, the monthly HOA fees also includes access to those amenities. A portion of your HOA fee will go into the reserve fund, this fund is primarily used for repairs and maintenance that the building may need . Most of the loft buildings in Atlanta will also include garbage and water in the HOA fee too.

How do you figure out if you are buying into a good building or not? That’s easy, look at how much is in the building’s reserve fund and how much per sq.ft. is the monthly HOA fees. Depending on the size of the complex and what amenities the building has will determine how much should be in the reserve fund. Your agent will be able to help you assess what the proper amount should be. If the building doesn’t have sufficient funds in the reserve fund you can probably expect that sooner or later your monthly HOA fee will increase or the association could place a special assessment on every unit to cover any repairs that the building may need.

Let’s break down the monthly HOA fee price per sq.ft. A building that does not have any amenities(swimming pool, fitness center, elevator, etc) should be around 17 cents per sq.ft and less. A building that does have amenities will probably be around 23 cents per sq.ft and if a building has all the amenities and a concierge it will be around 28 cents per sq.ft. Also note that there are buildings out there that also include other utilties in the HOA fee, such as gas, internet, cable, etc that could affect the fee per sq.ft. as well. If you find that the fee per sq.ft is much higher than these amounts it should raise a big red flag, which entails investigating as to why the fees are so high. There are numerous reasons that could affect this but usually it means that the building has ongoing repairs, the association increased the fee because a large repair is needed in the future or the association is or has been mismanaged.

Once you buy into a building, make sure you attend the association meetings, which usually occur once or a twice a year. They are not fun to attend because it is usually a bitch fest of homeowners griping and moaning about frivoulous stuff but when it comes time to vote on a issue that could affect your HOA fees you definitely want to be there, just to make sure the association doesn’t spend money on stuff that is not important. Associations are comprised of usually 3 or 4 board members, who are homeowners of the building. The board members usually don’t have any experience in managing a building and that is how some of these buildings get into trouble. Most of them have no clue that if the association fees are raised how much that can affect the properties sales in the future. If the HOA fees are high, the opportunities to sell makes it much more difficult. Plus, 90% of the foreclosures are usually in buildings that have high HOA fees. Once a foreclosure happens it has a huge negative impact on the building, not only does the values go down so does the amount of money that goes into the reserve fund. Banks don’t pay the monthly HOA fees, so if a condo is foreclosured on and sits on the market for months that means the association is losing out on collecting that units monthly fee, which can be huge negative impact for small buildings. – Nesa Kleinheksel