Communities with HOA fees (2015, lawyer, houses)

[elliedeee]

Is it true that when a community is in the first phase of building that it's the builder that decides what the HOA fee would be?

and I also read that once the amenities are completed that HOA fees will go up and then at some point an HOA of homeowners is formed.

But my question is.. Once all the amenities are in and the community is established does the HOA fee ever go up? or does it ever go down in price as time goes by?

My main concern is that I'll buy a brand new build in a new community and then find out later on that the HOA fees are too expensive.

Thanks for any input.

[rdlr]

Yes, builders decide, initially, what the HOA fee will be.

I've seen most of them go up. Maybe, not until the community is built out. Once the builder is gone, usually, the homeowners in the community take over, have meetings, elect officers, and manage the budget. Sometimes, after the community is built out, the builders specify their choice to take over the HOA, a separate entity. Costs to plow snow, mow grass, and upkeep the common areas all go up. I've never seen the HOA fee go down. A mandatory HOA is recorded with the county, and if you don't pay your dues, they can attach a lien on your property.

Voluntary HOA fees work differently, and we have a lot of those in Kent County. With a voluntary HOA, if you don't pay the HOA fee, the HOA can't put a lien on your property. The voluntary HOA is looser.

[elliedeee]

Originally Posted by rdlr

Yes, builders decide, initially, what the HOA fee will be.

I've seen most of them go up. Maybe, not until the community is built out. Once the builder is gone, usually, the homeowners in the community take over, have meetings, elect officers, and manage the budget. Costs to plow snow, mow grass, and upkeep the common areas all go up. I've never seen the HOA fee go down.

Do you know if they ever raise the HOA fee periodically?

I'm trying to decide between a new build or a resale in an already established community.

[rdlr]

It's up to them.

[EnjoyEveryDay]

Originally Posted by elliedeee

Do you know if they ever raise the HOA fee periodically?

HOA fees generally cover two things; (1) the Operating Expenses of the community (e.g., paying the light bills, maintaining the landscaping, paying the pool management company), and (2) building a Capital Reserve to replace things at the end of their useful life (e.g., a new roof and siding on the club house, relaminating the pool after a number of years, replacing the community roads if they are private). Operating Expenses recur regularly, and the community needs to pay for them from day 1; Capital Expenses are generally your "big ticket" items that occur after long intervals.

As with any budget, expenditures and therefore the HOA fees theoretically could go up or down, but as with most of our budgets, they only go up. That is usually because the cost of living drives up the cost of the Operating Expenses, because electric bills and landscaping service costs generally go up, not down. Funds for the larger Capital Expenses can be built up over time, but predicting future costs are never an exact science. For example, your community may assume that your clubhouse roof will need to be replaced for $100,000 in 20 years, and the vinyl siding will need to be replaced for $35,000 in 15 years. So part of the HOA fees are set aside every year to take care of that...but the roof may last only 14 years (or 26)! The goal is to have enough built up to cover all (or most) of predicted replacement costs by the time they occur.

The developer does indeed set the initial HOA fees, supposedly taking all these things into account. But remember, they have an incentive to keep the fees low while they are selling the properties because a lower HOA fee naturally is more appealing to prospective buyers. So I am sure that some tend to be a bit on the "optimistic" side when estimating future costs...which means when the development transitions to the homeowners and they do an initial Reserve Study, they may find that they need to raise assessments to cover future expenses. Not saying this will always happen, but I am sure it does sometimes.

In communities still under developer HOA control, I'd recommend asking to see the Operating and Capital Reserve funding for the community, and determine if the current HOA fees (multiplied by the number of final units) make sense. If it is an existing community in which the HOA is controlled by the homeowners, ask to talk to the HOA President about the finances. I'm sure he/she would be happy to do so.

Naturally, the fewer amenities a community has, the lower the total costs. And the more residents it has, the more those costs are spread over a large number of people. As with everything in life, we have to pay to maintain whatever lifestyle we choose. If yours includes tennis courts, clubhouses, indoor/outdoor pools, "free" lawn irrigation and mowing, fitness centers, outdoor community barbecue areas, playgrounds, kayak launches, and large open spaces, you have a nice lifestyle ... and you'll pay for it.

Hope that helps! Best of luck in your search.

[nuts2uiam]

I currently am in an HOA whose fees did in fact go down. RDLR pretty well explained it perfectly. It is all dependent upon how good your board is, and by good I mean diligent in being cost effective yet willing to make difficult decisions despite what some homeowners think. We moved in 2013, in 2014 they reduced the fees for 2015 and 2016. It was recommended that the fees be increased in the 4th quarter for the new year and we are now $6.40 over where we were when we first moved in.

We had an excellent reserve fund and now as the community ages the board has identified areas where we may need to spend down the reserve, so we just had an increase this month.

I have written extensively in the past about the advantages of new builds vs. resales. Timing is everything, when we were looking in 2011, there was a booming community and builder whose community we were interested in and planned to revisit once we were closer to the seriously buying timeframe. Two years passed and that builder did not sell as many homes as he thought and he pulled out of the community. The community sat builder less for over 15 months before another builder came in. Additionally, if a community is planned and doesn't sell out the issue becomes how to maintain the amenities that were supposed to be shared by X (the proposed number of homes). There is a degree of builder liability but that won't help much at a certain point. There are many plusses to being a new buyer, but you need to be careful.

[NJBoy3]

If considering buying into a HOA community you also want to know what all of the responsibilities of the HOA are.

If considering buying into a HOA community you also want to know what all of the responsibilities of the HOA are. Read all HOA documents before purchasing. If you have questions ask your realtor before purchasing. Ask the HOA officers before purchasing. Ask a respected real-estate lawyer before purchasing. Etc, etc...

The HOA may also own the roads/streets and storm sewers, etc.. And I am sure they may own other things I have never thought of. Or have current or potential liabilities I have never thought of. Some of these costs long term can be flat out enormous. Especially if the HOA board members have little or no property management experience.

[nuts2uiam]

Originally Posted by NJBoy3

If considering buying into a HOA community you also want to know what all of the responsibilities of the HOA are.

If considering buying into a HOA community you also want to know what all of the responsibilities of the HOA are. Read all HOA documents before purchasing. If you have questions ask your realtor before purchasing. Ask the HOA officers before purchasing. Ask a respected real-estate lawyer before purchasing. Etc, etc...

The HOA may also own the roads/streets and storm sewers, etc.. And I am sure they may own other things I have never thought of. Or have current or potential liabilities I have never thought of. Some of these costs long term can be flat out enormous. Especially if the HOA board members have little or no property management experience.

We have an excellent board. The members have no property management experience at all but of the seven one is an engineer, a CPA/financial planner, an architect, and attorney, retired school principal, retired maintenance director for a college and an IT person. The interesting part is that the one in the group that most might go, Huh at, is so good at facilitating discussions and swaying things from heated to calm that they are an asset we could not live without. A good board requires dedicated people, who are willing to give their time.

Many HOA's cover different things, so you need to read and ask and NJBoy said. Also ask if there have been special assessments, levied and when and ask to see the balance in the operating and reserve funds.

[IC_deLight]

Your decision about resale or new build has zero impact on the HOA assessments.
The developer will stay in control until such time as it wants to or is forced to exit.
The developer can unilaterally amend the restrictive covenants and impose more restrictions.
The developer will also control the HOA and can impose higher assessments through either control of the HOA or control of the restrictive covenants and other subdivision documents. You can be hit with special assessments separate and apart from the regular assessments. In all likelihood, the developer has provided that the HOA can borrow money. Your house is ultimately security for payment of the debt taken on by the HOA. Although the law varies among states there is likely no obligation for the developer to "finish" the amenities, whatever you think they are. There is also no requirement that the HOA actually spend the money it takes in on maintenance or operational costs. You simply have a blind obligation to pay money to the HOA. If you have other options consider exercising them. In many places across the country your only choice is which HOA.

[rdlr]

For Kent County, Delaware - Here's a link to access Homeowners Associations, in addition to some interesting information. Homeowners' Association

I'm sure there must be a link for Sussex County, similar to this.