What is a home owner assessments fee? Well, if you’ve been looking for a new home and you’re wondering how owning a home in a neighborhood that has a homeowners association (HOA), then this is a question you need to know the answer to and an answer you need to thoroughly understand before you make any decisions. Why? Because not understanding the ramifications of the home owner assessments fee could ultimately cause you to lose your home, if you’re not prepared to pay such a fee when it’s assessed. That statement sounds pretty serious, doesn’t it? The fact of the matter is that the home owner assessments fee is a subject not everyone who buys a home in a neighborhood with an HOA knows about, let alone understands how it works. Therefore, we are going to talk about what an HOA is, how they work, when a home owner assessments fee is necessary, and what happens if you don’t pay it.
What Is a HOA?
A homeowners association is actually a corporation. When you buy a home in a neighborhood that has an HOA, it’s usually a condition of the sale that you participate. An HOA is a governing body that oversees and manages the community as a whole. And the HOA will usually charge a monthly or annual fee for the upkeep of the community, such as the common areas, the buildings and any amenities that particular community might have.
How Does an HOA Work?
Every resident in a neighborhood that has an HOA will pay the required fees. Those fees are allocated to two different accounts, one for the current year’s operating budget and the other half will go into a reserves account, which is set aside for long-term repairs and other necessary replacements. If the HOA is well managed and the needs of the community are predicted accurately, then the monthly dues should easily cover the operating expenses and the long-term repairs and replacements. However, if the HOA doesn’t properly manage the budget or if it doesn’t accurately predict the current and future needs of the community, that could spell major trouble for the residents who live there. Additionally, any type of unforeseen event such as a fire or natural disaster could also quickly deplete the reserve funds of any given community. That’s where the home owner assessments fee, also known as a special assessment fee, comes in.
What Is a Home Owner Assessments Fee and When Is It Necessary?
A home owner assessments fee is the amount of a community expense that is above and beyond what the community has in reserve to cover such an expense. Once the money is gone, the current residents are required to pay for any balances that weren’t covered by the community’s insurance, which is quite often significant. The balance will be divided among the residents and that amount is usually due upon receipt. Other times, the community might allow six months or some other time frame for repayment.
A home owner assessments fee could be necessary for any number of reasons. For example, as we mentioned above, it could be due to a fire or natural disaster, the monthly operating expenses could end up being higher than anticipated or some of the current residents might not have paid their dues and so on.
What Happens If You Don’t Pay a Home Owner Assessments Fee?
Unfortunately, not paying your home owner assessments fee is an extremely serious matter. Pretty much all HOAs have the power to put a lien on your property if you don’t pay the monthly HOA fees or any of the home owner assessments fees you have been billed for. If you don’t pay for one or more of these fees, the HOA can put a lien on your house and not only that, but in some cases you will also then be required to pay any late charges, collection, and attorney’s fees, fines and even interest.
Once an HOA has put a lien on your property, it will show against the title, make it more difficult to sell, and it could also cause your home to be foreclosed on in order to satisfy that debt. Therefore, please make sure you thoroughly understand how an HOA works and that you have enough funds in reserve to cover any potential special assessments should they occur before you commit to any community that has an HOA.
What Do I Need To Know About an HOA Before I Commit?
If you’ve decided to buy a house in a community that has an HOA, then you need to be diligent when it comes to thoroughly understanding the rules, the dues and how that community is being managed. There are several ways you can research any given community to make sure you understand the state of that community and how well it’s being managed. This will significantly reduce the chances of you buying into a community that could potentially spell trouble.
You will first need to get a copy of the communities HOA rules and regulations and make sure the information they have provided you is current. And pay particular attention to the rules that define how they deal with fines and foreclosure for non-payment of any of their fees. Then you should make some time to participate in a few of their meetings to see how things are handled and how well everyone gets along. Drive around and talk with some of the current residents to find out if they are happy with the way the community is managed, if there have been any recent or previous problems and how many special assessments have been given within the last five years and why.
Once you have read the rules and regulations, attended a few meetings and talked with the current residents, if you find there are any particular issues you don’t agree with, if the rules are too restrictive or if the community is not being managed properly, you might want to consider buying in another neighborhood instead. It’s just not worth buying into a neighborhood that could ultimately end up costing you money or one that could potentially cause you to lose your home. Additionally, you don’t want to feel as if you can’t live like you want and do what you want (for the most part) with your home and property. There are plenty of well run HOAs out there, so don’t hesitate to make the right decision and reject a community that simply doesn’t pass the muster.
2 Point Highlight
1. Not understanding the ramifications of the home owner assessments fee could ultimately cause you to lose your home, if you’re not prepared to pay such a fee when it’s assessed.
2. We are going to talk about what an HOA is, how they work, when a home owner assessments fee is necessary and what happens if you don’t pay it.
