Property Q&A in Las Vegas>Question Details

Noam, Both Buyer and Seller in New York, NY

How is HOA determined?

Asked by Noam, New York, NY Thu Apr 12, 2012

How does a property's HOA monthly fee determined? Are there general guide lines?
For example, is the HOA for a condo always more expensive than a SFH? gated neighborhood Vs. Not gated? etc.

Help the community by answering this question:


Great explanations below, but one thing that you mentioned that I did not see addressed...
the HOA is often times higher on condos than some single family homes, due to the fact that on condos the hazard insurance is included in the monthly dues. There is a master policy that covers the units in the community.
Hope that helps!
Mary Preheim
0 votes Thank Flag Link Mon Apr 16, 2012
Outstanding response Steve! You are a credit to our profession!

Joan Bennett, SRES
Keller Williams of SN
0 votes Thank Flag Link Thu Apr 12, 2012
Good Question Noam.

We sometimes think of HOAs like we do governmental entities. Total authority, answer to no one, completely arbitrary and capricious with rules and decisions, all powerful, and authoritarian. The reality is that like the government and its relationship to the citizenry, the HOA answers to the homeowners, only in a more direct and accountable way. The HOA is made up of owners in the neighborhood (some of which seem to have way too much time on their hands, for all of the complaints they file against fellow homeowners...but that is a separate topic for another time), who offer oversight to a property management company, who is hired by the members of the Association, which as a homeowner, you become a member of. It is not a profit center for anyone other than the management company who can be hired and fired almost at will, and who has strict laws that they are to adhere to. Although at times it doesn't feel like it, If they fail to do their job, you can give them the Donald Trump finger wag and say, "You're fired".

So, with regard to the HOA fees, the costs are directly related to the number of homes which affects the management fee, the amenities of the community, and the strictness with regard to scope as well as enforcement of the Covenants conditions, and restrictions (CCRs). Therefore a community with a pool, rec room, gates, possibly guards, lots of common area from outside approach landscaping to parks and playgrounds is going to have a higher HOA fee.

With regard to how the fees are determined, all of those costs are budgeted, along with an estimate for the cost of repair, replacement (based on actuarial tables for obsolescence and physical breakdown of the component in question), and a rainy day fund of sorts for catastrophic events like someone crashing through a gate or wall, wind blowing tiles off the roofs of condos. The State of Nevada mandates certain percentages of reserve based on those actuarial estimates.

Hopefully, this will answer all three of your questions.

Best of luck, and thanks for reading.

Steve Matthews
0 votes Thank Flag Link Thu Apr 12, 2012
The HOA constructs a budget of all of the expenses they need to pay. This is then divided amongst all of the properties in that Home Owners Association. The more amenities it pays for, the more the HOA fee is. Any maintenance of common areas (gates, pool, grass, security, etc.) is an expense. Therefore, the more amenities, the higher the fee. Condo's typically include water, trash, etc. in the HOA fee so they can run higher than a SFR, but you do not have a separate water bill or trash bill. When you buy a property with an HOA you will receive all of the Rules, Regulations and the budget for that HOA and can review it as part of your due diligence.
0 votes Thank Flag Link Thu Apr 12, 2012
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