Courtesy of FOX Business
By Brendon DeSimone
October 6, 2013
Whether you just bought a condo or have owned one for years, you’ve probably accepted the monthly homeowners association (HOA) dues at face value. But there are reasons why you shouldn’t.
|HOA dues are money out of your pocket. They can have a huge impact on your decision to buy, or not buy, a particular condo. For example, you might have fallen in love with a condo in a big complex but decided you just can’t afford the HOA dues. Also, high HOA dues can be a deterrent to future buyers, too, when you go to sell later.
An HOA is made up of residents of the condo building or complex — volunteers who are busy
with their jobs and families just like everyone else. It could be that no one on the HOA board has time to look for ways to reduce the monthly HOA dues.
But like any budget, there could be lots of ways to reduce expenses. Here’s how you can have a positive impact on your HOA dues.
1. Ask to see the HOA budget
As a condo owner, you have the right to review the HOA budget. Get a copy and check it over thoroughly. If you have questions, ask the HOA president or a board member.
2. Join the HOA board
If you’re on the board, you’ll have more opportunity and more clout to dig into the HOA’s finances — such as its contracts with the property management company, landscapers and so on.
3. Review the HOA’s contracts
An HOA often has agreements with a variety of vendors: the property management company, a landscaping/grounds maintenance company, and so on. In some cases, those agreements or contracts may have been negotiated years ago and might be renegotiated today in more favorable terms for the HOA.
For example, the recent buyer of a condo in an Atlanta complex felt like the HOA dues were too high. So he asked to join the board, and the members were happy to have him. He then performed an audit and discovered money was being wasted in several areas, such as on landscaping/gardening.
The HOA’s agreement with its gardener had been negotiated five years earlier. The gardener, by default, raised his fees every year. The Atlanta condo buyer, with the HOA’s approval, sought bids from a variety of other gardening companies and succeeded in finding a reputable gardener at a lower monthly cost.
4. Reduce landscaping costs
If finding another landscaping or gardening company isn’t an option, maybe the HOA can reduce the frequency of these services, without jeopardizing aesthetics. It’s worth asking.
5. Determine if HOA is paying too much in property management fees
In large condo developments, the property management company would likely be the one to lead the charge to reduce expenses. But they’re unlikely to advocate lowering their own fees. So you’ll need to work with your HOA directly in exploring ways to reduce the property management company’s fees.
6. Look at insurance premiums
Insurance is often a big HOA expense. Get quotes for insurance premiums and be prepared to renegotiate with your current carrier once your policy comes up for renewal.
7. Defer non-essential maintenance or other projects
Aside from HOA dues, condo owners are often hit with assessments to cover things such as roof repairs and hallway painting. Talk to the HOA board about deferring any non-essential HOA projects for a year or two.
8. Reduce reserves, if possible
Every HOA has reserve funds to cover unexpected expenses. Over time, those reserves, if not tapped, build up. Find out how much the HOA has in reserves. If it’s a healthy amount and no major improvement or repair projects are in the works, ask the HOA board to consider temporarily reducing the amount it puts into reserves every month.
Easier said than done?
Most HOAs will welcome your participation. But your belt-tightening suggestions may require a formal vote from HOA board members or the entire association before they’re enacted.
At any rate, understand that changes to the budget may not happen overnight. Finding the fat, renegotiating fees, and asking for additional bids can be extremely time consuming.
Still, it’s worth a try. Talk to your HOA president, treasurer or other board member. Tell them your goal is to simply explore possible ways to lower the association’s cost for everyone’s benefit. A little bit of legwork may save you — and your neighbors — some money every month.