If you are shopping for a Silicon Valley condominium, townhouse, loft or other property that’s part of a home owners association or “HOA”, you may find yourself flabbergasted at some of the dues being charged in San Jose, Los Gatos, Saratoga, and all over Santa Clara Valley. A question I hear all the time is this: “Why are those HOA dues so high?”
HOA dues may cover a number of things, including:
- common areas, such as driveways, parking, pool, fitness center, rec room, elevators, landscaping, etc.
- insurance: regular homeowners or blanket insurance but perhaps also earthquake or flood insurance
- reserve funds for planned improvements (repainting, termite work, reroofing, repaving, pool replastering etc.)
- covering the defaults from units where the owners are in or about to be in foreclosure
What is the range of pricing for HOA dues in Santa Clara County and Silicon Valley?
Depending on the age of the property and the amenities, the dues may run between $150 and $250 on the low end (newer, no amenities) to close to a thousand on the high end (The Villages retirement community has extraordinarily high dues but they may include membership in the golf course too).
“Normal” is anywhere from $350 to $400 per month for a typical condo or townhome community.
Dues over $400 per month will deter investment buyers. Dues over $500 per month will deter almost everyone!
There are several things to beware of when buying a condo or townhouse. First, and perhaps most importantly, you’ll want to learn how many of the members are in default, because this may ultimately cost you with special assessments. A friend of mine, Laurie Manny, was a Realtor in Long Beach and wrote about this very eloquently (she passed away after a brief illness in August 2010, though her blog or website makes it look like she’s still selling real estate in Long Beach). Check out her timely post, which is still correct today: Long Beach Condo Buyers Beware! Long Beach Real Estate Condos and Lofts.
Second, you’ll want to check out the grounds and common area items to see if it looks like the community is being well maintained. Do the buildings have peeling paint, patches of grass without lawn, and overgrown shrubs? If so, those are “red flags”.
Finally, if you’re serious about purchasing a home in that community, read the minutes, newsletters and the rest of the Home Owner Association paperwork. Yes, it’s tiresome and probably 2-3″ thick but it’s important. (Imagine buying the home and not reading these but later discovering they don’t allow dogs – and you have a large lab! Bad all around. ) The HOA docs will give you insight on the budget and whether any special assessments may be needed down the road.