Why are some HOA dues so high in certain Silicon Valley townhouse or condo communities?
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. Today we’ll go over what may be happening in them to cause this problem.
HOA dues may cover a number of things, and if it’s a luxury complex with luxury amenities, those dues will be high:
- common areas, such as driveways, parking, pool, fitness center, rec room, elevators, landscaping, golf course membership, etc.
- insurance: regular homeowners or blanket insurance but perhaps also earthquake or flood insurance
- reserve account funds for planned improvements may have run too low and need bolstering (repainting, termite work, reroofing, repaving, pool plastering 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 $300 and $350 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). I’ve seen some in Menlo Park closer to $2,000 per month!
“Normal” is anywhere from $400 to $500 per month for a typical condo or townhome community.
Dues over $600 per month will deter investment buyers. Dues over $700 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. Right now that’s not a big problem, but between 2008 and 2010 and a little later, it was an issue.
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, the reserve account, budget, 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.
