Higher HOA fees lead to lower property values?
The implication is that property values should be higher with HOA fees, yet since inception of HOAs in the 1970s, the tide has turned.
According to a recent survey, more buyers are now paying attention to HOA fees when considering a home purchase. HOA fees are shown on real estate websites and many potential buyers refuse to even look at a home with a HOA.
Assessments for services that homeowners do not want reduces property values because the marginal purchaser of property feels there is less benefit out of the services than their cost.
Many times when a buyer is making the decision on which to buy the one with the lowest HOA fee wins. This may leave the home with higher HOA fees to languish on the market, as the price is lowered many times to get it sold. Thus, the average home sales price in the area is lowered.
Frustrated sellers who cannot sell their home, due to higher than average HOA fees (especially if it is in an older area) may have no choice but to rent it out or let it be foreclosed on. We all know that property values plummet as “rent houses” and foreclosures become the norm.
Fees that are out of line with area neighborhoods, of the same age, are negatively capitalized into property values.
“…keep in mind that buyers are often influenced in their purchase decision by the size and fairness of HOA dues. Buyers use this number as one of their criteria for deciding on a place to live. If your dues seem unduly high compared to similar communities in your area, you make the homes harder to sell.” (See #5 on Lawyers.com)
BOARD MEMBERS MUST THINK OUTSIDE THE BOX In these economic times intelligent board members realize the importance of finding ways to lower assessments; the incentive being higher property values for all. Many HOAs are now wisely splitting the amenities (i.e pool and tennis memberships) from the regular HOA fee making it much more attractive to home buyers. This also gives the HOA the chance to sell many more memberships to outside members at a higher price.
Far-sighted board members have found that pricing the homeowners assessment slightly below the other area HOAs (even $3 less) gives the home with the lower priced HOA fee the upper hand as home buyers make their decision. This leads to faster sales and less price reductions, thus keeping property values higher in that subdivision.
How do your HOA fees compare to others in your area? If they are out of synch and you allow them to continue without speaking up, you are hurting yourself.