Do you want to know how to lower HOA fees and make residents happy? When HOA fees are too high, it’s perhaps time to take steps to reduce HOA fees. However, when reducing fees, it’s important to consider what the HOA is willing to give up. Cutting costs is the obvious first choice, but it shouldn’t reach the point where the association will suffer for it.
What are HOA Fees?
Homeowners associations collect fees, otherwise known as regular dues, to fund the expenses of the community. These expenses typically include maintenance costs, landscaping costs, management fees, insurance premiums, security, and the like. Homeowners have an obligation to pay these fees to the association — an agreement they enter upon joining the HOA.
How to Lower HOA Fees? Know Where to Trim The Budget
Homeowners associations exist because of and for the residents. Because of this, one of the main concerns of an HOA is how to lower HOA fees. Most associations try to do this by reducing expenses as much as they can, without skimping on the quality of service from vendors. These cost savings can be passed down to the members in the form of lower HOA dues. With prices going up each year, keeping expenses under control can be a massive challenge.
What Happens When HOA Fees Are Too High
An association that can work with a huge budget can only be good for the community, right? Not when this budget is paid for by overly high HOA fees. When homeowners pay their HOA dues, that’s money out of their pocket. Since it’s a recurring payment, that’s a huge factor for prospective homebuyers.
A high HOA fee can negatively affect the rate which people buy properties or condos in a managed community. A prospective owner may have fallen in love with your immaculately maintained condo. But when the HOA dues are way out of reach, they could decide to settle down elsewhere.
Existing homeowners or condo residents are even more impacted by high HOA fees. That’s money out of their annual budget that they have no direct say over its use. And when they do decide to move out, high HOA fees can again get in the way. When HOA dues are way too steep, future buyers are deterred from buying a home in that community. That’s not a good situation to be in as someone selling.
How To Lower HOA Fees
A homeowners’ association may be a non-profit organization for the most part. But just like any other organization, they should look into ways to reduce expenses as well. Slimming down the HOA expenses is a great way to trim the budget without abandoning important projects. When you have a smaller budget, it can lead to lower HOA fees next year.
If you’re able to trim down the expenses well enough, it may even result in a healthier reserve fund, too. Healthy reserves also mean less chance of a special assessment later on. That’s another thing that board members will be happy about.
Does HOA ever go down? Here’s how to reduce HOA fees without sacrificing the well-being of your association.
1. Review Your Vendor Contracts
A HOA will have contracts with service providers, and they need them to maintain the community. That does not mean you have to stick to the same agreement, not if it’s costing the HOA a lot of money. Take the time to review those contracts, especially if they allow for annual rate hikes. Sometimes, you’ll just need to renegotiate to get more favorable rates.
Many HOAs can get into a rut when it comes to their vendors and insurance companies. Although the task can seem time-consuming and tedious, it is important to contact your vendors each year to make sure you are getting the best prices. This can be done with insurance as well. Negotiations can be made on a yearly basis to lower your premium or keep it the same.
Even if negotiations fail, you still have a recourse. You can bid out to other vendors, and secure a lower monthly cost that way.
2. Outsource Projects
Many HOAs spend a large portion of their yearly budget in maintaining full-time employees that complete tasks that could be done at a lower cost with vendors. Paying for extra insurance and salaries can cost more than the position is worth. Many of these jobs can be outsourced to a local vendor that can complete the task for a fraction of the cost of employing an inside person to do the job.
3. Know When to Invest More Money
Saving money sometimes means spending money. This is especially true when it comes to construction and maintenance. It is important, when embarking on a large repair or new addition, to ensure the quality of the building by paying a little extra. This extra money may put a bigger hole in your pocket in the short term, but will save both time and money by avoiding tedious unnecessary repairs down the road.
4. Stay On Top of Maintenance
It is important to be vigilant with regards to the maintenance of the property. Small leaks are much easier to fix than big leaks, and a small amount of mold is cheaper to get rid of than rotting infrastructure. Regular inspections should be scheduled to be sure that everything on the property is in good condition, and repairs should be dealt with in a timely fashion.
5. Maintain Detailed and Diligent Budgeting
A lot of money can be saved on a yearly basis by simply keeping meticulous records of all finances. If a budget is not under control, HOAs can find themselves wondering where all of the money went, and a lot of income can be wasted. Keeping detailed records and staying on top of your budget on a monthly and yearly basis will ensure that your HOA knows exactly where each dollar goes throughout the year. This will make it easier to find ways of cutting back and using funds more wisely.
6. Conduct a Budget Audit
Performing an audit of your budget can help significantly lower HOA fees. You should start by reviewing the HOA’s budget to identify areas where you’re overspending. Maybe you don’t need a start-of-the-art sprinkler system after all or maybe you’re paying too much in cleaning costs. This will allow you to point out any opportunities for cost-cutting and help you plan future expenses as well.
7. Review Insurance Policies
Assessing your insurance policies can result in large savings for your community. Check your coverage to see if you need all the riders and extras. Maybe you can save a few thousand on policies you don’t need. Of course, make sure you still have the necessary protections so you’re not left unshielded in the event of an emergency.
8. Explore Self-Management Options
If you have a professional HOA management company on your payroll, you might want to explore self-management instead. This will save you money in management fees. Keep in mind, though, that management companies offer a lot of help to HOA boards. As such, the benefits you receive might outweigh the costs.
9. Postpone Non-Essential Projects
Prioritizing your expenses is a great way to lower HOA fees. If you have non-urgent projects, consider postponing or eliminating them altogether. This will free up more room in your budget and keep residents happy. Once you find your footing again and have money to spare, then you can revisit those projects.
10. Reduce Reserve Contributions
If you already have a healthy or fully funded reserve account, you might want to reduce contributions. This will lower fees without trading off any quality services or essential expenses. Of course, you shouldn’t go for this option if you have an unhealthy reserve fund. Your HOA’s reserves play a critical role in the long-term financial stability of your association. Therefore, cutting back on it when it’s underfunded isn’t a smart move.
11. Reduce Energy Costs
You can reduce energy costs and cut down your HOA fees through a number of means. Some good examples include replacing traditional bulbs with LEDs, setting ACs to automatically turn off, installing scheduled sprinklers, and more. While these things may not seem like much, they can add up and save your HOA a lot of money in the long run.
12. Minimize Delinquencies
Sometimes, an HOA will have to increase HOA fees for everyone when a lot of homeowners are delinquent. This is because the HOA needs to offset the deficit with more contributions. To avoid raising dues and keep costs low for owners, it’s imperative to focus on reducing delinquencies.
Your HOA board should use enforcement and collection methods afforded to you by state laws and your governing documents. This will help you collect unpaid dues and keep the budget in good condition. It also makes it fair for all homeowners. After all, paying homeowners would not want to pay extra just to cover for non-paying homeowners.
13. Take Advantage of Technology
Technology can really come in handy, especially if you’re a self-managed HOA. Consider investing in software and programs that allow you to streamline processes and cut back on personnel costs. A single technological tool can take care of all the scheduling, notices, and invoicing that would usually take an entire team of people to accomplish.
Frequently Asked Questions
Here are the answers to commonly asked questions regarding lowering HOA fees.
Do HOA fees ever go down?
Yes, HOA fees can go down. However, it will depend on a few factors, including the homeowners association itself. If an HOA cuts down on expenses, there’s a good chance fees will go down. When the economy is in good shape, the same can happen.
Can you lower HOA fees?
Board members can lower HOA fees by reviewing your vendor contracts, outsourcing projects, knowing when to invest more money, staying on top of maintenance, maintaining detailed and diligent budgeting, conducting a budget audit, reviewing insurance policies, exploring self-management options, postponing non-essential projects, reducing reserve contributions, reducing energy costs, minimizing delinquencies, and taking advantage of technology.
Can you get HOA fees lowered?
Homeowners generally don’t have total control over lowering HOA fees. The HOA board is tasked with the duty to prepare an annual budget and determine HOA fees based on the needs of the association. However, homeowners can provide input by attending meetings and raising their concerns to the board.
Can an HOA fine you for not paying fees?
Depending on state laws and the governing documents, an HOA can generally impose penalties when a homeowner fails to pay their fees. These penalties can range from late charges or interest and small claims suits to liens and foreclosures.
How can I get out of paying HOA fees?
The short answer is you can’t. When you buy a home in an HOA, you automatically become a member of that community. Upon closing, you agree to abide by the HOA’s rules and accept your obligations as a member. This includes paying regular dues to the HOA.
Why do HOA fees go up?
There are a number of things that can cause HOA fees to go up. The board may have made a mistake in planning the budget, coming up short on allocated funds for expenses. There may be a significant number of homeowners who have defaulted on their fees, forcing other owners to make up for the deficit.
More often than not, though, HOA fees go up because expenses go up. Economic factors such as inflation, the rising cost of goods and materials, rising labor costs, and rising insurance premiums can all have an effect on HOA fees. Vendors may be charging more or the needs of the HOA may be expanding.
How To Lower HOA Fees? Keep An Eye On Your Finances
The biggest asset a board can have when trying to cut costs is a strong commitment to pay close attention year by year to the HOAs finances and yearly budget. Associations can stretch their budget far with the right financial management processes. If your association needs more ideas on how to lower HOA fees, we’re here to help. Give us a call today and find out how you can save your residents from steep HOA dues.
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