If you're considering joining a homeowners association (HOA), you may wonder about the costs associated with doing so. One of the potential expenses you may encounter is an initiation fee. This article will demystify HOAs and their initiation fees and help you understand if you'll need to pay one when joining an HOA community.
What is an HOA?
A homeowners association (HOA) is an organization that manages a residential community. HOAs are typically responsible for the upkeep of shared spaces within the community, such as parks, pools, and playgrounds. They may also enforce certain rules and regulations to maintain the community's aesthetic appeal and property values.
What is an HOA Initiation Fee?
Depending on the state and community, an HOA initiation fee goes by many names. Sometimes called a transfer fee, set-up fee, entry fee, membership fee, etc.
These are one-time charges assessed to new homeowners when they move into an HOA-managed community. Initiation fees are generally used to cover the costs of setting up the HOA and can range from a few hundred dollars to several thousand dollars depending on the community.
How Does the Initiation Fee Differ From Other Fees?
It's important to understand that an initiation fee is different from other types of fees that HOAs may charge. Some may be recurring fees, while others are one-time assessments.
For example, an HOA might charge a monthly fee to cover the costs of maintaining common areas, such as landscaping and snow removal. This fee would be in addition to any initiation fee you may be required to pay.
Some standard HOA fees you will likely encounter are:
- Monthly fees: These are typically used to cover the costs of maintaining common areas, such as landscaping and snow removal.
- Annual fees: Some HOAs charge annual and monthly fees. This may be used to cover the costs of items such as insurance or repairs.
- Special assessments: Special assessments are one-time charges that may be assessed to all homeowners in an HOA community to cover the costs of unexpected or large expenses, such as repairs to common areas.
Do I Have to Pay an HOA Initiation Fee?
Whether or not you'll be required to pay an HOA initiation fee depends on the community you move into. Some HOAs charge initiation fees to all new homeowners, while others only charge them to those who purchase homes within a certain time frame (e.g., within the first year of the development's opening).
Still, other HOAs may not charge initiation fees at all. If you need clarification on whether or not your HOA charges an initiation fee, your title company, real estate agent, or the HOA itself should be able to tell you.
When Do I Have to Pay an HOA Initiation Fee?
If your community does charge an initiation fee, you'll generally be required to pay it when you purchase your home. In some cases, the fee may be due at closing; in others, it may be due within a certain timeframe after closing (e.g., 30, 60, or 90 days).
How Much is an HOA Initiation Fee?
There is no set amount for HOA initiation fees, as they can vary widely from one community to the next. In general, however, initiation fees for new homeowners tend to be a few hundred dollars to a few thousand dollars.
What if I Can't Afford the HOA Initiation Fee?
It is important to remember that these fees will be included in your closing fees. You will be aware of them ahead of time, and likely have been given an estimate of your closing fees by your title agent.
It's also worth noting that, in some cases, the seller of the home you're purchasing may be willing to pay the HOA initiation fee at closing. If you're interested in requesting this, be sure to discuss it with your real estate agent.
Bottom Line
An HOA initiation fee is a one-time charge that is assessed to new homeowners when they move into some communities. Whether or not you'll be required to pay an initiation fee, and how much it will be, depends on the community you move into.
If you're considering moving into an HOA-managed community, ask about initiation fees so you can budget accordingly.
Camille Moore
Jennifer Harvey
Kara Cermak, CMCA®, AMS®, PCAM®
