First-Time Buyers

HOA Explained: What You Need to Know Before Buying a Condo or Townhouse

July 17, 2025• 7 min read

A Home Owners Association — or HOA — is a governing body made up of property owners within a residential complex. It sets and enforces the rules, manages shared expenses, maintains the budget, and handles problems that affect the community as a whole.

If you're buying a condo or townhouse, you'll almost certainly be joining one. Here's what that actually means.

What HOA Fees Cover

HOA fees vary widely — anywhere from $15–$20 per month at the low end to several hundred or even over $1,000 per month in higher-end complexes. What you pay depends on what the community offers.

Fees typically cover amenities like a gym, pool, landscaping, snow removal, and shared area maintenance. They also often include the building's master insurance policy, exterior maintenance, common area utilities, and in some communities, heat and air conditioning for individual units.

The fees collected from all unit owners are pooled into reserve accounts, and expenses are paid from those reserves. In normal circumstances, reserves are maintained at a level that keeps fees stable year over year. However, when a major unexpected expense arises — a roof replacement, structural repairs, a failed system — the HOA board can levy a special assessment, spreading that cost among all owners over the following 3–5 years. The governing documents determine how much the board can charge and by what process.

What HOA Fees Don't Cover

HOA fees cover shared and exterior expenses. Everything inside your unit — appliances, interior finishes, plumbing, electrical — is your responsibility. Budget for it accordingly.

The Right Way to Evaluate an HOA

Before buying, your agent should contact the management company to learn as much as possible about the community: the board's track record, any pending assessments, known issues, the ratio of owner-occupants to renters, and any existing violations or disputes.

You should also visit the property yourself and look around. Are the buildings well-maintained? Is the landscaping tidy? Is the common area clean? A complex where the buildings just got freshly painted and the roofs were recently replaced is a sign that major expenses are behind you — not in front of you.

Don't rely solely on what you're told. In most cases, sellers and management companies will direct you to read the HOA documents after purchase. The more information you gather beforehand, the more confidence you'll have in your decision.

The Owner-to-Renter Ratio Matters

Pay attention to the balance between owner-occupants and renters in the complex.

Communities with more owners tend to feel more stable and neighborly — especially if you have children or plan to stay long-term. If you later want to sell or rent your unit, a high renter concentration can make both harder. Some associations require HOA approval before a unit can be rented, and renters may even need to pass the association's own background screening — sometimes more thorough than what was required of you when you bought.

Financial Traps to Avoid

Before closing, find out exactly how much is in the reserve fund and what the projected monthly expenses are. An underfunded reserve is a warning sign: it often signals a special assessment or a significant fee increase.

An overfunded reserve, on the other hand, is usually a good sign.

The Downside of HOA Fees

The money you pay in HOA fees is gone — it doesn't build equity, and it doesn't come back. From a mortgage qualification standpoint, HOA fees reduce the loan amount you're eligible for, because they count as a monthly obligation. A buyer who would qualify for $500,000 on a single-family home might only qualify for $400,000–$450,000 when buying a condo with a monthly fee. This is part of why condos and townhouses are typically priced below comparable single-family homes and also appreciate more slowly.

If you fail to pay your HOA fees, the association has real power. First, they'll place a lien on your property — meaning you can't sell until the balance is paid. If the debt continues unpaid, they can foreclose on the unit entirely.

Why Condos Still Make Sense for First-Time Buyers

Despite the constraints, condos and townhouses are often the right first purchase for several reasons.

The purchase price is lower than a comparable single-family home. Major shared expenses are distributed among all owners rather than falling entirely on you. You don't have to think about roofing, exterior repairs, snow removal, or pool maintenance — it's handled. And you get the equity-building benefits of ownership without the full scope of responsibilities of a standalone property.

For someone buying their first home who wants to focus on their finances and build a foundation, a condo is a reasonable and often smart starting point.