As a first-time buyer, ensuring you know every cost involved is essential to the long-term financial health of being a homeowner. In 2025, about 373,000 Homeowner's Associations (HOAs) exist across the United States, a 373% increase since 1970.[1] This places roughly a third of all homeowners under control of an HOA, which increases further to 65% in Florida[2] and California.[3]

Unfortunately, the costs that come with living under an HOA are typically an after-thought. The cost is monthly, many states don't restrict how the money is spent or require strict financial oversight, and the prices can fluctuate haphazardly during emergencies or suddenly without prior notice. As a first-time homebuyer, I've been affected by these hidden HOA costs and would like to shine some light on what to look for prior, rather than after, purchasing a home.

1. Special Assessments

Before diving into special assessments, it's important to define the word "assessment". An "assessment" refers to the monthly payment every unit of the community pays into the association's funds. These help pay for trash, landscaping, utilities, and other recurring expenses that are known to exist. A special assessment differs from this normal assessment because it's an additional financial obligation on top of the existing, monthly payment.

For example, if heavy rains appear and a building roof needs to be replaced ($500,000), the HOA may not have all that money on-hand, so they will vote to impose additional fees on every homeowner to make up the financial difference. This allows the roof to be repaired as part of an emergency rather than saving up over many years and risking further damage to the building.

These special assessments can come in the form of an additional monthly payment (spread over an extended period of time, such as a year, to ease the financial burden) or as a one-time lump-sum when a part of the community or building must be fixed immediately (e.g. lobby door).

Buyers should pay attention to a few things:

• Buildings older than 20 years with HOA fees lower than the neighborhood median. While attractive, this may mean the fees are artificially low, indicating many parts of the community have been neglected over decades.
• Low reserve fund balances. In California, all HOAs are required to complete a reserve study every 3 years. This informs homeowners how much the HOA can respond to emergencies without special assessments.
• Visible deferred maintenance during a property tour. This indicates the HOA has neglected the building.
• Lawsuits against the HOA. This typically implies abuse of power, financial negligence, or failure to serve the community.

As such, prospective homebuyers should 1) investigate where the HOA fees lie within the neighborhood (using our HOA Lookup Tool), 2) request a copy of the most-recent reserve study (aim for at least 30% funding minimum), 3) determine if there are any ongoing lawsuits (immediate red flag), 4) ask if there are any planned, upcoming special assessments.

If the HOA refuses to hand over any documents, seriously consider walking away. This could indicate the HOA is unorganized or may try to hide information.

2. Transfer Fees

In this scenario, transfer fees refer to two different things: 1) a fine upon sale of the property, which goes to the HOA's funds, or 2) a move-in and move-out fee for homeowners upon sale of a property.

It is typical for an HOA to charge some form of a transfer fee, whether that's through the property management company (for the additional paperwork), or via the HOA itself. For example, one of my colleagues lives in an HOA with a $500 move-in and $500 move-out fee. These are unknown when people buy a home in an HOA, but pop up out of nowhere. The fee itself is not predatory, as they go toward fixing damage on walls, purchase of new key fobs, document preparation fees, and more.

Prospective homebuyers should ask the HOA whether a transfer, or move-in fee, exists.

3. Underfunded Reserve Fund

Unfortunately, I know many people that have fallen victim to this trap, and it's probably one of the most common occurrences on this list. HOA fees that are suspiciously low ($150/month with numerous amenities) typically hide underlying costs.

One time, I toured a condominium with below-average HOA fees for the neighborhood, which wasn't a red flag in itself, but after a bit of digging, I realized the building was a bit old, and a few parts of the common area were unkempt. After asking the homeowners about special assessments, they said they had to pay for an emergency $50,000 special assessment due to water leaks in the units, requiring every homeowner to pay $10,000 out of their pocket in the span of a month. In another scenario, somebody purchased their unit, and the day they closed on their unit, the HOA increased their dues by 30%. Both scenarios could have been avoided if the HOA simply followed recommendations from the reserve study and increased the HOA fees accordingly to prepare for these emergencies. Across the country, an estimated 70% of HOAs are underfunded.[4]

Prospective homebuyers should request a copy of the most recent reserve study and ensure the HOA is at least 30% funded. It is also worth asking if the HOA has a financial roadmap to ensure they are in a healthy standing.

4. Undisclosed Fines

Many homeowners do not realize how much power an HOA has in regard to imposing fines on individual units. For example, an HOA can impose fines on the following:

• Pet deposits: $200-$500 per pet and is usually a one-time, non-refundable deposit
• Monthly pet fees: $25-$75 per pet as a recurring fine to pay for common area repair, such as carpets
• Parking: an additional $50-$200/month
• Guest parking permits: $25-$100 as an additional one-time fee
• Storage units: $50-$150/month
• EV charging stations: $50-$150/month

On top of these fines, it is important to understand the cost of violations. At least in California, the maximum penalty per violation is $100, even for repeat offenses, as per the Davis-Sterling Act. Not all states hold such restrictions, but it is vital to understanding rules of the building and their underlying cost.

Prospective homebuyers should 1) request a list of building rules and their fine structure, 2) request the number of delinquencies in the building to understand how strong the HOA enforces these violations, and 3) ask for any additional fines outside of violations that could be imposed in the near future.

5. Additional Utility Costs

In the 1970s and 1980s, many buildings worked on a centralized plumbing system. Nowadays, homeowners and buildings have their own sewer line. If the home has its own sewer line, expect to pay water and sewer separately from HOA fees. However, if the building has a centralized plumbing system, understand that water and sewer may be included as part of the HOA fees, saving homeowners around $50-$150/month.

Prospective homebuyers should ask which utilities are included in the HOA dues and which must be paid out of pocket.

6. Lease Restrictions and Rental Fees

To avoid a community converting from ownership to a series of neglected investment properties, many HOAs place caps on how many homes can be rented and the fees associated with these rentals.

For example, an HOA might impose rental application fees ($100-$300/tenant), corresponding move-in/move-out fees (mentioned above), minimum lease terms (short-term vs long-term rentals), and even rental caps (the HOA might not want more than 50% of the units to be rented out). Many HOAs have explored this route to combat heavy turnover from AirBnBs.

Prospective homebuyers should request a copy of the HOA's CC&Rs to validate how many units can be rented at any given moment in time, as well as any associated restrictions.

Your Pre-Purchase HOA Checklist

Homebuyers not only are unaware of which documents to request, but are often afraid of asking for those documents. Exercise a realtor to request these documents to ensure unexpected costs do not arise when purchasing a home:

1. CC&Rs (Covenants, Conditions, & Restrictions): The HOA's rules and regulations
2. Meeting Minutes (last 12-24 months): Reveals previous special assessments, damaged areas of the building, and disputes
3. Reserve Study: Illustrates how well the HOA can respond to emergencies
4. List of pending/recent special assessments: Highlights hidden costs of living in the community
5. Delinquency rate: Percentage of homeowners behind on dues. If many homeowners are delinquent, this could indicate negligence, upcoming lawsuits, or underfunding

As a tip, many states require sellers to provide these documents within 5-10 days. If the documents aren't provided, buyers are free to back out of the contract.

Takeaways

I've been in this position before, and I've seen colleagues impacted by nearly all of the hidden costs discussed throughout this article. While it is easy to jump on a home with a low HOA fee, those dues could double after considering these hidden costs, and result in additional financial strain as well as mental strain dealing with the constant headaches of reacting to emergencies rather than being proactive.

Homebuyers must request all HOA documents, budget for a 10-20% increase in the future (in the event of unforeseen circumstances), and compare HOA fees across the neighborhood using our free lookup tool. This will buy peace of mind.