Own Luxury Homes®
What Is an HOA? The Due Diligence Checklist
HOA: nonprofit governing residential community. Median $135/mo; luxury $2K+. Due diligence: reserve fund (70%+ = healthy), no pending special assessments, <15% delinquent owners, no active litigation, review CC&Rs for rental/pet limits. Bare-walls master policy = higher HO-6 cost. Own Luxury Homes® 12-Point Agent Integrity Audit™ — specialists who review HOA financials first.
What Is an HOA? The Due Diligence Checklist Lender Pages Skip
Every page about HOAs explains what they are: a nonprofit organization that governs a community, collects fees, and enforces rules. The lender pages stop there because lenders only need to know the monthly fee for DTI calculations. A brokerage guide goes further: the HOA due diligence checklist that determines whether a community is a financial time bomb or a well-run asset. That checklist is what most buyers skip, and what most agents do not surface until after the purchase agreement is signed.
What HOA Fees Pay For
| Covered by Most HOAs | Not Covered (Your Responsibility) | ||||
|---|---|---|---|---|---|
| Common area maintenance (landscaping, pools, gyms, clubhouses) | Interior of your unit or home | ||||
| Exterior building maintenance (condos/townhouses) | Your own roof (single-family HOAs usually) | ||||
| Building insurance (master policy, condos) | Interior fixtures, appliances, personal property | ||||
| Professional management fees | Any HOA-violation fines you incur | ||||
| Reserve fund contributions | Special assessments when reserve fund is insufficient | ||||
| Shared utilities in some communities (water, trash, cable) | Individual utility connections | ||||
| What is specifically covered depends on your community’s governing documents. Always verify what the fee includes. | |||||
The Five-Question HOA Due Diligence Checklist
1. What Is the Reserve Fund Balance and Percent Funded?
The reserve fund is the savings account the HOA uses for major repairs: roof replacement, parking lot repaving, elevator overhaul, pool renovation. A reserve study (typically required annually) calculates how much should be saved versus how much actually is. Under 70% funded is a warning sign. Under 50% is a serious red flag. Ask for the most recent reserve study and the current reserve balance. If the fund is severely underfunded, a special assessment is likely in your future.
2. Are There Any Pending or Recently Imposed Special Assessments?
A special assessment is a one-time charge to all owners when the reserve fund cannot cover a major repair. They can range from $500 to $50,000+ per unit. Ask directly: "Has the board voted on or discussed any special assessments in the last 12 months?" Review the last 12 months of board meeting minutes. These must typically be disclosed but not all sellers proactively disclose pending assessments.
3. What Percentage of Owners Are Delinquent on Fees?
If more than 15–20% of unit owners are behind on fees, the HOA is operating with a budget shortfall. This strains reserves and raises the probability of either fee increases or special assessments. Fannie Mae and FHA both have guidelines about HOA delinquency rates; high delinquency can affect your ability to get a mortgage in the building.
4. Is the HOA a Party to Any Active Litigation?
Lawsuits against or by the HOA are a serious issue. A HOA defending a major lawsuit may face settlement costs that require special assessments. An HOA suing a contractor for construction defects may indicate structural problems with the building. Ask for a disclosure of any pending or threatened legal actions.
5. What Are the Rental, Pet, and Modification Restrictions?
CC&Rs vary widely. Some HOAs prohibit short-term rentals entirely (no Airbnb). Some cap the percentage of units that can be rented long-term (40% owner-occupied minimums). Pet restrictions (breed, size, number) may conflict with your household needs. Modification rules may prevent you from painting, adding solar panels, or replacing flooring. Read the CC&Rs before going under contract, not after.
HOA Fee Trends and What They Mean
The national median HOA fee has risen from $108/month in 2019 to $135/month in 2025. Fee increases above inflation signal either underfunded reserves being caught up or escalating maintenance costs. Large sudden fee increases (25%+ in one year) signal a financial problem that was previously hidden.
HOA Fees and Your Mortgage
HOA fees are included in your debt-to-income ratio calculation. On a $2,500/month mortgage at 28% of $100,000 income, adding a $400/month HOA fee increases your housing cost ratio to 33.6%. For buyers close to the DTI limit, HOA fees can affect qualification. Always get the exact monthly fee from the HOA documents, not from the listing, as listings sometimes show only base fees excluding special assessments.
“I make every buyer review the HOA financials before we go under contract. Not after — before. Because a $15,000 special assessment on a building with a 40% underfunded reserve and two pending lawsuits is not a surprise I want my client to discover after they’ve released all their contingencies. The HOA documents are available. Most buyers never look at them. The ones who do are never caught off guard.”
— Ryan Brown, Principal Broker & CEO, Own Luxury Homes®
What is an HOA and do I have to join?
A homeowners association is a nonprofit organization that governs a residential community, enforces rules (CC&Rs), and maintains shared areas. Membership is automatic when you purchase in an HOA community — it is not optional.
What are typical HOA fees?
The US median HOA fee is $135/month (2025, Realtor.com). Basic single-family subdivision HOAs may charge $50–$100/month for minimal maintenance. High-amenity condos or luxury buildings commonly charge $500–$2,000+/month.
What should I check before buying in an HOA community?
Five critical items: (1) Reserve fund balance and percent funded (under 70% = risk), (2) Pending or recent special assessments, (3) Owner delinquency rate on fees, (4) Active litigation involving the HOA, (5) Rental, pet, and modification restrictions in the CC&Rs.
Can an HOA take my home if I don’t pay dues?
In most states, yes. HOAs can place a lien on your property for unpaid dues and, depending on state law, may be able to foreclose on that lien. HOA dues are legally binding obligations, not optional contributions.
Own Luxury Homes® — audited specialists who review HOA financials before any offer is accepted. 12-Point Agent Integrity Audit™. Find your specialist now ›
"The introduction Own Luxury Homes® makes is to a specialist with documented closing history in your specific market — not the county, not the metro, the submarket you're actually selling or buying in. That's the standard we verify before your name goes anywhere."
— Ryan Brown, Principal Broker & CEO, Own Luxury Homes® (FL License BK3626873)