81°Clear

Reston Real Estate: Are Condo Fees a Total Rip-Off?

by Eve Thompson — May 9, 2017 at 1:30 pm 20 Comments

While helping a couple narrow down the focus of their Reston home search recently, the husband made a statement that he would never own a condominium because the fees were in his opinion “a total rip-off.” As a condo dweller active on my condo’s Board of Directors for years, I’ve heard this sentiment on condo fees many times before.

When you own a townhouse or a single-family home, you understand that sooner or later you will have replace your water heater, roof, windows, siding or appliances. Hopefully, you have a financial plan that allows you to save for the replacement of things as they wear out. It is a “pay me now or pay me later” situation, but you are going to pay. When you defer home maintenance, you won’t get top dollar for your property when you go to sell. Most people would prefer to save a little bit each month in anticipation of home repairs rather than face a large unplanned expense. Condo management requires this forced savings.

Every year condominiums in Virginia are required to confirm that they are reserving enough money to repair, replace and maintain the property. If a condo has not adequately reserved (saved) the money needed to make repairs and has a sudden failure in a common element, it must make a special assessment in order to make whatever repairs are needed to maintain the property.

So, a rip-off? Not if your property is properly maintained.

What are my condo fees paying for anyway?

In a condominium, the fees fund two categories: operating expense and reserve funds. The operating expenses are the monthly costs required for trash, grounds maintenance and snow removal, administration and condo management.

The reserve funds represent the anticipated cost of replacing and repairing common elements of the property like roofs, sidewalks, and elevators. The amount of money needed in the reserve fund is determined by a study which by law, is undertaken at least every 5 years for the purpose of determining how much money is needed to repair, replace and restore the capital components of the property. Every year condominiums in Virginia are required to review their study results and confirm that they are reserving enough money to repair, replace and maintain the property.

Before you choose this form of own ownership consider:

  • Condo life involves a lot of governance
  • Well-run condos always include an active membership

Some leadership decisions might be unpopular, but they ultimately protect the membership from unplanned assessments by insuring that reserves are adequate to meet the expected and unexpected repairs.

When looking at condominium ownership, you will have a chance to review a Resale Package that will include the condominium bylaws, rules and regulations, current financial reports, and audited financial reports. Review these carefully looking for potential problems. Questions to ask should include:

  • What do the audited financial statements say about the reserve funds? Are they adequate?
  • What major projects/repairs are anticipated for the upcoming year?
  • What projects were completed in the prior year?

The other thing to consider is what type of condo environment you are looking at. Is there a doorman, a concierge? The cost of people always goes up, so if you are looking at a condo with these types of amenities you should expect a slow steady rise in condo fees.

Are my condo fees too low?

If you live in a condo where the fees haven’t gone up for years, or if you are looking to buy a condo where they are advertising a low condo fee as a “feature,” take a closer look. The costs of goods and services have not gone down. Try to determine if something isn’t happening that should be happening.

When evaluating the financial position of a condominium there are some cost-of-ownership items that don’t apply in single-family home ownership. One glaring item is the cost of delinquencies — due to owners that are behind in paying their condo fees. While this isn’t the issue it was during the post-housing crash, a well-managed condo will actually provide an allowance for some percentage of delinquent accounts to insure that they have adequate operating cushion. When looking at a condominium’s resale package, be sure to look at the dollar amount of delinquent accounts and ask what that number represents as a percentage of the whole.

So what’s the upside of condo ownership?

In a well-run, well-managed condominium where the Board of Directors takes its responsibility seriously, property values are protected through active maintenance and enhancement of the property. You not only get to enjoy a well maintained property while you live there, you can feel confident about the condition of your property when you go to sell.

Save

Save

  • Hugh Aichoaye

    I almost bought a nice condo at the Heron House and then my realtor did a quick calculation for me: combine mortgage, condo fees and RA fees and I could easily afford myself a single family home in a posh neighborhood. Her argument was convincing.

    • Eve Thompson

      Right– except for one thing. You still have to save for the repair and replacement of things like, roof, hvac, waterheater, siding, etc.,those costs are still there in addition to the mortgage, taxes, RA dues etc.

      That’s the real point of the piece. Condo fees tend to represent the real cost of ownership and many buyers don’t consider that when buying single family or townhouses and they should if they want to have a full picture of what it costs to own property.

      • 40yearsinreston

        Shame 0n commission chasing Realtors then

    • 40yearsinreston

      Heron house condo fees include maintenance of the plaza
      Residents are paying for the business owners
      Ever wonder why St Bob bought the property on Lake Anne

      • Jenny Gibbers

        You forgot the RA hidden fee gem, 1 2 3 ok here it goes …

        R E L A C

        Sorry. The truth hurts.

  • Tim May

    TL; DR; – The reason is because condo living FEELS like apartment living and it is a lot of a not my problem living.

    I think the problem with condo fees is the what you see “now” makes them seem like a rip off. Lets say it starts to snow and there is no rock salt, shoveling, and sand dropped. It is a negative since you think you are wasting your money since it was never done. Now look to lawn maintenance, again if the grass is too high, you feel they are a rip off because nothing is done.

    I can see how maintenance of the parking garage (which has separate fees on top of condo fees) should be done. It is a common feature after all. However when an outside dryer vent clogs and a fire is started and it was the owners responsibility to clean it, it was now become an issue of commonality for their neighbors. The problem comes down to communication of what I am supposed to do and what they are supposed to do.

    All in all I think condo living is a rip off and I currently live in one. The biggest reason for that statement is the management company that has an exclusive contract to run the property. They do it poorly and oversight is almost zero. Lastly, the board meetings for these condo associations has often become a joke. Nothing gets done and it is just a forum for gripes. The one thing that is consistently agreed is condo fees should not increase.

    • Jenny Gibbers

      It depends. There are some well run condos and all of those have a well organized HOA board. Buildings with high % of renters tend to do worse but it also depends on the management company. I’ve owned over 7 condos and have seen the best and worst. The worst having mold in the building, it was a complete disaster but thanks to the HOA president, a lawyer, we filed class action and won.

  • JoeInReston

    There is an urban legend – don’t know if it is true- that a condo developer, while still in the process of selling off newly built condo units, will subsidize a part of the condo fees to make it appear cheaper than it actually is and therefore more appealing. Only after all the condo units have been sold and the property management is handed off to the condo owners is the subsidy dropped and the actual cost required to run the place revealed.

    • Why do you bother?

      Not a legend – I’ve seen it happen.

    • Greg

      I just received a postcard in the mail today for Cascades Overlook townhouse condos. One of the main features listed on the card was low condo fees.

    • Jenny Gibbers

      One of the big builders here, JBG, opened one of the first large “luxury” condo developments here. The board was stacked with JBG management as the building sat empty for months. Then when HOA board switched to home owners they realized:

      . Builder had not bought trash compactor
      . Reserve funds had to be replenished
      . Security system was inadequate, a major break-in occured
      . Plumbing issues took years to fix
      . Builder installed near obsolete freon air conditioning

      This problem is not isolated to JBG but any developer that hands off a new building to a less experienced and poorly organized HOA board.

      What is striking though is that JBG self promoted and issued statements like to the “satisfaction of all home owners” and portrayed an image of a happy community when in fact the board was struggling to stay on top of developer induced issues. Fact.

  • Greg

    Reston condo and cluster fees are higher than they need to be for the shameful reason that the Reston Association does very little of any value to negotiate bulk pricing costs for the things that all clusters and condos (and most single-family dwelling owners / residents) routinely and repeatedly purchase. These include: trash and recycling; landscape maintenance, enhancement and repair; snow and ice management; parking lot and street repair and maintenance; and utilities, including natural gas, electricity, cable TV and internet and others.

    The RA will claim that it has a cluster and condo outreach department and that it holds an annual meeting for contractors and purchasers, but the RA does nothing to combine the purchasing power of the many cluster and condos for these recurring expenses. Many other communities arrange for utility aggregation and arrange for bulk pricing for these ongoing expenses. In the case of trash and recycling, all RA members have to pay for this service, so everyone suffers higher costs.

    Nearly all of us use cable TV and internet services — everyone knows how outrageously expensive they are. One community (not in Reston) obtained TV and internet services from Comcast for $32 a month per door.

    Also, beware that many condo fees are too low resulting in hefty special assessments. Hunters Woods Village is one such example.

    • JoeInReston

      Some really good ideas presented.

      I resent how much I have to pay for internet and cable compared to a coworker whose apartment complex does the bulk purchase thing.

      The RA is looking for ideas… perhaps that should be added to the hopper.

  • Jay

    I’ll tell you what’s a complete rip off. The Reston association fee is a complete rip off. Apt complex owners don’t pay, businesses don’t pay, I pay the same as a person with a property that’s 2-3 times my homes value. RA is the ripoff crook. Worse then Boston properties. Parts of Reston doesn’t even have adequate sidewalks or street lighting. You can’t even change an exterior light bulb without filing paperwork with pictures of how the lightbulb will look with drb. #FreeReston #PowerToThePeople

  • Why do you bother?

    I have a fee-simple townhouse and I consider my HOA dues reasonable. I don’t have to mow a lawn or plow (although I do have to shovel my own sidewalk), or pay individually for twice-weekly trash pickup

  • Guest

    Condominium living (definition): All the expense of home ownership combined with all the disadvantages of apartment living…

    • Eve Thompson

      I’ve been in my condo for 5+ years now and really love it. I think it really depends on the property.

  • Jenny Gibbers

    If you can believe Larry our medicine man, he could not get RELAC working for him so he had to install his own AC. Unsure about the other businesses but yes, there are additional costs involved, some significant.

    What is not clear to me is why the RA should pay for an overhaul of the docks. Perhaps this dock space should be considered a common element of the Plaza and therefore be handled as part of their HOA. Be interested to hear your thoughts on this also.

  • Jenny Gibbers

    Thanks for your answers.

    Perhaps a review is needed. RA is an HOA not a for profit commercial enterprise. The lines are further blurred by certain individuals that serve both sides of the fence, its a recipe for disaster as you well know.

  • Amy Sue

    I’ve lived in a condo for many years and have been very happy. The condo fee has paid for major upgrades to the property and ensured I don’t have to worry about basic maintenance, grounds, snow removal, etc. Maybe I’ve been lucky, but I’ve been very happy living in a condo and paying a condo fee that has helped keep up the value of our properties.

×

Subscribe to our mailing list