Balconies of a modern luxury apartments with a blue sky

The age and energy efficiency of a condo or co-op building, or the houses in a homeowners association, may help you determine expected regular maintenance and utility costs. (Getty Images)

The home of your dreams seems perfect, but how do you evaluate the monthly fees or carrying costs for the community to determine whether it's the right fiscal match? After all, monthly homeowners association, condo or co-op charges, combined with a mortgage payment, can add up to a significant number which only gets bigger over time.

Before signing a contract, a real estate attorney, a knowledgeable real estate agent and a smart homebuyer can uncover a lot of valuable information about a building, its financial health and physical condition, which will help explain and validate the monthly fees. Though the dream home may be at hand, the overall health and day-to-day running of the community is a critical part of the equation.

[Read: Closing on a House: 10 Common Problems to Spot in a Final Walk-Through]

Building Expenses

You may see regular dues whether you live under a homeowners association, condominium association or co-op. If you're part of an HOA or condo association, you own your house or apartment outright, and agree to follow bylaws established for the neighborhood or building. A co-op, on the other hand, means you own shares in a corporation and assume a monthly maintenance, which encompasses the following:

  • Salaries for the staff, doorman, superintendent and others who help manage and take care of the building.
  • Building maintenance or upkeep on items such as the elevator, plumbing and landscaping.
  • Insurance policy for the building.
  • Building mortgage and mortgage interest payment (the interest portion is deductible to the extent of the law).

In a condo and HOA, the monthly fees are called “common charges.” Like a co-op, this fee covers items such as salaries and building maintenance. Unlike a co-op, there is no underlying mortgage on the building or subdivision. A separate tax bill is sent directly to the homeowner who pays his or her individual tax bill.

“There are several key areas that are closely examined to determine the financial health of the building prior to contract signing,” says Steven Matz, founding partner of real estate law firm Katz & Matz P.C. in New York City.

This due diligence process pays careful attention to certain areas, some of which are obvious to the naked eye but most require the professional review of a real estate attorney.

Here are some common HOA, condo and co-op fees you should review before purchasing a home:

  • Lobby and common spaces.
  • Size of the building or community.
  • Age of the building.
  • Siding and roof.
  • Boiler.
  • History of assessments.
  • History of maintenance cost increases.
  • Staff.
  • Green certifications.

Lobby and Common Spaces

Do these areas look outdated and in need of a redo? If so, when did the community last decorate or renovate the common spaces and how do they typically pay for these types of expenditures?

[Read: 6 Ways To Make Your Home Environmentally Friendly]

Size of the Building or Community

Smaller condo or co-op buildings usually have larger monthly costs as they are shared with fewer people. More elaborate amenities that may be included in an HOA, such as a pool, concierge service or even country club access, can also increase the total cost of regular dues.

Age of the Building

Older buildings will naturally have more maintenance issues. The elevator, plumbing and general infrastructure will require more repairs. New developments presumably need less repair and maintenance as they have not suffered the wear and tear of the last century.

Siding and Roof

Local laws in New York City require that building facades and brick work be inspected every five years. When was it last done by the building, what were the findings and how was it paid for? This also applies to any common buildings in an HOA – a clubhouse or common building will need the same exterior maintenance as your own house to keep it looking nice.


Many large cities require buildings to convert to clean oil or natural gas to cut down on negative environmental impact, which is an expensive process. Has it been done, how was it paid for and if not, what is the plan? If a building or community is using older heating systems, the cost of operation is also likely higher than a newer, more efficient system.

History of Assessments

How often is the building or community assessed? If properties are being reassessed, expect property taxes to increase, either for the general community, which will require a larger portion of your dues, or even for your individual home.

History of Maintenance Cost Increases

How does the building or community typically fund repairs? How often do they raise the maintenance fee, and by what percentage?


Does the building have a large staff, onsite property manager and many amenities? High-end living is luxurious, but it comes at a price. There is a premium for extras such as an elevator attendant, a swimming pool, a theater or a fancy gym.

Green Certifications

LEED-certified buildings and use of Energy Star-rated appliances typically have lower energy costs.

[Read: How Will a Recession Affect the Housing Market?]

The Financial Bottom Line

An examination of the current reserves and operating income are critical and the best indicator of the true fiscal picture of a building or homeowners association. According to Matz, a three-month reserve of the total operating income is the common formula or rule of thumb used by most real estate attorneys when evaluating reserve funds.

For example, if the building has $1 million in annual income, which is approximately $84,000 a month, there would be an expectation of $252,000 in reserve. It is important to note that many buildings have flip taxes which help to fund expenditures, but this only comes into play when there is a sale in the building, which cannot be relied upon.

In new development condos, buyers have made a contribution to the working capital with their purchase to build up the capital reserve. Because the building is new, fewer repairs are more likely. Often, there is more stability in newer buildings.

In the end, understanding the monthly charges for the building or community is critical and under the guidance of a real estate attorney, most potential red flags can be uncovered. After all, the home may be perfect, but if the community’s finances are not strong, it may be time to move on.

Tags: real estate, housing, home prices, personal budgets

Wendy Arriz is a licensed real estate broker with Warburg Realty in New York City. An accomplished real estate professional, Arriz has been ranked a Top 10 Warburg Producer four years in a row in 2019, 2018, 2017 and 2016. She was also named one of America’s Top Real Estate Agents by Sales Volume in the 2018 REAL Trends ranking in 2018 and 2019. Known for her sophisticated eye, discretion and sharp attention to detail, Arriz has brokered transactions and represented clients across Manhattan's luxury co-op, condo and townhouse marketplaces.

After earning a degree in Economics from the University of Pennsylvania, Arriz worked in wholesale sales for several top fashion designers in New York City. While her business sense, tireless work ethic and integrity fuel her success, most importantly, she believes wholeheartedly that one’s living space should be not only an investment but also a home and sanctuary.

Arriz has resided on the Upper East Side for over 30 years and currently lives in Carnegie Hill with her husband, three children and her miniature schnauzer, Lucy.

Recommended Articles

How to Write an Offer Letter to a Seller

Tania Isacoff Friedland | Sept. 17, 2020

Connect with home sellers to make them feel good about letting you purchase their home.

The Guide to Understanding Home Value

Devon Thorsby | Sept. 15, 2020

Here's a look at the process of calculating the value of your home and what it means for your home's sale price.

What to Know About Moving to Chicago

Devon Thorsby | Sept. 10, 2020

Chicago can be a great place to live if you can handle the cold winter and cost of living and embrace public transit.

How to Set Up Your Utilities

Devon Thorsby | Sept. 9, 2020

Here's what you need to know about which utility company services your new address, how to set up an account and why you may need to pay a deposit.

What to Know About the Halt on Evictions

Devon Thorsby | Sept. 3, 2020

The CDC has announced a halt on evictions through the end of 2020, but certain criteria keep some renters vulnerable to eviction. And the rent is still due.

How to Declutter Your Home

Devon Thorsby | Sept. 3, 2020

Follow this step-by-step guide to make your home more manageable and organized.

Deed vs. Title: What to Know

Devon Thorsby | Sept. 1, 2020

Learn how the deed and title play into homeownership, and the details you need to know before closing on a home.

Is Fee Simple or Leasehold Better?

Devon Thorsby | Sept. 1, 2020

Learn the different ways you can hold property with fee simple ownership or a leasehold.

How to Factor in a Home's Outdoor Space

Tania Isacoff Friedland | Aug. 27, 2020

While outdoor space has always been considered an appealing feature to homebuyers, there's newfound value in having a private outdoor oasis.

Should You Build a Mother-in-Law Suite?

Devon Thorsby | Aug. 25, 2020

These additional living spaces could give you the guest space or rental income you're looking for.

25 Small Space Decor Ideas for Your Home

Devon Thorsby | Aug. 21, 2020

These tips can make a small room feel bigger and help you master organization with minimal storage.

5 Things to Ignore on a Home Tour

Allison Chiaramonte | Aug. 20, 2020

Don't rule out a potential home for the wrong reasons. Focus on the details that count.

Why Tenants Are Not Safe From Eviction

Devon Thorsby | Aug. 19, 2020

People struggling to pay rent should still be worried about eviction should local eviction moratoriums end.

How to Vet a Neighborhood Before Moving

Devon Thorsby | Aug. 17, 2020

Before signing a lease or buying a house, visit frequently, check neighborhood safety and learn more about the area.

What Is a Duplex?

Devon Thorsby | Aug. 11, 2020

Learn the basics about duplex properties, and how they can be a first step for people looking to invest in real estate.

Should You Live in a Single-Family Home?

Steven Gottlieb | Aug. 11, 2020

Depending on your own priorities, finances and bandwidth, one style of living might be better for you.

Denver Housing Market Forecast

Andrew Fortune | Aug. 6, 2020

Here's what you need to know about the Denver housing market now, and what to expect in the future.

How to Make and Accept an Bid on a Home

Devon Thorsby | Aug. 6, 2020

Here's what you need to know to go under contract and move toward a successful home purchase or sale.

Considerations Before Buying a Vacation Home

Geoff Williams | Aug. 5, 2020

You'll want to think about money, rental challenges and market.

How to Build a Fire Pit in Your Backyard

Devon Thorsby | Aug. 4, 2020

Follow these 10 simple steps to transform your backyard into a rustic retreat.