Are HOA Dues Hurting Your Sales Price?

Posted by Greg Eckler on Wednesday, August 3rd, 2016 at 10:45am.

After showing a bunch of condos over the past few weeks, I wanted to see how HOA dues affect the price per square foot and if I could find a correlation between the two. Because a buyer that can afford a $400,000 condo would have a hard time justifying HOA dues of $800 per month, but would have no problem paying $200 per month.

I exported data for 2015 in the city of Denver. Then I created and calculated an “HOA Factor”. This factor would represent how the HOA dues relate to a sale price and therefore the price per square foot.

The HOA factor is basically the relationship of sale price to HOA dues:

Price = $400,000, Dues = $200
HOA Factor = 0.5

Price = $400,000, Dues = $400
HOA Factor = 1.0

Price = $400,000, Dues = $800
HOA Factor = 2.0

I started with a sample of condos with a similar size range – 1,250 to 1,499 square feet – and graphed how the sale price per sq. ft. changed when the HOA Factor changed.


The data is clear:  an HOA factor of 2.0+ has condos with an average price per sq. ft. of $133, whereas an HOA factor below .75 generates an average price per sq. ft.  almost 3 times higher.

I repeated the above with 7 sq. ft. ranges and all turned out about the same – in 31 out of 35 examples, the price per sq. ft. increased as the HOA factor decreased. 

What does this mean? 

  •          Look at the HOA factor if you are considering a condo purchase.  It is most likely affecting the price you are paying, and will also affect the future sale price.
  •          A higher HOA factor could result in lower appreciation and a harder re-sale; a lower HOA factor could do the opposite.
  •          If you live in a condo building, then consider trying to reduce the HOA dues.  This could affect your future sale price and make for an easier re-sale – not just for you, but for all your neighbors as well.

4 Responses to "Are HOA Dues Hurting Your Sales Price?"

Rebecca Ann-Foss Williams wrote: Hi Greg!
I love looking at real estate on the internet. Especially Condos right now. I am growing weary of taking care of a lawn and impending shoveling.
I cannot argue the math re: the HOA factor. When evaluating this factor, one must also closely assess the amenities the HOA includes. I am finding that the mass or apartment like condos in high rise structures of 250+living spaces sport higher HOAs than do the less dense or 5-6 condos per structure or a total of 25- 75 or so condo/townhouses in the total community. I am in favor of looking more closely at the latter choice at this time in my life.
I have owned an apartment like condo in The American Towers located in Salt Lake City, UT since 1994. My home has 10' ceilings and 1509 sq. ft. which includes a remodeled kitchen and 2 full bathrooms, also remodeled, a parquet floor dining room and 2 bedrooms. This complex is 35 years old, 2 towers offering a total of 256 condos in the heart of the downtown area. Upkeep, remodeling and maintenance of the common areas has been superb; this includes 2 lobbies (a north and south tower), an indoor heated swimming pool, 3 hot tubs with an internal one by the pool and 1 each on the roofs (26th floor) of each tower, a full gym, a hand ball court, party room, craft rm./library, a billiards room, trash shoots (1 on each floor), on sight manager, full time maintenance staff and 24 hour manned security. There are 3 levels of secure parking and a manual car wash on P-3. I have 1 parking space; an additional costs $100/mo. My monthly HOA is $536. The light rail is a half a block away, downtown 2 blocks away ( 2 malls with City Creek gurgling through), grocery 3 blocks. I make quite a bit on rent money which is why I haven't sold this home. When I lived there life was quite easy. The amenities decadent. And if one is Mormon, The Church is a mere 4 blocks away. Hansom Cabs are common in SLC...take one to The Church grounds.
My point: Yes the HOA factor. But what is a person looking for?
Thanks for your research!!
I love having a nerd as my realtor.
And thanks for observing Patrick's birthday.


Posted on Wednesday, August 3rd, 2016 at 11:55pm.

Greg Eckler wrote: Thanks for the comments. I agree with your comments about amenities - this was something I debated in the blog but left out since the HOA factor was my primary focus. I think it is safe to assume that higher dues will correspond to more building expenses - these expenses could be amenities like you mention or it could be an older building with older systems and higher maintenance. In the end, the dues are fixed at the time of sale and not negotiable. It is a cost to the buyer that can't be cancelled. If a buyer joins a gym they can cancel the membership. Same with a pool or extra parking in a paid lot. When I started researching this blog, I wasn't sure if there would be a correlation but after looking at the data, the correlation was very clear. Regardless of what the HOA gives you, the dues affect the price.

Posted on Thursday, August 4th, 2016 at 8:54am.

Joel Tax wrote: I was just reading through your article and wanted to just chime in on my perspective on lowering HOA Dues. I do reserve studies for condominium building and across the nation most communities (over 70%) are vastly underfunded - they do not have enough in reserves to fund future common area projects.

Since the reserve account is funded by a portion of the HOA dues the lowering of the dues will just place the community in worse financial footing in relation to their reserve account. Over time reliance on special assessments, loans or deferred maintenance (lower marketability) is the outcome.

One way or another someone always pays for these projects. Communities need to stay vigilant in raising their dues on a regular basis to offset inflationary factory that are occurring 24/7. Short term thinking regarding the sale price of the unit only leads to financial insecurity and unfairly placing the bulk of common area project costs on someone else later. Unfortunately this has been commonplace for the typical community and is the reason so many are constantly struggling to pay for even modest projects in the community.

Just something to think about - we've worked with thousands of condominium communities over the years all over the United States and see this issue everywhere.

Posted on Saturday, April 15th, 2017 at 8:39am.

Greg Eckler wrote: Joel - Thanks for taking the time to read the blog and respond. I agree with you and wasn't trying to encourage dues to be lowered just for the sale price. Dues should reflect the needs of the community for the current budget and reserve needs. My goal in the article was to show how high (and low) dues will affect the sales price and appreciation so people see all angles of a condo purchase.

Posted on Sunday, April 16th, 2017 at 3:16pm.

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