How Membership Communities Work
Have you been looking for a home to purchase in and came across a beautiful home that seems like the price is too good to be true, only to find out you need to pay a very large membership fee? Welcome to what is called membership communities.
Membership communities were established as a way to be able to support and maintain the ongoing costs of a golf course situated within a community development without needing non-resident customers. Many people moving to Florida love that you can golf year-round, so there is and was a demand for communities with golf courses. We will explain how membership communities work, and how it impacts housing prices.
What are Membership Communities?
Membership communities are a group of homes, or communities, that have certain amenities that are expensive to maintain and thus require a fee to join the community. Typically in South Florida, membership communities are houses built around a private golf club that only homeowners have access to and sometimes a limited number of non-homeowners.
Costs of Membership Communities
Each membership community will have its own costs to buying into the neighborhood. The main fees to be concerned about are:
- Equity, Capital Contribution, Initiation Fees
- Membership Class Fee
- Annual Dues
- Capital Assessment Fees
- Supplemental Dues
Equity, Capital Contribution, Initiation Fees
The fee to purchase a home and join the membership community is typically called either an equity contribution, capital contribution, or initial fees. They all mean the same thing, which is to become a member of the community. It’s typically a large one-time fee that is paid when you purchase a home in the community. It’s usually not refundable, but in some communities, a portion of it may be refunded when you sell your home. Here are a few examples of some equity contributions in a few South Florida membership communities
- Aberdeen Country Club – $20,000 (Plus which ever Class you choose from $6,500 to $20,000)
- Broken Sound – $60,000 – $80,000 (Depending on your age as well as which golf course you want access to)
- Delaire Country Club – $79,000
- Wycliff Golf & Country Club – $74,000
Membership Class Fees
Some communities charge a fee based on what type of membership class you want. This usually makes the equity contribution lower (see Aberdeen from above), and gives some flexibility if you do not intend to use all the amenities. You may not need any of the sports amenities and just want to be able to access the clubhouse and pool as part of the “social class”.
Once you’ve become a member of the community, you may have an ongoing annual due which is usually higher than a typical HOA. Each community assesses its annual dues, but as an estimate, it’s typically between $12,000 – $24,000 annually.
Capital Assessment Fees
A capital assessment is a fee that occurs when a large renovation or expense has occurred and each member of the community needs to contribute to its cost. These assessments are difficult to consider when purchasing a home because they are unexpected and can often be large. Capital assessment fees are not limited to membership communities and will happen in any homeowners association-governed community.
Some communities tend to itemize their expenses and the supplemental dues are a way to cover some of the smaller expenses.
How Membership Communities Impact Housing Prices
The demand for membership communities has greatly declined since the late 90s and early 2000s. While people continue to love golf, there are plenty of golf courses in South Florida both public and private. The need to pay such a large sum of money and be locked into a permanent membership is not very attractive to many buyers today. This reduced buyer demand has led to stagnant home prices within these communities.
People doing an online search for homes in South Florida are often first inquiring about homes in membership communities, unbeknownst to them that the real cost to purchase that home will be many thousands of dollars more. They see a home that looks like a great value compared to the other homes they are seeing within the same price range. This is caused by the membership fee which drives down the home price.
More Home For Your Dollar in Membership Communities
Because of the large fees that come with membership communities and the lower value of these homes, you can often times get more bang for your buck in membership communities. Even when you account for the membership fee that you will need to pay at closing, the price is often comparable to, if not better than a similar home in a non-membership community.
Who Should Consider Purchasing in a Membership Community
Golfers! If you are an avid golfer and you know you will get great value out of the golf club, a membership community might be right for you. Many people choose to be members of private golf clubs and pay the same fees at a club that isn’t in their back yard, and not nearly as private.
If It’s Your Final Home
Currently, you can buy in a membership community and pay the initiation fee, and the price will not be very dissimilar from buying a similar non-membership fee home nearby. So your purchase price really may not be much more, or even more at all, buying into a membership community. The problem is if you want to sell your home, you will most likely not recover your initiation fee. This makes selling a home in a membership community difficult to do without losing money.
If you plan on buying a home and living there for the rest of your life, this equity loss when selling your home does not really impact you.
If You Are OK With The Ongoing Fees
If you are ok with the annual dues required for a membership community and understand the cost can be significantly higher than a typical HOA.
How Can You Exclude Membership Communities from Your Home Search
If you have been using some of the most common home search websites on the internet, you’ve probably noticed its difficult to filter out homes in membership communities. We can create a search for you on our website that completely removes membership communities. Our search would provide you a list of homes that meet your home search criteria, as well as email you whenever something new comes to the market. You can contact us here, or give us a call to get started.