Homeowners Associations: A Double-Edged Sword

Homeowners Associations (HOAs) are increasing in the United States, shaping the landscapes of many neighborhoods. They are the most popular in Florida, California and Colorado, where over 60% of properties are part of HOA. In Wisconsin, it’s just about 19%.

HOAs offer a unique blend of benefits and drawbacks, making it essential for potential homeowners to understand their implications.

A Brief History of HOAs

The concept of HOAs traces its roots back to the early 20th century, emerging as a response to urban sprawl and the need for community governance. Initially, HOAs primarily focused on maintaining property values and ensuring aesthetic uniformity within neighborhoods. However, over time, their role has expanded to encompass a wider range of responsibilities, including:

Community Maintenance: HOAs often oversee the upkeep of common areas like parks, pools, and landscaping. With this, they take over for the owners chores like lawn mowing and snow removal.
Enforcing Rules and Regulations: They establish guidelines regarding property maintenance, architectural styles (often regulating details like color of siding, type and height of a fence etc.), and even noise levels.
Providing Amenities: Some HOAs offer additional amenities such as clubhouses, fitness centers, or security services.

The Cost of Belonging

One of the most significant considerations for potential homeowners is the financial impact of HOA fees. These fees vary widely depending on the specific HOA, location, and the level of services provided. On average, HOA fees can range from a few hundred dollars to several thousand dollars per year. Not surprisingly, the highest HOA membership fees are paid by home owners in Alabama, on average almost 5,500/year, with Wisconsin average being “only” $4,000/year on average.

While HOA fees may seem burdensome, it’s important to weigh the costs against the benefits. By maintaining property values and providing amenities, HOAs can contribute to a more desirable living environment. However, it’s crucial to carefully review the HOA’s budget and financial history to ensure that fees are being used responsibly.

The Pros and Cons of HOA Living

Pros:

Enhanced Property Values: HOAs can help maintain property values by enforcing consistent standards and investing in community improvements.
Community Amenities: HOAs often provide access to shared amenities like pools, fitness centers, and clubhouses.
Security: Some HOAs offer security services, such as gated communities or 24/7 surveillance.
Sense of Community: HOAs can foster a strong sense of community through social events and volunteer opportunities.

Cons:

Strict Rules and Regulations: HOAs may impose restrictive rules on homeowners, limiting their freedom to modify their properties.
Increased Costs: HOA fees can add to monthly expenses and may increase over time.
Potential for Conflict: Disagreements between homeowners and the HOA board can arise, leading to tension and legal disputes.
Lack of Privacy: In some cases, HOAs may have the authority to monitor residents’ activities.

Making an Informed Decision

When considering a home within an HOA community, it’s essential to conduct thorough research and ask the right questions:

Review the HOA’s Governing Documents: Understand the rules, regulations, and financial obligations.
Inquire About Fee Structure: Learn about the current fees and any potential increases.
Assess the HOA’s Financial Health: Review the budget and reserve funds to ensure long-term sustainability.
Attend HOA Meetings: Participate in meetings to gain insights into the board’s decision-making process.
Talk to Current Residents: Get firsthand accounts of the HOA’s strengths and weaknesses.

By carefully evaluating the pros and cons, potential homeowners can make informed decisions about whether HOA living is the right choice for their lifestyle and financial situation.

Buyer

All about home inspection

The Importance of a Home Inspection

Buying a home is a significant investment, and a home inspection is a crucial step in the process. It provides valuable insights into the property’s condition and potential issues, helping you make informed decisions about your purchase.

Why a Home Inspection Matters

Identifying Structural and Safety Concerns: A home inspector will thoroughly examine the property’s foundation, framing, roof, electrical system, plumbing, and heating/cooling systems. They can identify potential structural weaknesses, safety hazards, and code violations that may not be visible to the untrained eye.
Assessing the Overall Condition: The inspector will evaluate the general condition of the property, including the interior and exterior finishes, appliances, and overall maintenance. This information helps you understand the property’s age, wear and tear, and any necessary repairs.
Budgeting for Repairs and Maintenance: Knowing the property’s condition allows you to budget for potential repairs and maintenance costs. This helps you avoid unexpected expenses after closing.
Negotiating Power: If the inspection reveals significant issues, you can use this information to negotiate a lower purchase price or ask the seller to make repairs before closing.
Peace of Mind: A thorough home inspection can provide you with peace of mind knowing that you’re making an informed decision about your investment.

What Does a Home Inspection Typically Cover?

A standard home inspection typically covers the following areas:

Foundation: Checks for cracks, water damage, and other structural issues.
Roof: Assesses the roof’s condition, including any leaks, missing shingles, or other damage.
Plumbing: Evaluates the plumbing system for leaks, water pressure issues, and the condition of pipes and fixtures.
Electrical System: Tests the electrical system, including outlets, switches, and wiring.
Heating and Cooling System: Checks the condition of the HVAC system, including the furnace, air conditioner, and duct work.
Attic and Crawl Space: Inspects the attic and crawl space for insulation, ventilation, and signs of pests or water damage.
Interior: Assesses the condition of walls, floors, ceilings, and cabinets.

How Much Does a Home Inspection Cost?

The cost of a home inspection varies depending on several factors, including:

Size of the Home: Larger homes typically require more time to inspect, which can increase the cost.
Age of the Home: Older homes may have more potential issues, which can also increase the cost.
Location: Home inspection costs can vary by region.
Inspector’s Experience: More experienced inspectors may charge higher rates.
Specific Services Included: Some inspectors offer additional services, such as radon testing or mold inspection, which can add to the cost.

Typically, you can expect to pay between $300 and $500 for a home inspection. However, some inspections may cost more, especially for larger or more complex properties.

Who Pays for the Home Inspection?

Traditionally, the buyer is responsible for paying for a professional home inspection. However, there are some exceptions and nuances to consider.

Buyer Pays: In most cases, the buyer assumes the cost of the home inspection to ensure the property’s condition before purchasing.
Seller Pays: Sometimes, sellers may offer to pay for a home inspection as an incentive to attract buyers, especially if the home has been on the market for a while or has known issues.
Negotiation: The cost of the home inspection can sometimes become a negotiation point during the offer process. Buyers may include the cost of the inspection as part of their offer, and sellers may agree to pay for it or negotiate a lower price.

How to Schedule a Home Inspection

Once you’ve found a home you’re interested in, you can schedule a home inspection with a certified inspector. Be sure to choose an inspector who is licensed and insured.

When scheduling the inspection, you’ll need to provide the inspector with the following information:

Property Address: The inspector will need to know the address of the property to be inspected.
Access to the Property: The inspector will need access to all areas of the property, including the attic, crawl space, and basement.
Any Known Issues: If you’re aware of any existing problems with the property, be sure to let the inspector know.

What to Do After the Inspection

After the inspection, you’ll receive a detailed report outlining the inspector’s findings. The report will include any potential issues and recommendations for repairs.

If the inspection reveals significant problems, you may want to negotiate a lower purchase price or ask the seller to make repairs before closing. You may also want to get quotes from contractors to determine the cost of repairs.

Conclusion

A home inspection is an essential part of the home buying process. By investing in a home inspection, you can protect yourself from costly repairs and ensure that you’re making a sound investment.

Additional Tips for Home Buyers

Do Your Research: Before you start looking at homes, do your research and learn about the different types of home inspections available.
Get Multiple Quotes: Get quotes from several different inspectors to compare prices and services.
Be Present During the Inspection: If possible, be present during the inspection (and ask your agent to accompany you) so you can ask questions and learn more about the condition of the home.
Don’t Be Afraid to Ask Questions: If you have any questions about the inspection process or the inspector’s findings, don’t be afraid to ask.

By following these tips, you can ensure that you’re making an informed decision about your home purchase.

Buyer

Navigating Wisconsin’s New Real Estate Landscape

Real estate market has recently undergone significant changes, impacting the home-buying process. Here’s a breakdown of the key updates as they relate to Wisconsin real estate transactions that you need to be aware of.

Mandatory Written Documents

Before viewing a property, buyers in Wisconsin are now required to sign one of three written documents:

Agency Agreement: This agreement establishes a formal relationship between the buyer and their real estate agent, outlining the agent’s fees as well as their duties and responsibilities.
Disclosure to Customers: This document provides information about the agent’s limited duties with no agency agreement. Agent does not represent buyer in the transaction, they only fill out contract per buyers instruction and cannot provide any advise.
Pre-Agency Showing Agreement: This agreement is used when a buyer is considering working with an agent but hasn’t yet made a final decision. Agent cannot provide advise or fill out contract until buyer decides if he wants to work with agent.

Buyer Responsibility for Agent Commission

It’s important to understand that buyers are responsible for paying their real estate agent’s commission. However, buyers can request sellers to provide a credit towards the cost of their agent commission. This is known as a seller concession and can be negotiated during the offer process, along with purchase price and other terms.

Conclusion

Navigating the Wisconsin real estate market can be exciting but also challenging. With the recent changes to the home-buying process, it’s more important than ever to have a knowledgeable and experienced real estate team by your side.

The Korwels Team is here to help you every step of the way. Our team of dedicated professionals can provide expert guidance, negotiate on your behalf, and ensure a smooth home-buying experience.

Ready to get started?

Contact The Korwels Team today to schedule a consultation and learn how we can help you find your dream home in Wisconsin.

Buyer

4 tips to moving with pets

I mentioned before we moved several times in a short period of time. Our two cats moved with us. It was never easy on us, but it was even harder on them – cats are creatures of habits. Dogs also do not take well to long trip and commotion of the move. Here are four tips we tested over the years, hopefully they will help you – and your pet.

Pack and clean one room in old home first, for example spare bedroom. Keep you pets, in their crates, with favorite toy, in this room. This way they will be in relative quiet. Other options, for more anxious pets, is to have them stay with a friend or even board your pet for a packing day.
Pack a set of basic pet supplies: pet food, favorite bowl, water bowl or fountain, litter box and litter for cats, leash for dogs, couple of favorite toys. Keep it handy with you in your car, make it easy to reach the stash when you arrive on site so you can unpack and set up spot for your pet in your new home.
It goes without saying, but have your pets travel with you in the car. I strongly recommend having any pet in crate, to avoid distractions while driving. Additionally, have the crate facing you and so your pet is able to listen conversation or just be aware of your presence during the trip. Some pets might prefer to have crate covered with blanket. Remember about securing the crate with seat belts.
When in new location, set your pet up in one quiet room while you unpack. Keep it there for a day or two, and get accustomed to a new place. I suggest setting up your bedroom, if your pet is allowed to sleep with you, then your presence at night will also help ease them.

Do you have any of you tested any tips or tricks to make it easier for your pets to get through move? Share them in comments below.

Buyer

Tax benefits of owning your home

Oceans of paper have been filled with dissertations whether it is more beneficial to rent vs. own your home. You can read our own take on it here… One thing that very few sources mention are potential tax benefits* of owning your home. In some cases they can tip the scale substantially towards the ownership side.

How can owning a house save you money?

1. Mortgage interest

Chances are that you have a mortgage on your house. And at the end of each year you’re receiving a form from your financial institution detailing how much interest you’ve paid over the course of the year. Save that form. Interest paid on mortgage used to finance your primary residence is tax deductible. But you probably knew that. Mortgage interest deduction is one of the most common ones claimed by tax payers.

2. Property tax deduction

You may deduct up to $10,000 ($5,000 if married filing separately) for a combination of property taxes and either state and local income taxes or sales taxes.

You might be able to deduct property and real estate taxes you pay on your:

Primary home
Co-op apartment
Vacation homes
Land

3. Home office deduction

Do you run small business out of your home? Is that space used exclusively for business? If yes the IRS allows you to deduct utilities, real estate taxes, repairs, maintenance and other related expenses. The details of this deduction are too complex to list it in this post, but the simplest way is to claim standard deduction of $5 per square foot (up to $1,500) of the space dedicated as office use.

4. Energy efficiency updates and credits

As a homeowners can claim a federal tax credit for making certain improvements to their homes or installing appliances that are designed to boost energy efficiency. Solar, wind, geothermal, and fuel cell technology are all eligible for the Residential Renewable Energy Tax Credit.

Disclaimer: we are Realtors, not tax attorneys or CPA, so the above should be treated as anecdotal. Please consult with your tax preparer before you claim any of the credits.

Tips around the house

Spring around the house

First warm days of season are upon us, and with this, it feels good just going outside after long months of cabin fever (particularly if you live up North). It is a good time to take a walk around your house, backyard, and garden, and check on everything after the winter season. Even if you live in an apartment, there are things you can do, so please continue reading our tips collected from around the Internet.

On your balcony or deck

Clean patio furniture. Soapy water and soft brush or sponge will do the trick for most types of materials.
Wash the pillows and outdoor rugs. Check the manufacturer’s instruction if fabrics can be washed in the washing machine.
Give your grill thorough scrub. Long-handled stiff-wire brush works on all types of grates.
Refill propane tank for grill to be ready for first grilling of the season (we already started ours!)
Check the deck surface: does it need any repairs? Maybe fresh coat of paint is in order this year?
Consider planting containers with ornamental plants, maybe even vegetables or herbs. Particularly if you do not have a big yard or live in condo, few containers will add life to your outdoor space.

Around the outside of your house

Wash your windows, from outside and inside. You will see so much more light coming in. My recently discovered quick tip – glass cleaner and squeegee.
Replace any used exterior light bulbs, on house walls, in the walkways, on the deck.
Check and clean gutters and spouts, make repairs if needed.
Hose down or power wash home exterior.
Check your roof for any obvious problems.
Check your fence if you have one: does it need any repairs? Is it in need of fresh coat of paint?

Lawn and backyard

Clean your lawn: brush back all remaining fall leaves and remove fallen branches. Pick up litter and any pet waste.
Identify bold spots in your lawn. Mix seeds with fresh soil and fertilizer and seed fresh grass. Remember to keep it moist until it starts growing!
Prune all shrubs and trees – it will encourage new growth
Check water hoses for cracks and leaks. Make any needed repairs – or buy new parts.

In the garden (or container garden)

Remove winter layer of mulch if you had any placed to cover plants from freezing
Add new layer of mulch around trees and shrubs
Cut majority of stalks of ornamental grasses to have them come back fresh
Pull any dead annuals. Consider replacing them new ones?
Remove dead growth of perennials, they will come back fresh and strong.
Take an inventory of plants you already have – and start planing what you want to add when time comes. Make shopping list of seeds or plants.
Build new vegetable beds if you need more/new ones. They will be ready when you need them!
Now it is also good time to seed cold-loving vegetables, for example salad greens or radishes. You will be able to enjoy them in no time.

Buyer

Rent or buy?

This is probably one of the most often asked questions and at the same time one that almost never has a clear cut answer. Our lives differ and what makes it even harder to answer this question is that everyone looks at life through their past experiences and biases.

When our clients or prospects ask us this question here is what we say…

Do you enjoy making your house your home?

Owning a house comes with great freedom of making it your own. While renting, the most you can ask for is probably paint change, but don’t expect to be presented with choice other than white, gray or beige. No landlord will agree to blue, green, red or any other non bland, neutral color, for fear of not being able to rent it again when you leave. Would you like to plant a raised bed garden? Install a play set with slide for your kid? You can forget about it when you rent.

Nobody will kick you out or increase your rent!

Owning a house means that your life is protected. You won’t be surprised by landlord changes, sudden rent increases or outright refusal to renew. No maintenance visits either. How would you feel if somebody regularly ‘inspected’ all your closets or bedrooms?

Uncle Sam prefers home owners

Yes, it is rare that uncle Sam is favoring one group over the other. Yet when it comes to owning the house the government clearly prefers that you own your home. To incentivize you to buy they allow you to deduct interest you pay on your mortgage from your taxes (as always, we are not tax professionals so please ask your tax preparer for details).

Your home can be your retirement fund or savings account

We all know how hard it is to save for the future. There is always this or that expense that gets in the way of regular contributions into your savings account. How about your house? Every single one of your monthly mortgage payments contains growing principal portion. Your equity is growing every month. I don’t know about you, but I appreciate this and am relived that my net worth is constantly growing.

And it brings interest!

Real estate traditionally is the safest way to conservatively grow your wealth. Properties appreciate on average between 5 and 10% every year. Not only does your equity grow because you make monthly contributions. It also brings interest!

One more thing – monthly cost in most cases will be lower

When you rent you not only have to pay for somebody else’s mortgage payment on the house. They also need to pay their property manager, accountant, build some nice maintenance reserves, pay business insurance and in the end, bring a profit. This all usually adds up to about 15% premium over what you would pay as an owner on the same property.

Is it all roses then, right?

Of course not. Sometimes it makes sense to rent. Here are some arguments for renting:

Are you planning to live in the place for at least 4-5 years?

As fun and rewarding as owning a house is, selling it comes with a cost. In addition to our commission you will have to credit the Buyer with prorated property taxes, in some states provide home warranty and title insurance and probably pay for some maintenance, upgrades or repairs requested by the future owners. On average you have to budget between 8 and 10% of your selling price as your cost of selling. Considering that in the beginning your monthly payments cover mostly interest it pays to wait few years before selling to build equity and let the house appreciate. If you plan for short stay, better rent.

Can you do small fixes on your own?

I’m not talking remodeling your kitchen or replacing roof, those are best to be left to professionals. Yet there are many small things (like replacing light bulbs, smoke detectors, cleaning dryer vent or cleaning siding and windows that are normally handled by the owner when you rent). All those are typically included in rent (see the mention of the own maintenance reserves) but if you can do them on your own in your house it will cost you only pennies on the dollar and will greatly lower your cost of ownership. On the other hand if you can’t tell which side of the screwdriver is the business end – better consider renting. The owner will have properly trained crew on call that will take care of those issues efficiently and quickly.

Rent vs. Own. There is no right answer. Only you can make that decision. No matter which way do you choose to go, we’re here to help. Let us know if you have any additional questions or comments, we’ll be happy to help!