Saturday, August 01, 2015
Ask the HOA Expert: Illegal Or Unapproved Modifications
Question: Our board is concerned about some of the structural changes made by owners like cutting concrete foundations, moving walls and plumbing modifications that tie into the main lines. Is there a statute of limitations to bring action against an owner for illegal or unapproved modifications?
Answer: Every HOA needs a policy for architectural changes. That policy should require proper engineering and permitting. If your HOA is comprised of single family homes, the HOAs concern is curb appeal. In common wall HOAs like condominiums, improper structural changes may degrade the structure which is the HOAs responsibility to maintain. Structural changes can create life safety issues. So in condominiums, the stakes are much higher and the HOA needs to be much more vigilant and aggressive in controlling outcomes. There is a sample Architectural Design Policy in the Regenesis.net Policy Samples section which can be adapted to your HOAs use.
Whether the HOA should get involved in retroactively enforcing violations depends on how long the feature has been in place and if it is something that affects structural integrity. If the latter, the board should act and bring the building department into the mix if necessary.
Question: Our board is debating the value of installing an entry monument in our HOA. I dont see it as a worthwhile expense. What is your experience?
Answer: It is generally a good idea to have an entry monument or sign since HOAs have rights and responsibilities that single family subdivision homeowners do not have. The sign will help identify that fact to prospective buyers, real estate agents, contractors and others that may be thinking of getting involved is some way. It is recommended that the sign include contact information website, phone since finding the proper source of information is a major problem in the HOA world.
Question: Should the board require that a members account be current before they approving an Architectural Review Application?
Answer: Timely collections are an essential for all HOAs. The board should enact an aggressive policy that includes filing liens and anything else the governing documents and law allows. Denying an architectural design request is probably permissible as long as your approved collection policy states that it is. As with any board policy, it should be reviewed prior to enactment by a knowledgeable attorney that specializes in homeowner association law in your state.
There is a sample Collection Policy in the Regenesis.net Policy Samples section which can be adapted to your HOAs use.
Question: We are a pet friendly condominium but the number of resident pets has been climbing rapidly recently. We currently have a 30 weight limit on dogs which no one abides by. We are thinking of charging dog owners an annual fee because our carpet cleaning costs are so high. Have you seen this done in other condominiums?
Answer: Common area carpet should normally be cleaned several times a year even without the pet challenges. Pet owners whose pets are caught in the act, of course, should pay the cost of special cleaning. But charging all pet owners for something a few are guilty is not fair.
As far as your 30 weight limit, the premise is that smaller dogs are better mannered than larger ones. The biggest problems with dogs are barking, aggression and owners failing to clean up after them. In this, size is no object. The HOA should definitely have some policy for dealing with dog owners that fail in these categories. Post regular reminders of pet guidelines. There is a sample Pet Policy in the Regenesis.net Policy Samples section.
Question: Our HOA is dealing with some distressing issues regarding rentals. A number of landlord owners do not properly maintain their units. Is the HOA allowed to inspect rental units to ensure that the interior is in good repair? We think their condition is affecting our market values.
Answer: Unit owners have many protections that extend to their renters. If your concerns is one of fire safety or health trash, cockroaches, rats, the HOA has the right to demand the unit owner take action. The HOA has no direct authority over renters and should not enter a unit without permission or unless there is an emergency fire, flood, etc.
Making a case that interior condition affects curb appeal and market value is hard to prove. There have been many court cases affirming the right of residents to live like pigs if they so choose. But unit owners are just as capable of living this way so singling out renters is unfair. The HOA should focus on individual residents, whether owner or renter, and specific issues that directly affect the HOA.
If a renter is violating HOA rules and regulations, the unit owner should be notified in writing and given a deadline for correction. If the owner fails to take action, invoke approved fines and penalties to enforce compliance. If there is illegal or dangerous activity, call the police, health or fire department.
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Remember The Rollover? It May Cost You Some Tax
Remember the old rollover? It provided a tax benefit for those of us who sold and then bought principal residences before 1997. That old friend is no longer with us. However, for many taxpayers who are now considering selling a home, its memory lingers on - and can haunt them financially.
The rollover allowed homeowners who sold a principal residence to defer tax on any profit if they purchased a new home within two years at a price equal to or greater than the sales price of the old one. However, unlike under current law, this was not a tax exclusion. It was only a tax deferral, which meant that ultimately you might have to pay a capital gains tax when you sold a home for the last time.
The rollover was in force through May 6, 1997. The Taxpayer >
The law has two important limitations:
You must have owned and used the home as your principal residence for two out of five years before the sale. If you are married, as long as one spouse meets the ownership and both meet the "use" requirement, the exclusion applies. Marital status is determined on the date the house is sold. In the event of a divorce in which one spouse is awarded sole ownership pursuant to a divorce decree or separation agreement, the use requirement will take into account any time that the other spouse had an interest in the property before that interest was transferred.
The exclusion is generally applicable once every two years. However, if you are unable to meet the two-year ownership and use requirements because of a change in employment, health reasons or unforeseen circumstances, then the exclusion is prorated.
These "prorations" are complex and require professional guidance. On the other hand, most homeowners who have to sell a home in less than two years will probably not have made enough profit to be concerned about this issue.
Current law applies to all principal residences: single-family homes, condominium units and cooperative apartments. If a boat or a mobile home is your principal residence, the law is still applicable. Note that to qualify as such, three things are required: sleeping quarters, a toilet and cooking facilities.
Although the new 250,000/500,000 exclusions sound good, there is one important point to remember when calculating your profit. Real estate has appreciated dramatically over the years, and many homeowners pursued the "great American dream" by selling and "buying up" repeatedly. If your current house was purchased before the May 1997 "trigger date"and you decide to sell, you have the right to take advantage of the gain exclusion. But you have to look carefully at any previous home sales to determine the tax basis of your current home.
For example, lets say that in 1965, you purchased a house for 50,000. Then, in 1975, you sold it for 150,000, and purchased a new house for 200,000. For purposes of this example, we will ignore such matters as home improvements and real estate commissions, although such expenses can - and should - be taken into consideration in determining profit. Because of the rollover, you deferred 100,000 of profit 150,000 minus 50,000, and the basis of your new home became 100,000. You determine the basis by subtracting the reinvested profit from the purchase price.
In 198, you sold that second home for 400,000 and purchased another one for 500,000. Now, because of the rollover, you deferred profit of 300,000 400,000 minus 100,000, and the basis of your new, 500,000 home is now 200,000 500,000 minus 300,000. You may be tempted to question the use of 100,000 in computing the profit, because you purchased your second house for 200,000. But remember: The basis of that house was only 100,000, and the profit is computed by subtracting the basis of the house and not its purchase price from the sales price.
The problem starts when you decide to sell the house you bought in 1987. Now you will have to determine the houses basis, and to do that, you will have to take into account your history of home buying and selling, which in our example goes all the way back to 1965.
In the example above, if you are married, file a joint tax return and have lived in the house for at least two out of the past five years, you will not have to pay any capital gains tax unless you sell the house for more than 700,000 i.e. a basis of 200,000 plus the exclusion of 500,000.
But the numbers in that example - for many homeowners - are very low. Houses that 10 years ago were selling for 300,000 to 400,000 are now bringing in more than a 1 million in many parts of the country. For a longtime serial home buyer, the capital gains exposure could be pretty scary.
That is why it is so important to keep all of your records, including all of your settlement sheets. Such expenses as home improvements, real estate commissions, fix-up costs, legal and title costs, will increase your basis - and lower your tax.
You must keep all of your records.
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Using Time-Tested Real Estate Marketing Tools With a Twist
Whats Old is New Again -- Only Better
Heres whats to love
: real estate has roared back with a passion and agents, both new and seasoned are seemingly working smarter rather than harder. Thats powerful and a trend most of us that have been around the real estate block a while cant wait to watch continue to grow and grow. Seeing agents succeed, work to the top of their game, without breaking the bank, or burning out will never grow old.
Savvy agents have realized that to survive and thrive in this industry despite the peaks and valleys requires smart business strategy, planning, tools, and skills. That whole chasing the next commission thing? So five years ago. When the bottom fell out of the real estate market, agents left the business by the droves -- some with lifetime careers in the rear view but nothing to show for their efforts. Why? They didnt build the foundation. They didnt keep a database or book of business. So instead of having something to sell when they were ready to exit or had to exit the industry, they just walked away. The other agents that dug in could because they put the work into building the three things agents really need in any market: a strong sphere of influence, geographic farm area, and niche market.
When times got tough we saw many agents and brokers get away from tried and true ideas in marketing, strategy, and mindset. Now that things are hopping again, they are back to doing what works -- but adding new twists based on technology and social media advances.
Heres what we see trending with todays agents:
1. Agents are back to building books of business
. Those agents we mentioned that left the industry with nothing to show for it did so because they never took the time to build a solid sphere of influence or geographic farm database that could be documented and sold. Thats not what kept them from the ability to survive a market down-turn, and it is what kept their database keeping counterparts afloat. There was a big lesson there for agents and now we are seeing a resurgence of agents who are wisely putting all their contacts: friends, family, colleagues, acquaintances, past clients, etc. all in a sphere of influence database. They create a separate contact list for prospects those they are nurturing to put into their sphere, and another for their geographic farm area. Top agents add a fourth list to the database -- that of a niche market that they are passionate about. We had a tremendous response to a recent article: The 250 People Who Should Be in Your Sphere. The problem for most agents is they think they dont have the time to sit down and input the data into a manageable system. The truth is they dont have a long-term, sustainable business without making the time -- or better still, delegating that duty and hiring someone to input the information while they stay close to their highest and best use of time which is, of course, prospecting, presenting, and closing real estate transactions.
2. Agents are using Just Listed/Just Sold marketing consistently. When agents tightened their belts, many stopped marketing altogether or >
3. Agents are once again geographic farming. For a long while the idea of geo-farming and door knocking was almost taboo in the industry. Scoffed as a waste of time when email became the holy grail of marketing. Agents have gone back to being community centric. Making it a point to come out from behind their computer screens and actually walk the neighborhoods in which they want to be recognized as the specialist to turn to. They are warming their farm areas with postcard marketing, then knocking on doors, leaving door hangers, meeting neighbors, answering questions -- even hosting real estate Q amp; A events at the local coffee shops, libraries, and community centers. Thats smart business. We know people buy and sell with those folks they know, like, and trust. Savvy agents are making it their business to make solid >
4. Agents are marketing smarter. To find hand-raisers in their markets, agents are using old school marketing tools like postcards, newsletters, and flyers -- but they are getting better at matching their message to their marketing segments. Especially when they are working valuable niche markets such as Expireds, or First time home buyers. They are even taking it a step further with the advance of new data technology such as the specialty Prizm Code selects from Nielsen provided by the folks over at ProspectsPLUS.com. Now agents who love to work with buyers and sellers in golf or boating communities for example, can pull specialty lists of consumers who have expressed an interest in those areas and send them marketing pieces that speak specifically to those interests. Thats a powerful combination and one that is helping agents carve out, and take market-share ownership for those niches.
Its an exciting time in our industry. Agents are out in their communities, staying top of mind with their business base, and once again taking their incomes to new levels. By wisely adopting smart strategies, easy-to-implement marketing tools, and staying ahead of the trends by partnering with education-based resources that help them stay competitive on top of their game, the skys the limit as to what agents can accomplish.
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Sellers Advice: Should You Give Square Footage?
The square footage of a home can work for or against you as a seller. Buyers tend to think bigger is better, but your smaller home may actually feel more spacious than one that has a bigger footprint. Or your large home may actually be more livable than lavish square footage would suggest.
So how do you get the true character of your home across to buyers-by showing your living space to advantage. Living space is defined as space that is roofed, enclosed and finished for human occupancy; heated and cooled; and directly accessible from another living space.
Tax authorities typically measure from the exterior of the home, length times width. Thats one reason why square footage often doesnt reflect the livability of a home or explain why the interior may seem much smaller than exterior square footage.
Living space measurements do not subtract the thickness of the exterior walls, insulation and drywall. Further, a lot of living space is simply unusable for actual living, such as empty space beneath stairwells, or the access space required around water heaters and other systems required by code.
So if square footage numbers dont seem in your favor, talk to your real estate professional about ways to make what you have more attractive to buyers. Showcase your floorplan to advantage through videos, photos, staging and lighting. Bright, sunny spaces appear larger than dark closed spaces, so open the curtains and let the light in. Keep the lights on for showings.
Clear out all clutter. Clutter takes up valuable real estate and a messy room is distracting. Remove and store excess furniture and belongings, so that each room functions well with a minimum of furniture and accessories. Stage the home for optimum traffic flow around uncrowded tables and chairs.
Help your real estate professional stage your home for all photos that will appear online. Take the computer off the dining room table. Clear off countertops and tabletops, make sure furniture and lamps are right-sized for each room, and that each room is represented as advertised.
What you dont want to do is measure your home yourself. There is no standard way to measure a home -- a laser or a measuring tape may yield different numbers for different people, which could open you to liability.
Last, provide third-party sources for square footage, such as a tax assessor or appraiser. Put a disclaimer in your mandated sellers disclosure that says the following: "All third-party measurements are approximate. Buyers must >
Remember, your buyer is interested in getting the most home for the money compared to other similar homes, but you can show them that what they want is a home that functions well.
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What a Rising Median Home Price Means To Buyers
The nations median home price is up to 236,400 according to the National Association of Realtors. Thats "6.5 above the year-ago price and above the peak price set in July 2006," said USA Today. And whether that seems like a bargain or a bust depends squa>
What that translates to is a widely swinging affordability index with homeownership in some cities out of reach for only the tippy-top of its earners.
The median household income nationally is 55,132, and a buyer would "need to earn a salary of 47,253.07 to afford it," according to HSH, a leading national mortgage resource. "Yet if they put only 10 percent down instead of 20 percent, that salary increases to 54,341.84."
Those numbers bode well for cities like Dallas-Fort Worth that have lower-than-the-national-average home values albeit largely dependent on specific locations within the region, and rising more quickly than many other metros. The median sales price is 206,438 and the median household income is 72,400 in Fort Worth 73,900 in Dallas, according to DMNmedia.
But head toward Northern California, Southern California, or New York, and its a different story.
"San Francisco remains singularly unaffordable for all but the highest earners," said HSH. "To afford the median-priced home in the San Francisco metro area you will have to earn an eye-popping 141,417 a year. Los Angeles is once again more affordable than New York City, but only by a mere 159."
HSH also noted that recent home-price declines have made Cleveland the most affordable metro area studied. "Compared to Cleveland, San Francisco homebuyers need to earn over 112,000 more per year to afford a median-priced home in their metro area."
Check out HSHs cool chart to see where you stand in your city. You can also check out the National Association of Realtors Housing Affordability Index, which tracks housing prices, mortgage rates, and incomes geographically by month and year.
What can you buy for 236,400?
CNN Money took a look at how the median home price translates to homes for sale in different cities. Click here to see what 236,400 will buy you in: Colorado Springs; Ocala, FL; Phoenix; Columbus, OH; Atlanta; Boston; Kansas City, MO; Dallas; and The Bronx, NY.
Here are a few more examples:
You wont get a ton of space in this two-bedroom, two-bath, 897-square-foot Laguna Woods, CA condo, but you will get a beautiful view, a renovated kitchen, golf on two championship courses, and a bunch of amenities in the community, for 219,000.
Las Vegas was one of the cities hit hardest by the real estate market crash and is still not fully recovered, which means great deals can be had all over the area. This brand-new home from Pardee offers four bedrooms, three baths, and 1,897 square feet from just 219,950.
You can live and Chicago with room to move and a view. This two-bedroom, 1,200-square-foot condo has an open floorplan, a modern kitchen with granite and stainless steel appliances, a terrace, and a partial lake view for 229,900.
Cute, quaint, and updated in Saint Louis Park, MN, this three-bedroom, one-bath, 1,458-square-foot home is priced at 229,900.
This North Raleigh, NC charmer is spacious with four bedrooms, three baths, and 1,934 square feet, is in a great location walking distance to a park, and has a huge finished basement. Plus, it has almost a third of an acre.
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How to Enjoy Your Swimming Pool And Be Responsible in Drought Conditions
Swimming pools are a great way to cool down under the scorching summer sun, and of course theyre tons of fun. But with the summer heat comes water shortages in many states, and saving water becomes crucial. Dont feel guilty using your swimming pool instead, follow these drought and environmentally friendly considerations to recycle, conserve and preserve pool water.
It would be a crime to suggest no splashing while in the pool. But unfortunately, pools lose a significant amount of water when youre splashing around or jumping in with a cannonball. And when the water level is too low, the pool needs to be refilled. To reduce the amount of water you lose to splashing, under-fill your pool, leaving a foot or two at the top. This way you can play around all you want with less water ending up on the pool deck.
Use a Solar Pool Cover
A solar cover prevents water evaporation from the sun up to 90 percent, according to the In the Swim blog, and it acts as a heater as well thus saving you the energy youd spend on a pool heater. The U.S. Department of Energy estimates a pool cover can save up to 7,000 gallons of water each summer that would normally be evaporated. For the 10 percent that will evaporate regardless of your solar pool cover, use clean containers to collect rainwater that will replace the water lost in your pool due to evaporation or splashing.
Stop the Leaks
Inspect your pool for any cracks where water will leak. If youre unsure about any leaks in your pool, mark the current water level with a grease pen and check the water level in 24 hours for any significant changes in water level. Thousands of gallons of water can be lost as a result of leaks in your pool, dont let that precious water leak away.
Quench the Plants
If emptying your pool at the end of the summer is a must, recycle your pool water by using it on your plants. You should allow the water to sit for a week without adding chemicals before you use it on plants. This allows the pH level and chlorine content to fall. Use a pool testing kit to check that the chlorine content is less than one part per million, and consider adding neutralizers. Plants that are salt-tolerant such as rosemary, desert bloom, aloe and oleander, will thrive with old pool water.
Maintain the Pool
If properly maintained, draining and refilling a pool is so rare and unusual once per decade that it usually requires a professional. For proper maintenance, clean the filters to ensure maximum efficiency. Certain filters, such as cartridge filters, dont require any backwashing saving even more water. Remove debris such as leaves, bugs and trash immediately to keep the water in your pool clean.
Rinse off Before Swimming
Not rinsing before you enter the pool can negatively affect the quality of your pool water. Naturally our bodies have oils that will enter the pool, but rinsing before swimming removes these oils in addition to sweat, lotions, shampoo, conditioners, cosmetics and soaps on our skin and hair that affect the cleanliness of the pool. This includes your bathing suit, which should be cleaned with clear water instead of laundry soap. Residue from soaps and lotions are a major contributor to poor water quality, and not only will rinsing before swimming keep the pool water clean, it will keep it healthy by reducing the risk of waterborne illnesses, swimmers ear and skin infections.
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Buyers Advice: Dont Wait For a Better Deal
Despite a hot economy, mortgage interest rates are near historic lows. Prices are still below where they were nearly 10 years ago. Home values have risen for over five years allowing homeowners to build equity. Unemployment is down to where it was before the recession.
Prices are higher, inventory is tight, and buyers are being shut out of homes in many areas. Rents are higher than mortgage payments across the country. So buying a home is tougher than its been in years. Some homebuyers may be wondering if they should wait for a better deal.
There are valid arguments to waiting and to jumping in the market. Either choice has its risks. If you dont buy, prices can go up even more. Youll pay more in rent and when you decide to buy, homes that you could have afforded now will be more expensive, possibly out of your range.
If you do buy a home, prices could go down, which will put you underwater longer, and possibly leaving you with an expensive asset thats harder to sell.
But consider this - what if you buy and prices go up? Youll accumulate instant equity, a savings account of a kind, all while receiving considerable tax breaks and other incentives. Would you feel just as weighed down by owning a home if it were appreciating in value instead of losing value?
There are no guarantees that home prices will turn in your favor. Local markets rise or fall based on their own micro-economies, but there is one truth that never changes -- youll never know if you could have had a better deal unless you commit to making one.
In January 2015, Kiplingers predicted a 3.5 percent increase in national home prices. By June, prices were already up 3.2 percent, according to the National Association of REALTORS.
At the least, you should run the numbers. Document what you spend in rent VS what you can afford as a house payment. On the conservative side, you should spend no more than 28 percent of your income on your mortgage payment, taxes and hazard insurance. Your other debts should be no more than seven to 14 percent of your income.
Factor in other costs, such as moving, commutes, schools, and, of course, your down payment.
Buying a home isnt just about the money. Its about life>
You have to do whats comfortable for you and your family, whether thats remaining on the sidelines or buying a home. But heres a tip -- if you buy the home that best meets the needs of your household and budget, chances are that youll be pleased with your decision for years to come.
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