Stay Away From Myths of the HOA

Stay Away From Myths of the HOA

by Craig Markhardt, NMLS #7026

HOA’s (Home Owner’s Associations) has become an increasingly common term heard by home buyers during the normal course of business of a real estate transaction. Most buyers tell me that they dislike HOA’s, while at the same time not having any experience with them. Homeowner, or community associations are now a standard part of a large population of properties since being introduced in the U.S. a little more than 50 years ago.

The primary purpose of HOA’s is to manage a number of amenities on behalf of the home owner, rather than the individual owner solely being responsible for every item. Other purposes of HOA’s are to combine resources to fund capital improvements such as pools and entertainment areas in addition to regular upkeep. Many believe the existence of an association is a total waste of money.

This is true when the costs outweigh the benefits. Prospective buyers of properties that are a part of an association where monthly, or annual dues are required should not automatically disregard considering the property.

The first thing every buyer of a home (or current owner) in a development with an association should know is – membership in the association is a requirement. Why? The master deed to the development creates the legal obligation for the property, and owner, to be included in the association. What is not well known is that even though payment of dues to the association is also mandatory,  involvement is voluntary, and not an obligation.

HOA’s are notorious for having mismanaged operations, simply because the voluntary involvement of the board and committee members. This often results in poor financial management with dues that exceed, or are much less, than what is needed. In addition to reading all governing association documentation, careful review of association budgets and minutes of meetings is an essential part of evaluating whether or not to buy a home in a community.  Capture

What can be found is whether or not the HOA budget is properly funded, or underfunded per the covenants and rules for the community. Condominium associations often include many items that are normally a part of a typical home’s utility and upkeep costs and can actually reduce the housing budget.

Economies of scale are the important item to think about when evaluating the benefits of a home with an association. Careful review can help buyers become aware of significant, unknown cost savings that can increase to purchase power.


Gen Y Breaking Barriers to Urban Home Ownership in Sioux Falls

September 21, 2018 – Craig Markhardt, NMLS 7026

Downtown Sioux Falls, South Dakota has been growing in popularity and population even before I first moved to a warehouse loft there almost ten years ago. Back then, opportunities to own single family residences did not exist. Last year, into mid 2017, with over 2,000 individuals calling the core of Downtown Sioux Falls (DTSF) home, there were still less than a handful of individuals who owned their residence rather than leasing.


Sophie sits atop the #Jones421Condos in July looking over Downtown Sioux Falls #DTSF,      Photo: Craig Markhardt

That all changed with the development of 32 condominiums in a mixed use development known as Jones421, located on Phillips Avenue. Envisioned and created by a dedicated team including Jeff Hazard & Stacey McMahan from the award winning #KochHazardArchitects, the four story, 89,000 square foot plan for a total gut-rehab of a steel reinforced concrete grain elevator originally built by O. S. Jones Seed Company in 1909, was added on to, bringing valuable underground parking for owners, retail business, and owner-occupied living together at the end of 2017.

Earlier this month, Koch Hazard Architects received the SD AIA 2018 Merit Award in the category of Architecture for its design of the Jones421 Condos.


The historic facade of Jones421 Condos merged gracefully with the addition to the south, completed in 2017,      Photo: Craig Markhardt

Located in the heart of downtown in the Sioux Falls historic warehouse district, #Jones421 is within a 5 minute walk of shopping and dining, the gently flowing Sioux River, the East bank entertainment district, museums, theaters, as well as the beautiful Falls Park. All throughout DTSF, residents and travelers are able to enjoy the Sculpture Walk which features an annual display of over 50 outdoor sculptures that are changed each spring by volunteers and are on lease from artists from around the world.

In the spring of 2019, the $4.6 million outdoor concert pavilion known as #Levittatthefalls will open across the street and annually feature 50 free, professional concerts. The joint venture between the Levitt Foundation and the City of Sioux Falls will inspire and reinvigorate a large public green space and add exceptional value for residents and visitors by continuing to strengthen the quality of downtown life.

Levitt concept image

Levitt at The Falls concert venue to be located directly across Phillips Avenue from Jones 421 Condominiums, construction to be completed in Spring 2019, Image: Levitt Foundation

Jones421 brought the idea of condo ownership in a downtown setting like never seen before in South Dakota. Before breaking ground in 2015, I began working with the development group to coordinate (with much help) the availability of loans and certify the development allowing Frontier Bank, the preferred lender on the project, to finance buyers who qualify under conventional loan guidelines. Buyers have been able to contribute as little as 5 percent down payment with long term, competitive, fixed interest rate mortgages. This has allowed the Jones421 condo project to exceed expectations and close sales on 27 of the 32 units as of July 2018.

Another key ingredient to its success is the wide range of socioeconomic demographics the residential piece of the project covers. Condo units became available for every price point, ranging from about $180,000 to over $1 million. This setup has allowed both younger and older buyers to gain entry into home ownership in an urban setting. The make up of resident owners in the Jones421 condominiums includes 25% who are under the age of 40 with another large percentage of members of the Baby Boomer generation.


Jones421 Condos East facing courtyard has been mentioned to be the best courtyard in the City and is a welcoming space for patrons of the main level businesses as well as condo owners, Photo: Gene’s Photography

Hjoyung Lee, a Postdoctoral Fellow at the Joint Center for Housing Studies at Harvard University, #JCHS, believes that Gen Y (Millennials) are not likely to leave city living for suburbs anytime soon. Generation Y buyers have exclusively been renters in DTSF up until now, and for the first time ever, they are now able to become home owners with help of available financing.

Since the early 2000’s, I have been carefully monitoring development opportunities in Downtown Sioux Falls. For the first time in the City’s history, there are more core areas ready for development to cater to home ownership, versus the traditional leased apartment living. Urban home ownership in Sioux Falls is something I believe will continue as long as developers bring additional projects with units available for sale.

This is no easy task with complex lending guidelines and federal laws, which is why developers hire me as a consultant to help with projects, while buyers use me to finance their purchases.

Working Photo with Realtor

Craig Markhardt, Preferred Lender to Jones421 Condos discusses a unit’s appraisal onsite with a colleague,  Photo: Frontier Bank

I am excited to see what’s in store for DTSF in the next 10 years, especially since my wife and I are also proud owners of our new Jones421 condo. The success and momentum from the project has given many of us owners an expectation we will see new ideas from visionary developers and investors who have great energy.

It has been an honor to work with the developers on Jones421 Condos, and my ongoing goal is to help increase the number of downtown home owners; specifically Generation Y, from less than a dozen to the hundreds in Sioux Falls. I believe this is possible with well thought out  planning by developers, and when executed, every new owner will benefit from increasing property values at a pace beyond what is found in the typical residential neighborhood.