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.

Death of a Borrower


This is part 3 of 4 of a series called “The most important things consumers can benefit from my 15 years as a mortgage expert”

This topic is so important my brother and I just got off the phone about it.  What is your answer to the question, “how will your spouse make the mortgage payment in the event you unexpectedly pass away?”  This should be an easy answer.

Over the years, two of my clients have called for help in making their mortgage payment due to the unexpected death of their spouse.  During a tragic event, such as an unexpected death, the mortgage payment should be the last thing someone should be concerned about.  Each day 2600 Americans expect to be alive tomorrow, but will not be.

Every client has heard me ask a version of that question.  Those words have been spoken tens of thousands of times because the goal is for homeowners to seriously take the advice into consideration.

Borrowers who have a home loan should plan on to immediately purchasing an inexpensive, term life insurance policy for an amount equal to or greater than the balance on their mortgage.  Just ask yourself a few questions to help imagine if your spouse’s income suddenly vanished…

  • Where would the funds come to pay the very first mortgage payment after the funeral?
  • What family member would you have to ask for money from because you were short funds?
  • How little time would you have to grieve over the loss of your loved one because you had to earn a living?
  • What changes to your life would occur because your spouse wasn’t there to take care of household and family duties?
  • How confident are you that your children would be able to continue to live a normal life in your home after a death?

This list of questions can go on and on.  There are so many other reasons to pay for life insurance and skip one trip to Subway each month, but very few individuals take the time to buy it.  I am not an insurance agent, but maybe I should be.

Most employer’s life insurance plans do not provide enough benefit to fund the same standard of living after you pass away.  Don’t plan on your aunt to setup a “GoFundMe” site and bankroll the roof over your family’s head.  Your spouse will never stop worrying about money.  It is very unlikely that your health insurance plan has enough death benefit to handle the household expenses.

If you own a home or plan to buy one, the second thing you should do after signing the loan application is setup an appointment with a life insurance agent and buy a new policy, or update your current one.  It is not unethical to have adequate life insurance to pay off the house in the event of an unexpected death.  Adequate coverage will provide the luxury of allowing your family to take as much time to grieve over your loss, all while maintaining the stability of life’s current routines.

If you think you are going to live to 100, guess again!  The U.S. Department of Health has some interesting statistics.  Accidents are the #4 cause of death each year.  Did you know that five percent of all annual deaths, over 130,000 Americans, die unexpectedly each year and not from old age?  For every 100,000 people in America, over 1,000 individuals between the ages of 25 and 54 pass away each year.

Think about the family of someone you know who passed away recently.  How are they managing their finances today?  Will they have to sell the home, or will the children have the comfort of keeping their bedrooms and attending the same school because of some very simple and inexpensive planning.

I have a list of highly qualified, trustworthy life insurance companies and agents, feel free to email me for recommendations at  Consider buying life insurance today and give the best Christmas gift available, security.

Yes, I’ll still ask every client if they have adequate life insurance for each other, great bankers should be required to do so!

What Every First Time Home Buyer Needs to Know About the IRS

study-girl-writing-notebook-159810This is part 1 of 4 of a new series called “The most important things consumers can benefit from my 15 years as a mortgage expert”

First time home buyers are a unique group of people.  There are many things in common such as dreams of owning, visualizing themselves taking care of a place they call home, talking with friends over lunch about their searches with a real estate agent, and the list goes on and on.

One thing that I have found that they don’t talk much about is finances or financing of the property to the most important people in their lives like their spouses and most importantly, their banker.

Through the lack of detailed conversations about financial goals, income, expenses and in the case of this article, IRS Taxes; with experienced bankers such as myself, most first time buyers are losing money like water through a strainer.  But the tap is not on trickle, it is on full blast!

Most first time buyers qualify for a tax credit from the IRS which is available IF you ask for it and sign the paperwork at or before closing.  It is not like the old tax credit where all you had to do is buy and then when tax season rolled around simply complete some paperwork and hand it into the IRS for $8,000.  This tax credit has the potential to be significantly more valuable, but the paperwork must be signed and delivered at closing. Let me repeat, this request must be signed with your banker before you own, no exceptions!!

The IRS is allowing first time buyers to receive up to $2,000 of credit toward Federal Income Taxes each year you own the home and occupy it, forever.  That means after only 4 years of owning, the potential of this credit can begin to exceed anything that the IRS has offered in past history.  Can you imagine that after ten years of owning your home you potentially could have received a total credit of $20,000!  There is not a single other advantage that the IRS has that is more valuable to the mass population in the United States than the little known current tax credit.

Shortly after the beginning of each year borrowers receive a statement from the servicing agent of the loan showing the total amount of interest that was paid over the calendar year.  The first time buyers that qualified and completed the INITIAL request form for a Mortgage Credit Certificate (MCC), will receive up to 50% of each dollar paid as a credit back toward their IRS Tax Bill.  (This is where you pause and go get your 2015 IRS Form 1040 and look at line 63 on p.2 to see how much you were charged in taxes)

The result of this credit directly and immediately reduces the charges from the IRS for Federal income taxes.  That is the easiest $2,000 that could be made each year, and just for owning a home with a mortgage on it!

But don’t ask for it AFTER the closing.  You are disqualified immediately after closing if you did not complete the request for MCC paperwork that your banker should have offered to you.  If your banker didn’t offer it to you, then you are also out of luck.  Maybe a little shopping would have been beneficial in that case because he could have just cost you tens of thousands of dollars.

There are some restrictions, but it is definitely worth investigating and discussing with bankers.

To learn more about the tax credit and if your situation would allow you to take advantage of it, sent me an email at