What is Due Diligence in Real Estate?

If you’re moving for the first time into a community with a homeowner association, you must be wondering how much it’ll all cost you. What do HOA fees cover, are they negotiable, and how are they collected? Do you have to pay HOA fees even if you aren’t using the services it offers, and what happens if you don’t pay them? We’ll guide you through all the details, explain HOA rules thoroughly, and provide an insight into how a homeowner association functions.   Understanding a Homeowner Association  Homeowner associations are formed within communities, buildings, or neighborhoods where properties are owned by multiple parties. The aim of these organizations is to create and enforce rules regarding the properties within their jurisdiction regarding the cleanliness and the condition of the properties and their uniform appearance. What else is a homeowners association in charge of? An HOA can also be in charge of minor tasks such as seasonal lighting, snow removal, etc.  HOAs have the legal authority to require residents to abide by the terms of the contract they signed. If the property you bought was previously in an HOA, in most cases, you’ll automatically become a member of it. That’s why getting acquainted with the HOA’s rules should be a part of your due diligence when buying a home. Failing to abide by these rules can lead to penalties such as monetary fines, the restriction of some privileges, or even legal actions.  How Much Will It All Cost You? Let’s shed some light on homeowners association fees. Depending on the neighborhood, the monthly or annual HOA fees members are required to pay usually range from $200 to $400 per month. In luxury neighborhoods, fees can go up to $10,000, while HOAs in less attractive areas can have lower-than-average fees of about $100 per month.  The prices vary depending on the city or area, too. According to a Trulia study from 2015, the lowest were in Warren, Mich ($218 per month) and the highest in New York City ($571). The same study established that older buildings entail a higher average fee due to more extensive maintenance requirements.  What Do Homeowner Association Fees Cover?  Before we get into detail, please note that this isn’t a definite list. Different HOAs offer different services to their members, so you should always check the rules of the particular HOA your (prospective) home belongs to. In this section, we’ll discuss the most common, basic services. Communal Areas Maintenance The homeowner association will usually cover the expenses of repairs in common areas, lawns, roads, and pavements maintenance, as well as snow removal. What else do HOA fees cover? It can be the maintenance of common areas, such as patios, lobbies, elevators, landscapes, and many other things. City Services Sometimes, HOAs cover certain communal utilities: trash removal, electricity for communal areas, water and sewer fees. Pest Control Residents of condominiums often struggle with cockroach infestations, and single-family houses sometimes have to deal with rats, termites, squirrels, or even rabbits that can seriously damage gardens. Having your HOA deal with pest control - especially roaches in buildings - is only logical because these insects spread from one unit to another, so getting rid of them has to be a joint effort if it’s to be successful. Insurance Condos association fees won’t cover the insurance costs for your humble abode but only for the communal areas and the exterior of the building. In case, for example, your condominium and/or the surrounding property is damaged in a natural disaster, you can lean on your HOA. But make sure to purchase homeowner’s insurance to protect your home.  Additional Amenities  We’ve listed some essential services covered by HOA fees. However, those who reside in more luxurious properties might get additional perks included in the (higher) price, such as security services or access to spas, gyms, tennis courts, swimming pools, community clubhouses. Do You Have To Join an HOA? After learning the answer to the question “What are HOA fees?” your next question is likely whether HOA membership is mandatory. With more than 350,000 homeowner associations in the US running about 53% of all properties, future homeowners don’t have much choice unless they’re lucky enough to find a home within the jurisdiction of a voluntary HOA. Voluntary HOA If you reside in a community with a voluntary HOA, you don’t have to sign up for its services. By refusing the HOA payment, you probably won’t have (free) access to communal facilities or community clubs reserved for members only. On the bright side, apart from not having to pay the steep fees, you won’t have to abide by the rules imposed by the association.  Mandatory HOA If typing “What do HOA fees cover” into the search box is what landed you here, it’s more likely than not that your real estate is in an area with a mandatory HOA. That means you will have to pay a monthly fee and abide by its rules. The good side of the situation is that you won’t have to deal with maintenance and bureaucracy yourself. However, painting your house in loud colors, keeping a zoo at home, or renting your apartment to just anyone without going through a thorough tenant screening process first probably won’t be an option.  Breaking HOA Rules  An average HOA fee is a major budget item for most families, so many people are tempted to just skip their payments. A word of caution if you’re thinking about dodging the fees and/or rules of your HOA: Penalties against rule-breakers can be harsh and might lead to legal action against the homeowner or even foreclosures of the property.  To avoid all that unnecessary trouble, take enough time to study the rules of your future home’s HOA. According to real estate statistics, home buyers spend 10 weeks on average searching for a new home, so there’s plenty of time to examine all the possible sanctions and restrictions a HOA might impose.

Becoming a homeowner is one of the best experiences one can have, but purchasing a property comes with many decisions. Finding the right home to fit your lifestyle and budget in your preferred location can seem like mission impossible. Add to that the interchangeable terms for property types, and the confusion can become mind-numbing. We’ll focus on handling one of those issues and explain the difference between a townhouse and a condo. We’ll also briefly cover other types of properties so you can walk into a realtor’s office with the knowledge and confidence you need to find the perfect place to start your new life as a homeowner. Keep in mind, though - real estate is one of those niches where definitions can vary even in theory; in real life, the line where a condo ends and a townhouse begins is even more blurred. However, once you have the basics, you’ll be able to tell one from the other much easier. What Is a Condo? In the realtor playbook, a condominium is a style of joint ownership - as a new owner, you’d be purchasing a piece of a building, which would give you exclusive access to some of its areas. Having a condo means living in an apartment building, but you own the apartment instead of renting. You also share joint ownership of the whole building with other owners, including the gym, pool, grounds, or any other common areas the building has. This solution is typically cheaper than the others, but it can also be limiting for some people. Living in a condo makes you a part of a community, but where that will land on the list of pros and cons of buying a condo depends solely on you. What Is an Apartment? Now, you’ll often hear the word ‘apartment’ used interchangeably with ‘condo,’ which can lead to confusion. However, the term ‘apartment’ typically refers to the individual units that make up a specific style of building. These units are usually occupied by tenants based on a lease. In practice, an apartment building is owned by a person or business that rents the units to carefully screened tenants and oftentimes relies on property management software or a company on call. Even though this is the main difference between a condo and an apartment, it isn’t always the case, and there are exceptions to it, too. You usually can’t tell whether a building consists of apartments for rent or if it’s part of a condominium just by looking at it, as they’re built more-or-less the same. Some modern condos look more like multi-level townhouses, which only adds to the confusion. Luckily, this is where brokerages and real estate agents can help, as it takes them a quick look into their real estate CRM to find precise information about the property you might be interested in. As mentioned before, there are always exceptions, but the main difference in the condos vs. apartment struggle lies in who owns the units in a building - those living there or landlords. What Is a Townhouse? A townhouse is a type of building: To first-time homebuyers, it’s easiest to explain by saying, “think row houses.” A townhouse shares one or more walls with other townhouses, but the owners don’t have to worry about downstairs or upstairs neighbors. You’ll also likely get your own basement, front yard, or backyard with a townhouse. Townhouses come with the convenience of a condo and some of the flexibility of a single-family home. With this type of property, you get more privacy than with the former, as it’s very close to owning a single-family home. The critical difference between a condo and a townhouse is that townhouses are more expensive. On the other hand, they’re much more affordable when compared to the price of a single-family home. In other words, it’s a reasonable middle ground, which is why this option is so popular with new homeowners. Homeowners Association (HOA) It is essential to take a moment here to discuss the role the Homeowners Association (HOA) plays with these types of properties.  When you purchase either a condo or townhouse, you’ll have to abide by HOA rules, but also cash out for HOA fees. HOA’s fees are typically higher in condos, as the HOA is responsible for most of the maintenance, which allows for a lock-and-leave mentality, where you don’t have to worry about repairs. This is another difference between a townhouse and a condo, as HOA fees for townhouses cover only a few services, such as water bills or lawn maintenance. Any repairs on a townhouse may be a bit expensive, and you might have to pay for them at a moment’s notice. Now, let’s quickly go over the remaining property types: Single-family and semi-detached homes. Single-Family Homes Single-family homes or fully detached, stand-alone properties are the dream of many wannabe homeowners, but these can be very expensive. Still, they come with much more space, privacy, and rights than the other options on this list. Semi-Detached Homes A semi-detached house shares some similarities with the townhome definition, except you get to share a single outer wall of your home with someone else, whereas with a townhouse, you usually share both. These houses are typically mirrored images of each other. So, Which Home Is Right for You? As usual, the answer is: It depends on you and, more specifically, your lifestyle. People who chose condos typically appreciate living with neighbors, sharing common areas, and take a lot of comfort from it. Not having to worry about maintenance in a condo is a nice bonus, even though it might mean paying a bit more in HOA fees each month. On the other side of the condo vs. townhouse debate are the people who appreciate their privacy more. They could also prefer the type of lifestyle that requires a backyard, for example, but cannot yet afford a single-family home.

Quite a few real estate agents have given up on the open house concept and categorized it as an archaic selling method. On the other hand, those that still use this strategy say they’ve had great success with it. So which example should you follow? Well, in our opinion, an open house is not to be underestimated - if it’s done right. But simply letting people in the door isn’t going to do much. That’s why, today, we’re going to give you all the necessary tips and tricks on how to do an open house and do it well. What Is an Open House? Before we go into more detail, we’d like to clarify what exactly an open house is, to avoid any mix-ups. An open house is a period during which a property may be shown to any potential buyers or tenants, but it can also refer to the property itself. There are also broker’s open houses, which, unlike their traditional counterparts, aren’t available to the general public. Instead, their goal is to enable real estate professionals to examine a property and assess if it would be of interest to their clients. How To Do an Open House Successfully? Do Your Research There’s a lot you can learn from your competition, so take the time to visit open houses in the area where the property you're selling is located. If you have the time, you should go to the surrounding areas as well. While attending these open houses, pay attention to how the homes are staged, what features the real estate agent in charge is focusing on, and, most importantly, try to assess the buyers’ reactions. Create a Description The second step of preparing for an open house involves creating a property description sheet. This sheet should contain information such as the property’s address, asking price, number of bedrooms and bathrooms, total square footage, photos of the interior and exterior, as well as anything else that could be relevant to potential buyers. Make sure all the information you list is correct, because errors could make you look unprofessional; as someone new to the world of real estate, you can’t afford to make a bad first impression. Stage the Property You’ve most likely heard of this term, but if you haven’t, know that staging is the process of preparing a property for sale. Before hosting an open house, you need to make it look as appealing as possible to the majority of your prospective buyers. You should focus on cleaning and decluttering the space, as well as removing any personal items such as photos, monogrammed towels, and personal knickknacks. You may also need to replace some of your old appliances. Inform People We’ve reached what’s perhaps the crucial part of this entire process: Getting people informed and interested in your open house. If you’re well-connected, this shouldn’t pose much of a problem. There are numerous excellent text marketing apps you can use to send out a text blast and notify all your prospects. However, you’ll have to resort to more elaborate open house ad ideas if you’re short on contacts.  According to the National Association of Realtors, 93% of all home buyers use the internet as their primary source of information regarding real estate. Therefore, your advertising efforts need to be aimed at: Social media platforms: Facebook, Instagram, and Twitter are the most obvious choices, but seeing as how immensely popular TikTok has become, you might want to consider using that as well. Real estate websites: Your open house advertisement should be listed on at least one or two real estate websites. We recommend  Zillow and Trulia, since they are among the most visited. Multiple listing services: If you’re an agent, you might want to join an MLS. MLSs are networks that enable brokers and agents to exchange data about properties for sale.  Your own website: Out of all the things we’ve listed so far, building a website isn’t among the most important conditions you need for a successful open house. However, if you’re planning on further pursuing a career in real estate, you should definitely think about it, especially considering the fact that, nowadays, there are numerous affordable and easy-to-use website builders available, such as Wix and Squarespace. Video sharing websites: More and more agents have begun filming video tours and posting them on YouTube and similar sites. It may seem counterintuitive, but giving people a preview of the property could actually get them to come see it in person. In addition to the internet-related advertising methods, you can also print open house flyers and distribute them at gyms, grocery stores, and large workplaces, and put up a “For sale” sign in front of the property. Be a Good Host You’ll need to be both friendly and professional. Keep in mind that your goal isn’t to make the property seem perfect - there’s no such thing - but to point out the features that make it stand out from the competition. After you’ve shown the buyers around the home, be prepared to answer any questions they may have about it and leave them enough time to explore it independently. In addition to that, try to find out about other open house listings they are looking at. You should remember to put out some refreshments as well – cookies and bottled water are the safest options. Some agents serve alcohol to get a better turnout, but we'd advise against that, since your focus should be on attracting serious customers, not anyone who just wants to take advantage of the free drinks. Lastly, make sure that every visitor fills out the sign-in sheet. Their contact information is vital for the next step in this “How to Do an Open House” guide. Stay in Touch You should never forget to send a “thank you” email or text to the people that visited your open house. Not only is it polite, but it will also enable people who may not have picked up one of your flyers or descriptions to get in touch with you. The message should include a link to your web page or ad. During the following week, you should call every one of your visitors and ask them if they are interested in the home and have any additional questions about it. If they are disinterested, thank them for stopping by your open house showing and use the opportunity to hear their opinions on how you could make the property more attractive to future potential buyers. Those serious about a career in real estate can benefit from getting a good piece of customer relationship management software. In the beginning, you probably won’t need it as much, but as you gain more contacts, you’ll see that developing a relationship with them will get increasingly harder if you don’t enlist some help to keep track of all the information. When to Host an Open House? Scheduling your open house at the right time can make the difference between two visitors and twenty. People tend to have more free time on weekends, but the best time for an open house depends on the area in which the showing is being held. In metro areas, you don’t want to organize an open house too late in the day, since the heavy afternoon traffic will most likely discourage many from coming. You should be fine if you choose any time slot between 11:00 a.m. and 3:00 p.m. Setting a time in the suburbs is less tricky. Our suggestion would be to let people enjoy their mornings and host your open house between 12:00 p.m. and 4:00 p.m. Although it may seem like a fun idea, avoid the temptation of holding an open house on a public holiday. Few will want to go through the effort of finding the time to drop by. Another thing that you should remember is that you will almost certainly need to organize several open houses to get the best possible offers. When planning several showings, sticking to a schedule will help you keep track of everything you need to do and make things less confusing for your potential customers. Note that, unlike standard open houses, broker’s open houses are typically held midweek, since agents are more available during those days. Should You Hold an Open House? Now that we’ve explained how to host an open house, let’s discuss whether you should actually do it. Pros: Exposure: Open houses are a terrific way to publicize a property. They may not lead to a direct sale every time, but sometimes the hardest part of selling a home is making people aware of it. To help with that, you should make use of flyers and internet ads to attract attention to the actual event, and then put in plenty of open house advertising effort to maintain buyer interest while they’re on the property and afterward. Attracts inexperienced buyers: A lot of first-time homebuyers don’t know where to start their home-buying process, which is why they will commonly attend open houses to ask a real estate agent for advice, see what’s out there, and perhaps even learn from other visitors. Networking: Potential buyers aren’t the only visitors you should expect at your showing. In most cases, you’ll also find real estate brokers and agents there too. Not only can they offer you useful open house tips, but they might actually have one or several clients who might be interested in your property. Lack of pressure: During private viewings, buyers can feel pressured into making a purchase, while an open house enables them to explore the home in a relaxed environment. Keep in mind that, to create such an atmosphere, you mustn’t be trying to market the home too aggressively. Convenience: If you time your open house right, you could get plenty of potential buyers who just happened to be passing by at the time of the showing and see your open house sign. On top of that, not everyone is a huge fan of technology, and many people still prefer to experience things first-hand instead of through a virtual tour, for example. Cons: Time-consuming: Whether you’ve recently become a real estate agent or you’ve decided to sell your home on your own, keep in mind that marketing, preparing, and presenting a property takes a significant amount of time and research. Low selling chances: As we’ve already mentioned, many real estate agents don’t believe that open houses work. The truth is that most serious prospective buyers will usually opt for a private viewing instead of a group one. Security risks: Unfortunately, one of the main downsides of an open house event is that criminals often use them to explore a property without raising suspicion or being supervised. The odds of a post-open-house break-in increase in situations when the home is vacant. What’s more, you’ll have to look out for any attempts of theft during the event as well, as large crowds make it nearly impossible to find the culprit afterward. Hobbyists and curious neighbors: For some, occasionally visiting open houses is a kind of hobby, especially when high-end homes are concerned. While conducting your open house follow-up, you might also discover that some of the people you had met were just inquisitive neighbors who wanted to compare the property to their own. Obviously, none of these individuals will be interested in making a purchase, and they aren’t very useful as future contacts either.