Fee Creep: Homeowner's Edition
When we talk about fee creep, most would think of cable companies or airlines and their ongoing list of fees that always seem to go up. But if you are a homeowner, costs for fixes, updates, and the long list of future projects is just part of the deal. Depending on the fix or project, those costs can take a chunk out of your pocket. But another unpleasant surprise is on the way for Texan homeowners. By this time of year, most mortgage services providers have sent out their annual escrow disclosures. And for many Texans, their homeowner’s insurance policy fee has increased and even more likely, their property taxes went up again. Beyond paying more just sucks, it can causes headaches with escrow balances.
Insurance rates always feel like they are going up anyway, but they have really accelerated in the last couple of years. There’s a couple of reasons for this. One, Texas has some pretty extreme weather events that cause damage every year. One way or another the cost of those damages get passed along to all homeowners. But the real accelerator has been rising home values. And that really hits two ways. If you have sold a home in the last couple of years, you’ve seen how home values have skied. That’s one piece of the puzzle. And more importantly, the cost to replace a home has increased immensely. This was one of the first areas hit with inflation of raw materials in 2020. With those two factors, homeowner’s policies have become more expensive.
So, what do you do?
Shop! Every single year. Most of these can be done quickly online these days. Make sure you are doing an apples-to-apples comparison. Any savings or even just to keep from having an increase, helps keep costs down.
This is another area where the fee creep is definitely real. Most municipalities in Texas were nice and didn’t do any property tax increases during 2020. But with booming home values, every new sale in your neighborhood was a new comp for your property to be measured against. Municipalities will now make sure to get their piece of the pie.
How do you fight the increases?
Protest your property taxes every year. It used to be that you had to go before a group to protest your taxes and it was a big hassle. But lots of municipalities now have ways to protest your property taxes online. But remember property taxes are county to county, so your county may have different processes. Even if your property taxes didn’t go up, if you have done property fixes (like let’s say a new AC last spring) you can use those costs against your current property value. This is one of the few areas where we are given tools to protest taxes in our lives, so make sure to use those tools.
WHY DOES IT MATTER?
It may seem like a lot of work to save a couple of hundred bucks over a years’ time. And that is true, but just like your investment’s best friend is the power of compounding, it also works in reverse. Expenses can compound too! One of the first questions I ask when I’m reviewing investments, is what do we need to produce for your retirement? i.e., what are your expenses? So, managing the various expenses in our life from compounding is goal #1.
Do you have questions about your situation? Let's chat.
Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.