Wednesday, November 16, 2011

The American Dream (and Other Benefits of Owning a Home)

Realtors, mortgage lenders, economists and all sorts of other professionals who have a little skin in the game are quick to tell you to buy a home, if you can.  I believe most people who are sitting on the fence have some sort of apprehension, thinking of all the headaches along the way.  Homeownership, as it stands today, has a mistaken reputation.  "Foreclosures", "Short Sales" and other distressed home lingo dominate the headlines.  What is interesting is a recent poll by the National Association of Realtors (NAR) finding that 95% of homeowners and a surprising 72% of renters say that owning a home for a period of several years is a far better financial decision than renting.  77% of homeowners also mentioned that simply owning a home is the biggest contributor to their long term financial goals. 

So with all the naysayers, sitting in their towers, naysaying, I thought I'd come along and mention some of the beautiful reasons why owning a home is so beneficial:

1)  Tax Advantages
Ok, so when I mention tax advantages, most people glaze over and check the next line item.  Before you get there, take a second to see what kind of money homeownership will save you.  To be fair, to get the majority of tax advantages, you need to have a mortgage (i.e. debt).  Since the mass majority of us need some "help" in the form of a loan, I'll assume we all have a mortgage.  With that mortgage, every month you pay a portion of "principal" and "interest".  Your mortgage interest is tax deductible.  In the early years of a mortgage, the majority of your payment is interest, so especially when you first buy a home, your mortgage interest deductions are much greater.  Say you have a $1200 dollar payment.  About $1080 per month is interest and is deductible, so over a year, it reduces your taxable income about $13,000 per year.  Pretty nice, eh?  Among other great tax deductions are your property taxes, mortgage related closing costs and home equity lines of credit interest.  It really starts to add up.

2)  Financial and Physical Security and Stability
One major difference between buying and renting is that when you own your home, chances are you have a fixed mortgage that will never increase.  How many times have you been in a rental apartment and you were certain that your landlord wouldn't raise your rent?  Could you guarantee that your rent wouldn't be raised over the next 30 years?  Unless your landlord is your Mom and you live in her basement, you would be crazy to think that.  That's what is great about homeownership.  You can always count on a stable payment every month, that won't go up (unless you have an Adjustable Rate Mortgage).  Beyond just financial security and stability comes physical security.  A study by NAR revealed that with more homeowners and less renters, neighborhood turnover rates were lower.  With lower turnover rates, less crime was being committed and reported.  Turns out that since homeowners are more consistent neighborhood stewards, riff-raff was more likely deterred. 

3)  The American Dream
Homeownership comes with a myriad of advantages.  The most well known, and most attacked idea, is the notion of owning the American Dream.  Homeownership provides you the luxury of planting roots, settling down and focusing on the more important things in life.  NAR studies show that homeowners are more likely to volunteer and contribute to neighborhoods and communities.  Their children are more likely to participate in organized activities and actually watch less TV.  Now there is a novel idea!  From my own experience, I can say that homeownership keeps you grounded and gives you a sense of belonging.  My parents still live in the very first home they bought over 30 years ago.  All of my memories revolve around that home from birthdays to Christmases, all the good (and bad) times.  I truly believe a home is what helps solidify a family.  On top of stronger, more engaged families, homeowners have a sense of pride in their home and their neighborhood.  They want to build relationships with neighbors and they want to keep their homes in good shape.  Homeownership isn't merely an action, it is a state of mind.

Tuesday, November 8, 2011

These Incentives Will Sell Your Home

Incentive: noun; Something that incites or tends to incite action or greater effort as a reward.

If you've had your home on the market for a couple of months with very bites or nibbles you might be in quite a pickle.  What if you've lowered your price as much as you can, just up to the point of making your sale a short sale?  What if you've improved the curb appeal, cleaned the entire house, replaced all the appliances, painted, carpeted, or staged and the home still hasn't sold?  If you're up against a wall, there are some incentives or perks to offer your buyers to make your home stand out from all the others.

1)  Help With the HOA Dues
For most first-time home buyers, the "add-ons" of taxes, HOA's, insurance and all the other little things beyond just a simple mortgage payment can really add up.  They're used to just paying just one simple rent check.  They see all the extra numbers and wish they could go away for a while.  What if you could help them manage that?  A savvy agent will be able to craft an incentive that will help pay HOA dues for six, nine, or twelve months, or maybe even more.  That way your buyers can ease into home ownership and you can stand out among other houses in your neighborhood.

2)  Offer a Bonus to the Buyer's Broker
If you want to get people to come take a look at your home, you need to first convince agents that your home is worth taking a look at.  If it is in the same condition, looks the same, and is similarly priced as your competition, how can you nearly guarantee that your home will be shown?  Offer the buyer's realtor a bonus to sell the house.  The bottom line is, realtors will always know what commission they can expect to sell a home but, if you offer a bonus, maybe they'll try a little bit harder to get yours sold.  Depending on the size of value of your home, you could offer a $1000-$2000 bonus, they buyers may never even know!

3)  Assist with Closing Costs
This is a more common incentive that helps folks with little to no down payment get into a home without needing a lot off extra cash to pay loan fees, escrow fees and mortgage insurance.  Typically, beyond having to put money down to pay for the home, buyers also need to pay for all sorts of closing costs.  As a rule of thumb, you could offer anywhere from $1000 to $5000 to help cover the closing costs of your buyers.  The benefit to you is you get your home sold; the benefit to the buyer is they don't have to come up with all that cash at time of closing. 

4)  Help Pay Down Your Buyer's Interest Rate
If there is one cheap method to entice your buyers to save tens of thousands of dollars over the life of their loan, this is it.  Offer to work with the buyer's lender to help pay down their interest rate.  A few "points" (1 point = 1% of purchase price) added to the deal can get your home sold quickly, and will reduce your buyer's monthly payments. It also assures that no matter what they do, when they buy your house, they will get below market interest rates. 

Hint: Hey buyers out there...If you're reading this, now you have a little ammunition when you're making your know what incentives you might be able to ask for!

As always, some of these incentives may or may not work for particular situations.  If you're not sure you can always ask your savvy realtor.  If you need one of those, I know one--he looks just like me and isn't my twin brother Jeff. 

Tuesday, November 1, 2011

Market Statistics to Sink Your Teeth Into

September market statistics are out and available for viewing here

Scroll through the commentary to get to the meat of the statistics.  Numbers are what drive economies.  It gives us a gauge as to where we stand, whether good or bad.  Northern Colorado is broken down into three different markets, Greeley/Evans, Loveland/Berthoud, and Fort Collins.  These three markets are again broken down into sub-categories of detached (single family homes) and attached (condos, townhomes, and similar). 

Realtors rely on a number of variables when understanding the market and which way we're moving.  I conduct my understanding of the market based on three key statistics: number of listings sold, days on market, and median price.  The reason why the number of listings sold is so important is because that represents the true market.  Knowing how many homes are actively on the market doesn't indicate anything, unless you know what has sold.  Think about it, the only way to truly measure how much inventory is getting moved is how much is sold, not how much is on the shelf.  That's why I don't focus much on "active listings".  Average days on market indicates how long a home is for sale, which gives you a good idea of how long it takes for inventory to move.  On top of that, median sales price gives a good indication as to which direction the market is moving, up or down.  Having statistics through the third quarter gives us enough of a sample size to understand 2011's market.

Below is a breakdown and interpretation of each market.

Fort Collins detached home sales for 2011 are just trailing 2010 just slightly with a drop off of 2.7%.  Normally this would be a negative sign; however, the due to the 2010 first-time home buyer tax incentive of $8000, multitudes of home buyers were able to jump into the market early in 2010, as opposed to sometime in 2011.  Noticing the attached sales, we're far ahead of 2010.  Median sales prices are just slightly higher in 2011, meaning home prices aren't falling (good news to all you sellers).  The reality of short sales and foreclosures continues to impact the market, but not in sales price, just days on market, in which we have seen a slight increase in 2011.  Overall, the Fort Collins market in both attached and detached homes have been very healthy in 2011 and will continue to stay strong in the next year. 
Loveland/Berthoud home sales (both attached and detached) have outpaced 2010 through September, which is a very positive signal.  Considering the tax credit from 2010, Loveland is faring very well as we climb out of the recession.  Attached home days on market has increased significantly, where as detached days on market has remained stable.  Median prices are coming in a bit higher for detached homes and nearly even with detached homes.
The Greeley/Evans is fairly consistent with the rest of the region.  There is a slight reduction in detached units sold, but once again keeping in mind the tax credit from 2010, the market is healthy.  Days on market for attached homes have decreased significantly, where detached homes have increased.  Year to date median home price averages are slightly lower as the short sale and foreclosed homes in area are decreasing home values.  Greeley/Evans and most of Weld county was hit hard by distressed properties, and considering the amount of foreclosures and short sales that have gone through, the price dips are actually promising.  Another glimmer of hope for Weld County is the oil and gas production increases that are being projected.  With workers and servicers soon moving to call Weld County home, property prices will be expected to recover.

Tuesday, October 25, 2011

10.5 Ways to Winterize Your Home

Winter is fast approaching and with it comes the task of preparing your home for winter's icy chill.  Tonight, Northern Colorado is expecting 4-8 inches of snow and temperatures dipping well into the teens.  Take a look at the following tips and tricks on what you can do to winterize.  Are you prepared?  It could be a long winter...

1.  Clean Those Gutters
Autumn means gorgeous colors and leaves galore.  Many of those leaves can end up in your gutters in the form of a wet, leafy clog.  Come winter, those clogs will suspend water, causing ice damns that could cause severe damage.  Do a quick check to make sure you're spouts will be flowing.

2.  Block Those Leaks
Fill in the gaps around your windows with caulk to prevent drafts.  Buy door sweeps or find creative ways to prevent the cool air from rushing in beneath your doors.  If you have noticeable cracks in your bricks, use exterior caulk to prevent cool air from penetrating.

3.  Insulate Yourself
Adding insulation in your attic won't only keep you more comfortable, it'll also keep your heating bills lower.  12 inches of insulation will do the trick, and you can even go thicker.  Make sure when adding insulation that you buy non-backed insulation to avoid creating an inappropriate vapor barrier.

4.  Check Your Furnace. 
Before you actually need the heat, check your furnace to make sure it's still in good working condition.  If a strong dusty smell persists for more than an hour or two, it might be a good idea to call an inspector to make sure everything is working correctly.

5.  Check Your Ducts
If you have accessible ducts running through non-heated spaces, make sure they're insulated to prevent heat loss along the duct.  Check the connections for leaks or obstructions.

6.  Prepare Your Windows
Obviously, winter will force you to take down your screens and put up your storm windows.  If you have a problem area or window that just always feels drafty no matter what you do with it, budget to replace them.  If that isn't in your budget, go to your local home improvement store and buy some plastic to create an additional air space inside the window.  It's easy to do and is an effective alternative.

7.  Check The Chimney
Your chimney is often forgotten.  It doesn't need to be cleaned yearly, but if it gets a lot of use, it is a good idea to get it inspected.  Keep the damper closed while not in use to prevent drafts.

8.  Reverse the Fans
If you've enjoyed the relaxing breeze from a ceiling fan all summer long, make sure you flip the switch and help force warm air downwards.  A few degrees can really make a difference with comfort and heating bills.

9.  Mind Your Pipes
Make sure that water to your hose bib is shut off before freezing temps begin.  If leaving on Thanksgiving or Christmas vacation, it is a good idea to set your faucets to drip and keep the ambient temperature of your home above 60 degrees to prevent pipes from freezing and bursting.

10.  Blowout Your Sprinklers
Just like any other pipe, don't forget about your sprinkler system.  Trapped water in your system can freeze, expand and really give you a headache.  Every autumn, use compressed air to blow the remaining water in your sprinkler system out to prevent any issues.  You'll thank yourself in the springtime.

10.5  Check the Alarms
For a little added safety over the winter months, check the alarms throughout your home.  Smoke detectors and Carbon Monoxide detectors could use replacement batteries.  Instead of pushing the test button alone, hold a match up to your smoke detectors to see if they work properly.  Replace the detector entirely if it is over 10 years old. 

With these tips you should be set for a warm, comfortable and enjoyable winter.

Tuesday, October 18, 2011

3 Ways to Pay Your Home Off Sooner

Alright homeowners, are you ready to hear how you could potentially save tens or even hundreds of thousands of dollars over the next 30 years?  Depending on the value of your home, you could see some HUGE savings with very little effort or stress on your part.  I'm talking about paying off your mortgage sooner, which will give you peace of mind, control, and a little extra money in your pocket down the road.  For all of you homeowners out there, I'm assuming you could use all the help you can get.  For all the calculations and comparisons provided, we'll assume a $225,000, 30 year fixed mortgage at 4.25%.  Let's see how the numbers stack up.

Pay Bi-Weekly
The current mortgage system is set up for 12 monthly payments over the course of each year.  A great way to pay your mortgage off sooner is to set up "bi-weekly" payments, meaning that you pay one-half of your mortgage payment every two weeks.  Now it might not seem like much, but consider this,  over the course of a year, you end up paying the equivalent of 13 payments without it feeling like you made that extra payment.  That's the beauty of this method. 
Bi-Weekly Payments Total Savings:  $29,373.08 - Mortgage paid off after 25 years

Refinance to a Shorter Term Mortgage
If you have a higher interest rate, right now is a great time to refinance.  Beyond refinancing to lock in a great interest rate, consider refinancing to a short term mortgage like a 15 year mortgage.  Obviously, amoritizing payments over a shorter term will increase the monthly payment, but that's exactly the point--you want to pay off your mortgage sooner.  Be sure you are financially stable enough to afford the higher monthly payments.  It doesn't have to be a 15 year mortgage, some lenders have different terms available, just ask them what products they have to help you.  There are closing costs, just like any other loan, so keep that in mind.  (For a little extra kick, refinance to a 15 year mortgage and make bi-weekly payments...)
15 Year Mortgage Refinance Total Savings: $93,798.55 - Mortgage paid off after 15 years
15 Year Mortgage (w/ Bi-Weekly Payments) Total Savings: $103,373.60 - Mortgage paid off after 13 years

Just Pay Extra
To avoid the refinance charges, simply pay as if you had a 15 year mortgage each month.  That way you get the benefits of a 15 year mortgage without the stress of being locked in to a higher monthly payment.  Another way to pay off your principal is to round payments off.  In the example, your monthly payments would be $1,106.86 per month.  Try rounding up to $1110.00.  Simple additions can really add up because when you pay a little extra towards your principal you get an added bonus, each future payment will have more of your payment going towards the principal than the interest and your loan gets paid off sooner.  Get a raise or a bonus?  Apply that extra income to your loan.  Get creative, it'll pay off huge.

Drawbacks of Paying off Your Mortgage Sooner
Paying off your mortgage early saves you money, saves you time, and is very safe and conservative.  There are certain situations where paying your mortgage off early, or paying extra every month won't work well for you.  First, above all else, before you pre-pay or get fancy, check your mortgage contract for a pre-payment penalty clause.  Make sure your lender allows you to pay down your mortgage faster.  Also, if and when you are able to add extra payments, make sure all your extra payments are applied towards the principal, not the interest.  Some lenders will simply apply them to the next months payment, which won't help you at all.  Finally, if you don't see yourself staying in your home for the long haul, don't pay down your mortgage sooner.  You won't see the long term effects of your work and your extra payments might be better used elsewhere, such as a down payment on a bigger and better home, alternative investments, life insurance, etc.  When you put extra money into your mortgage, that money is tied up in the home and is much less liquid than a typical savings account, and its rate of return is 0%.  Keep that in mind before you whip out your checkbook and go wild.  Paying down your mortgage is a very reasonable and effective strategy for those with the financial means to pay extra each month with the intent of living mortgage free, and stress free in the future.

Tuesday, October 11, 2011

3 Issues that Will Kill Your Home Purchase

Deals come and go, some are tougher than others, and some run smoothly.  Ask any agent, no particular deal is exactly the same, whether it be different terms, buyer/seller issues, loan problems, etc...There are always problems to be sorted out and dealt with in any transaction. But what issues are the biggest?  What can kill your deal?  Below are three issues that can and will kill your deal, unless you know how to avoid them.

Condition of the Home
Believe it or not, the condition of the home is a huge reason why some lenders will REFUSE to loan you money to buy the home.  Crazy right?  Well, after the wave of distressed properties (short sales and foreclosures) a lot of homes were left in pretty bad shape.  Some had missing sinks, appliances and systems; others had chipped and peeling paint, wood rot, and dangerous electrical hazards.  Think about it, if you were lending money to someone to purchase the home, and the home was your collateral, would you at least expect it to be in good enough condition so that if your borrower defaulted, you would be left with a live-able or at least sell-able home?  That's exactly what the bank feels.  For FHA and VA loans, the home will need to be in a good condition for you to receive a mortgage.  When a bank owned foreclosure mentions that the home is "as-is" it really means it.  Don't expect the bank or asset manager to do any repairs, so make an offer accordingly.

Loan Approval
Typically when writing your contract to purchase a home, your agent will put a contingency in the agreement that says if you can't obtain financing, the purchase will be terminated and your earnest money will be refunded.  The only problem with this contingency is if your bank (or lender) drags out the process and you aren't sure if you are going to be financed or not.  Getting pre-approved is just the first step in the entire lending process.  Sometimes you'll get pre-approved for your loan months before your offer is accepted on your home, and you'll need to provide proof to your lender that your situation is similar to your situation at pre-approval.  The best thing to do at the time of pre-approval is to ask your lender/broker/bank what documents are going to be required for underwriting.  They typically have a checklist.  Use this checklist and immediately start collecting all the documents that are required.  When your loan is being processed, they will ask for these documents, sometimes multiple times, so be prepared to send them redundant information without delay.  The faster you are in getting everything to the lender, the quicker they will move.

Low Appraisal
What might seem like the best thing ever could kill your deal.  We're talking about a low appraisal.  What this means is that a professional appraiser values the property for less than you offered.  Your bank will not lend you money towards something that is worth less than what you're offering.  If the difference in the appraisal and the offer is only a few thousand dollars, usually the seller will concede and you'll get just a little bit better deal than what you offered, which is great for you.  If the difference is too much and the seller can't afford to take that much off the price, the deal may fall through and the seller may be forced to stay put.  This is bad for you.  Your dream home is gone for now.  There are ways to avoid the low appraisal, some you can control, some you can't.  First, even though you may really, really want a home, don't offer strangely above what the comparable properties in the area are valued at.  Before your offer, your agent should give you a list of comparable properties in which to base your offer off of.  Don't get crazy.  Another issue is when an inexperienced appraiser, or an appraiser not largely familiar with your area inadvertently appraises the home too low.  This can be tough to avoid as your lender is in charge of who appraises the property.  The best way to get an appraiser familiar with your area is to use a local mortgage broker who has a smaller pool of local, qualified and knowledgeable appraisers rather than a large bank who is lucky to get an appraiser from the region to appraise the property.

There you have it!  Now, you're armed with some tools to help you navigate the market out there.  Remember, I'm always here to answer any questions you have.

Friday, September 23, 2011

Debunking the 20% Downpayment Myth

Ok...I'm going to get it out of the way right now...You DON'T have to put 20% down when you buy your new home.  If you've been thinking about it and busting your hump to save up that $40,000 downpayment for that $200,000 home, I applaud you, but life can be a little easier.

To be clear,  putting more money down will usually get you a better interest rate, help you avoid Private Mortgage Insurance (PMI, explained later), and reduce your monthly payments.  But, if 20% down seems like a massive number that you might never reach, I've got options for you.  I won't go totally in depth because your lender will be much more knowlegable and will be able to give you current requirements for each loan scenario.

  • USDA Loans -  USDA (United States Department of Agriculture) loans are backed by the government and require 0% down and can in some cases offer closing cost assistance as well.  These loans are typically available in rural and agricultural areas and give you a great option to purchase that "nice ol' home in the country".  Elgibility areas can sometimes creep very close to urban areas, which means you don't have to be too far out of town to be elgible.  Parts of Fort Collins, Wellington, Windsor, Severence, Johnstown, Berthoud, Longmont, Loveland, and Greeley have USDA elgibility.  Go to to search areas of elgibility and talk to your lender early on if you want to pursue that loan program.
  • VA Loans -  VA (Veterans Administration) loans are also loans backed by the government and are designed to help those who have served in the armed forces with some of the best loans available.  VA loans require 0% down, with no private mortgage insurance. 
  • FHA Loans - FHA (Federal Housing Administration) loans require a minimum of 3.5% down.  They are privately funded loans, insured by the federal government.  There are credit score minimums and income requirements.  PMI is typically required on these loans as well, but closing cost assistance is also available.
  • Conventional Loans - Depending on your lender, loan programs with smaller down payments, typically 5%-10% are available with very reasonable interest rates.  Every lender has different requirements, consisting of debt to income limitations, credit score minimums, along with other financial requirements, all of which can affect your "credit-worthiness".  Speak with your lender to see what is available for your unique financial situation.
Let's take a quick minute to talk about Private Mortgage Insurance.  PMI is an additional fee charged to the borrower (i.e. you the buyer) to help protect the lender in case you default on the mortgage.  Typically until you have a 20% equity position in your home, your lender is taking a big risk lending to you, and you need to pay for it.  The fee for PMI is either a percentage of your loan amount, or closer to $55 per $100,000 financed.  So on a $200,000 mortgage, you would pay about $110 per month just to help protect your lender from your default. 

There are low downpayment options that will help you avoid PMI.  Combination loans called "piggy-back" loans give you a second mortgage to pay down in combination with your first mortgage.  You'll see piggy back loans in the following form 80/10/10 where you'll put down 10% and carry a second mortgage at 10% of the loan amount, or 80/15/5 where you'll put down 5% and carry a second mortgage at 15% of the loan amount.  Although you monthly payment will be similar to a monthly payment with PMI, your benefit is that instead of the PMI getting "thrown away", the extra money you're paying on your piggy back will be put into the equity of your house.  Having a good income history and great credit could be necessary for these loans.

So, that's a quick look at low down payment options, PMI and piggy back loans.  Contact me and I can put you in contact with great lenders who can maximize your options, I'm never too busy for you.

Friday, September 16, 2011

3 Tips for Buying a New Home, While Selling Your Old One

Moving on up? To the east side? Maybe?  Dated references are my specialty.  Well, regardless of which part of town you're moving to, you could be looking to sell and buy at the same time.  In Realtor jargon, we call you "move-up buyers" when really you could be moving up, downsizing, or moving sideways...however you want to slice it, you've got a lot of things happening at the same time.  Here are four tips for making the buy 'n sell scenario far less painful and stressful than it needs to be.

1)  Get a Realtor on board early
Ok, I have to say, I am a little biased on this tip, obviously.  Getting connected with a Realtor is typically the first step in anything I mention on this blog because I want to stress the importance of having a professional help you through the transaction and be a resource to you every step of the way.  A good Realtor will help you establish a marketing strategy, pricing strategy and more than anything, they will handle all of the transactional details so you don't have to take 2 months off of work to digest all the intricacies of the transaction.  Your real estate professional should give you ideas for any last minute improvements to help your home show its best and sell for top dollar.  They'll also be able to get you in tune with the local market and set up home tours to maximize your searching time together.

2)  Get Connected with a Lender or Mortgage Broker
A mortgage professional is a very important resource when starting your buy/sell transaction.  First, they will qualify and approve you for a loan, so you'll know exactly how much home you can afford.  This will help narrow your home search, and keep your expectations in line with your finances.  Your lender will also be able to run all the scenarios and let you know exactly how much you will "net" from the sale of your old home or how much you might need to bring to the closing table.  Just having a good estimate of all the costs involved will help put you at ease and help you move forward.

3)  Expect The Unexpected
Expecting your old home to get sold in coordination with buying your new home could leave you missing out on a great opportunity.  Typically, if you have a home to sell your contract to buy will have a contingency in it that you need to sell a home to execute the buyer contract.  This clause is useful but can also tie up your transaction waiting for your home to sell, and who knows, maybe the person buying your old home will also have a home to sell as well.  Do you see where you can really get bogged down?  If you have the financial means to buy a home and take advantage of a great deal, then do it, don't wait for your old home to sell, or better yet, price it to get it sold quickly so you don't have to worry about it.  Chances are, pricing your home to sell quickly will be your best shot at making the transaction run smoothly and you'll make up on the buying side, and you won't have to pay two mortgages at the same time for months and months...

With these tips you should be set for any move up, down or sideways.  Make it easy on yourself and let your realtor sweat the details.  I'd be happy to help.  By the way, I'm never to busy for your referrals.

Friday, September 9, 2011

The Obvious Reason the Rental Market is like, "Soooo Hot Right Now"

Over the past few months, I've been tracking the news about the national and regional rental markets in preparation for what I declare will be a "home buying boom" in the semi-near future (intentionally vague statement).  By tracking the rental markets, I, in theory, should be able to understand when a tipping point is reached and when all those who are renting currently, will jump into the lovely world of home ownership.  That means a lot to me, but what does it mean to you? 

Basically, whether you're a buyer or an investor, you've got the same play.  As Jim Cramer from tv's Mad Money would say: BUY BUY BUY.  As an investor, it is your best bet right now to get in on the hot rental market, buy and hold for the long term and realize both consistent (hopefully positive) cash flow, along with expected long term appreciation.  As a buyer, there has been no better time to buy a home:  rates are near 4%, prices have dropped, and the supply of available homes are abundant.  Have you heard me mention all of this before?  Do I sound like a broken record?  Probably.  I'm not hopping up on my soapbox for my benefit, I want you to get off the fence, you'll be happy you did.

So let's talk about why you're reading this in the first want to know why the rental market is so hot right now.  If you can think back to (or vaguely remember) your high school economics class, the only thing you'll ever need to remember is the concept of Supply and Demand.  Vacancy rates are near their lowest points both regionally and nationally.  We are seeing some of the highest demand in history for rentals; from large apartment/condo/townhome complexes, all the way to investor owned single family homes, duplexes and the like.  Let me break down the reasons for all the demand.

  •  Foreclosures, Short Sales and Distressed Properties, oh my! - These are just part of the game these days...If someone is foreclosed on, or if they need to sell their home for less than what they owe on the mortgage, these people are typically not able to buy a home for at least 18 months, and in most cases, 3 years or more.  When you can't buy a home, the only other option is to rent.
  • Job Losses - After the financial meltdown, a lot of people lost their jobs, did you hear about it?  It was on the news one time, I think.  Well, some of those folks were lucky enough and had the financial capability to sell their homes and go to the safe harbor of the rental market which offers typically lower payments, and flexibility.  While renting, these folks were able to search for jobs away from home base, and have the relative flexibility to move when a job was found.
  • Tighter Lending Climate - Along with the financial meltdown, lending practices were restricted.  No longer could Joe Somebody go in to Banks-R-Us and get a zero-down mortgage or interest only mortgage.  All the folks who could have gotten loans to buy homes they couldn't afford can't now, simply because the restrictions have made it tougher for people to get into bad situations, which is a good thing.
  • Fear, Indecision, and Downright Ignorance - From what I've seen in the market, fear, indecision and ignorance is keeping the rental market hot.  There are some very well qualified people who might just be either ill-informed about what's happening out there right now, or they might just be sitting on the fence to wait for things to "calm down".  Whatever the reason, people aren't buying homes right now, and they are flooding the rental market because it's "safe".
Ok, ok...I've taken enough of your day.  I just wanted to let you know, if you're renting -  talk to me if you aren't sure where to even begin about buying.  I'll help you figure out if it is a good time for you and get you into something you can comfortably afford.  If not, I can help you establish savings goals so that you can get to where you need to be.  If you're investing, keep at it, there are abundant deals out there and plenty of people to fill your rental.  Talk to me, I can provide some interesting options for amazing returns.  Life is great!

Thursday, June 23, 2011

3 Reasons To Have a Buyers Agent Work For You

I've gotten a lot of questions lately about why a buyer agent might be necessary when purchasing a home.  While there are many reasons that having a buyer agent can be very beneficial to you, I've picked out my three favorites, enjoy!

1.  Buyer Agents are FREE, FREE, FREE
Yep, that's right, buyer agents cost you nothing.  They can drive you around for months, prepare countless market reports, put in offers, and facilitate each and every transaction, and you still don't pay them a dime!  Typically, when purchasing a home, the real estate commissions are paid by the seller.  In Northern Colorado, its very common for the seller to pay 3% to the listing agent and 3% to the buyers agent.  So, because your buyer's agent is willing to do so much for free, I suggest you take advantage of the opportunity and get as much as you can out of your Realtor.

2.  Access to Every Home on The Market
Contrary to popular belief, buyers agents not only have access to every home that they are listing, they also have physical access to every home on the market!  Any home you want to see can be show by your very own buyer's agent.  Without an agent, access to homes can be limited, as homeowners can be wary about letting random unsupervised folks into their house for an extended period of time.  It's a toss up whether or not you'll be able to see every home you want to see, unless you're lucky enough to find an open house or model home.  Also, their access online is further reaching than the average person.  Having access to the MLS system provides the agent with access to more properties and more information.

3.  A Buyer Agent Will Negotiate for You
Buyer's agents are trained in negotiation and have a grasp on the ever changing real estate markets.  They are experts in valuations and can let you know if a property is overpriced, saving you money.  Also, a buyer agent will be equipped with the tools and experience necessary in negotiating tough deals; its what we do every day.  Want the seller to pay some of your closing costs?  Want that washer and dryer to stay when you buy?  Hate the price but love the house?  A Realtor has a feel for what can get done and what can't, and they're always willing to listen to you and negotiate with the seller as long as it takes.

So, if you haven't considered using a buyer's agent, your next purchase might be the time to start.  Beyond the three points mentioned above, think about all the time and energy you can save by utilizing a buyer's agent.  Searching out new homes, calling for showings, filling out contracts, and dealing with the transaction can be a major headache when all you want to do is get into a new home.  My advice:  Get a buyer's agent, it'll be worth every penny you don't have to spend.

Wednesday, April 20, 2011

How to Make an Offer They Can't Refuse

This is a tricky market.  With so many distressed properties (Short Sales, Foreclosures, REO's) out there, you may have no clue what to do when making an offer on a home you want to purchase.  Sure, you want to get a good deal, and you should, but your offer won't be taken very seriously if you present an extremely low-ball offer with ridiculous terms.  Of course you want the house, but what do you have to do to make an offer that will be accepted or at least counter-offered, as opposed to an offer that will get you laughed out of the neighborhood?

First and foremost, a good Realtor should always be on your team when making the decision on how much to offer.  A Realtor can be worth their weight in gold by saving you from offering too high and missing out on a deal, or offering too low and missing out on your dream home.  Your Realtor should be there for you to take all the market data, economic data, and micro-geographic data and boil it down into simple, easy to understand advice, so that you can make your most informed decision.  Here's how they do it:

1)  Determine Affordability:  First and foremost, when making an offer, you need to know what you can afford.  If you've got a job and good credit, chances are you'll be able to visit a lender (most likely recommended by your Realtor)  and get pre-approved for a certain amount.  Chances are the price you're pre-approved is much higher than what you might be willing to pay for, so keep it in perspective.  Know your monthly budget and don't overspend and become "house-poor".  Find something that you can comfortably afford to set your pricing parameters.

2)  Perform a CMA:  When performing a CMA (Comparative Market Analysis) your agent will take similar properties in the neighborhood or micro-geographic area, and create a comprehensive report that will help you determine your offering price.  Your agent will take the active listings, recently sold and recently expired or withdrawn properties with characteristics similar to the home you want to make an offer on, and compare all the aspects of value.  NEVER make an offer on a home without a CMA.

3)  Motivation:  Gut check time!  What is your motivation to get in the home?  Do you believe this is the home you'll want to be spending a significant portion of your life in? If you're making an offer 30% below the fair market price just to get a good deal, remember, you have to live in that house.  If you really want to live in a house, make sure you make an offer in line with your intentions.  Also, try to gauge the seller's motivation as well.  Ask your Realtor how long the home has been on the market, and how many times that price has been reduced.  If it's been on the market for months and months, without reductions, chances are you don't have a motivated seller.  If you've seen reductions, that's a good indication that they are motivated to get out of the house. 

All of this information can be provided to you in a relatively short period of time so that if and when you want to make an offer, all you have to do is review the facts and come up with a number.  Its easy when you have the right people on your team and have the faith to take the leap.  Happy hunting!

Thursday, March 10, 2011

Hot Home Tax Tips for Tax Season

Tax season is just around the corner folks, and here are some great ideas to consider when filing your tax return.  Even if you are using TurboTax or your own CPA, make sure you cover all your bases.

1.  Consider the Tax Implications of Refinancing and/or Reducing Your Property Taxes
A lot of people have refinanced over the past few years to save some money on their monthly mortgage payments.  I mean, who wouldn't have refinanced their 8% loan to a loan at 4.5%?  Also, people are looking to save a little money on their property taxes by getting their home re-assessed because they were likely to have lost some home value over the past three years.  Remember, come tax season, the mortgage interest and property taxes you're trying to reduce, are also the greatest tax benefits you have as a homeowner.  Don't get me wrong, refinancing and re-assessing your home is one of the best things you can do to save on your monthly payments; however, make sure that those savings don't wipe out some of your best deductions.  Consult with your CPA when considering your options.

2.  A Large Portion of Closing Costs are Tax Deductible
If you took advantage of the low interest rates and abundant inventory in 2010 by buying a home, a good portion of your closing costs are deductible.  Discount points or any origination fees that were paid to your lender at closing are deductible.  This hold true even if the seller paid your closing costs!  To find your deductible costs, simply pull out your HUD-1 settlement statement, and if you can't find it, your Realtor should still have a copy.

3.  You Need to Itemize Your Return to Claim Your Deductions
Believe it or not, about 40% of homeowners fail to itemize their return, and therefore get no credit for their most major tax advantage.  If you have a relatively simple return and think that taking the standard deduction will make your tax season a piece of cake, think again!  You could be missing out on thousands of dollars of deductions from owning a home.  If you have a simple return (i.e. simple income, few investments, homeowner) TurboTax (and CPA's for that matter) will do all the math for you to determine which option is best for you, and it won't cost any more either way.  So, take the time to save yourself a little extra money, and weigh your options.

Lastly, I'm not a seasoned tax professional, and if you don't claim to be super tax-savvy, then save yourself the time, effort, and late night calculator crunch sessions, and get professional help.  The costs associated with hiring a CPA or going to a professional Tax Preparer will pay for itself when they find a big deduction that you missed.  Happy tax season!

Tuesday, February 8, 2011

First Time Home Buyer Start Up

It's time.  You're tired of renting, you're tired of roommates, you're tired of not having something to call your own.  It's time -- time for your first home.  This is one of the most exciting times in your life, but its also filled with apprehension and confusion.  Let's relax and try to make it easier for you.

Who are first time home buyers?
First timers are typically anticipating a major life event like an upcoming marriage, birth of a child or completion of school.  They are most likely currently living with friends or relatives in a rental property.  The best attribute of the first timer is that they value the emotional and financial benefits of owning a home (i.e. personal satisfaction, pride, asset building, etc...)

What do first time home buyers want?
If you're a first timer, you know exactly what you want, but you might not necessarily know how to go about getting it.  Today's first timers are more and more savvy than ever before, with the majority of first timers doing an extensive amount of research on the internet before contacting a Realtor.  First timers want and need a broad array of products, with clear explanations of the entire process from offer to possession. 

Debunking Financing Myths
One of the first things a first timer will need to do is get pre-approved for a loan.  These days, there is a lot more honesty and transparency required on your part, but if your financial house is in good order, you have plenty of great options.  Think you need to put 20%+ down on your first home?  For younger first timers, coming up with that huge down payment is usually prohibitively expensive.  20% is not the norm! 

FHA (the Federal Housing Administration) provides loans that require a minimum of 3.5% down, with a minimum credit score of 600 and mortgage insurance paid up front monthly.  For those who have served in the military, VA (The Department of Veterans Affairs) loans are available for 0% down with any credit score (up to home value of $700k) and.  Conventional financing requires 5% down for first timers with a minimum credit score of 620 with mortgage insurance paid monthly.  One of my favorite loan options is USDA financing.  This type of loan is typically used in more rural areas (i.e. Weld County) but can also creep into the boundaries Fort Collins, Loveland, Greeley and Windsor.  This loan requires 0% down with a credit score of 600.  There are published maps of areas that the USDA provides these loans.  Don't let anyone tell you that you need a hefty chunk of money to put down on a home.  You can afford a down payment, and you can find a great home for nearly the same as what you're renting for right now.

What to do next
A Realtor is going to be able to put you in touch with everyone you'll need to be in contact with.  Take your time, do your research online, and contact a Realtor to get the process started if you're ready to make your dreams into a reality.  If you have any questions, I'm always here to answer them for you -- and the next time you come across someone who is tired of renting and wanting to get into a new home, pick up the phone and call me to let me know how I can help them.