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 place...you 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!

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.

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!

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!