How to Buy a Home Quickly and Confidently

Yes, Denver is a competitive market, but if you’re committed to the process you can find a home fairly quickly. Let me give you an example…

A lovely couple contacted me one spring to ask for help buying a home to move into by summertime. The catch was that they lived in California at the time and, obviously wanting to save on flight costs, really only had one long weekend for house hunting. No problem!

We did a buyer consultation over the phone, and I put them in touch with a trusted lender to get finances lined up. They came to town with lender preapproval letter in hand, and we took the weekend to look at properties which fit their criteria.

We explored properties in various neighborhoods so they could get a feel for their purchase power. By the end of the second day we had two great properties lined up that met their needs.

It was summertime and demand was very high, so we submitted a strong offer on their first choice home — and it was accepted! We even finished the home inspection before they had to fly back to California, and then we negotiated the rest over phone and email. One month later they flew back to sign closing docs and take ownership of their new place!

I’d actually argue that the short timeline helped us stay focused. There wasn’t time to agonize over the details, and they trusted me to take care of things they weren’t able to do, (like make sure repairs were completed properly).

It just goes to show that when you work with qualified professionals you trust, it’s easier to move forward confidently and swiftly when the time is right.

Homebuyers & Renters: Financial Questions Answered

Shakira Pollard is a neighbor and friend of mine, who’s also a financial representative with a practice at Northwestern Mutual. With 2016 nearing a close, I wanted to pick her brain on the questions I hear most from clients and people out and about that I talk with. Here are her responses.

Is buying better than renting?

This is a great question, and to keep it simple there’s no hard and fast rule. A person’s choice depends on personal circumstances, access to capital and the time horizon for living in the home. In essence, one is not universally better than the other, but there are pros and cons to each choice. Check this link for a useful guide from Shakira’s firm.

I have student loans. Should l pay them off or buy a house first if I can swing it?

Again, this depends on circumstances. Here’s an example of how I recently assisted a client with a similar situation:I met with a newly married couple. The husband is a practicing physician who just completed his fellowship and the wife is a law student. Their major objectives are to strategically pay down student loans from medical school and also save for a home together. They would like to purchase a home around $500k and would like to have 20% of the purchase price saved. My recommendation to this couple was to continue to attack the student loan debt with aggressive payments while continuing to set aside funds for the home purchase. However, I also instructed them not to become distracted by the goal of saving 20% of the purchase price lest they miss an opportunity to purchase in a low interest environment. In summary, continue to pay student loans but don’t forgo an opportunity to purchase if for the sake of aggressively paying student loans.

Is it a good idea to use my retirement for a down payment?

I don’t think this is a question that can be answered in a vacuum. More information is needed to assess the person’s financial situation before my team could be comfortable making any recommendations. For example, an early careerist, mid-career professional, or pre-retirement professional would have different considerations. This could potentially be a very viable option to assist a newly married young professional couple with being homebuyers. On the flip side, a mid-career professional who has accumulated equity in the form of “cash value” through a permanent life insurance policy can access the equity in the policy for a downpayment.

So while there are not hard and fast rules, one thing is certain: Professionals such as Shakira and myself like to help out when you have questions. Even if you’re using us for information, it gives us a chance to foster a relationship and gain your trust and hopefully work with you or one of your friends one day. Contact me if you’d like to talk, or if you’d like an intro to Shakira.

Selling and Buying Real Estate and Bridging the Gap

Recently had a client who was ready to move. She needed to sell her place — a 1-bedroom condo — and then find and purchase a house. Selling and buying real estate simultaneously can seem like a daunting task, but it happens all the time, and the sooner you hire a Realtor the sooner you can start getting pieces in place to make it work.

She knew what she wanted (a house) and had an idea of the neighborhood where she wanted to end up. It was a high-demand area, and we lost on the first offer to competition. By the second round she was ready. She wrote a solid offer and beat out two other buyers for the contract. She closed on the house in January, and with her current abode not yet sold, had time to line up a few contractors and get some work done before moving in.

After the purchase, the clock was ticking to sell her condo. After all, she didn’t want to pay two mortgages any longer than necessary. We’d begun prep work in December — which largely consisted of decluttering, clearing space and sending stuff to storage — and made finishing touches in January. She still lived there, but she was a good occupant and kept it very neat for the time we were actively listed.

After just two open houses, the right buyer came along and we got a contract signed. In a month she was was signing closing docs and handing over the keys.

She was lucky that she was in a position to buy first before selling her place. But what to do if you can’t afford to buy before selling? 

Airbnb Vs. Lease

Advantages of Airbnb Over Leasing

Some argue that the loose regulations for short term rentals like Airbnb ultimately drive up housing prices, and it’s possible they’re right. But it’s also worth understanding that for many homeowners, using Airbnb can be a better option than taking on long-term tenants. For one, you can make good money using a short-term rental platform service such as Airbnb. The flexibility is also attractive for someone who doesn’t want to lock into a long-term lease.

Airbnb is Lucrative

A few weeks ago, I met a gentleman who purchased a house about 10 years ago as an investment property. He had reached out to me about selling his property, and over the course of our conversation he said he’d rented out his house in a variety of ways– short-term, long-term and with Airbnb.

Airbnb was by far the most lucrative option. In peak season summer months, he gets upwards of $6000 per month for this furnished 3-bedroom house with basement; whereas leasing to long-term tenants, it would be in the $3,500 – $4,000 range. But it seems like this is pretty typical. A quick search on Airbnb today shows a similar house in the same neighborhood currently offered for $350/night in June. While a full month of occupancy is rare due to scheduling line-ups, even at ⅔ occupancy that comes out to $7000.

The extra money does, of course, require extra work and expense, and owners have to make sure their guests stay happy so they keep a positive profile. One owner I spoke with said that a typical turnover between guests costs $130 (cleaning plus linens) for his 3-BR, 2.5 bath house, and utilities (gas, electric, water and cable) come out to about $400. With just four turnovers, that’s nearly $1000/month out of pocket to keep the place running.

For many homeowners the positives are worth the work, especially since it allows them the flexibility to use the space if they want it — for example if they want to block off time for personal use if they have guests or family town.

Airbnb Offers Opportunity for Homeowners

It’s fairly clear that moving forward, Airbnb (and services like it) will be an important part of the housing picture in our region. In discussing the topic, it’s helpful to keep in mind the perspective of individual property owners — many of whom pay high mortgages to live in this expensive city — who could use the extra income and flexibility that Airbnb provides.

If someone buys real estate with the intention of renting it out as an investor, the Airbnb platform provides an attractive model. Property owners in many neighborhoods throughout the city are certainly working it to their advantage.

Questions about Airbnb vs. Leasing? We haven’t seen it all, but we’ve seen a lot. Contact Jess if you want to chat.

Appraisal Contingency: What’s it Good For?

Alex Jaffe has been a loan officer for 10 years and I’ve known for nearly as long. He has a top producing team which provides high quality and speedy (when needed) service to his many happy clients.

In today’s competitive market, some buyers are choosing to make offers without the appraisal contingency. Here’s what Alex has to say about using an appraisal contingency in a contract. This is important for buyers to know as it can help you write a more competitive offer in today’s competitive market. If you’re a potential seller, it’s also good to know how this works.

It’s a competitive market and that means that I’m often involved in strategy discussions with agents and their buyers regarding strengthening offers.

On a conventional loan, one way to strengthen an offer is by waiving an appraisal contingency, and then relying on a financing contingency to cover the risk of an appraisal coming in low. While each lender may interpret our obligations in a low appraisal situation differently, here is what our legal and compliance folks have determined:

If an appraisal comes in short of the agreed upon sales price, AND the buyer and seller do not agree on a revised price, we may either:

  1. Provided the buyer still qualifies with the original sales price and wishes to proceed, approve the loan as is. *In this case the buyer brings the cash difference to the table.*
  2. IF the buyer chooses not to proceed and restructure their loan due to the low appraisal, AND the buyer and seller do not agree on a new price, then we can deny the loan. Provided a financing contingency is in place, then the buyer can get out on the financing contingency to retain their EMD.

While low appraisals are rare, and buyers and sellers not agreeing on a revised price is rarer still, this can help give you an additional edge against other competing offers. On a government loan however (FHA & VA), the appraisal and financing contingencies are intertwined.

Thanks to Alex and his team for these words of wisdom.

Without an appraisal contingency, what do you lose? If the appraisal comes in low, the appraisal contingency allows a buyer to request the seller reduce the price to the appraised value. If there is no contingency, they won’t have this option. But if a loan won’t get approved because of a low appraisal, the buyer may alert the seller that they won’t qualify for the loan…and will exit the contract using the financing contingency.

Is there a chance the seller would reduce the price anyway if it meant keeping the deal together? Given the time, money, and effort already spent by both the buyer and seller, it is possible.

Self-Managed Condos: What Buyers Should Know

Self-managed condo buildings have their drawbacks, but there are positives. Whether buying or selling a self-managed condo, knowledge is power. Smaller buildings can cost owners less over time since fees tend to be so much lower — but it might cost you personally in time and effort. If that’s OK with you, you’ll still want to do your due diligence and make sure you’re not signing up for future headaches and stress in the place you call home.

Right to Cancel

Once you’re under contract, you have a negotiable period of time to review the association documents and find out what you need to know about the building and the association. If there’s something you can’t live with or that can’t be rectified to your satisfaction (or for any reason at all), you have full right to cancel the contract and get your deposit back. Here’s what you should look for.

Your Due Diligence for a Self-Managed Condo Building

First, take a look at the building itself. Are common areas clean and tidy? Is the mail center organized? How’s the exterior? If you can, check out the roof and any other common areas – gym, laundry room, etc, and see how they look. This is good practice if you’re looking for a condo in any building, but particularly those that are small and self-managed.

Secondly, how does the association behave? Do they get the documents to you in a timely fashion? Is the information complete, and do they seem organized? Does the budget look OK, and do they have money in their reserve account? Do the expenses seem reasonable? Did they provide a history of board activity, such as meeting minutes?

Talk to someone on the board. Find out if they’ve done a reserve study, or have plans of doing so. (A reserve study takes place when an association hires a specialized engineer to walk the building, examine common elements such as stairwells, roof, etc, and identify short- and long-term maintenance and repairs that will be needed, and provide a corresponding timeline so they can be factored into the budget).

A young association may not have had a reserve study done yet, but they should be open to the prospect of doing one soon in order to keep a realistic budget in place and avoid costly one-time assessments in the future. 

Common Space Maintenance. Ask your board contact how things work – do they hire out landscaping help or do residents do it themselves? Ask yourself if you want to help out in that kind of way.

Of course, part of it is instinctual — what’s your “feel” for the building? As always, it’s helpful to work with an experienced Realtor to provide perspective and a second set of eyes on any questionable elements.

Advantages of owning in a self-managed building

  • Owners have greater individual contact and control over the issues of the day.
  • Easier to keep a close eye over association accounts and budget
  • Owners lead from within and determine board meeting agendas and association priorities.
  • Cost savings – professional management fees can run about $400/month (give or take) for a 4-unit building condo building in — that’s $100 per owner.
  • Get to know your neighbors, form bonds from common goals and interests.

Drawbacks to owning in a self-managed condo building

  • Fewer owners means greater risk per owner (in the case of special assessments, or if someone decides to stop paying their dues).
  • Time Allocation – owners take on more active roles in community management.
  • Inexperienced Members – may not have experience or training in community management.
  • Politics – professional management gives objective viewpoint, can be a buffer for personality conflicts.
  • Legal Compliance – an inattentive board may let things fall by the wayside — required business licenses may expire, for example.

Bottom Line: Do Your Research and Be Real with Yourself If you just want to pay your dues and be done with it, a self-managed building may not be right for you. But if you’re an organizer or like being active and involved with your neighbors, a self-managed condo association can be a nice way to foster community and keep costs down.

Selling a Condo in a Self-Managed Building

“A self-managed condo will be as sane as its craziest owner” — Anonymous Online Commenter

If you are thinking to sell a condo in Denver and live in a self-managed building, you’ll want to make sure your condo association is ready to face the public. If a buyer sees red flags from your association — usually in the form of questionable finances, record keeping or poor communication — you could lose a deal, which is never fun, and it could even affect your condo’s value.

Once you receive a contract, you have to deliver condo docs to the buyer fairly quickly. Since the Buyer can cancel a contract upon review of these docs, you’ll want to make sure your ducks are in a row before you list Denver condo, so you’re sure to give a good impression to potential buyers and, most importantly, keep that contract in place.

Make sure your condo association “shows well” by checking these points.

• Have Condo Docs Ready – Make sure docs are organized and complete. You’re required to turn over the association docs as well as budgetary information, insurance details, financials, expenditures and condo association meeting minutes. Make sure all these items are included in a nice, friendly format.  

• Keep Business License Current

• Designate a Communicator – Someone has to answer inquiries from Realtors and/or potential buyers. This person is your voice to the public, so make sure they are fully available, “with it,” and friendly. 

Cautionary Tales – How to Lose a Contract on Condo Docs

Don’t Let This Guy Be in Charge of Docs Delivery

My buyer clients were under contract for a cute condo in a 10-unit building, and the person responsible for delivering documents to the buyers happened to be on vacation. When we managed to talk with him, the guy was unpleasant, resentful and rude in our interactions. To make matters worse, even though dogs were allowed in the building, he hinted that there might be a problem with their dog at some point. And, most unfortunately, the unit these buyers were looking to purchase was right next door to this rude specimen.The whole episode left a bad taste in their mouths, especially the dog issue, and they cancelled the contract.

Don’t Be the Main Point of Contact on Your Own Sale

A buyer was under contract in a four-unit building, and upon reviewing the condo association docs, he had a few questions about the reserve funds and some of the condo expenditures. It was awkward that the president and main point of contact of the association was actually also his seller. She was slow to respond (because she was getting married) and there was no one else to talk to. He was left without answers, and also wondering who would be in charge once she was gone. In the end it was more than he wanted to bite off, so he cancelled the contract.

Before you list your Denver condo, it will save you money, time and stress to give your association a checkup and make sure it’s in good shape.

Denver Home Values and Pricing Guide

Three factors play a role in the sale of your home:

Location, Condition and Price.

Obviously you can’t change the location of your home — that’s why the old “Location, location, location” adage holds true. So, you have condition and price to work with when it comes time to sell real estate in Denver.

Once you’ve determined how your place will appear to home buyers, hopefully after discussing possibilities with your Realtor, you’re ready to determine your Denver real estate market value.

The market value of your home is not determined by what you think it should be worth, or what you hope it’s worth, or even what you paid for it plus the cost of all the improvements and repairs you’ve put into it over the years. Say it with me now: Your home’s value is determined by the market. Essentially, it’ll come down to what a ready, willing and able buyer is willing to pay for a property like yours in your neighborhood. 

Get Your Comparative Market AnalysisThe most important tool to help you gain an understanding of your Denver real estate property value will be a Comparative Market Analysis (CMA), ideally compiled by a competent Realtor. The analysis should be easy to read and understand, and it should be prepared with recent and relevant comparable sales in your area. You should also be able to review other neighborhood statistics and information so you have context for your Denver real estate home value. 

Now, Zillow offers Zestimates, but the nuances of pricing must be done with more expertise for the purposes of pricing an individual property for its respective market. I like to take at least four or five, or more, properties to review and compare to the subject. My clients find it helpful to see other properties marked up or down for various “assets” or “deficiencies” compared to the subject (their home to sell). This is something that Zillow cannot do, which is why those Zestimates are notoriously inaccurate.

The valuation often turns into a discussion. Clients are often able to provide input or context for specific properties, and they learn details (such as seller subsidies, or whether a buyer purchased with cash) not readily available to the public. After careful analysis and discussion, we should be able to pinpoint and agree upon the value of your property.

Price Range & Price

A 500K property might price anywhere from $480K to $525K. Once you’ve determined your value, you’ll want to take into account the current market conditions as well as your goals and needs to decide where you’ll price within the range. It takes a certain amount of psychology and strategy. For example, with low inventory in a hot time of year, you might price on the low end to shore up a bidding war. But, if there are fewer buyers out there or inventory spikes, this strategy could backfire.  

Pricing Points

  1. Eyeballs are important –most serious buyers are online, looking at searches they or their Realtors have set up, which typically include price caps within their range. $500K or $700K would be common caps, so you wouldn’t want to price just above, like at $705. It wouldn’t be worth the number of eyeballs you’d lose for a presumed $5000 gain.
  2. Oddball Numbers may cause unnecessary suspicion and confusion. If you’ve priced at $874,372, a buyer might wonder why you did that, and might be more likely to dig for information on you — when really, it’s the house they should be concerned about. As a seller, it’s best to remain anonymous and in the background when you are selling real estate in DC.
  3. Evaluate and Track market activity once you’re actively listed. Have other listings come on? Has another property gone under contract when yours didn’t? Keep up on the competition in your neighborhood as well as other neighborhoods buyers would be considering. Also, pay attention to the feedback you get from the showings. Have buyers voiced any objections? A Realtor is a helpful buffer and gatherer of information here — Buyers are much more willing to share their true feelings with a professional agent rather than with an owner. And the truth is what you want.
  4. Have a Plan of Action If your property gets a good number of showings on a regular basis, then, congratulations! You’re in the right price range. But…. if the showings stay regular with no offers, or if the number of showings tapers, you’ll want to find out why (that’s why feedback, mentioned above, is so important!) Be ready and willing to adjust your strategy in order to keep to your goals. After a set period of time (the number of days you give it will depend on market) you’ll want to check in with your Realtor and assess your strategy to make sure you are reaching the right audience.

Though DC’s real estate market still favors Sellers, today’s Buyers are extremely savvy. Make sure you get your best price by making your property look its best for its price and your market.

Of course, you don’t want to give your house away! Read about the record prices I helped seller clients obtain earlier this year. 

Is your house special or is it “special”? Read about this unique house where we exceeded Seller’s price expectations. 

Republican Tax Reform and Housing

Republican Tax Reform and Denver’s Housing Market

The proposed Republican tax reform legislation will have lasting effects on homeowners, homebuyers and housing in Denver and across the country. The US House and Senate each have their own versions of the bill, so let’s discuss some of the primary provisions.

If they get the votes for it, which still isn’t certain, the final bill will likely be a combination of the House and Senate proposals. GOP leaders have set a goal to pass the bill by the end of the year, and put the new law into effect by January (yes, next month!).

Here are some of the changes they’ve proposed that will affect homeowners and real estate:

Mortgage Interest Deduction Cap (MID)

The bill passed by the House in early November lowers the cap on the loan amount for deductible mortgage interest, from $1M to $500,000. With a median home price of $530K in DC, this will affect a significant number of potential homebuyers in the higher price ranges (about $550K and above, if you assume a 10% down payment would give a $500K mortgage). Limiting this deduction will effectively increase the cost of owning a home in the higher price ranges.

It’s important here to note: this provision only affects new buyers. A grandfather clause in the House bill would allow current homeowners to keep their full deduction. This was probably meant to be fair to current homeowners who made their home purchase factoring in the deduction. But, by grandfathering the provision, it may encourage current owners who benefit from it to stay in their homes longer. I predict this will exacerbate the inventory shortage we’ve felt since 2011, especially in the crucial buy-up range of $600-$1M.

The Senate’s proposed language would not touch the MID — instead it focuses solely on the property tax deduction.

Property Tax Deduction

The House bill caps deductible property taxes at $10K per year. The Senate’s version eliminates the property tax deduction altogether (but as mentioned, leaves the MID alone). With a large number of homes in DC worth over $1M, many homeowners will be affected by the $10K cap in the House bill, and all homeowners taxes will be affected by the Senate’s version. Homeowners in other areas of the country with high real estate values — especially the Northeast and coastal California — will feel these effects more than homeowners in the Heartland, where property values are lower.

Standard Deduction Increase

Another potentially huge change for most income earners is the proposed adjustment of the Standard Deduction. Both the House and Senate versions of the tax bill propose increasing the amount by more than double, from $11,700 to 24,000.

Presumably this is an effort to simplify the tax code, since fewer people will itemize on their returns with a higher standard deduction amount. But it would also significantly reduce the number  of taxpayers who use the two main deductions which go along with homeownership–the mortgage interest and property tax deduction. This could make the prospect of homeownership generally less attractive, and may encourage renting over buying.

Are GOP Tax Reforms Good Ideas for Housing?

The mortgage interest deduction has been on the chopping block for a while. Many economists consider it bad policy, and it didn’t originate as an intentional policy move for housing — in the early 1900s it just used to be that any and all interest was deductible. Though it can be seen as giving those who have the means to purchase a home an unfair advantage over renters who can’t afford a down payment or closing costs, it has played an encouraging role for homeownership overall.

The property tax deduction makes sense on principle, and it poses greater risk to home values if eliminated. Why should we pay taxes on money we’re already paying to the state? This popular deduction has a sound logic behind it. And you better believe that corporations deduct their property taxes.

Property taxes are based on value assessments, which ideally tend to go up — so the property tax deduction plays a valuable role in keeping homeownership affordable. The loss of this deduction will increase the cost  of owning in a more fundamental way than the loss of the MID, which decreases over time as one pays down the loan.

How Will Republican Tax Reform Affect Denver Real Estate?

There’s more to this tax reform with regards to housing: the legislation impacts the mortgage interest deduction on second homes, the time frames on capital gains exemptions from real estate sales, and there are a few other provisions that will impact housing. Such significant changes are bound to create ripple effects on our economy, both seen and unseen.

It stands to reason that since these at-risk housing deductions are baked into real estate values in DC and across the country, eliminating them will reduce values and appreciation levels (again, with stronger effects along the coasts). Many Americans hold most of their wealth in their primary home and, as we learned in 2008, the housing industry plays an essential role in our economy. So this legislation will likely have broad-reaching effects on the local and national housing market.

That said, tax reform isn’t necessarily a bad idea — and perhaps it would be a good thing to encourage policies that reduce dependency on the housing industry for the nation’s economic health.

Unfortunately, since Republicans in Congress seem determined to push this legislation through quickly, not enough consideration has been given and very little research has been done on the effects these changes will have on our nation’s housing and, as a result, the national economy. Sadly the most detailed numbers I could find were from Trulia and the National Association of Realtors, which are of course not independent sources. Though it’s hard to find any analyses that focus specifically on this bill as it affects housing, nearly every writeup agrees that it doesn’t truly benefit middle and lower income earners over time.

Easy Holiday Decor

Since holiday decor in the home is such a lot of effort, I like to decorate for the season with stuff that’ll last through February. It’s easy to make it festive without being too “Christmas-y” by staying away from the green and red combo. Colorful globes, sparkly trinkets and gold, silver and white brighten up rooms and add festive flair. Pines and greenery add nature and color, vibrancy and warmth to the cold, darker months.

Check my pinterest board!

Happy Holidays and Enjoy the Season!!!