Lies, damned lies and statistics…
Denver Real Estate ~ Take a close look at the sales statistics for real estate sales in the Denver Metro area. At first glance the average sale price has dropped $55,251 from a year ago ($267,259 from $322,510). That is a huge drop that would indicate values have dropped considerably.
But Wait! Let’s look at the Percentage of Sold Properties by Price Range:
Notice the lower prices ranges (single family), everything under $150,000 has seen an increase in volume this year.
Now notice the drop in sales of homes over $500k. We are selling the same number of homes, we are just selling them in the low end of the market.
The decline in value is due to the number of lower end homes we are selling coupled with the decrease in the higher end. A glut of low end sales will skew the average price, pulling it down and giving an inaccurate picture of the market.
Interestingly the middle of the market has not been effected.
First time home buyers, investors are in the market. They are scooping up the low end real estate. Savvy buyers know how to buy (low) and sell (high). People who continue to put their trust and faith in the news media will be saying in a few years, "Gee I coulda bought that for $xxx, but now the market has passed me by and I can’t afford to purchase a home."
Why is my house not selling?
As I go about my daily routine selling Denver real estate, I get asked by home sellers, "why doesn’t my house sell?" That is the $64,000 question.
I wish there was one simple and complete answer, but alas there isn’t. In today’s real estate market we are dealing with factors beyond what I’ve seen in my 24 years in the business. We are seeing sales occur in the first 30 days and others that take 6 months or more.
Typically the reason the home is not selling is either price, condition or location.
What most seller’s don’t take into consideration, they are competing with the market as a whole, not just their neighborhood. True when pricing a home we look to the area for valuation. That is normal and accepted.
What isn’t realized is buyers have many choices. They might like a particular neighborhood or any of the other hundreds of neighborhoods in the Denver metro area. Seldom do buyers (or at least the ones I’ve worked with) hang around waiting for a home to go up in one specific neighborhood.
Most buyers are going to buy based on 1) their budget 2) personal tastes 3) proximity to work and/or schools. These requirements often times have multiple solutions, so your house may work or maybe not.
Condition of the home is a huge factor.
Today most savvy agents and homeowners take the time to prepare the home by hiring a professional stager. We learned a long time ago "the way you live in a home and the way you sell a home are two different things." Hiring a professional to come into the home and either work with your belongs or augment some of their own, works miracles. Simply said.
It has been my personal experience the expense of hiring a stager often comes back in multiples by shortening the listing period and increasing the homes potential. (a great resource for staging is found at Staging rants & ravings)
Another factor that makes a home more difficult to sell is the "dated aspect". A homeowner must consider who the potential buyer will be. In the year 2000 home styles changed. We went from gold fixtures to chrome. Some age demographics will not purchase a home with anything gold in it! Changing out the fixtures is usually a fairly easy fix. However if your home has 1970’s vibrating through it, the makeover my be more than one will want to do. The only way out maybe to price it accordingly and let the buyer bring it up to date.
Homeowners who want to "update" a home, be sure you are up to doing the job, not just right, but complete. There is nothing sadder than having a seller update part of their home. Buyers will come look and the only thing they will see is the undone updating. Yes, buyers are cut from the same "the glass is half empty" mold.
Location is so important.
Buyers shop for the best of everything. If your home has a location with a glitch, say an apartment building next door, or a messy neighbor, barking dog, busy street, backs to a freeway, a blinking sign glaring through the bedroom window or railroad tracks in the back yard, you may have a problem.
Location issues can be overcome. Sometimes the best thing to do with a bad location is tackle it head on. Some buyers actually LIKE homes on a busy street, because they crave the "pulse of the city" nearby. Others might be looking for a home next door to the soup kitchen, because they are into volunteering. Creativity is part of sales. Get creative with a solution.
Pricing is the most important factor.
When all else falls reduce the price. Statistics have shown a property that has 10 showings and not offers is over-priced. Homeowners who insist on a price that home buyers aren’t grabbing need a reality check, or to remove their home from the market.
Overpriced homes that get shown and are getting good feedback maybe being used as an example. Buyers are comparing values and if one home isn’t selling and the other one is, perhaps being the bridesmaid again and again means it’s time to adjust for the market.
When it comes to real estate there is a mathematical equation that works time and time again.
Price=Sale.
Find the right price and find the sale.
Mortgage Debt Cancellation Relief - H.R. 3648 Public Law 110-142
Individuals who are relieved of their obligation to pay some portion of a mortgage debt on a principal residence between January 1, 2007 and December 31, 2009 will not be required to pay income tax on any amount that is forgiven.
General Provisions of Public Law 110-142:
- No income limitation: All Borrowers receive the relief, no matter what their income.
- Dollar limitation: no more than $2 million of mortgage debt is eligible for the exclusion ($1 million of debt for a married filing separately return).
- Relief applies only to an individual’s principal residence.
- The forgiven mortgage debt must have been secured by that residence.
- No relief is available for cash-outs, whether the cash-out takes the form of a refinanced first mortgage, a second mortgage, home equity line of credit or similar arrangement.
- Eligible debt is what is called "acquisition indebtedness." This is debt used to acquire, construct or rehabilitate a residence.
- Refinanced debt qualifies, so long as the debt does not exceed the original amount of the debt. (Same rule as Mortgage Interest Deduction).
- Home equity debt (or second mortgages) qualifies if the funds were used to improve the home. ((Borrower must have adequate records, as under current law.)
- See cash-outs, above. No amount of a cash out maybe treated as acquisition debt.
Additional Provisions of Public Law 110-142:
Refinanced Mortgages:
The relief does apply to refinanced debt in some circumstances. The rules seek to assure that any debt eligible for the relief is directly related to the acquisition or improvement (such as rehabilitation, expansion, renovation, reconstruction) of the principal residence. Debt used for furnishings (i.e., any movable property) in the home is not eligible for the relief. When the proceeds of any refinanced debt is used for any purpose other than acquisition or improvement, those proceeds are not eligible for the relief.
Principal residence:
A principal residence is defined in the same manner as the rules that apply to the capital gains exclusion on the sale of a principal residence. An individual may not have more than one principal residence at any given time.
Second Homes:
As a general mater, the relief does not apply to any debt forgiveness on any mortgage for any second home of the taxpayer. However, if a taxpayer uses a residence (other than his principal residence) solely as an income-producing rental property, already-existing relief provisions might apply, depending on the taxpayer’s situation. If the second home property was acquired as a speculative investment (such as for resale rather than rental), relief provisions are unlikely to be available.
In all events an individual who is in a short sale, foreclosure, workout or similar situation on a residence (including condos) other than his principal residence should consult a tax adviser to determine what, if any, relief provisions might be available.
Mortgage Insurance Premiums:
The deduction for mortgage insurance premiums is extended through tax year 2010. Income limitations on the deduction will continue to apply.
Surviving Spouses/$500,000 Exclusion:
In some circumstances, a surviving spouse is denied eligibility for the full $500,000 exclusion on the sale of his/her principal residence. This most frequently occurs when the residence is not held in joint ownership at the time the spouse who is not on the title dies. In that case, the deceased spouse had no ownership interest, so there is no basis step-up on that half of the property. The surviving spouse is thus eligible only for an exclusion of $250,000 . (Had the home been sold during the deceased spouse’s lifetime, the full $500,000 exclusion would have applied, so long as they filed a joint return.)
Challenges for the surviving spouse are compounded when this circumstance occurs late int he year. The surviving spouse is often unable to sell the property within the same year that the spouse died. This legislation provides that a surviving spouse may claim the full $500,000 exclusion not only in the year of the deceased spouse’s death, but also during the two years after the spouse’s death.
Second Homes Converted to Principal Residence:
The new law signed by the President does not include a provision limiting the application of the $250,000/$500,000 exclusion when a second home is converted to a principal residence.
Background Information
A fundamental principle of the income tax is that a taxpayer must recognize income and pay tax any time a debt of the taxpayer is forgiven or discharged. Exceptions are provided in several circumstances, including bankruptcy, insolvency (as defined by state law) and for some investment real estate. until this new rule was enacted, however, no exception applied to any amount debt forgiven on a mortgage for a taxpayer’s principal residence. Thus, until now, when some portion of a mortgage debt was forgiven, that amount has been treated as taxable income and borrower has been taxed at ordinary income rates on the forgiven amount, even though there is no cash.
The newly-enacted relief for mortgage debt forgiveness is Congress’s response to the problems generated by the subprime crisis, short sales, rising foreclosure rates and price corrections in some markets. Thus, when a lender forgives some portion of a borrower’s mortgage debt in a short sale, a foreclosure, a workout with the lender or some similar circumstance, the borrower will not be required to recognize income or pay tax on the forgiven amount. This relief applies to debts forgiven between January 1, 2007 and December 31, 2009.
Sellers, you have to sell three times not once!
Putting your home on the market these days seems to be so complicated. Resale homes have to complete with builder models and the rest of the resale competition. The competition is rough!
Savvy Colorado brokers make sure their homeowners know the value of staging the home, so they hire a stager to provide professional advice to the seller. Stagers arrive at the property with a bundle of suggestions to help make the home more marketable.
Yes, that means yet another "to do list" for the homeowner. Once the staging is compete, the photographer comes in to perform their magic for the MLS.
The home goes on the market and hopefully the phone begins to ring with requests for showings.
BUYER SALE #1
If the seller is lucky the showings provide a ready, willing and able buyer, who wants to buy the home.
The offer is written and accepted, then the inspections begin.
INSPECTOR SALE #2
Now if the seller has maintained the home the SECOND SALE to the home inspector will be a piece of cake. If not, the seller may end up having to do some repairs. Either way the if the seller can get through this process with the buyer still willing, the next step might be the toughest.
APPRAISER = SALE #3
Yes, the last and final step is to make sure the seller’s home value is in line with the market. The current real estate market has been effected by foreclosures and the liquidity crisis in the financial industry. Appraisers are being required to be very conservative in their values plus the fact many areas of Colorado have been designated as "declining" by the private mortgage companies.
In my office we are seeing appraisals come back lower than the sale price. When this happens the seller has a couple choices.
- The seller (or seller’s agent) has the right to provide comparables that might better fit the property. It is up to the appraiser to determine if the new comparables are better suited to the property, if so the appraised value can be adjusted.
- The seller doesn’t have to sell the property if the value is not equal or greater than the appraisal. The seller can keep the property and lose the buyer.
- The seller can reduce the price of the home and sell it to the buyer at a reduced price.
- If the buyer feels the appraisal is out of line and doesn’t mind paying more for the home than it appraised for, they can do so. But the additional amount must be over and above the minimum down-payment required by the lender.
FOR YOUR INFORMATION
- Appraisers are generally looking at no more than 90 days back for sold comparables. Sold comps older than 90 days are likely to be irrelevant.
- The lending rules are changing every day for every loan. Our company is advising buyers to have 2 loan options, maybe with 2 different lenders. Plan A and Plan B.
- Lenders and their support system are at the mercy of the market.
- This too shall pass.
WHAT SHOULD A SELLER DO?
First it is important to know that homes ARE selling. In fact we sold more units this year than last. The issues we are facing can be resolved, but it means some sellers may not get the price they want for their home. The best way for a seller to know where they stand is to do a very realistic analyst of the homes sold in the neighborhood.
- Track homes sold and update every 30 days.
- Watch the current and seasonal trends. Realize the market has busier times of year, so this month’s numbers should be compared to the same season last year.
- Consider the absorption rate. If it is increasing that means longer days on market with more homes competing. Most likely that means values will decrease.
- If values are declining, make a decision to stay with the market or GET OUT.
GOOD NEWS
Even though the Denver real estate market seems to be taking a big hit in values, much of the metro area is not that bad off. In fact 20% of the homes that sell, do so in the first 30 days.
As a seller the goal should be to be one of those that sell in the first 30 days. The homes that are selling typically are in mint condition. The sellers have taken extra care to price and package the home so it is very attractive to a buyer, inspector and the appraiser.
When selling a home, be sure to speak to all three buyers, and the home will get sold.
Sold! What does that really mean?
Yesterday my cell phone rings. On the other end was an inquisitive voice stating she was
sitting in front of my listing at 9654 XYZ Road. She said her agent told her the house was “sold” and she wanted to know why my sign was still up.
“Well,” I explained, “The house is actually under-contract waiting to close.”
“But your sign is still in the yard.” she protested.
“Correct. It will stay in the yard until the house is closed. Then I will have it removed.” I replied.
“Oh. Thank-you.” click.
This conversation got me to thinking how often we use words that aren’t technically correct. The caller’s agent told her the house was “sold.” When in fact it was “pending” or “under-contract.”
Pending is not sold
Pending and under-contract mean the same thing. When a buyer writes an offer on a house there is a period of time between the offer being accepted (under-contract) and the actual sale or closing of the house. That time can be a matter of a couple weeks to months.
During this time the buyer completes inspections and finalizes financing details. If there are items on the inspection the buyer and seller cannot come to terms on, the contract could “fall.” Actually the contract doesn’t fall, but rather buyer can opt not to purchase the house.
It is for this reason we don’t remove the “for sale” sign. The sign will stay up until the home does officially close.
One thing consumers may notice, a rider saying “under-contract” or “pending” might get attached to the sign. This typically lets the consumer know there is an interested party who is working toward purchasing the property.
It is important to note, a buyer can still place an contract on a property in what we call a “back-up position.” This would mean if the first contract did not work out, the offer in second position would than have a chance to purchase the property.
Is writing a Back-Up Contract wise?
Most listing agents and sellers LOVE having a back-up contract. It helps their negotiating position with the 1st contract and gives a feeling of security if the 1st contract doesn’t work out at least there is a “plan b.”
So as a consumer should you consider putting in a back up contract? Maybe.
Let’s work through this scenario. The seller has two contracts. The first contract just completed their inspections and they are now requiring the seller to do repairs. The seller can say, “no!”
This could force the buyers into accepting the house “as is” knowing that if they didn’t they would lose it.
Sometimes the buyers love a home enough and realize the only way they will get to buy it, is on the seller’s terms. This wouldn’t happen if the seller didn’t have a second contract.
So as a back up contract, you just helped the seller force the buyer to buy and you walk away empty handed.
Of course every situation is different. It could just as easily happen in reverse with a buyer who refused to go forward and walks away, leaving you with the house!
Are you upside down?
Homeowners who need to sell their property right now are finding they owe more than the home is worth. This is a tough problem to face. How can it happen?
There are several reasons why the mortgage on a home exceeds its value:
- Real estate values in the neighborhood have declined, due to an over abundance of homes on the market or a glut of foreclosures.
- The home owner has refinanced taking out a larger mortgage than the value of the home can support and/or incorporated closing fees into the mortgage, thus increasing the mortgage amount.
- Late fees and back payments have been added onto the mortgage and are also accumulating interest charges.
- A negative amortization mortgage was taken out on the home.
- Lack of maintenance
Homeowners who find themselves in a situation where values in the neighborhood are dropping, but they don’t have to sell their home really have nothing to worry about. Since most people plan to live in a home for many years, the market will rebound and values will increase. Sit tight and tune out all the negative press. Make your payments, enjoy life and when it comes time to sell you will be fine and probably save yourself a few gray hairs in the long run.
If you are a homeowner that MUST sell your home and are up-side-down with your mortgage vs. home value, you do have some choices.
- In a declining market you can price your home to sell and make up the difference with cash from your pocket at closing. Many homeowners do not like doing this, but will just to be able to move on to their next home. If the homeowner is lacking the cash, it might be possible to get a cash advance on a credit card or from relatives to complete the transaction.
- Rent the home out until the market improves. Sometimes this means only a couple years of renting until things look better.
- In the case of a home that has not been cared for, fixing the home might bring it up to acceptable standards to sell.
- Request the mortgage company holding the mortgage restructure your mortgage so you can sell. The balance of what is owned can be transferred into another note which you can make payments on until paid off. The mortgage company may or may not be able to do this depending on what type of lending institution they are. Of course the better the borrowers credit score the better the chances are of negotiating this type of deal.
- Short sale ~ ask the mortgage company to accept less than what is owed and write off the balance. This is a lengthy, not guaranteed process that could take up to 6 months. If the bank is willing to cooperate in a short sale, the amount of mortgage that was relieved could be subject to income tax. (please check CPA for details) Short sales have a negative impact on credit ratings.
- Some employers (as in the case of a transferee) might agree to absorb the amount short in order to get the employee settled in the new location.
- Deed in Lieu of Foreclosure ~ if there is absolutely no way to get the home sold and there are no funds, renters or family to help, giving the home back to the bank is an option. The best way to do that is to start a conversation with the mortgage holder to see how they would like to go about it.
There is really no "one size fits all" solution. Usually there is a way to salvage a situation if one tries. Homeowners in trouble have become the focus of many agencies, with the government looking for ways to help.
If you are a homeowner who is up-side-down and you need to get out of your home, don’t hesitate to call and ask for help. Start with your mortgage holder. If I can assist you in the Denver metro area, please feel free to call.
Home owners in trouble have the FED on their side
There isn’t a day that goes by where we don’t hear or read a story about a home owner having trouble making house payments. The Foreclosure Crisis continues with more and more communities trying to figure out what to do to help. The Federal Government is taking a strong look at various solutions.
Federal Reserve Chairman Ben Bernanke said this week.
“In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure. ”
“Reducing the rate of preventable foreclosures would promote economic stability for households, neighborhoods and the nation as a whole. Although lenders and servicers have scaled up their efforts and adopted a wider variety of loss-mitigation techniques, more can, and should be, done.”
Interesting how the Big Guy has a different twist to solve the problem. I’ve only heard of lenders reducing their interest rates for home owners in trouble. That just means the mortgage payment is made more affordable, especially with the adjustable rate loans that topped out at unmanagable highs.
By reducing the loan amount to give the mortgage holder instant equity means home owners who must sell might be able to use this adjustment to get out of their home without having to lose it to the bank.
Bernanke’s reasoning for giving the home owner equity was to take stress off the homeowner and give him financial incentive to stay in the home.
I’m not sure I agree with Mr. Bernanke on this. Given a choice between taking a lower interest rate or a reduction of loan amount, I would have to make my decision based on my future plans.
If my intention was to stay in the house, the lower interest rate would be more attractive in the long run.
If my life situation was such I had to move, my preference would obviously be the principal reduction.
So the solution aka Bernanke is not “one size fits all.” Of course nothing in life is…
Bottom line, the market may stink, but the strategy is still the same. If you live in an area of declining values and don’t have to move.
DON’T MOVE. DON’T SELL. STAY PUT.
On the other hand if you are thinking about downsizing, moving up or investing, now is the time to do it. What you lose on your current home you will gain equally if not more by acting now.
Really.
There is Life After Foreclosure
Please feel free to call on me if you have questions. I welcome your click or call.
Revival of the Carpetbaggers
After the civil war unsavory characters descended on the South with less than good intentions. The people of the war ravaged countryside were in need of assistance. The unsavory men who came with all their worldly goods packed into a single carpetbag took advantage of every possible chance. They lied, stole and cheated the citizens of the south who made the simple mistake of trusting them.
The Carpetbaggers are back. Not in the civil war sense, but in a modern day global sense. They are popping up all over the U.S. offering services to the economic war now being lost by the masses of folks who over-estimated the appreciation of their homes and their ability to repay loans.
Short sales, bankruptcy, deed in lieu, reo, foreclosure, sheriff’s sales, delinquent mortgage payments have become the evil terms of today. Homeowners in fear of being tossed upon the street are grasping at every straw they can in hopes to avoid disaster.
Fear coupled with a lack of understanding of one’s rights and remedies often leads the innocent consumer to the nasty old carpetbagger.
Today’s carpetbaggers aren’t all that easy to spot. Most of the time they look like an ordinary citizen. They dress nice, they can emphasize with the best of us. They appear to want to help.
But they don’t tell you the whole story.
Before a distressed homeowner pays a third party company to cure their credit problems, they should take the time to understand their predicament.
Ads in the newspaper and online that promise to free of your mortgage with no negative credit reporting to those who “qualify”. Are not totally accurate. They are speaking to a very small (if any) group that might “qualify” assuming mistakes had been made to the credit reporting agencies. Most people will not fit this criteria.
Having a foreclosure on one’s record is a black mark on your credit that will NEVER go away. Yes, after 2 years and if the default was due to extenuating circumstances (death of a primary wage earner, divorce (rarely) or debilitating health issues) the borrower may be able to get another mortgage. Normal time for qualifying for a mortgage is 4 years.
Once a homeowner has experienced a foreclosure, forever afterwards the box on any loan application that asks “have you ever lost a home to foreclosure” will need to be checked, yes.
Is there help? Read on…
The National Association of Realtors is pushing for Homeownership Protection for Older Americans. Foreclosure rescue scams (Carpetbaggers) are causing many older Americans and other vulnerable borrowers to fall into their trap.
In Colorado, the State Legislature passed a law, changing the foreclosure time line. The new law went into effect January 1, 2008, giving homeowners a longer time to work out their delinquency issues with the banks.
Consumers in trouble should not wait for the knock on the door. Your power comes from taking the initiative now. Call your lender, YOU REACH OUT and ask for help.
If you can’t get a response go to the next level. Be persistent. Take notes. Record date, time, contact person of every conversation. Be consistent.
There are remedies. Social Service organizations have been formed to help answer questions and perhaps help get consumers on the right track.
Here are some resources to assist in helping consumers learn about loans and foreclosures.
Mortgage Bankers Association: Home Loan Learning Center
Department of Housing and Urban Development (HUD) 1-800-569-4287
Homeownership Preservation Foundation 1-888-995-HOPE
Colorado Foreclosure Hotline 1-877-HOPE
Things to know and financial tips for homeowners
In the end, if foreclosure is your only option remember, there is life after foreclosure.
(Carpetbagger: cartoon by Nast> “Online Photograph. Encyclopaedia Britannica Online. 14 Feb. 2008 http://www.britannica.com/eb/art-4724 )
Baby Steps; encouraging words for buying your first home
Home ownership is the American Dream come true. No where on earth is becoming a
home owner easier than it is in the U.S! Owning a home is part of our heritage and the desire to put down roots is strong.
The home ownership path is not always as easy as one would like. First timers find with house prices so high, they often have to settle for less than they would like. Of course settling for what you can afford vs. what you want is a rule of life for most people. Weeding out the "wants" from the "needs" is a process I help buyers with all the time. It doesn’t matter if they are in the entry level market or purchasing a million dollar home. There is always a gap between want/need.
First Time Buyers Challenges
After the decision is make to purchase a home, the first time buyer will face a few challenges which are generally overcome with a simple strategy.
- Credit; good, bad or lack there of! If a 1st timer has been living within their means, chances are they have good credit or perhaps no credit at all. Establishing a good credit record is the first step in obtaining a loan. If there is no credit a mortgage broker will advise obtaining a credit card and charging a few items on it each month. Paying off the credit card in a timely manner will establish a good track record for the first time buyer.
- Bad credit; It seems first time buyers are tempted early on in college to take out credit cards. Next thing they know they are in over their heads, unable to make timely payments. Late payments, written off charge card accounts, etc. can be taken care of. The remedy will vary from case to case, but a good mortgage banker can advise the best strategy. I’ve been told even the worse credit (including bankruptcy) can be turned around with proper attention.
- Down-payment; Buying a home has almost always required some sort of down-payment from the buyer. In recent years mortgage companies became very liberal in lending practices and made loans with no down-payment necessary. That practice was found be to faulty, so now we are back to requiring the buyer to have some "skin in the game!" The amount of skin required depends on the type of financing obtained.
- Low-income; Mortgage loans are typically made on a ratio of take-home earnings to house payment. An affordable house payment is generally defined as 30% of income. What happens to many potential buyers is their income is not sufficient to warrant purchasing a home in the area they live. In some instances there is a way around this by using First Time Home Buyer Programs.
First Time Home Buyers Programs
In Colorado, every county has some sort of program to assist buyers in purchasing a home. The Colorado Housing Finance Authority (aka CHFA) is a state run organization that makes loans to low income buyers. Typically these loans are made at a better interest rate then offered on the general market.
CHFA programs as do most First Time Home Buyer Programs have very specific requirements the borrower must meet.
- loans are made on an income based scale. Borrower’s income cannot exceed specific amounts.
- Borrower(s) must attend a Home Buying Class put on by the organization that is lending the money. If there are two borrowers on the mortgage, both must attend prior to closing on a home.
- Credit score is important
- Must be "under-contract" with a home before borrower can apply for loan.
I am purposely being a little vague here, because each program has rules that differ from the other. Income limits can be as low as $40,150 for one person to as high as $71,400 for a household of 1 or 2.
For buyers who are lacking a down-payment, there is also Down-Payment Assistance in the form of Denver Bond money. This program GRANTS up to 4% for a down-payment that NEVER has to be paid back. Grants can also be used to bring the cost of the mortgage down by 4% if the buyer is able to have the seller pay for closing costs.
Ok, are you confused yet? These facts actually make my head swirl!
"Putting together a loan package that uses CHFA, Denver Bond Money and other options has become an art form!" said Cindy Howeth CHFA’s top mortgage loan broker at 1st Priority Home Loans.
The important thing to know is there are people who specialize in funding first time home buyers. Whether the buyer qualifies for special financing or not, the process of buying a home for a first timer takes more care and concern. The buying process itself is not much different, but the education process that should accompany is critical in making the experience one of pleasure or one of pain.
In a Nutshell First Time Buyers Need To:
- Consult a Professional who can inform them of their options…all the options.
- Make the time to attend a Home Buyers Class, before purchasing
- Develop a strategy to become a homeowner
- Maintain or become fiscally responsible
- Go find a home you can afford
The journey may look like a maze of confusion, but with a little help first time home buyers can successfully navigate and enjoy the trip.
Other Articles of interest
First time buyers are finding opportunity with CHFA
Buzz on Basements
Last weekend Berkshire Post writer, Christian Toto published an article “Basement remodel a warm and wise idea“. The gist of the article was how a finished basement gives added appeal when reselling a home, plus a comfortable living space to the homeowner while living in the home.
I made a comment in the Denver Post article that causes several people to look me up and call. Here’s my quote:
Kristal Kraft, a broker associate with the Denver Group Realtors, says do-it-yourself types should proceed cautiously when renovating a basement.
Homeowners must get a permit before they start such a project, Kraft says.
Counties often have differing building requirements, so even if a Denver transplant knew the rules in his or her old state, they may be different here, especially when it comes to local soil issues.
Kraft says she has had deals fall through because of permit issues.
“Whatever time, trouble and money they save on the front end, they lose on the back end when selling,” she says.
I was surprised by the confusion from my statement. One gentleman wanted to know “If I finish my basement without getting a permit, who would know?”
Good question!
From my perspective as a real estate broker, there are three ways I might know:
- Home inspector identifies issues
- Seller’s Disclosure
- Basement is obviously NOT professionally finished.
- No record of a permit at the County Building Dept.
Home inspectors are generally very good about locating “clues” to determine if a basement was completed without a permit. Such clues would relate to items not being finished to code.
When a seller hires a broker to sell the home, the homeowner fills out a Colorado approved Seller’s Disclosure form. On this form there is a question relating to the status of the “improvements.” If known the seller must disclose to the prospect whether the improvements were made without a permit.
AH! My last statement is no longer true. Upon investigation I’ve learned the Colorado approved Seller’s Disclosure form has changed. No longer is the question asked about the improvements!
This discussion now turns in yet another direction!
My question is “why did the Colorado Approved Seller’s Disclosure” form change? Was is a error? Are they merely asking a question without leading to the next question?
“Any alterations or additions made?” Huh? If the answer is yes, as a buyer’s agent, my next question would now be “Were the alterations or additions made in accordance with the local permitting process?”
Why is this important to know? I believe it is important to disclose all the facts to the consumer. As a real estate broker I DON’T MAKE THE DECISION to purchase, the buyer does. I want them to be able to make the decision based on facts. Correct facts.
If the buyer should decide to go forward with the purchase of a home that had a basement finished without a permit, they are taking on all the responsibilities and obligations of that decision.
Let me clarify something. the lack of a building permit could mean the work is shoddy, but not necessarily so. It just means that at some point in the future to sell the house the current owner may have to go back and have the work permitted.
My Denver Post remark is a reflection of the hassle it would be to opt not to get a building permit at time of construction, then have to do so later when one wants to sell the house! It had little if anything to do with the quality of construction.
Of course quality of construction can also make or break the improvement when it comes to resale. Do It Yourselfers (DIY) often fail to build properly. A couple years ago I had a transaction hit the rocks because the basement, (done nicely on the surface) was not built according to code. The walls were built directly on the concrete in an area where they should have been floating. This mistake was major. It meant if the foundation moved the walls would push and heave the home, causing havoc upstairs.
The remedy was to remove the offending walls and do the job right. It was worse than having to finish a basement. All the existing basement walls had to be removed and rebuilt.
Now had the homeowner followed the proper channels he would have avoided this issue. I don’t know what a building permit costs, but I would bet it is a lot cheaper than redoing the basement!
So I stand by my original statement, when finishing off a basement or any other home addition, do it right. Get a building permit.
Next time I might blog about the design mistakes people make when finishing off a basement!
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