2008 February

Baby Steps; encouraging words for buying your first home

Posted by kristal on February 29th, 2008

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.

Steeple Installation

Posted by kristal on February 24th, 2008

The view from my office in south-central Denver is nothing short of fantastic. I’ve loved it since the very day we moved in, several years ago in the fall. On the fifth floor facing due west, I get to take in the ever-changing view of the front range of the Rocky Mountains.

As part of my view I see the John Paul II Center for the New Evangelization campus. I never fail to admire the beautiful old world architecture of the buildings. The distinctive red tile roof brings back fond memories of Italy.

Last week, while driving through the neighborhood I noticed a new addition. Glistening in the sunshine were new steeples. So new in fact the crosses were still wrapped in protection paper.

Luckily I had my camera by my side so I could share this beautiful sight. It is not often one gets to see a steeple installed!

The mystery is finally revealed

Posted by kristal on February 20th, 2008

Ever since the announcement was made a mystery LLC purchased the former Storage Tek site in Louisville for $55.6 million, the rumor mill has been going wild. Every high tech company from Yahoo, to Microsoft to eBay and even Google has been named as the buyer.

Today the announcement by Gov. Ritter cleared up the speculation. The new owner is ConocoPhillips. Huh? Not a tech company?

Now wait;

The Houston-based energy giant plans to convert the 432-acre site to a global technology and corporate learning center. ConocoPhillips (NYSE: COP) plans to bring thousands of employees to the center for training each year. The center will be the company’s hub for research and development of renewable energy and high-tech carbon fuels recovery. ~ Denver Business Journal

Now that we know the whole story, it makes perfectly good sense. Energy & Colorado goes hand and hand. The new economy is about renewable energy.

Now in Colorado we have both.

WELCOME TO COLORADO CONOCOPHILLIPS!

We are happy you are here. Can I interest you in some nice Denver Dirt?

Buzz on Basements

Posted by kristal on February 20th, 2008

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!

There’s Snow in the Hills

Posted by kristal on February 16th, 2008

I love getting photos via the cell phone! Today my daughter sent me a picture from the top of Wolf Creek Ski area. She called it “from the top of the world!” It is breath-taking, I just had to share it with the world.

Enjoy!

Denver Real Estate is Mooving!

Posted by kristal on February 14th, 2008

Just when you get lulled into the secure feeling of having all the time in the world,something happens to whack you over the head!

Yes, it’s still technically winter. Yes, there is snow on the ground. Yes we have about 29,000+ properties for sale in Denver. Yes, the media keeps raggin’ on how bad the real estate market is…

BUT

Today I had another client LOSE out on a house because somebody else snatched it up before we could write an offer.

This isn’t a big pretty property, this home was a nasty, dirty, extremely smelly REO! As far as a deal goes this one had potential, if and only if the buyer was brave enough to accept the property in “as is” condition.

In this case “as is”meant removing all the floor and baseboards to get rid of the cat pee smell. Yuck!

Nasty, smelly properties like this aren’t appealing to everyone. The buyer/investors who are willing to take them on are usually rewarded $’s for their efforts.

Are you an investor who is sitting on the fence?

If the answer is yes, and you want to win, you need to show up armed and ready!

Have a pre-approval letter in hand
House looks like a good deal? Don’t hesitate, write it now.
Know the market.
Be familiar with rehab pricing.
Bring your checkbook.

Colorado contracts have an “inspection” clause written into them. The buyer has enough time to inspect the property; if the property is unsatisfactory in any way the buyer can decline the purchase.

There has never been a better time to be prepared. Denver real estate is Moving!

January Real Estate Sales Statistics

Posted by kristal on February 13th, 2008

Watching home sales in Denver is a favorite past time for many. Our market is not as wonderful as we would like, but quite frankly it is not doing as bad as many others around the country.

January saw a decline in the average sale price of home in the Denver Metro market. There are reasons that this is occurring. One obvious reason is the change in lending practices.

Home buyers who in past were able to purchase a home with very little (if any resources) are now longer able to do so. Many Denver real estate professionals found transactions falling apart the day before closing, because of changing lending practices.

Jumbo mortgage loan availability dried up. Home buyers wanting to purchase homes with a loan of over $417,000 found themselves scrambling to find mortgages. If the buyers were unable to create resources they were unable to close on the home.

As this combined with a high number of foreclosures in many neighborhoods has taken it’s toll on the market.

Funny with that said, we are now seeing many homes that have been languishing on the market reel in multiple offers. Odd how that works.

Homes in Denver are selling. Rather let me say this, NICE homes are selling. Yes, the competition to sell is tough, but with proper pricing, packaging (read staging) and a good marketing strategy homeowners are finding success in selling.

The Denver Market Update for January 2008 is posted here.

Larry McGee of The Berkshire Group is quoted in the Denver Post here.

Larry D. McGee the managing broker of The Berkshire Group is also quoted in the Rocky Mountain news here.

How to figure absorption rate

Posted by kristal on February 13th, 2008

Knowing your area’s Absorption Rate, helps to track trends. Understanding the market and where it is headed is part of our job as real estate professionals.Absorption rate is NOT an exact science. Figuring it is based on the premise that one will be looking for a TREND. It is advised to consistently do the numbers each month, to be able to track a trend.

Getting Starting…

You need to know 2 figures.

1) How many listings are currently on the market?

2) How many listings sold last month?

You will be counting under-contract or pendings as listings, since they are not SOLD yet.

Multiple the number of solds last month by 12 (months).

Divided by the current listings equals # of Units that would sell each week.

Divide the # or units that should sell each week into the number available = absorption rate.

The Definition of Absorption Rate:

Number of weeks it takes to sell the current inventory at the present rate of sales.

Realty Agents Seeking Other Careers

Posted by kristal on February 11th, 2008

The tide of the real estate market ebbs and flows. The past few years the business has been so good everyone wanted a piece of the action. Now the tide is changing leaving many short-timers rethinking their strategy. According to Business Week the National Association of Realtors is experiencing a drop in membership for the first time since 1996.

Dues to belong to the National Association are not terribly high, I believe I paid around 5 or 6 hundred dollars. Of course when you are serious about your business and work everyday to grow, that amount of money is just another cost of doing business.

On the other hand when you dabble in real estate selling only a house now and then, the price of membership goes beyond the cost of what a hobbiest real estate agent cares to pay.

Now that the market isn’t ripe with low hanging fruit, many are finding now is a good time to look for other options. Of course there is nothing wrong with this. I just feel sorry for all the “orphan consumers” who are left holding their unsold listings or are tied into an existing offer than needs some serious transaction management.

Part timers in the real estate industry make it hard for everyone, consumers, associates and themselves. Real estate is and will always be a full time job. Trying to make real estate a career with anything less than 40-50 hours a week is a disservice to all involved, including the part-timer.

I remember once talking to a broker-manager friend of mine. She said a huge part of her job was helping agents discover other employment!

It just goes to show, it make look easy but selling real estate is a difficult, time consuming job. This is my 24th year in the business. I’m beginning to think I might just hang around another decade or two!

<Inspiration for post belongs to ResPres for leading me to the link via Twitter!>

Denver is off and on some Forbes Lists

Posted by kristal on February 11th, 2008

Best Cities for Bargain House Hunting

Denver, Colorado didn’t make this list and I guess that is OK. Sometime inclusion on a list is not the best thing! Forbes Magazine online is worth logging into to read the full data. Here’s a quick crunch down of the list FYI…

Salt Lake City, UT
Raleigh, NC
Orlando, FL
Charlotte, NC
Phoenix, AZ
Las Vegas, NV
Seattle, WA
Jacksonville, FL
Richmond, VA
Houston, TX

Denver was way down on the Hardest Hit Counties for Foreclosures

This is a list no community wants to be on. The hardest hit for foreclosures is not a premium list. Hopefully the communities included will become so attractive to investors they will soon lose their position on this list.