It just so happens that Fox News has discovered what we have known in Denver…we have a healthy market. In fact, it is a perfect time for investors to step in and build their portfolios. Click the link below to see what Fox News has to say in their Dec 28, 2011 post.
Whenever I show homes, I always get questions about the quality of the build, or the quality of the finish. It’s hard to understand what is normal by our construction standards, and it helps to know what type of flooring has been engineered for each lot. As a reminder, the driveways, sidewalks and the basement floors are not poured as an attachement to the foundation, and instead are free floating. So of course there is natural settling, and an amount of normal cracking. How do you know what is normal and what is excessive? Thanks to Tony Siegert, Certified Home Inspector, CRI, CMI for explaining the differences and how you can repair innocent settling.
Normal fluctuations of interior walls often cause problems. Wallboard is fastened to the studs of the ceiling and walls and the joints are taped and joined for finishing. Minor cracks in drywall and some nail-pops are normal occurrences. Slight imperfections, such as nail pops, seam lines, and cracks not exceeding 1/8″ are common. Repair cracks with joint compound, sand and repaint. Repair hairline cracks at inside corners with a flexible, paintable caulk. Repair nail pops by resetting or replacing the nail in the drywall. Place another nail 1″ or 2″ away in the stud and hammer below the drywall surface. Cover the areas with spackling compound and allow to dry completely (second coats may be needed). Sand until smooth and repaint. Wallpaper seams can become loose or curl due to climate changes. Re-attach loose wallpaper.
I visited with a seller yesterday, and to no one’s surprise, they were mildly upside down. Only two properties had sold in the last year giving us very little to go on for comparables. We searched for homes that were similar within the mile radius allowed by appraisers, but they were not remotely close to the same product, therefore unusable. What a challenge, yet increasingly common as fewer sales become the new reality. What I really appreciated from this client is the acceptance of my honest assessment, and my suggestion to have the property appraised before listing it. While I don’t want to leave money on the table for my clients, I also want them to recognize the importance at not over pricing. Since the first 30-40 days on the market are critical for a seller, chasing the market backwards is inevitable if you start too high, particularly if this home were in a declining value neighborhood.
Not every neighborhood is like theirs, and recently the activity in sales has been increasing, meaning our inventory is decreasing. Some neighborhoods are very active and can substantiate a price derived from a market analysis, but always keep in mind those are not an appraisal, but what I think the current market value is.
Whatever they choose to do, I can sleep at night knowing I was honest with them and didn’t try to “buy” the listing. What’s that, you say? When an agent goes in and agrees to a high price just to get their sign in the ground with the intent to get a seller to drop their price until it sells. The agents wins the listing and loses credibility, not worth it in my eyes.
The chart below is the truth about our foreclosure market here in the state of Colorado. If you want doom and gloom, you’ll have to go to Gilpin County, the ONLY county that shows an increase in the amount of owners who have received a Notice of Election of Demand (NED) which is the notification that your home is going into foreclosure.
Rather than listen to media hype, check the stats yourself. After Channel 9′s news broadcast last night, I ran a report of one of my listings and found the home had appreciated 1.06% since March 2011. While that isn’t a huge amount, it is a perfect amount going the right direction. We don’t want huge spikes in appreciation or that will lead to the troubling appreciation that got many homeowners into this mess.
The lesson here is to let your agent find your home’s local statistics before you declare the sky is falling. It is a great time to buy and hold in your portfolio. Heck, it’s a great time to buy the home you want to retire in, or the one you’ve had your eye on for years. Our vacancy rate is at records low, the interest rate is below 5%, and you still have the Mortgage Interest Deduction as a tax write off, so why would you pay someone else’s mortgage by renting?
County: NEDs Filed (Yr Prior)
01/01/10 – 06/01/10;
NEDs Filed
01/01/11 – 06/01/11;
% Change;
Current
Actives*
1) Adams 2,183 1,471 -33% 2,522
2) Arapahoe 2,368 1,713 -28% 3,259
3) Boulder 548 407 -26% 724
4) Broomfield 126 95 -25% 156
5) Clear Creek 40 38 -5% 58
6) Denver 2,180 1,356 -38% 2,562
7) Douglas 1,023 681 -33% 1,544
Eagle 227 214 -6% 378
9) Elbert 119 91 -24% 160
10) El Paso 2,027 1,478 -27% 2,759
11) Gilpin 31 38 23% 50
12) Jefferson 18 1,171 -28% 2,315
13) Larimer 715 503 -30% 872
14) Pueblo 610 487 -20% 667
15) Summit 163 131 -20% 173
16) Weld 1,173 820 -30% 1,636
TOTALS 15,151 10,694 -29% 19,835
*“Current Actives” includes NED Filings with a status of ‘BANKRUPT’, ‘CONTINUED’, ‘NEW’, ‘RESTARTED’, ‘EXPEDITED SALE’ or ‘DEFERMENT’
The times…they are a changing. Never have I felt that phrase be so prophetic as it is now. Lenders change the rules putting overlays on the minimum standards, banks are preferring properties go to foreclosure rather than sell them as a short sale, less than 15% of the home loans have been modified and loan requirements are getting harder and while it looks like there is plenty of inventory on the market, the reality is that most of the homes are not available for sale with several offers at the lenders awaiting some form of approval to be sold. Add to that the fact that sellers of distressed properties are denying showings because it could displace them. Afterall, if they can stay for another couple of months without paying, why would the seller agree to sell?
So it is a very difficult way to make a living but I still love real estate. I love the look on a buyer or seller’s face when they succeed. I love making a difference in someone’s life.
So thank your Realtor, and appreciate what they are doing for you, and understand their challenges.
On August 25, 2010, the Denver Post gave a side by side comparison of payments buying with the tax credit or after the tax credit with lower interest rates. What a great chart:
Sellers: Should you take your home off the market for the ‘holiday season’?
I would encourage you to keep it on the market for several reasons:
1. Buyers willing to shop for a home in the busy season, cold and winter weather are generally more serious buyers. They rarely tolerate cold weather to kick a few tires.
2. Historically, the inventory is lower. What does that mean for you? Less competition. It still means that your property needs to be in A-1 condition, and priced aggressively if you want it sold in a timely manner. But if you have an inherent problem with it (backing to a busy street or power lines or no basement, etc.) it is better to have less competition than wait until the spring or summer season.
3. If nobody buys in the winter, why aren’t all the agents on vacation then? In other words, many companies and buyers have end of the year goals and budgets to meet. If there were no business to be had, trust me…we’d all close up shop and beach it in the warm climates. But we don’t. Based on a report I ran for one seller, December 2009 had more sales than any other month in one area of Denver’s Stapleton.
Buyers: Why would you wait until spring to buy your next home?
1. The best deals are in the winter months. Statistically speaking, most sellers are willing to come off their original price a few percentage points in the “off” season. This means a better bottom line for you.
2. Your purchase gives you a tax advantage in this tax year, and you don’t have to wait for another year. The mortgage interest tax deduction is a great incentive to give up renting.
3. Seller’s in the winter months are a bit more motivated to sell. Although they have less competition, their product is a bit better because they know they are competing for a smaller number possible consumers.
4. Interest rates are incredibly awesome right now. I’m not much of a gambler, so I wouldn’t wait on the chance of them rising just to wait for warmer weather, would you?
The bottom line here is that real estate is still being bought and sold. Don’t let the cold weather stop you from achieving your dream. As long as we have sellers willing to sell and buyers wanting to buy, we will have a market read to respond, regardless of the weather.
But like all good Hollywood movies, a surprise twist came in at the last minute and it is a game changer…. Sometimes our government says, “JK” (for those of you who don’t text-speak that means JUST KIDDING 
) See, our leaders have a sense of humor and a bit of drama in their blood. So, get to the point already:
WE HAVE AN EXTENSION TO CLOSE ON THE FTHB (First Time Home Buyer) and SHB (Second Home Buyer credits).
Imagine the floor of the House last night as the drama unfolded. The original terms to cut off any credit was that the closing of the property HAD to be done, closed AND funded by June 30, 2010. Title companies were swamped with the need to close. And when all things seemed to indicate that there would be no extension, in a late night vote…VOILA, the House voted to extend it. Here’s the official news release given by our National Association of Realtors:
Congress passed an extension of the closing deadline for the Homebuyer Tax Credit, the Homebuyer Assistance and Improvement Act (H.R. 5623). The extension applies only to transactions that have ratified contracts in place as of April 30, 2010, that have not yet closed. The legislation is designed to create a seamless extension; the new closing deadline for eligible transactions is now September 30, 2010. There will be no gap between June 30 and the date the President signs the bill into law. Extending the tax credit closing deadline will help provide additional stability to real estate markets across the nation.
I imagine there was a mass sigh of relief heard across the country! (I thought I felt a breeze come through about 10pm MST). But seriously, I am hoping it helps those buyers already under contract that are entangled in the short sale nightmare with lenders. It takes months to get approvals, and so this additional time will be great to give more time to liquidate our distressed properties. But really lenders/banks/asset managers/PMI companies… can you not see the benefit of making quick decisions and streamlining this process? That’s an article for another time.
Til then… I’m out busy selling and buying for people. Will you be next?
An opinion piece in the Spokane, Wash., Spokesman-Review last month reported inaccurately that the health care bill contained a provision for a 4.0 percent “sales tax” or “transfer tax” on the sale of a home and the rumor mill has been busy ever since. The article, as stated above, was inaccurate.
My sources tell me, however, that the health bill does include a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have “net investment income.” Any revenue collected by the tax is dedicated to the Medicare hospital insurance program.
This new tax applies only to households with Adjusted Gross Income of more than $200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property.
But there are two major factors in figuring out the tax, which is complex. Keeping in mind that the new 3.8 percent Medicare tax is assessed only when the $200K/$250K AGI limits are exceeded, the amount of net investment income subject to tax is the LESSER of 1) total net investment income OR 2) the excess of AGI over the $200K/$250K AGI limits.
However, even when the AGI limits are met, the new tax would not be applied to capital gains that result from the sale of a home, since the existing home sale capital gains exclusion rule still applies – $250,000 (individual)/$500,000 (couple). So if the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid on the gain. The new Medicare tax would apply only to a home sale gain realized in excess of the $250K/$500K that pushes the filer’s AGI over the $200K/$250K income limits.
Some other quick points:
There is no such exclusion for the sale of a second home.
The new Medicare tax will take effect January 1, 2013.
The legislation makes no changes to the mortgage interest deduction.AND ANOTHER ERRONEOUS EMAIL….
This email claims that pending legislation in the Senate would require an energy license or retrofit for home sales. Here’s the real skinny:
“Homeowners—Listen Up” e-mail:
This e-mail is inaccurate. There is no requirement in H.R. 2454, The American Clean Energy & Security Act, that home sellers obtain either a license or energy audit or make energy retrofits before they can sell their home. The legislation, earlier passed by the House, is pending in the Senate.
Here are the two REAL provisions in the bill:
Once again, REALTOR’s have your best interest in mind. Can you imagine the nightmare if it had past without excluding existing homes and mandating audits? WHEW.
