Tuesday, June 19, 2018

Waiting Will Cost More

As I sit here and edit the little addendum I can hardly believe how our prices in Denver have increased and interest rates have too! And then there is a couple I am working with to try and find a home who have been here for 6 months "waiting" and they have found that very thing...prices in the 300 to 400k range have increased by about 7% and interest rates have gone up too, making it harder to afford a home they "could learn to love". It is a hard lesson when the right house disappears from under you because someone acted faster than you and that is a regular part of the orientation into the Denver market I do for buyers. And sellers start to wonder when their home is not sold in 5 days! What a crazy market here in Denver!

An economist responded when asked how interest rates would change: “They may fall some and then, rise and after that, they’ll fluctuate.”Denver

Just because interest rates have been low for ten years doesn’t mean they are supposed to be low. The Federal Reserve has raised interest rates twice this year and are expected to go up twice more plus three times next year.  Mortgage rates have risen from 3.95% to 4.62% since the first of January.

Increased rates directly affect the payments on homes but so does the price. With inventory levels remaining low, the prices will continue to go up. When interest rates and prices rise at the same time, it costs buyers a lot more.

If the mortgage rates go up by one percent and prices increase by five percent in the next year, the payment on a $250,000 home could go up by $200 a month. In a seven-year period, the buyer would pay $18,000 more for the home.

People planning to buy a home, need to investigate the possibilities of accelerating their timetable to take advantage of lower rates and prices. Use the Cost of Waiting to Buy  calculator to see how much more it could cost you to wait.  Call (303) 880-5585 if you have questions about what can be done now. Or contact me.

Cost of Waiting in Denver

Tuesday, June 12, 2018

The Tax Difference in Second Homes

Many folks who live in Highlands Ranch have 2nd homes in the mountains. Some are fishing cabins while others are condos for ski weekends, or you might find a true replacement residence. The truth is that some of the tax law changes form last year might affect those home owners in Highlands Ranch. So read on...

A principal residence and a second home have some similar benefits, but they have some key tax differences. A principal residence is the primary home where you live and a second home is used mainly for personal enjoyment while limiting possible rental activity to a maximum of 14 days per year.Highlands Ranch

Under the 2017 Tax Cuts and Jobs Act, the Mortgage Interest Deduction allows a taxpayer to deduct the qualified interest on a principal residence and a second home. The interest is reduced from a maximum of $1,000,000 combined acquisition debt to a maximum of $750,000 combined acquisition debt for both the first and second homes.

Property taxes on first and second homes are deductible but limited to a combined maximum of $10,000 together with other state and local taxes paid.

The gain on a principal residence retained the exclusion of $250,000/$500,000 for single/married taxpayers meeting the requirements. Unchanged by the new tax law, the gains on second homes must be recognized when sold or disposed.

Tax-deferred exchanges are not allowed for property used for personal purposes such as second homes. Gain on second homes owned for more than 12 months is taxed at the lower long-term capital gains rate.

This article is intended for informational purposes. Advice from a tax professional for your specific situation should be obtained prior to making a decision that can have tax implications.

Should you need a good Highlands Ranch CPA or tax adviser, contact me. I can put you in touch. OR, if you want to buy that mountain getaway, let me know that  too, as I know quite a few good mountain Realtors.

Tuesday, June 05, 2018

When Neighbors Don't Seem to Care

How many times I have addressed this issue when marketing a home for sale here in Denver I cannot say. In the old days neighbors would band together to water and mow the front yards of abandoned, or even properties that were in foreclosure. Some folks do run into financial issues, and my experience here in Denver has been 2 fold: a. they appreciate the help or b. they bury their heads even further hoping things will fix themselves. Either way, a neighborly offer of help may be the most appropriate way of approaching the folks involved. You might even find they could use help from someone like myself (introductions appreciated).

A home that isn't being maintained like others in the neighborhood can negatively affect your visual sense of appeal and in some extreme cases, even affect property values. It might be an overgrown yard, a fence in need of repair, excessive noise, unruly pets, paint peeling on the home or even a car or boat parked in front of the home that hasn't moved in weeks.Denver

Most people want to be good neighbors and may be willing to correct an issue once it is brought to their attention. A practical but possibly, confrontational solution is to contact the responsible person and describe your perception of the issue. However, they may not always agree with the same urgency and it might be necessary to seek other remedies.

An owner-occupant may be more sympathetic to the neighbors and willing to correct the issue. If you think the home might be a rental property, check with the county tax records or me, to identify the owner. They may be unaware of the situation and welcome the notification to protect their investment.

Another alternative might be to notify the homeowner's association, if there is one. One of the benefits of a HOA is to enforce community appearance standards as set in the covenants or bylaws that specify how properties must be maintained. This could be a less personal method of reaching a beneficial outcome.

If the source of the problem is a code or housing violation, the city may be the ultimate authority. Most cities have a separate code and neighborhood services division and some cities have 311 for non-emergency assistance.

Talk to your neighbor first! We had a barking dog out back and she barked well into the early morning hours in our quiet suburban neighborhood of Denver. The past 5 years there was nothing like this from the dog but my blood was boiling! When I called I had calmed down and the neighbor explained his son had fallen off a roof, broken his neck, and they had been spending their days and nights at the hospital, never thinking about the dog. They apologized and I almost ate my hat!a So before you turn them in to the authorities here in Denver, or any other part of the world, be neighborly and talk to them first.


Tuesday, May 29, 2018

Flag Protocol

The American flag is obviously a symbol of our country but it has come to remind us of every man and woman who has fought for the freedom that we enjoy. The emotions that are stirred by images of our flag can run from happiness to sadness to trust and everything in between.flag2.png

Most of us learned American flag etiquette or the Flag Code when we were young but occasionally, it is a good idea to review the guidelines so that the flag is treated with the respect it deserves.

  • The U.S. flag should not be flown at night unless a light is shown on it.
  • The U.S. flag should not be flown upside down except as a distress signal.
  • The flag should never touch the ground.
  • A U.S. flag should be displayed at the peak of the staff unless the flag is at half-staff in mourning.
  • When displaying multiple flags of a state, community or society on the same flagpole, the U.S. flag must always be on top.
  • When flown with flags of states, communities, or societies on separate flag poles which are of the same height and in a straight line, the flag of the United States is always placed in the position of honor - to its own right. No flag should be higher or larger than the U.S. flag. The U.S. flag is always the first flag raised and the last to be lowered.
  • When the U.S. flag is flown with those of other countries, each flag should be the same size and must be on separate poles of the same height. Ideally, the flags should be raised and lowered simultaneously.

More information on flag etiquette can be found at the Veterans of Foreign Wars website.


Tuesday, May 22, 2018

Second Guessing Price

Imagine a homeowner consulting with their agent about the price to place on their home. The agent suggests that the market data indicates that $200,000 to 210,000 would produce a quick sale by pricing it properly. The owner puts a $210,000 price on the home.76605908-250.jpg

The first person who looks at the home offers $205,000. When the seller receives the offer, he comments that he thinks he priced the home too low and counters for  full price. The counter-offer is rejected, the home stays on the market and at the end of the first month when based on market conditions, the home should be sold, no other offers have been made.

It may be human nature that when an offer is received so quickly, the first thought to come to mind is that it was priced too low. A more appropriate thought might be that it was priced correctly. In some cases, when a home comes on the market, there is increased competition (real or perceived) among the buyers waiting for the "right" home to come on the market. The home can sell for a higher price than if it sits on the market for several months.

There may be stories of sellers who turned down the first offer and ended up receiving a better offer that would net more money. However,  real estate professionals say the first scenario occurs frequently.

The wisdom of experience advises owners to find a real estate professional that they trust and have confidence. Allow that professional to become familiar with your home and compare it to similar homes in the market that have sold recently and ones currently on the market. Determine the demand for homes in the area compared to the inventory. Decide on a price that will allow the home to sell within a relatively short period of time. And lastly, be satisfied if your home sells quickly near the price you put on it.


Tuesday, May 15, 2018

A Denver Home for Tomorrow

Most folks I talk to here in Denver seem to be afraid of a bubble bursting as it did in 2008. Statistically, that started in 2006, and some of us started to notice that early. I am asked about when prices will start to fall...when we see over 180 days on the market average for 2 straight months. Right now the average is 32 while the median is 6 days on market. So it does not look like things will change anytime soon. What is the difference between average and median? The average sale price in Denver in April was $484,795 while the median was $451,311.

Prices continue to move up at a quick pace indicating that if there is a move planned in the next 2-3 years, you should do it now to take advantage of the prices on the new place. It will not be cheaper in 2 years. Statistics and history show a traditional appreciation rate in Denver of 3 to 6%. At that rate a $400,000 home will be over $475,000 in 3 years in the 7 counties that make up metro Denver.

Now lets talk about retirement housing. For those who do not know I am a Senior Real Estate Specialist (SRES) and can help most folks with the issues they are facing. But read on....

As people near or enter retirement, one of the decisions that typically comes up is whether to sell their "big" home and buy a smaller one. If you know anyone who has been faced with that situation, selling one home and buying a smaller one may not save enough money to make it worthwhile.79996505-250.jpg

There are sales expenses on the property being sold and acquisition costs on the replacement home. Generally speaking, homeowners may not mind a home with less square footage, but they usually don't want to give up amenities or locations that they've become accustomed.

After a little number crunching, the move may not make enough difference in savings and they end up staying in their current home even if it doesn't fit their needs anymore.

What if while this couple were still in their peak earning years, they acquired a home in an area where they would consider retiring and rent it during the interim. They could put it on a 15-year mortgage and possibly, even accelerate the principal payments to have it paid off by their anticipated move.

In the meantime, they could continue living in the "big" home until it is time to make the transition. Sell the "big" home that may be paid for by then and avoid up to $500,000 of capital gain. Take part of the proceeds and remodel the rental/transitional home and invest the proceeds for retirement income.

Ideally, the former rental would be mortgage free by this point, so the retirees would not have a house payment. Even if at this point, they changed their mind about retiring to this particular home, they still have a property that acted as a hedge against rising prices and have sufficient equity to purchase something else without using the proceeds from the "big" home.

It is difficult to know what the situation will be years from now when a person retires. It is clearly advantageous to have a plan that allows for options and choices. To find out more about purchasing your retirement home today, give me a call at (303) 880-5585. Or reach out and contact me via e-mail.


Tuesday, May 08, 2018

Assumptions May be an Alternative

Denver Assumptions Are Hard to Find ...

Hard to believe but there are still good assumable mortgages out there in Denver, if you have the cash to make up the difference, or know a good loan officer. I actually know of one coming up in Highlands Ranch, and it will require about $100k to assume. You have to qualify with credit income and cause the liability to be released, but it is a nice interest rate. But read on...

For the last 25 years, most buyers have gotten a new mortgage or paid cash when purchasing a home. For a practical reason, owner-occupant buyers have another alternative: assuming a lower interest rate existing FHA or VA mortgage.29377293-250.jpg

In the late 80’s, both FHA and VA began requiring buyers to qualify to assume their mortgages. Prior to that, good credit or even a job wasn’t required. The real reason there haven’t been significant numbers of assumptions in the past 25 years is that interest rates have been steadily going down. If a person had to qualify, they might as well do it on a new loan and get a lower interest rate.

Even though mortgage money is currently attractive and available, it is at a four-year high. When interest rates on new mortgages are higher than the rates of assumable FHA and VA mortgages originated in the recent past, it may be more advantageous to assume the existing mortgages.  Conventional loans have due on sale clauses that prevent them from being assumed at the existing rate.

FHA loans that originated with lower than current interest rates have great advantages for buyers and sellers.

  1. Interest rate won't change for qualified buyer
  2. Lower interest rate means lower payments
  3. Lower closing costs than originating a new mortgage
  4. Easier to qualify for an assumption than a new loan
  5. Lower interest rate loans amortize faster than higher ones
  6. Equity grows faster because loan is further along the amortization schedule
  7. Assumable mortgage could make the home more marketable

This financing alternative can save money for the buyer in closing costs and monthly payments. While the equity may be more than the down payment on a new mortgage, second mortgages are available to make up the difference. Call us at (303) 880-5585 to find out if this may be an option for you.

And of course you can contact me here for more information about the Highlands Ranch real estate market.