Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

July 2, 2020

Denver Metro Market Update - July 2nd 2020

Denver Metro Area Real Estate.  COVID-19 hit the real estate market hard in March and April during the stay at home orders issued by Governor Polis.  Withdrawn listings went through the roof and inventory plunged.  Since early May the number of listings have been increasing however we are still in a housing shortage.  This is great for home sellers but I cannot say the same for home buyers.  They are competing with many offers and needing to pull some tricks out of the sleeves in order to get a home under contract.  

There seems to no relief in sight in the near future.  Mortgage rates are falling and new mortgage applications are rising.  As buyers secure contracts and others close on their home a new buyer is ready to take their place. 

The following slide show, compiled by Your Castle Real Estate, paints the picture of where the market is in comparison to previous years.  Call or email me if you have questions on how you can succeed in today's market. 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posted in Market Updates
June 20, 2020

The 4 C's of Qualifying

Qualifying for a mortgage can be explained with 4 C's.  Capital indicates the borrower has the necessary funds for the down payment and closing costs without exhausting their savings.  Capacity shows that the borrower has the ability from income to pay back the loan.  Credit history reveals the borrowers FICO score, which is a composite of payment history, amounts owed, length of credit, new accounts and the different types that are open.  The final C is for collateral proving that the home's value will secure the loan.

To protect consumers and the lending market, the Dodd Frank Reform Act became law in January 2014.  The Qualified Mortgage Rule affects the underwriting standards that most lenders use to qualify buyers.

The ability to repay rule states that financial information must be supplied by the borrower and verified by the lender.  The borrower must have enough assets or income to pay back the loan which limits the maximum debt-to-income ratio of 43%.  To present a more accurate picture of the costs to the borrower, teaser rates can no longer hide a mortgage's true cost.

A maximum of 3% in upfront points and fees can be paid on behalf of the borrower.  There can be no negative amortization, interest-only or balloon payments and the loan term limit cannot exceed 30 years.

While there are more requirements, most deal with good underwriting practices that are followed by reputable lenders such as considering and verifying things that affect the ability to repay the mortgage like income, assets, employment status, simultaneous loans, debt, alimony, child support and credit history.

Even though most mortgage lenders are bound by this law and its many rules, all lenders may not deliver the service that you expect and require.  For a recommendation of a trusted mortgage professional, give me a call at (303) 856-6185.

June 17, 2020

Why Put More Down

The least amount in a down payment is an attractive option when people are thinking of buying a home.  A common reason is to have cash available for furnishing the new home and  possible unexpected expenses.

Some people don't have any options because they only have enough for a minimum down payment and the closing costs.  For those fortunate buyers who do have extra money available, let's look at why you'd want to do such a thing.

Most loans in excess of 80% loan to value require mortgage insurance to protect the lenders for the upper portion of the loan if the home were to go into foreclosure.  FHA requires an up-front premium of 1.75% of the amount borrowed plus a monthly amount of .85% on the balance.  FHA mortgage insurance premium must be paid for the life of the loan.

Mortgage insurance on conventional loans varies depending on the borrowers' credit and the amount of down payment being made.  Unlike FHA, when the unpaid balance reaches 78% of the original amount borrowed, the mortgage insurance is no longer needed.  If the home enjoys rapid appreciation, after a period, the lender may allow the borrower to get an appraisal to show that the unpaid balance is now less that 78% of the current appraised value.

The premium for mortgage insurance on conventional loans can be paid as a single premium upfront in cash or financed into the mortgage.  A second option would be monthly mortgage insurance included in the payment until it is no longer needed.  A third option could be lender-paid MI where the cost is included in the mortgage interest rate for the life of the loan.

VA loans do not require mortgage insurance but there is a one-time funding fee of 2.3% that can be paid in cash at closing or added to the amount borrowed.  Disabled veterans and Purple Heart recipients are not required to pay the funding fee.

Putting at least 20% down payment on a home not only will avoid the mortgage insurance, it could also help you to get a little lower interest rate.  Since the loan to value is lower, there is less risk for the lender.

A $350,000 with a 10% down payment at 4% interest could have a monthly mortgage insurance cost between $70 to $130.  A trusted mortgage professional can help you assess the options you have available.  It is always better to make some of these decisions before you start shopping for a home.

This is another reason it is good to start by getting pre-approved with a trusted mortgage professional.  If you need a recommendation, call me at  (303) 856-6185.
June 7, 2020

Removing a Person from a Mortgage

When two people decide, whether they're married or not, to buy a home, they're probably considering what a great idea it is.  If later, they rethink the decision and determine to go their separate ways, simply deeding the home to the remaining person may not solve the potential liabilities.

In the case of a marriage, the divorce court can determine who can live in the home and who is responsible for the payments and upkeep and even which party gets title to the home.  What the court cannot change are the terms of the loan which is a contract between the lender and borrower at the time the mortgage was made when the parties were still married.

When two people originate a mortgage, both people remain "jointly and severally" liable for the loan.  Regardless of any mutual agreement between the parties or even a court decision, the lender still holds both parties who originally signed the note liable and can come after both or either if there is a default. 

Deeding one's rights to the property conveys title but it doesn't affect the note. 

Two solutions to the issue would be the following:

  1. Sell the property to a third party, pay off the existing mortgage, and divide the equity according to the divorce decree or mutual agreement.
  2. Refinance the home in the remaining party's name only.If the divorce didn't remove the spouse's name from the deed, it will need to be done at this time.Depending on the terms of the divorce, there may need to be a cash settlement to the spouse when the equity is realized.

Some people may not become aware of this type of problem until years later when they might want to sell the property.  A situation like this involves legal rights and a person should consider legal advice.

May 31, 2020

What goes with the house?

Sometimes, there can be confusion on what goes with the house and what goes with the seller when they move.  Generally speaking, the house is the land and buildings and any fixed or attached property.

Permanently installed and built-in items are considered real property.  Some things are obvious such as built-in appliances, wall-to-wall carpeting, light fixtures including chandeliers, shrubbery and landscaping, and window shutters. 

One indication is that if the item was removed, there be evidence that it was missing.  For example, if there was a wall mounted TV in the home, the TV is personal property, but the TV wall mount is real property.

Factors that determine if something is permanently installed or built-in would be:

  1. Was the installation intended to be permanent?
  2. How is the item attached and will the surrounding property be damaged if it is removed?
  3. Is the item made specifically for the property?

Personal property examples would include furniture, area rugs, pictures, non-built-in appliances like washer, dryer and refrigerator.  Confusion could arise between a mirror that is hung like a picture and one that is attached to the wall.  Most people would think that the former is personal, and the latter is real property.

Sellers are encouraged to have an open discussion with their listing agent about items that are not going to be included in the sale of the home.  The agent can advise you if they should be mentioned in the listing agreement and property description.

If buyers are concerned about items that may or may not be included, they should review with the agent items that the Seller has identified as not included in the sale.  If necessary, some items may be negotiated in the sales contract.

Posted in Home Buyers
May 27, 2020

Instant Buyers Save Time But Cost Money

There are a multitude of companies across the Internet, referred to as iBuyers, who are suggesting that sellers can save the hassle of putting their home on the market, showings, repairs, open houses and other things by accepting their instant offer to purchase.

The adage goes "if it sounds too good to be true, it probably is."  The price to be paid for the convenience of not having to deal with the hassle is a lower net sales price than you'd probably realize if you took a more conventional approach to selling your home.

These companies are not charities and therefore, will need to make a profit.  The offer you receive is based on an automated value model that takes public information about your home and the market to arrive at a price.  Since the "buyer" of your home will then become a seller, the costs for the commission, repairs, selling expenses, holding costs and other things will have to be considered in the price you'll be offered.

For the company to take on the risk associated with owning an asset of that size, they will have to anticipate expenses that may not actually be incurred.  Some of these companies may even factor in a profit also.

There may be situations when an iBuyer or instant buyer would be worth it due to the circumstances.  However, if a seller wants to maximize the equity out of their home, it may not give them the proceeds they want, need and/or deserve.

At the very least, you should meet with a local real estate professional who can evaluate your home personally to consider things that automated value models do not.  This pro can also estimate what a reasonable sales price could be, how long it may take to sell and what marketing efforts would be needed. 

An owner who has made an investment in the home for years along with the risk and responsibility of ownership, deserves to maximize the proceeds they can receive.

May 20, 2020

How Pricing Your Home Right Makes a Big Difference

How Pricing Your Home Right Makes a Big Difference | MyKCM

Even though there’s a big buyer demand for homes in today’s low inventory market, it doesn’t mean you should price your home as high as the sky when you’re ready to sell. Here’s why making sure you price it right is key to driving the best price for the sale.

If you’ve ever watched the show “The Price Is Right,” you know the only way to win the game is to be the one to correctly guess the price of the item up for bid without going over. That means your guess must be just slightly under the retail price.

When it comes to pricing your home, setting it at or slightly below market value will increase the visibility of your listing and drive more buyers your way. This strategy actually increases the number of buyers who will see your home in their search process. Why? When potential buyers look at your listing and see a great price for a fantastic home, they’re probably going to want to take a closer look. This means more buyers are going to be excited about your house and more apt to make an offer.

When this happens, you’re more likely to set up a scenario with multiple offers, potential bidding wars, and the ability to drive a higher final sale price. At the end of the day, even when inventory is tight, pricing it right – or pricing it to sell immediately – makes a big difference.

Here’s the other thing: homeowners who make the mistake of overpricing their homes will eventually have to lower the prices anyway after they sit on the market for an extended period of time. This leaves buyers wondering if the price drops were caused by something wrong with these homes when in reality, nothing was wrong, the initial prices were just too high.

Bottom Line

If you’re thinking about selling your home this year, let’s get together so you have a professional on your side to help you properly price your home and maximize demand from the start.

May 15, 2020

Gift the Down Payment

A legitimate source of a down payment can be from a gift as long as it meets certain requirements of the lender.

The person making the gift needs to be related to the recipient.  In most cases, you might think of a parent or grandparent making this gift, but it can work the other direction.  A child or grandchild could also make a gift to a parent or grandparent.

A person can donate up to $15,000 a year without incurring gift taxes and the recipient is not required to pay tax on it.  A father and mother could gift $15,000 each to a child making it a total of $30,000.  If the child was married, the father and mother could each donate $30,000 to their child and the child's spouse, if they were married.

There could be other avenues available to gift more than these amounts but would warrant talking to your tax professional about your individual situation.

Once the basics of the gift have been determined, the lender is going to require a written gift letter explaining the specifics before the loan package can go to underwriting.  The letter needs to contain:

  • The donor's relationship to borrower
  • State the dollar amount is a gift and not a loan
  • State that no repayment is required
  • Signed and dated by the donor and borrower
  • Include all contact information
Posted in Home Buyers
May 6, 2020

Buying a Home Early Can Significantly Increase Future Wealth

Buying a Home Early Can Significantly Increase Future Wealth | MyKCM

According to an Urban Institute study, homeowners who purchase a house before age 35 are better prepared for retirement at age 60.

The good news is, our younger generations are strong believers in homeownership.

According to a Freddie Mac survey,

“The dream of homeownership is alive and well within “Generation Z,” the demographic cohort following Millennials.

Our survey…finds that Gen Z views homeownership as an important goal. They estimate that they will attain this goal by the time they turn 30 years old, three years younger than the current median homebuying age (33).”

Buying a Home Early Can Significantly Increase Future Wealth | MyKCMIf these aspiring homeowners purchase at an early age, the Urban Institute study shows the impact it can have.

Based on this data, those who purchased their first homes when they were younger than 25 had an average of $10,000 left on their mortgage at age 60. The 50% of buyers who purchased in their mid-20s and early-30s had close to $50,000 left, but traditionally purchased more expensive homes.Buying a Home Early Can Significantly Increase Future Wealth | MyKCMAlthough the vast majority of Gen Zers want to own a home and are somewhat confident in their future, “In terms of financial awareness, 65% of Gen Z respondents report that they are not confident in their knowledge of the mortgage process.”

Bottom Line

As the numbers show, you’re not alone. If you want to buy this year but you’re not sure where to start the process, let’s get together to help you understand the best steps to take from here.

Posted in Home Buyers, Investing
May 2, 2020

The Overlooked Financial Advantages of Homeownership

The Overlooked Financial Advantages of Homeownership | MyKCM

There are many clear financial benefits to owning a home: increasing equity, building net worth, growing appreciation, and more. If you’re a renter, it’s never too early to make a plan for how homeownership can propel you toward a stronger future. Here’s a dive into three often-overlooked financial benefits of homeownership and how preparing for them now can steer you in the direction of greater stability, savings, and predictability.

1. You Won’t Always Have a Monthly Housing Payment

According to a recent article by the National Association of Realtors (NAR):

“If you’ve been a lifelong renter, this may sound like a foreign concept, but believe it or not, one day you won’t have a monthly housing payment. Unlike renting, you will eventually pay off your mortgage and your monthly payments will be funding other (possibly more fun) things.”

As a homeowner, someday you can eliminate the monthly payment you make on your house. That’s a huge win and a big factor in how homeownership can drive stability and savings in your life. As soon as you buy a home, your monthly housing costs will begin to work for you as forced savings, coming in the form of equity. As you build equity and grow your net worth, you can continue to reinvest those savings into your future, maybe even by buying that next dream home. The possibilities are truly endless.

2. Homeownership Is a Tax Break

One thing people who have never owned a home don’t always think about are the tax advantages of homeownership. The same piece states:

“Both the interest and property tax portion of your mortgage is a tax deduction. As long as the balance of your mortgage is less than the total price of your home, the interest is 100% deductible on your tax return.”

Whether you’re living in your first home or your fifth, it’s a huge financial advantage to have some tax relief tied to the interest you pay each year. It’s one thing you definitely don’t get when you’re renting. Be sure to work with a tax professional to get the best possible benefits on your annual return.

3. Monthly Housing Costs Are Predictable

A third item noted in the article is how monthly costs become more predictable with homeownership:

As a homeowner, your monthly costs are most likely based on a fixed-rate mortgage, which allows you to budget your finances over a long period of time, unlike the unpredictability of renting.”

With a mortgage, you can keep your monthly housing costs steady and predictable. Rental prices have been skyrocketing since 2012, and with today’s low mortgage rates, it’s a great time to get more for your money when purchasing a home. If you want to lock-in your monthly payment at a low rate and have a solid understanding of what you’re going to spend in your mortgage payment each month, buying a home may be your best bet.

Bottom Line

If you’re ready to start feeling the benefits of stability, savings, and predictability that come with owning a home, let’s get together to determine if buying a home sooner rather than later is right for you.