Category: Uncategorized

Buyers appear to be getting “off the fence” as they see mortgage rates beginning to rise. How costly can waiting be?

     Even a fraction of a percentage point rise quickly adds up. According to realtor.com, on a $300,000 purchase with a 30-year fixed-rate mortgage and a 20% down payment, the difference between 4% and 5% is $142 a month. That’s more than $51,000 over the life of the mortgage.

According to the realtor.com article, it’s important to note that mortgage rates are still low. After falling from a high of 18.63% on Oct. 9, 1981 they averaged about 7% from the 1990s through the 2008 financial crisis.  They dropped below 5% for the first time in March 2009, before bottoming out at 3.1% on Nov. 21, 2012.

After those recent historic lows, average mortgage rates have now reached their highest levels in more than four years. They hit an average 4.43% for 30-year, fixed-rate loans as of March 1, according to data from Freddie Mac. This is the highest they’ve been since Jan. 9, 2014, when they averaged 4.51%.

 

 

Our drone pilot has moved to the Western Slope and is not always available when we need her. If you’re a licensed drone pilot (or want to be), give us a call. We have a state-of-the-art Mavic drone which we could make available to you for your own work in return for a discount on shooting aerial footage for our listings.

 

   There are two schools of thought when it comes to whether sellers should look for and address possible inspection issues prior to putting their home on the market.

One school of thought recommends hiring a professional home inspector to do a full-blown pre-listing inspection and fixing problems that are bound to become inspection issues.

I subscribe to an alternative school of thought. When I meet with sellers, I look for what I call “eyesores” — issues that are likely to draw the negative attention of prospective buyers during a showing. This could be wall damage, old carpeting (especially shag), damaged countertops, peeling paint or excessively worn hardwood floors — any number of things that are indicative of deferred maintenance.  Here are some other things I recommend doing before putting your home on the market:

>  Remove and label (with tape) all window screens, and store them in the basement or garage. Wash all windows, inside and out.

>  Use one of our free box trucks to move unneeded items from your home and garage to storage, the Salvation Army, Habitat ReStore or the dump.  If you’re going to use a professional mover, put  items you’re going to keep but don’t currently need into a moving company’s POD rather than a storage unit.

>  Clean the carpets, replacing those which can’t be made presentable by cleaning.

>  After a walk-through, my staging consultant and I will make other suggestions as to repairs or improvements that will help your home to show better.

What I typically do not recommend is a major repair, or improvements that aren’t obviously required.  For example:

>  Do not replace undamaged countertops with slab granite or other surfaces that may be in vogue.

>  Do not replace a 15- or 20-year-old water heater that works fine, just because it might be considered beyond its useful life.

>  Do not add central air conditioning or solar panels or make other improvements.

>  Do not replace double-pane windows that show limited signs of vapor seal failure (minor condensation between the panes).

Behind these recommendations is a simple principle. You have everything to gain and little to lose by leaving undone those repairs or improvements which make little or no difference to the average buyer on his or her first visit to your home.

Imagine, for example, you have two windows with minor vapor seal leaks that end up in a buyer’s inspection objection notice. That objection will probably include other items, both major and minor.  Let’s say, for example, that your home’s radon level measured above the EPA action level of 4 pico-curies per liter and that your furnace is emitting carbon monoxide — a telltale sign that your furnace’s heat exchanger has a crack in it.

Mitigating radon will cost about $1,000. Replacing the furnace will cost $3,000 or more.  Replacing the two windows will cost about $1,000.

Here’s why you should not have replaced the windows before listing your home: you’re now in a position to offer, for example, to mitigate the radon and replace the furnace but not replace those windows with minor vapor seal leaks. If you had replaced those windows prior to putting your home on the market, you wouldn’t have been able to use them as a bargaining chip, which could save you the $1,000 cost of replacing them. Of course, this is but one example of how the agents at Golden Real Estate can help save you money.  The same principle applies to other points of negotiation that might have been lost by making repairs ahead of time.

Sometimes agents will recommend buying a home warranty policy prior to putting a home on the market.  A home warranty costs $300 or so and covers most appliances in the house if the appliance fails within the first year after closing. (Home warranties do have copayments for repairs, typically about $50.)

I like to hold back recommending a home warranty to use when responding to the inspection objection.  For example, the water heater is well beyond its useful life but working fine, and the buyer wants it replaced.  I can usually get the buyer to accept a home warranty, saving my seller several hundred dollars, versus replacing an appliance that is working just fine.

Other practical advice I give to sellers includes the following:

>  Replace the furnace filter and vacuum the interior of the furnace cabinet. This could forestall the inspector suggesting that the buyer require professional cleaning and servicing of the furnace.

>  Install downspout extenders so that water from your roof is diverted away from your foundation.

>  Replace all burned out light bulbs. Otherwise the inspector might question whether your light fixtures are working.

>  Apply silicone spray to your sliding doors so they operate smoothly and quietly.

¨  Imagine yourself as a prospective buyer who’s seeing your home for the first time, and pay special attention to first impressions.  This includes your front landscaping and especially your front door.  If the door or frame is weather beaten or badly faded, have it repainted or re-stained so it looks fresh and clean. If your doorbell or doorbell button is broken, fix it.

    I was assisted on this article by broker associate Andrew Lesko, who has additional suggestions regarding condos and townhomes, which are his specialty. You can reach him at 720-710-1000. Or visit his website detailing 30+ condo & townhome communities at www.GoldenTownhomes.com.

 

One of the changes in the Trump tax reform legislation was to remove the tax deductibility of HELOCs — Home Equity Line of Credit loans.

My contact at US Bank tells me that their lawyers say the interest is still deductible, but only if the money from the loan was used for home improvement. I used a HELOC to pay for hail damage repairs to my home and car, so I’m guessing that the interest on it will not be deductible starting this year.  If this is confirmed, Rita and I are planning to pay it off as soon as possible. You may want to do the same.

An increasingly popular aspect of living sustainably is to engage in “urban farming.” As shown in another post today, we have an urban farm listing in Lakewood, and in a couple weeks we’ll have a second urban farm listing in Arvada.

In light of these two listings, I asked an expert to enlighten you (and me) on this topic. Her name is Elizabeth Buckingham, and she writes a terrific blog, at www.FindingQuietFarm.com.

Here’s what she sent me on this topic:

By ELIZABETH BUCKINGHAM, Guest Columnist

Until the global economy collapsed a decade ago, my husband Nicholas and I were working on private yachts in some of the world’s most glamorous places. He was a deckhand and dive instructor, and I was a chef. We had spent years travelling, and when we returned to Colorado, where I was born and raised, we knew we wanted a little space around us. We found a charming 1960s home in midtown Arvada on about one-fifth acre. In addition to built-in bookshelves and a wood-burning stove, the yard had mature, leafy trees and plenty of space for extensive vegetable and herb gardens, a chicken coop with run, and a beehive.

We’ve spent the past eight years building an exceptionally productive urban farm. Our largest vegetable plot benefits from variable shade; we use it for greens, such as lettuce, kale and spinach, plus garlic and Egyptian walking onions. The northern third, up against the shed, collects quite a bit more sun, so we often plant staked runner beans and eggplant there. The soil in this in-ground plot was in decent shape, but every year we amend it generously with mulch from our leaves and compost that we make ourselves along our southern fence. Whether in a backyard garden or a farm, soil is by far the most important component – it’s essential to take good care of it.

The shaded garden plot was useful, but we needed space for heat-loving summer vegetables, like tomatoes and peppers. Nicholas built two large raised beds, which we filled with a mixture of lush organic soil and worm-rich compost. The beds are light, loamy and easy to grow in. We also constructed five smaller raised beds, ideal for squash, potatoes, peas and flowers, and we’ve planted raspberry bushes and perennial herb beds, including sage, English thyme, oregano, chives, lovage and mint. Every year, we harvest hundreds of pounds of organic food from our backyard.

Nicholas repurposed some beautiful redwood and built a secure chicken house and run. Instead of flimsy, inexpensive chicken wire, which a hungry raccoon can easily pry open, he used heavy-duty hardware cloth – and buried it nearly twelve inches underground to deter digging predators. Thanks to its solid construction, we never lost a bird to predation, which is the major risk to chickens in an urban area. The hen house itself is thoroughly insulated, eliminating any need for dangerous heat lamps which can kill chickens and burn down structures. Backyard chickens are easy to keep; they need protection from the sun and predators, plenty of fresh water and good-quality food and a clean, safe place to nest and sleep. The eggs are unparalleled.

To bring more beneficial pollinators not only to our garden but also to the surrounding area, we also installed a Langstroth beehive. The bees have overwintered successfully for three seasons and each fall they provide us with about fifty pounds of our own local honey. They’re fascinating to watch, improve pollination in our crops as well as those nearby, and maintaining a beehive doesn’t take much work.

Soon we plan to relocate to a much larger piece of agricultural land, where we’ll start a small organic teaching farm focused on sharing our knowledge with others. We want to encourage everyone to pay attention to where your food comes from and to grow and cook as much of your own food as you can. It’s not as hard as you think, and you’ll be amazed at how much food you can grow and how much money you can save. And it can be done even in an urban area! For more about our journey, please visit www.FindingQuietFarm.com.

Here are more resources where readers can learn more about all aspects of urban farming:

www.Echters.com

http://www.FleischerFamilyFarm.com

http://www.TheGrowHaus.org

http://www.SlowFoodDenver.org

http://www.ColoradoBeekeepers.org

Learn More About Urban Farming

Does urban farming make sense for you? Find out this Saturday by attending a 90-minute class taught by Elizabeth Buckingham in the living room of our Lakewood urban farm listing. The fee is only $10. You can RSVP at Jim@GoldenRealEstate.com. or by calling Chuck at 303-885-7855. The class starts at 1pm on Sat., Mar. 3rd, at 2665 S. Eaton Place. You don’t have to be interested in buying this home to attend this informative class on urban farming.

 

Last week I wrote about the capital gains exemption of $250,000 for single taxpayers and $500,000 for married taxpayers. I failed to mention (because I didn’t know) that a widow or widower has 2 years after the death of their spouse to sell their primary residence and still take advantage of the higher exemption amount. I thank the readers who brought that to my attention.

 

   If you bought your primary residence back in the 1960s or 1970s, there’s a good chance that you’ll be pushing the limits of the capital gains tax exemption when it comes time to sell.

Fortunately, the recently enacted tax reform bill retains the $250,000 exemption from capital gains tax for a single person, and the $500,000 exemption for a married couple. If you bought your house for, say, $30,000, in the 1960s, it’s quite possible that it’s worth 10 or 20 times that amount now, resulting in the possibility of capital gains taxation.

I am not a CPA or tax advisor, but I can share some of what I’ve learned about strategies to avoid capital gains taxation on the sale of your home.

If you’re a couple thinking that you might want to sell before you both die, consider selling before one of you dies, or your $500,000 exemption will be cut in half. Remember that you have to have lived in your home for at least two of the five years prior to sale date, in order to have that exemption, so if you recently moved into, for example, an assisted living facility, you’ll need to sell it within three years of your move or you’ll lose the exemption.

Do not add your heirs to the title of your home as a “joint tenant” with rights of survivorship.  Why not?  Because, although it may simplify the passage of ownership to them upon your death, it simultaneously adds to their tax liability.  This occurs because they inherit your original purchase price as their cost basis, whereas if they inherit the property through your will, the basis for them is stepped up to the fair market value of the home at the time of the inheritance. Again, this requires that you not move out of the house more than 3 years prior to passing.

If one of a married couple moves out, the $500,000 exemption is preserved by the other spouse as long as the absent spouse is still alive, providing the couple sells the house within 3 years of the last spouse moving out.

Again, I am not a tax advisor, and am only recounting what I have been told by tax and estate-planning professionals. Consult your own tax  professional before acting on anything I have said in this article. If you don’t have a tax advisor, I can help you find one.

If you’d like to know what your home is currently worth, or what it might sell for, call Golden Real Estate at 303-302-3636 for a free market analysis.  Our agents are also available to meet with you in your home.

If you’re considering moving into a senior community — whether independent living or assisted living — we know experts on such facilities, which are usually rentals.

Downsizing could take the form of moving into a low-maintenance or zero-maintenance condo, townhome or patio home, in which case we, as Realtors, can serve you ourselves. If you are worried about selling your current home and then not being able to find a replacement because of the low number of active listings, we have strategies for avoiding that situation. Call us for a free consultation.

As an “early adopter” of electric cars, I am often asked about how they work and whether they make sense for particular buyers. I’m happy to speak with you (or your group) on the topic, but let me share some general advice.  (At right is the opening slide of my PowerPoint presentation, which you can view at www.GasCarsAreObsolete.info.)

1) Plug-in hybrids are a good first step. My favorite is the Chevy Volt. My 2012 Volt has 78,000 miles on it, performs like new, and I get 2,000 to 3,000 miles on each 8-gallon fill-up.

2) Used electric cars are a real bargain. You can get a used Volt for $10,000 or less. Unlike a used gas-powered car, there’s almost nothing that will fail in a used electric car — no transmission, timing belt, exhaust system, etc.

3) If you’re waiting for a Tesla Model 3, consider getting your deposit back and buying a used Tesla Model S.  There are plenty on the market for as little at $45,000.  A comparable Model 3 could cost at least that much and there’s no telling how long your wait might be for the Model 3.

4) If you want to buy a new Model S or Model X, use my referral code to get lifetime free supercharging: http://ts.la/james6985.

 

All Colorado real estate licensees are required to take a 4-hour annual update class, and, although the deadline for doing so is the end of the year, Golden Real Estate’s brokers always take it as early in the year as possible. All 10 of us took the class on January 29th, and came away surprised at some of its content.

What surprised us first of all was what the class said about disclosing “affiliated business arrangements” and recommending service providers.

Many larger brokerages, such as Coldwell Banker and RE/MAX, have an ownership stake in mortgage companies and other related businesses, including title companies, inspection companies, and insurance companies. If the ownership stake is 1% or greater, that constitutes an “affiliated business arrangement,” and every client of those brokerages must be presented with a disclosure outlining those affiliations and the fact that the brokerages may profit when buyers or sellers engage any of those affiliated businesses.

Before I created Golden Real Estate in 2007, I was a broker associate at two firms with affiliated businesses, and I dutifully provided the disclosure of affiliated businesses to my clients, but I found it ethically questionable that agents were encouraged to “capture” clients for these affiliated businesses. I became more concerned as it became clear to agents that those with the highest “capture rates” were rewarded with relocation and other referrals from our managing broker.

For years I’ve known that the seller, not their listing agent, should select the title company and that we should offer a list of no fewer than three title companies from which the seller may choose.  I don’t have a problem with that.  In this year’s update class, I learned that the list must be in alphabetical order. Okay, I can handle that, too.

What surprised me was learning that if a brokerage has an affiliated title company, an agent needs only to disclose the affiliation using the state-approved disclosure form, but he/she does not have to provide the names of alternative title companies. Wow!  That pretty much guarantees that each agent’s buyers and sellers will use the affiliated title company and inspection company (since buyers and sellers are generally unfamiliar with such companies).  And buyers who are renters, not homeowners, are likely to accept their agent’s recommendation of his brokerage’s mortgage company and insurance company because they don’t have an existing relationship with providers of those products/services.

This shocked me because it’s so counter-intuitive: a small brokerage with no affiliated businesses (and therefore no opportunity to benefit from such an arrangement) is required to provide clients with the names of three vendors of each and every product or service that might be needed during the course of a transaction.  A brokerage with affiliated businesses, on the other hand (and which stands to benefit from the recommendation) is not required to provide the names of alternative vendors.

A year ago, the Denver Post published the results of an investigation of 2,200 transactions showing that three-quarters of those big brokerages captured 90% or more of the title work for their affiliated title company.

Another surprise for me was the expanded definition of “settlement service providers.” I had been under the impression that the term “settlement service providers” referred only to title companies, mortgage companies and other providers of services related to settlement, i.e. closing.  In the update class, we were told that this term also applies to the following:

►Attorneys  ►Inspectors       ►Surveyors

►Contractors      ►Home Warranty companies

Brokers must now provide an alphabetical list of three providers in all of these categories. I am not allowed to share my own experience, gained from 15 years of  observing the competence and professionalism of service providers in any of these categories. But if Golden Real Estate had a 1% ownership interest in any of these categories, I could recommend just that one vendor, providing only that I disclosed that ownership interest.  It doesn’t seem right to me.

According to the Real Estate Commission, this rule is designed “to provide transparency, accountability, and consumer protection through disclosure” and “to ensure consumers do not pay disproportionately high settlement costs.”  These new rules, as defined by the Real Estate Commission, appear to stifle competition which tends to increase costs to the consumer.  Maybe they should revisit these rules.

Perhaps the most shocking item in this year’s update class concerned the Foreign Investment in Real Property Tax Act (FIRPTA). If you purchase real estate from a foreign national without a Green Card, you, the buyer, are required to withhold 15% of the purchase price at closing and to forward that money to the IRS within 20 days of closing. (Good luck with that!) You read that correctly. If you’re the buyer, it is your responsibility, and if you fail to do so, the IRS can come after you for the tax not withheld, plus interest and penalties!  The buyer’s agent may also be held responsible but only up to the amount of any commission earned on the transaction. You’re only off the hook by getting a signed affidavit from the seller affirming that he/she is not a foreign national living abroad.

And, as if putting the burden on the home buyer isn’t enough, this federal law states that the withholding is 15% of the entire purchase price, even though the seller will be responsible in the end for paying tax only on his/her capital gain. (It’s helpful to know that this requirement of the buyer to withhold the tax does not apply if the purchase price is $300,000 or less.)

In conclusion, I urge other real estate licensees to take the update class early in the year instead of waiting, as so many do, until November or December.  Meanwhile, I hope this column is helpful to them, not just to consumers.

By the way, Golden Real Estate has a smartphone app listing 100 service providers in 50 categories. You can download it at www.clientlinkt.com/install/243.

Many home buyers, especially first-time home buyers, would like to buy a home but harbor misconceptions about the obstacles they might face along the way. Here are some perceived obstacles.

Down Payment

Many buyers are misinformed about minimum down payment requirements.  They may think that a 20% down payment is required to purchase a home, or that they’ll be charged mortgage insurance if they put less than 20% down. In fact, some conventional loans require only 5% down, and while they do require mortgage insurance initially, that expense can go away once you can demonstrate 20% equity.

Indeed, even 5% is not the minimum down payment.  FHA loans require only a 3.5% down payment, and VA loans require no down payment at all to qualified veterans. The Colorado Housing Finance Authority (CHFA) can get a first-time home buyer into a house with only $1,000 out-of-pocket. CHFA also has a program which includes a down payment that is an outright gift to the buyer, and their Mortgage Credit Certificate program allows first-time and veteran homebuyers to get a tax credit for 20% of their interest expense for the life of the loan.

Credit Issues

The credit reporting agencies have done a good job of informing us about what is a good credit score, but we still encounter people who believe that derogatory credit entries are insurmountable barriers to home ownership. I had a client who had a bankruptcy and two foreclosures in her credit history, along with a sprinkling of minor late payments. Using one of our preferred lenders (Jaxzann Riggs), she still obtained a 3.5% down loan. While medical collections still factor into credit scoring, those under $2,000 are typically ignored by Fannie Mae and Freddie Mac underwriting software. Most credit obstacles can be overcome within a 6- to 12-month period if the client has some discretionary income.

Student Loan Debt

Fifteen years ago student loan debt averaged $15,000, but today it is $35,000 and growing. Most underwriters will now accept income-based repayment plans of student loans (if reported to the credit bureau) as opposed to fully amortizing payments. Fannie Mae now allows student loan debt to be included in refinances without categorizing the loan as “cash out” (which would impact the interest rate). Families with children living at home could use this option to reduce the burden associated with student loans.

Unwarranted Risk Aversion

Another emerging segment of our marketplace is millennials who experienced the loss of their family home. One day Dad was employed, and the next he was not, and 6 months later they were out of their home. They do not trust that the employment market will always be so robust and therefore opt for the perceived security afforded by renting. A good Realtor and loan officer can help a buyer understand and recognize the advantages of home ownership vs. renting, making the decision to buy feel safer.

Limited Inventory

While it is true that there are fewer active listings on the market and that there is more competitive bidding, especially in the lower price ranges, it is definitely possible to succeed at buying a home when you have the right real estate agent and the right loan officer.

It is possible to be notified within 15 minutes of any new listing that meets your search criteria, so there’s no reason to be late to the process — so long as you check your email regularly. Here at Golden Real Estate, we are particularly successful in winning bidding wars for our buyers. Just last week, for example, our buyer was the successful bidder for a Belmar townhome, which was accomplished by matching, not beating, the next best offer. How? By offering totally free moving to the seller using our moving truck, laborers, moving boxes and packing material.  All of these costs will be covered by Golden Real Estate, not by our buyer.  Of course, covering moving expenses is only one of the many advantages Golden Real Estate’s agents bring to the table, so give us a call!

Lenders and Loan Officers

A good loan officer, such as Jaxzann Riggs of The Mortgage Network, who assisted with this week’s column, can make a huge difference in helping buyers get into their first (or next) home.  A good local mortgage broker like Jaxzann makes a better impression with home sellers and their agents than any online lender and even some banks. You can reach Jaxzann at 303-990-2992.