Sellers Ask: Should I Wait Until Spring to Put My Home on the Market?

About this time of year I like to remind readers why winter can be the best time of year to put their home on the market.

First of all, there is less competition because, frankly, most sellers don’t know that homes sell well year-round. If your agent says you should wait until spring, get an agent who understands this!

Second, buyers continue to get alerts of new listings year-round.  You know this yourself if you’ve been looking at listings. Nowadays every serious home buyer has asked their agent to set up an MLS alert matching their search criteria, or done it themselves on Zillow, and these alerts are generated 24/7/365 — even on Christmas morning!

This is a change from years past, when buyers depended on their agent to monitor the market and find listings that matched their buyers’ needs and wants. No more! Buyers do their own searching, even if it’s on Zillow, and call their agent when they want to see a listing which appears to meet their needs and wants.

Third, you won’t be bothered by lookie-loos.  Only serious buyers, ready to make an offer, will be asking to see your home in the winter. The buyers who just like looking at other peoples’ homes are less inclined to go out at this time of year.

Fourth, you’ll have your agent’s and mortgage broker’s full attention.  With less traffic in the winter, these professionals can give you their undivided attention.  Others, including title officers and home inspectors, are also less busy in the winter, which is to your advantage.

Fifth, you can light your fireplace. I love going into a warm, cozy home when it’s cold outside. Unless your home is drafty and cold, this makes for great staging!  And if you have a wood-burning fireplace, it’s even better. I love the smell of a wood-burning fireplace, don’t you?  Also, put some cider on the stove, with cinnamon sticks in it and have a ladle and cups next to it with freshly baked cookies, and you’ve made my day! Your visitors will feel like they are in their new home!

Sixth, holiday decorations are good staging, too.  Most stagers will urge you to depersonalize your home, including removal of crucifixes or other religious symbols, but this is Colorado, and people of all religions enjoy our Christmas holiday decorations. Again, like the fireplace and hot cider, holiday decorations can add a welcoming, homey feeling to your home.

Remember, buyers need to move year round. The concept of selling during the children’s summer vacation may be valid for a limited segment of the population, but even in that case many families move locally, and the MLS allows us to set up searches based on school district or even specific elementary, middle or high school service areas. Other moves are triggered by job changes, health changes or seniors moving to be closer to grandchildren, and these needs arise year-round.

Call any of us at Golden Real Estate — our phone numbers are below — if you’d like a free market analysis of your home or for any other reason.

Jim Smith, Broker/Owner –  303-525-1851

Jim Swanson — 303-929-2727

Carrie Lovingier — 303-907-1278

Kristi Brunel — 303-525-2520

Chuck Brown — 303-885-7855

David Dlugasch — 303-908-4835

Andrew Lesko — 720-710-1000

Carol Milan — 720-982-4941

Many Renters Are Unaware of Programs That Make Homeownership a Possibility

Last week I wrote about the challenges facing buyers who must sell their current home in order to buy a new home and are not sure how to accomplish that.

This week, I’m going to address the different challenges facing renters, including first-time home buyers.

There are many programs for first-time home buyers, but did you know that anyone can qualify as a first-time home buyer if he or she hasn’t owned a home for at least three years? You could have owned many homes in your lifetime, but if you haven’t owned one in the past three years, you can take advantage of these special programs.

A common misconception among people who want to buy a home is that a 20% down payment is required, but that is simply not true. Another misconception is that if you put down less than 20%, you’d be required to pay for mortgage insurance. There are conventional loans available with as little as 3% down that don’t require mortgage insurance. That differs from the 3.5% minimum down payment required for FHA loans which do require mortgage insurance which continues for the life of the loan.

One of our preferred lenders, Scott Lagge of Movement Mortgage, compares the low costs of available programs to what renters pay when they lease a condo or home. Typically, renters need to come up with the first and last month’s rent plus a damage deposit.  Some first-time home buyer programs have out-of-pocket costs as low as $500.  Moreover, your partially tax-deductible mortgage payments could be as low or lower than what you’d pay in totally non-deductible rent.  

When I bought my first home in Golden in 1997, I was single but I had a good friend (also renting) who agreed to rent a room from me if I bought a suitable home. I found a ranch-style home with a walk-out basement that worked perfectly. He lived in the basement, I had a main-floor master suite, and he had access to the kitchen. We both saved money over renting, and I was building equity in my home. This is a formula that can work for anyone – if they have someone they’d like to have living in their basement!

There are programs from CHFA (the Colorado Housing & Finance Authority) that offer a grant of up to a 3% of the first mortgage loan amount, or up to 4% through a “silent” second mortgage that accrues no interest and requires no payment until the first mortgage is paid off, either at maturity, refinance or resale.

Scott claims that the best first-time homebuyer program of all is his company’s Dream to Own Loan.  This loan includes a silent second of 4% of the purchase price to be used for down payment and closing costs. This is the closest thing to a no-money-down loan that Scott’s aware of for first-time buyers.  There’s no mortgage insurance and the rates are competitive.  Call Scott at 303-944-8552 for more details.

Another great option for renters is a rent-with-option-to-buy program which you can read about at www.HomePartners.com.  The way it works is that you only have to qualify to rent a home which that company then purchases so you can rent it.  They’ll pay up to $500,000 for almost any home (except a condo) that’s on the MLS once you agree to rent it at a pre-determined rental amount based on the purchase price.  You can rent the home for up to five years, knowing in advance what your rent will be for all five years, but at any time you can buy that home at a price that is also agreed to in advance. Call Golden Real Estate to apply for this program.

That program is also a good option when your credit isn’t strong enough to buy right away but you know it will be better within five years. You can also use the program for the peace of mind that comes from knowing what you’ll pay in rent for five years and that you won’t have to move.

It’s also a good program for people relocating to our area who see a home they may want to buy but feel better renting it with an option to buy it later on if they like it — but they don’t have to.

Timing the Sale of Your Current Home and Purchase of New Home Can Be Challenging

Have you faced this dilemma? You want to buy a home that better fits your family’s needs, but you are stymied by the need to sell your current home to pay for the next one.  So you stay put in a home that doesn’t quite meet your needs.

There are several ways to tackle the challenge of buying a home when it depends on selling your current home. Let’s look at different scenarios based, first of all, on the amount of equity you have in your current home.

If you own your home “free and clear” and are downsizing to a lesser priced home, the easiest path is to take out a home equity line of credit (or HELOC) on your current home. This kind of loan is easier to obtain than a standard mortgage, especially when done through a credit union. Note: You must do this before going on the market.

When I obtained a HELOC from a credit union, they didn’t even charge for title insurance and did only a “drive-by” appraisal, and the closing took place at the loan officer’s desk with no closing fee. It couldn’t have been easier.

If you have a mortgage on your home but still have substantial equity, a HELOC can provide the cash you need for a 20% down payment, which is what’s required to get the most favorable interest rate on the mortgage for the home you’re buying. You would no longer be a cash buyer for your new home, and the mortgage lender for your home purchase may make the sale of your current home a condition for approving the loan on your new home, depending on the size of your income and the ratio of your debts to your income. But that doesn’t mean you can’t succeed in buying the new home.

Under the right circumstances, a seller and his/her listing agent will consider an offer that is contingent on the sale of the buyer’s current home. I have succeeded in this process as a buyer’s agent by showing that the buyer’s home is ready to be listed immediately and will be priced to sell quickly based on a market analysis.

Don’t expect, however, to win a bidding war against non-contingent buyers. You can avoid bidding wars and succeed with a contingent offer by looking only at homes that have been on the market over two weeks. Your agent can set up an email alert with that being one of the search criteria. Then be sure to include in the contract the price that you are going to list your home and submit with it a market analysis demonstrating that it is priced to sell quickly. That market analysis should include a spreadsheet of comparable homes sold in the last six months, showing days on market, and a price per square foot that is higher than the price per square foot of your home at the listing price specified in your offer. Your agent could even enter the home on the MLS as an “incoming” (not yet active) listing, complete with high quality photos, showing that you’re ready to “pull the trigger” immediately after your contract is accepted on the new home.

The contract to purchase your new home could have a closing date of 45 to 60 days, and if you have priced your current home correctly, you should get multiple offers and be under contract within, say, four days with a buyer who has agreed to match the closing date on your new home.

One of the deadlines in a contract to buy a home is the contingency deadline, after which you would lose your earnest money if you fail to close on your purchase.  That date should not be the day of closing but maybe a week earlier. If the contract to purchase your current home has the same date for that last opportunity for your buyer to terminate and get their earnest money back, you can have some peace of mind about everything working out well.

When I write a contingent contract, I like to add a provision that the seller can terminate if my buyer’s home is not under contract within, say, a week or 10 days after going under contract. That increases the likelihood of acceptance.

(I’ll write about the challenges facing renters who want to become home owners in next week’s column.)

The Federal Reserve Raised Interest Rates, Yet Mortgage Rates Plummeted. Why?

If you follow mortgage interest rate fluctuations, you may wonder how mortgage rates can drop despite several increases in the Federal Reserve’s much talked about discount rate over the past year.

The benchmark 30-year mortgage rate plummeted 27 basis points (over 1/4 percent) last week, the biggest weekly drop in a decade, creating a huge affordability window for home buyers and for homeowners considering a mortgage refinance. The last time the benchmark 30-year rate was below this level was Jan. 3, 2018, when it hit 4.10 percent, according to Bankrate’s historical data.

This can be a teachable moment, so I asked one of my preferred lenders, Scott Lagge of Movement Mortgage to explain.

According to Scott, financial markets are complex, and many factors impact interest rates.  What we are experiencing currently is based to a large degree on consumer sentiment.  As consumers, we can have a huge impact on the market based on what we “feel” about where the economy is headed.  If we “feel” the market is getting worse, we hold onto our money, spend less, buy less, and shift our investments from short term to long term investments. Therefore, worries about slowing economic growth can change our behaviors as consumers and as investors.  Investors worried about the economy slowing in the short-term start to shift their money to long-term investments such as bonds, specifically mortgage backed securities (also known as mortgage bonds). This flood of money into mortgage bonds reduces mortgage bond values and rates fall due to an over abundance or supply of bonds.  In essence, it’s supply and demand.

For a more technical explanation, Scott cited this statement from Greg McBride, CFA, Bankrate’s chief financial analyst: “Worries about slowing economic growth — both domestically and abroad — and the inversion of the Treasury yield curve put investors into semi-panic, bringing bond yields still lower after the Fed indicated no more rate hikes in 2019.”

Above is a chart from www.Bankrate.com showing last week’s sudden drop in mortgage interest rates. 

Changes in mortgage rates can affect home prices. To the extent that buyers use mortgage financing, what they can afford to purchase goes up or down. As mortgage rates flirted with 5%, we saw a definite softening of the long-running seller’s market. If these low rates last into the coming weeks, we may see more buyers wanting to resume house hunting and lock in a low mortgage rate.

Scott Lagge invites you to call him at 303-944-8552 if you’d like to see what interest rate you qualify for. Call me at 303-525-1851 if you’d like to go house hunting!