Tag: Jim Smith

I Have Reserved a Ford F-150 Lightning Electric PIckup

By JIM SMITH

There’s a lot to like about Ford’s electric version of their popular F-150 pickup truck, and I joined more than 50,000 others who reserved one of them on the first two days it was available for reservations.

I’m a big fan of Teslas — Rita has a Model S and I have a Model X — but I’m no fan of its long anticipated Cybertruck. I like that Ford’s EV has the same styling and functionality of the standard F-150, plus over-the-air software updates (like Tesla), and its battery can power my home in the event of a power failure. You can reserve your own at www.Ford.com. The starting price is under $40,000, so the cost after federal and state tax credits will be under $30,000. 

For a detailed article about the F-150 Lightning Pro by Green Car Reports, click here.

What Are Your Options When Approaching the End of Mortgage Forbearance?

As unemployment surged during the early months of the pandemic, many homeowners found themselves taking advantage of forbearance programs offered by their mortgage servicer. At the end of February, roughly 2.5 million homeowners in the U.S. were still in forbearance plans. I sat down with Jaxzann Riggs, owner of The Mortgage Network in Denver, to learn about what options are available for those who are approaching the deadline for exiting forbearance.

For homeowners who may still be experiencing financial difficulties, extending their forbearance plan may be a possibility. However, an extension will not happen automatically. If you are in a forbearance plan that is close to expiring, you should reach out to the company that services your mortgage to see if you are eligible to extend forbearance.

Whether you qualify for a forbearance extension depends largely on your loan type and when you originally entered forbearance. If your loan is backed by Fannie Mae (FNMA) or Freddie Mac (FHLMC), you must have entered into your forbearance plan by February 28, 2021. If your loan is backed by the FHA, you must have entered forbearance by June 30, 2020. Once forbearance ends, the best course of action depends largely on your personal circumstance and loan type.

Borrowers with a FNMA or FHLMC loan can opt to pay the “past-due” amount in a lump sum and have their loan reinstated if they are in a financial position to do so. For those who have loans through Fannie and Freddie but are not able to pay off their forbearance amount immediately, there are several options. If you can afford a few hundred dollars on top of your typically monthly payment amount, you should speak with your servicer about entering a repayment plan for a specified time frame.

For borrowers who have found themselves in a different financial position than they were prior to the pandemic, putting several hundred additional dollars a month towards a mortgage may not be possible. In that case, you may be able to enter payment deferral, in which you resume your typical monthly payments and the past due amount is added on to the end of the loan. You can also talk to your loan servicer about a loan modification, in which the servicer agrees to lower the interest rate, forgive a portion of the principal, or otherwise adjust the loan. Note, however, that a loan modification will negatively impact your credit history.

Borrowers with an FHA loan have several options, the most straightforward being to simply resume monthly payments. The FHA considers the past due forbearance amount as an interest free second loan, meaning that the payments are essentially deferred until the end of your loan term. If you are not in a position to resume your full monthly payments, you should speak with your servicer about a loan modification in which your interest rate will be lowered and loan term extended.

For those with a VA loan, a repayment plan or loan modification may be the best course of action. Although the VA does allow deferment as an option, it does not require that its loan servicers provide it.  For borrowers with a nonconforming loan (jumbo) there are no specific guidelines regarding forbearance. Some loan servicers may have chosen to offer forbearance, but they are not held to the same guidelines as other loan types.

Navigating your options as forbearance comes to an end can be tricky, but you do not have to face it alone. You may find it helpful to speak with a housing counselor before calling your loan servicer. The U.S. Department of Housing and Urban Development, or HUD, offers a list of approved counselors by state on their website.

And for any mortgage scenarios you may have, as always, I recommend calling Jaxzann Riggs of The Mortgage Network at 303-990-2992.

What Should You Fix or Improve Before Putting Your Home on the Market?

One of the most common questions we are asked during our first meetings with prospective sellers is, “What should I fix or improve before I put my home on the market?” I’ve written about this topic before, but the subject is worth revisiting, given the current market.

My advice has always been that you should only fix the “eyesores” and not make many of the repairs or improvements that you might make in a more balanced market.

So, what’s an eyesore? Simply put, an eyesore is something that draws negative attention from a buyer. But some eyesores are more important than others — specifically ones which help form a buyer’s first impression of your home.

In other words, your front yard, the front façade, your porch, front door and the first few rooms a buyer sees are more important than the condition of inner rooms or the basement. By the time buyers are deep inside your house, they either love it or they don’t, and if they love it, they’ll be more forgiving about a stain on the carpet or a loose railing that they see later in their visit. So definitely work on cleaning up your front yard, staining or repairing your front porch and front door (if it needs it), and address any eyesores inside the front door. If the paint on your siding or trim visible from the street is aged, dirty, or peeling, you’ll want to take care of that, too.

Further inside the house, fixing eyesores is still important, just not as important. New wall-to-wall carpeting is more affordable than refinishing hardwood flooring, but a wood floor that is in dire need of refinishing is definitely an eyesore. If a hardwood floor could use refinishing, but isn’t in dire need of it, I don’t recommend it. Re-staining a wood deck is an affordable task that eliminates the eyesore of a deck which sorely needs it.

Should you replace a Formica kitchen counter with slab granite, quartz or Corian? Not if the Formica is in good shape and is not hot pink. If it has peeling edges or burn scars, yes, replace it.

One of the smartest things you should do before putting your home on the market is to wash the windows inside and out. Since that requires removing window screens, I recommend washing and labeling your window screens and putting them in your garage or store room. The window screens can be reinstalled after you’re under contract and prior to inspection, because missing screens will definitely be an inspection issue.

When you invite one of us to see your home, you’ll want to know what fixes or improvements we suggest, and we will usually come down on the side of not making any repairs or improvements which aren’t necessary to get your home under contract.

The reason you don’t want to make unnecessary repairs or improvements — for example, replacing a 20-year-old furnace that works fine, or mitigating radon if a home test reveals it is needed — is that you need to retain those as bargaining chips.

Let’s say, for example, that your buyer’s inspection objection lists a dozen items including replacing the furnace and mitigating radon. You could agree to doing those two repairs but not the other ten items, and that would probably satisfy the buyer. If you’ve already replaced your furnace and mitigated radon, you don’t have those as bargaining chips and would have to address those other items.

Interior painting is another common issue. Let’s say your son painted his bedroom ceiling black, or your daughter has a cute mural with giraffes and trees covering one or two walls in her bedroom. Should your repaint those rooms? Maybe the black ceiling, but leave the mural — assuming it’s well done, of course!

These are merely general guidelines, and every house is different. My broker associates (below) and I are happy, of course, to meet with you in your home to discuss what to fix or not fix.

The best thing you can do before putting your home on the market is neither a fix nor an improvement. It’s decluttering. We all have too much stuff, don’t we? Some of it should be taken to Goodwill or the Salvation Army (using our free truck, of course!). Other items should be put in storage, and we can usually get our clients the first month free at a local mini-storage facility.

Once we’ve agreed on what to do, you may be concerned about how to pay for it. Our clients have access to our handyman at the client-only rate of $25/hour. For bigger repairs, we can help you with obtaining financing that could be paid off from your proceeds at closing. Ask one of our broker associates or me for details.

I Learned Some Things I Didn’t Know About Title Insurance in a Recent CE Class

I thought I understood everything I needed to regarding title insurance, but I took a Continuing Education class about it last week anyway, thinking I might learn something I didn’t already know. I wasn’t disappointed!

We Realtors trust the title company’s closer to explain the process and the forms to our clients, and for the most part they do. The title commitment documents delivered early in the contract process are long and involved, and we probably pay too little attention to them.

I know that many of my fellow real estate agents read this column, and this week I am writing as much to share what I learned with them as I am with the average home buyer or seller who may find him or herself in a real estate transaction.

The first thing we need to know is that title insurance is not a guarantee, it is an indemnity against covered losses. The “owner’s policy” insures against a covered loss; it does not ensure that there will not be a title challenge or a loss. As our class instructor, Doug Barber, pointed out, title insurance companies are like other insurance companies in that they are diligent about paying only for those claims which are for covered risks.

(Having been told that title insurance is not a guarantee, I find it interesting that Colorado’s leading and home-grown title company goes by the name of Land Title Guarantee Company.)

Fortunately, most title companies are pretty thorough in their title searches — which I have learned they typically outsource to highly skilled companies who do the title searches for multiple insurers. Nevertheless, a claim could arise, and it’s important for us agents and Realtors to be aware of that possibility and take reasonable care to warn our buyers and sellers of that possibility.

We agents like to describe title insurance as a policy that guarantees the buyer is obtaining a property “free and clear” of any claims or liens against it. That, however, is an overstatement, our instructor told us.

One mistake that we agents make — although it has yet to bite me — is to take the word of our sellers as to the ownership of their property. We should not, as most of us do, simply assume that the assessor’s database has it stated correctly. Instead, we are advised to obtain an “Ownership and Encumbrance” report from our preferred title company at the time of signing a listing agreement for a property. If the property is owned by an entity — a corporation, a trust, an LLC, a partnership, etc. — it’s essential to obtain written evidence of who is authorized to sign for that entity.

When the owner of a property dies, the deceased’s estate could be the seller, in which case there is a “Personal Representative” who signs for the estate, but don’t take someone’s word about who the PR is.  Trust but verify!  If the property has been inherited, then the heir is now the seller, not the estate, but that should be documented by a decree from the probate court.

Divorces can be really tricky, and it’s best to obtain a court decree or signed separate agreement requiring or authorizing the sale of the property.  One thing I didn’t know is that if a husband or wife inherits money during the marriage and uses it to purchase a home, the portion of the purchase price paid for with the inheritance is separate property, not marital property, in case of a subsequent divorce, although the increase in value of the property during the marriage is marital property subject to equal division upon divorce.

Another thing I learned: A minor cannot buy or sell real estate. Legally, they are considered incompetent until they are 18.

The title insurance policy only insures the buyer of the property up to the price he or she paid for it.  Thus, if you purchased a home in the 1970s for $30,000 and it’s now worth close to a million dollars, your title to the property is only insured up to $30,000 in case of some unexpected claim against your ownership.

When a property is owned by more than one person, they can hold it as joint tenants with right of survivorship — the most common form of title — or as tenants in common. As joint tenants, each person owns 100% of the property, and if one of them dies, the surviving person now owns that 100% by him or herself. Tenants in common each own a stated portion of the property. So, for example, if a couple owns the property 50/50, either person can sell their interest in the property without the consent of the other person.

Our instructor pointed out that, from an estate planning perspective, it might be wise for a couple who bought their million dollar property for $30,000 to switch to tenants in common. That way, when the first partner dies, the other partner can inherit that half interest at its stepped up valuation at the time of death, significantly reducing the capital gains liability if that surviving spouse were to sell it — something I hadn’t considered before.

Here’s Some Guidance on Appealing the County Assessor’s Valuation of Your Home

Normally, I’d advise you to make your appeal in person, but this year the Jeffco Assessor is using Covid-19 as a reason to deny in-person appeals, and the online method being offered at his website, http://assessor.jeffco.us, is not as intuitive or helpful as it was two years ago.

This year, instead of sending a full-size letter to each property owner, the Jeffco assessor sent a fold-over postcard which only asks you to provide your own dollar valuation of your home and state a reason. The full-size letter of prior years had a place to enter up to three qualified comparable properties sold during the 24 months prior to June 30 of last year which justify your lower valuation of your property. That letter-size form can be downloaded and printed from the assessor’s website. I’ve posted a link for both the Jeffco and Denver appeal forms at www.JimSmithColumns.com.

Both counties allow for online appeals, but the online forms do not have a place to enter the “Qualified Sales” on which your appeal is based, which is surprising and disappointing. However, you can print out the letter-size Jeffco form with those three comps and attach it as a scanned document to your online filing. The Denver form can be completed online, so you don’t have to print it out and scan it.

You can find those qualified comps (defined as homes similar to yours sold in the 24 months between 7/1/2018 and 6/30/2020) by clicking on the “Sales” tab on the web page for your own home on the assessor’s website.  Good luck!

Here Are Some Strategies for Assembling Your Down Payment Funds

Last week I wrote about how  first-time home buyers can buy a home with as little as $1,000 out of pocket, but the rest of us may be challenged to come up with down payment money when we buy a home.

Many buyers assume that lenders require a 20% down payment, but that’s not necessarily true. There are loans available from many lenders with as little as 3% down payment. FHA requires 3.5%down, and qualified veterans can get a 0% down VA loan. On conventional loans the interest rate charged will probably be higher, but with rates for conventional loans so low, what’s an additional quarter percentage point or so anyway?

And don’t assume that every loan with less than 20% down payment requires mortgage insurance, which can be expensive. Often mortgage insurance is waived in exchange for a slightly higher interest rate.

So, first determine how much money you will need for your down payment, and shop around with different lenders, since this requirement can vary greatly. Generally, I recommend mortgage brokers instead of banks, because banks only sell their own loan products, but mortgage brokers can sell multiple products from multiple lenders, including special products for first responders, teachers, medical personnel, and others.

Once you know the amount you need to raise, how can you raise it when you don’t have that much cash in the bank?

Start your quest by asking advice from your loan officer. A good loan officer, like Jaxzann Riggs of The Mortgage Network, will be able to make suggestions once she (or he) has a full picture of your financial situation and assets.

Strategies I’ve seen employed include the following.

1) If you own a home currently and have substantial equity in it, you can borrow against that equity with a Home Equity Line of Credit or HELOC. Credit unions are good at issuing these loans to its members, but if you’re planning on selling, you need to apply for a HELOC before you put your home on the market. Since these loans have little or no closing costs and you don’t pay interest until you actually draw on that line of credit, there’s no reason not to have a HELOC in place right now and certainly ahead of needing the money. It’s like having money in the bank — literally.

2) If you have a high-balance IRA or other retirement fund, you may be able to withdraw money from it without penalty if you return that money within a couple months, so this is a good strategy if you need the money from selling your current home but don’t want to make an offer on your replacement home that is contingent on selling your current home. A loan against your 401K carries no penalty, I’m told.

3) If you own stocks and bonds but don’t want to sell them, consider using them as collateral for a loan.

4) Relatives or friends can gift you with money, but speak to your loan officer about documentation requirements. As you may know, anyone can give up to $15,000 per year to anyone else without paying gift tax.

5) Another option is a bridge loan. This option carries a higher interest rate, but it could be your answer.  Ask your loan officer.

6) Get creative! If you’re engaged, how about a bridal registry for down payment funds? A GoFundMe campaign might work for you, too. If you have no loan on your car and it’s worth a lot, credit unions will lend you money against it. (I did that once.) You may own jewelry or other valuables to which you are not so terribly attached that you might be willing to sell them. (Rita and I have done that, too.)

Don’t Fall for This Gift Card Scam

This Monday, people on my contact list received an email that looked as if it was from me, asking for “help.” If they responded to the email, it went to a scammer pretending to be me who said I was in a meeting but could they help me purchase some Google gift cards for me and I’d reimburse them.

This kind of scam doesn’t hurt the person who’s being impersonated, but it hurts his/her friends and contacts who fall for it. Tell your family and friends about this scam and don’t let them fall for it.

1,200+ Metro Area Homes Are Sitting on MLS – No Bidding Wars for Them

No buyer wants to be in a bidding war, but there are many listings on the MLS that aren’t selling, and submitting an offer won’t put you into a bidding war. You might even buy them for less than their listing prices.

As I write this on Sunday, there are 1,241 active (that is, unsold) listings on the MLS within 25 miles of downtown Denver that have been active 10 or more days. There are 764 that have been active a month or longer, and 483 that have been active 60 days or longer. And it’s not as if those 483 listings are in the boondocks. The map shown here (from REcolorado) shows where they are.

483 Homes on the MLS for 60 Days or Longer

As I’ve written before, any agent can set you up to receive only listings which have been on the MLS a certain number of days. It is a good way to avoid bidding wars.

    Let me or one of my broker associates below know if you’d like us to set up an email alert like that for you.

Jim Smith, 303-525-1851

Jim Swanson, 303-929-2727

Chuck Brown, 303-885-7855

David Dlugasch, 303-908-4835

Ty Scrable, 720-281-6783

Andrea Cox, 720-446-8674

Home Buyers Have Widely Differing Needs and Motivations

During my two decades as a licensed real estate agent and Realtor, I’ve met and worked with a wide variety of buyers and gotten to know their varying needs and motivations. Allow me to share some of that with you. I’ve identified at least five categories of buyers.

First-time home buyers: This group has always enjoyed a wide variety of programs to meet their special needs. By the way, you are deemed a “first-time” homebuyer if you have not owned a home for at least 3 years.

The primary need for this group is obtainable financing. We can connect first-time buyers with lenders who require as little as $1,000 out-of-pocket to get into a home, and who offer classes for first-time homebuyers to help them succeed as homeowners.

The motivation to change from renter to owner is well understood. Homeownership is the number one method of wealth creation. Not only are the taxes and interest on your home tax deductible (with some limitations now), but your home may well appreciate in value as much as or more than what you pay for it each month. Then, when you sell, your capital gain on it will be mostly or entirely tax free. With such incentives, first-time home buyers are highly motivated and rewarded for buying a home.

Move-up buyers: Homeowners frequently need to buy a bigger home or simply want to buy a more luxurious one. Typically, this is when children are born or adopted, but with Covid-19 we’ve seen homeowners who need more space to work at home, not just temporarily but long-term. Employers have learned that workers can be highly productive working at home, and employees like the lack of commuting time and expense — but they need space for a home office.

Downsizing buyers: Empty nesters rattling around in 5-bedroom homes with lawns to mow and bushes to trim are wanting, if not needing, to have a simpler life in a smaller home — perhaps a “lock-and-leave” home where they can travel and not worry about their home while they’re gone. Many of these homeowners have long ago paid off their mortgages, or their mortgage is small enough that they can buy a newer, smaller home and live mortgage-free. Taking out a home equity line of credit on their paid-off home could provide the cash to buy the replacement home without a contingency on the sale of their current home, which also allows them time to transition from one home to the next. That’s just one strategy that I can share if you are in this group.

Investors: I don’t work much with investors, preferring to work with people who buy a primary residence, but I have broker associates with extensive experience serving this group of buyers. With the bidding wars going on currently, investors, especially fix-and-flippers, are having trouble buying homes with enough margin to make a profit on reselling them, but it can be done.

Relocation buyers: In this column last week I wrote about “climate refugees” relocating to Colorado from areas with high climate risks. Others move here for jobs or family. Such buyers need to find the right city, community and home to buy despite being new to Colorado. That’s where they need us the most. Yes, we can give them tours and answer their questions after carefully listening to their needs and wants. Before they even come to town, I like to send them listings and FaceTime them as I preview homes of particular interest. In just the past month I sold an Arvada listing to a couple from Minnesota and a Denver listing to a couple from Los Angeles. Both went under contract based solely on my video tours and only saw the home in person when they came for the inspection a week or so later. They could have terminated at that time, but they both loved the homes.  I love my job!

How High Are Bidding Wars Pushing Up Home Prices?

We’ve all heard some crazy examples of bidding wars in which homes have sold for way over their listing prices, so I took a snapshot of just one day’s closings, limited to a 15-mile radius of downtown Denver. That takes in an area from Broomfield to Highlands Ranch and from Golden to Aurora. It does not include the City of Boulder.

The day I chose was last Friday. The source was REcolorado.com.

I limited my search to homes, condos and townhouses that were on the MLS at least one day and no more than 6 days before going under contract. Those are the listings that experienced bidding wars. I divided the results into homes which sold up to $500,000 and those that sold for more than that.

On April 16th there were 48 closings up to $500,000. The median home sold for 4.7% over its asking price. It was a tri-level home in Aurora listed at $420,000 which sold in 3 days for $440,000. Only 3 homes sold for the listing price and 2 sold for less. The highest ratio was 25.8% for a home in Aurora that sold in 1 day.

There were 68 homes that closed on April 16th for more than $500,000. The median home in that group sold for 8.3% over its listing price.  It was a 1950 ranch in Denver’s North Hilltop neighborhood listed for $600,000 that sold in 3 days for $650,000. The highest overbid in this group was 18.8% for a 2-story home in Westminster listed for $425,000 that sold in 5 days for $505,000. Only 5 sold for the listing price and 4 sold for less.

To get a statistically meaningful number of closings over $1 million, I looked at 68 such closings from April 1-16. The median ratio was 4.3% over listing price. The highest was for a 1954 bungalow in Denver which was listed at $965,000 and sold for $1,205,000, 24.9% over listing.

Note: These statistics reflect the bidding wars that were taking place during late March, when most of these listings went under contract. Today’s bidding wars appear to be even more intense. Stay tuned!