Renting vs. Buying in a sellers market

You should always buy versus rent if you are able to.  Rental rates are as much or more then monthly mortgage payments.  The only difference is that at the end of the payments, you have gained some equity in the home and with the rental you have none.  Over a 40 year period housing prices have risen an average of 6 percent a year.  If you buy a 180,000 then over the long haul you can make 10,800 a year.  If you buy a 340,000 dollar house then you can make 20,400 dollars a year.  If you rent then you make 0 dollars a year.

There are some benefits to renting over buying and those come in liability and maintenance.  If the home you rent has serious defects and it loses value then you are not on the hook for that until you can pay off the mortgage.  If you decide to make a life change, it is much easier to pick up and leave if you are renting than buying.  If something breaks or needs maintenance then you can call your landlord and get it fixed in most cases for free.  However, you cannot change things on the property without the landlords permission.  You cannot make improvements to increase the value of the property and get that money back.  In my opinion, you should always buy and never rent if you are able to.

Credit Rating to Get a Home Loan

Getting a mortgage isn’t as easy as it once was.  You need a great lender, good credit, and lots of patience.  Typically what you need to get a home loan is two years of job history with pay stubs, a 640 or better credit score, 20 percent down payment in the bank, and a stable housing market where you want to live.  Those are the four things that lenders like to see when they issue you a pre-approval letter.  Sometimes you can still get a loan if one of these things is very off as long as the other three are overly good.  If you have less than two years job history then you will need note explaining the job gap.  Even with the note you will need at least six months job history.

Kelly Checkan, a loan officer with Lincoln Capital Lending, says that you still get a Federal Housing Administration home loan with a 620 credit score if you have a lower debt to income ratio.  A USDA requires a minimum of 640 credit score.  With all loans you cannot have any collections or child support payments.  That means that if you are paying off collections or paying child support get the final payments done before you try and buy a home.

I’m told that creditor’s reserve their best rates for customers with 720 FICO credit scores.  Currently the best rate as I am writing this now for a 30 year conventional loan is 4.25 percent APR.  If you are trying to raise your credit score, here are some things you can do.  First, get a credit card.  No credit is bad credit and you need to start building your credit.  There is nothing wrong with using cash all the time as long as you are willing and able to pay cash for a house.  When you get the credit card you need to use it and pay it off every month.  You also need to have a minimum of one year with active credit use.

Credit scores range from 0 (which no one has) to 850 (which is nearly impossible to get).  A good credit score is around 750.  It is important to find out your credit score and monitor it monthly for errors.  Your local bank can get your credit score or creditkarma.com can get it for you for free.  Any loan officer can help you find out if you are qualified to buy a home or get an income property.  You can talk to Kelly Chekan today at 303-995-7166 or me at 303-263-7142.

What’s a typical listing percentage?

The first thing you have to consider is that most buyers are already shackled up to a real estate broker.  This means that the person who is listing your home is unlikely to find the buyer without that person having an agent.  Consideration must be made to the selling side (buyers agent) that is the part that differs from state to state, county to county, and year to year.  Here in Boulder County it is customary to give 2.8 percent or more to the selling side.  In Fort Collins the number is 3 percent and 10 years ago in Boulder it was between 3.0 and 3.5.  Once you have figured out how much the other side is getting then you can pay the listing side.

For the lowest amount of work the seller might get away with paying only 2.5 percent on the listing side.  For a standard amount of work you might give 2.8 percent.  If the broker goes above and beyond (fliers, ads, open house, staging, tour factory) then you might give 3.2 percent or more.  If you add up both sides then a standard listing percentage would be between 5.3-7 percent.  If the home would take a lot to sell or there is a business attached to it then you could pay as much as 10 percent.

At the end of the day it doesn’t matter because it is not the seller paying the commision, it is the buyer and this is why I say that.  Think about any product or service throughout time.  Take toothpaste for an example.  When you think of toothpaste you think of Crest.  Why?  Because Crest paid for years of advertising for name branding.  Did Crest pay for those ads?  I would argue that they didn’t.  While Crest fronted the money for the ads the consumer paid for those ads in full by buying Crest from supermarkets.  In the end the buyer always pays.

The amount of commission doesn’t matter.  What matters is your bottom line.  What does the seller want after the sale? 10,000?  150,000?  If the broker has a good plan to sell the home then you should pay them a good commision.  Remember, the broker receives no money until the successful sale of your home and often puts money towards it without the guarantee of a return.  Ask your real estate professional what they charge and try to work out something the both of you can agree on.

The is usually no out-of-pocket cost to the buyer for using an agent to find a home.  Technically the buyer pays for the buying side commission in the asking price, (see Crest toothpaste) but because the banks would never agree to finance the broker’s commission we all just agreed that the seller would pay both sides.  At the end of the day all the offers to the seller should come with a net sheet telling the seller how much is their take home after everything; if that number is close to what they want then they should counter, if it’s right on they should accept, and if it’s way off then they should decline.  The listing commission shouldn’t play into the decision.  Remember, getting a good real estate broker is essential to selling your home.  Real estate professionals practice a limited scope of law and one wrong move could jeopardize your biggest investment (your home).  Good real estate professionals generally charge a larger commission which is anywhere between 6 and 7 percent.

What’s going on in Gunbarrel?

What is going on in Gunbarrel?  Or should I say east Boulder because the city of Gunbarrel doesn’t even have it’s own name on the address.  If you live in Gunbarrel your address says Boulder, Longmont, or Niwot.  It is mostly considered Boulder and if that is what’s expanding then you can believe that whatever is going on is going to be very expensive when it gets finished.  Since the early 1980’s Boulder has had very high home prices as well as other things, high education level, high income level, and high percentage of very fit patrons.  The housing market in Boulder is one of the best in the country and has never really dipped in either of the last two recessions.

So where can you live in Boulder that is still affordable? The answer is the eastern part, the unincorporated city called Gunbarrel.  Gunbarrel is rural borough in between the city Boulder and Longmont/Niwot. You may have noticed a lot of construction going down the diagonal heading into Boulder.  Gunbarrel appears to be expanding both out and up.  Many residents are concerned that their small quaint neighborhood will not be quaint anymore.  Some are excited to see some life breathed into that part of town and others hate the idea of losing the small town aspects of it.

Whats going on in Gunbarrel is a project that is 12 years in the making.  The first step is putting up 251 apartments on the side of town closest to the diagonal.  They will be for rent as early as 2015.  Developers will then build a main street in Gunbarrel with shopping, restaurants and free standing art.  This is a 50 million dollar project that is expected to end within 2 years.  The 100 room Hampton Inn already finished last year and a brewery and restaurant will be completed by February of 2015.

The plan is to bring Gunbarrel up to the 21st century with a full and colorful downtown.  Gunbarrel will still remain unincorporated with most parts belonging to Boulder so this change is sure to bring housing prices and economic growth up.

Boulder County Area Home Sales

When looking at statistics, it is sometimes hard to determine if you are living in a seller’s market or a buyer’s market.  How do you know if it’s better or worse than last month?  We have taken the guess work out of it and put together a comprehensive market analysis on whether you are living in a buyer’s or seller’s market.  This may give you the edge you need to either list your home or buy a new property.  Look below at the stats for your area of interest and call 303-447-7171 with any questions you may have.

The last two years have been great in Boulder, Broomfield and Denver Counties  The rapid increase in sales prices and the low inventory have been a blessing for sellers.  While to the untrained eye it looks like we are in a boom for prices and they may fall any day, we at Cobalt Realty see things differently.  Prices appear to be high due to the 2008-2012 low sale prices.  We are actually right on the line for 6 percent growth rate over the last 40 years.  So while your neighbor might be worrying about another crash, it is likely that prices will continue to rise.  Inventory is at an all time low this year which defines our market analysis below.

You can click the image to make larger.

Putting Up Solar Power Panels On Your Home

We are blessed with 300 days of sunshine in the Boulder County area and we need to take advantage of it.  Putting up solar panels on your roof can be costly, but the rewards are well worth it.  Between the government rebate and the break on your monthly energy spending, it can save you money in the 15-20 year range.  This may be the best option for you if your bill is over 80 dollars a month.  The tax credit is 30 percent if you chose to purchase your system.  For more information about government tax breaks click below.  http://www.bouldercounty.org/property/build/pages/solar.aspx

A number of people are choosing to lease a system which comes with a no money down option.  To find out more information about leasing, please visit this website –  http://www.solarcity.com/residential/states/colorado-solar  This may be for you if you don’t care about owning your panels, but you just want to do the right thing for the environment.

I have installed solar panels in Washington State and I can tell you that they are very easy to install.

Longmont Homes Built in 1910 and the Fire

I have always liked looking at old homes and Boulder County has tons of turn of the century homes.  You have probably seen a substantial amount of homes in Longmont built in the year 1910.  Not very many were built before then and not many after then.  The Chicago-Colorado Colony was founded in 1871 by men from Chicago, Illinois.  If the town was founded in 1871, why were so many homes built in 1910?  Is that when most of the people moved here?  Was there an economic boom?  What you didn’t know is that most of those homes weren’t built in 1910.

The reason that so many homes say they were built in 1910 is because there was a fire at the hall of records that burnt down all the property records in 1910.  From then on, unless they knew the age of the house through other sources, they just called all the homes built in the same year.  Many homes in Longmont were built prior to 1910 but they didn’t have sufficient history to prove it.

If you are lucky enough to own a home “built” in 1910, then try looking in the walls to find the year it was built, sometimes they would use old newspapers as insulation and you can read the date on them.  For more questions about the history in Longmont call Jack Zagunis (303) 263-7142 or e-mail jackzagunis@gmail.com

Difference Between a Broker and an Agent

This blog was written to clarify the difference between a real estate broker and a real estate agent.  Selling or buying your home is probably the biggest financial transaction you are going to have in your lifetime.  One of the best parts of working with a real estate agent rather than selling a home on your own is oversight.  Broker associates and real estate agents have oversight from their managing brokers and they have oversight from the real estate commission. It is also important to know who you are working with and the level of knowledge they have in real estate.  Many times I have seen people call a broker a salesman or a salesman a broker.  I am here to set the record straight and distinguish the differences between those two and other types of real estate professionals.

A real estate agent, also called a real estate salesman, is a special agent in real estate who can buy and sell homes for a client.  A salesman is always under a broker who has oversight on all their flies.  A salesman has limited schooling compared to a broker and typically splits the commission with a broker.  Salesmen are common in other states, but you won’t find one in the State of Colorado.

A broker associate is also a real estate agent, but has more schooling and is held to higher standards of knowledge than an agent.  A broker associate can be on their own without oversight from a managing broker after just two years.  A broker requires more schooling and testing then a salesman and should be called “broker” and not agent or salesman whenever possible.  In Colorado, they have done away with the salesman distinction and made everyone brokers to stop the confusion.  The real estate commission in Colorado decided that for the public good, all real estate agents need the extra schooling to become brokers.

A Realtor is a trademark and a real estate agent that belongs to a national association.  This association has a standard of ethics and lobbyist fighting for Realtors in Washington, DC.  Only half of licensed real estate agents are Realtors.  Many real estate agents are often incorrectly called Realtors, but those people are only right about half the time.

In some states a real estate attorney is required to be at the closing table to help aid in the deal.  In Colorado real estate attorneys are rare due to the Conway-Bouge decision.  Real estate professionals are not attorneys, but this decision says that as long as brokers use real estate commission approved contracts they can practice a limited scope of law.  They must recommend legal counsel to the client but for the most part this keeps the attorneys out of real estate.  If something needs to be drawn up outside of a commission approved contract, then a lawyer needs write that.  That is why when you move to Colorado you will only see two brokers, a lender, and a closing agent at the closing table and often not an attorney.

A managing broker is someone who has been a broker for at least two years and had completed extra schooling to become a managing broker.  He or she will often have Broker Associates under them and is responsible for all files and oversight for 4 years after a transaction is completed.  In our company we have two managing brokers, Joe Bennell and Bob Luna.  They make sure that all our contracts are perfect and no dates and deadlines are missed.

An independent broker has practiced real estate for two years and is not under a managing broker or has broker associates under them.  The only oversight an independent broker gets is with the commission.  Next time you are working with a Real Estate Professional ask him or her if they are a Managing Broker, Broker Associate, Independent Broker, or Real Estate Salesperson.

Colorado Flood 2013 and It’s Impact on Homes

Northern Colorado received record breaking rains followed by a massive flood in September of 2013.  Nearly 10 inches of rain fell on September 12 and by the 15th, over 16 inches of rain had fallen in the foothills near Boulder, Colorado.  Boulder County only gets about 20 inches of rain a year so this was a massive drenching.  The flood waters reached about 200 square miles and by the 15th, 17 counties received federal emergency declarations.

It was a very scary time for me and my family.  I live in Boulder County which was the worst hit county in the disaster and my in-laws live in Larimer County which was also terribly hit. The town I was living in, Longmont, was cut in half by the flood.  To the North of the St. Vrain where we lived, and to the south of the St. Vrain river.  No one from the South could come to the North and vice versa.  I tried to get out and work in Northglenn that day, but I-25 was closed on and off throughout the crisis from Thornton to the Wyoming border.  Highway 119 was also closed for weeks after the flood hit Longmont.

We were lucky in that our home did not have any damage.  Several homes for miles around the St. Vrain sustained terrible flood damage.  Flood insurance is not required in most homes in Boulder County and can be very expensive if purchased separately.  Most homeowners did not have flood insurance and lost their homes in the tragedy.  Owners can buy flood insurance seperately by going to http://www.bouldercounty.org/property/flood/pages/nfipcrs.aspx and purchasing federally backed insurance.  Some homeowners who had insurance found out it only covered the clean up and not the replacement of items.

People relied on FEMA, Red Cross, Save the Children, United Way, Air Land Emergency Resource Team, and Boulder Flood Relief to get back to some level of habitability in their home.  I remember people purchasing furniture with vouchers from the Red Cross and FEMA.  These organizations really helped people in need during the flood.

For more information about the flood please contact Jack Zagunis at (303) 263-7142

FAQ

What is the current flood plain in Boulder County?

Click below for maps of the flood pain in Boulder county.

http://www.bouldercounty.org/flood/pages/default.aspx

http://gisweb.ci.boulder.co.us/agswebsites/pds/floodmap/

Did this home flood at all?

While there is no clear way to tell if flood waters entered the home or ground water entered the home, this site allows you to look up the information with the county.  You can also look at the map of the flood and the address to get some insight.

http://www.bouldercounty.org/property/flood/pages/interimfloodplainmap.aspx

What did they do to get rid of the flood water in this home?

In most cases a sub pump was installed, but if a sub pump wasn’t installed then it might be a good idea to do that or ask for one in inspection.  A sub pump is a relatively easy installation in the basement or crawl space that will get rid of water when needed.

Can we get a mold test?  How much is it?

If the home was flooded then you need to do a mold test.  Mold can continue to grow for years after moisture gets into the home.  This can make you very ill and even cause death.  A mold test cost nearly $500 and it is worth it.  If your home does have mold it can cost 10,000-30,000 dollars in repairs and replacement.  Here is a PDF link about mold damage and its possible extents in the home.

https://www.utexas.edu/safety/ehs/air/mold9803.pdf

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