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Cancel your Private Mortgage Insurance

If you purchased your home with less than 20% down, you may be paying PMI. PMI is usually required by lenders because with less than 20% down you are considered a risky buyer more likely to default. In Denver, prices have gone up significantly the last two years. In May 2016 the average sales price was $451,429 and in May of this 2018 that jumped $89,195 to $540,624. A 20% down payment would have been $90,285 in 2016 and $108,124 in 2018. That is a lot of money!!

Many millennials were smart, they jumped into the market with 5-10% down conventional loans.

Once your loan to home value reaches 80%, you can contact your mortgage company to cancel your PMI. They will not identify this, so you will have it initiate the change. Each mortgage company is different, but there should be a place on their website to request to cancel your PMI. Once you initiate the process, they will require an appraisal ($700) or a broker price opinion ($100) to verify your home’s value before they drop the PMI.

Unsure of your homes value? Please contact me for a free broker’s price opinion before you pay for an appraisal to make sure you are eligible to drop your PMI.

Example

10% down loan ’16 = $406,287   ->  Loan balance ’18 = $400,000,
Purchase price ’16 = $451,429    -> Value of home ’18 = $540,624

= 75% loan to value in 2018 for the average home in Denver purchased in 2016

FHA

If you purchased your home using an FHA loan with 3.5% down, you are required to pay PMI for the life of the loan. If you put 10% down, your PMI will drop off after 11 years for FHA loans. This is a huge disadvantage of purchasing using FHA financing.

Refinance

Another way to drop PMI is to refinance. However, interest rated have gone up from about 3.75% in May 2016 to 4.75% in May 2018. Due to the 1% increase in interest rate, it does not make sense for most people to refinance right now.

Purchasing with less than 20% down

If you are considering purchasing a home, but are waiting until you have 20% down… STOP. As you can see, home values are appreciating quicker than you could possibly save money for a down payment. Jump in now! You may have to pay PMI for a few years, but as you can see above it can be cancelled when your home value increases.

Posted in: Uncategorized

The Real Cost of a HOA

The Sales Price Can Be Deceiving

Most buyers looking for an affordable home in Denver will naturally gravitate towards condos that seem more affordable when you just look at the purchase price. The monthly expense of an HOA can really add up, so make sure you consider the alternative of a single family home or townhouse that does not have an HOA. Also, ask yourself if the cost of the monthly HOA aligns with the services provided. Would you pay someone $250/m to shovel your snow? I recommend setting up two separate searches. Most HOAs in Denver are a minimum of $250/M which equals $50K in purchasing power. Set your max price for the condo search at least $50K lower than the price for a home that does not have an HOA.

Example

You are searching for a 3 bed/3 bath in Congress Park and your budget is $650K. You would like to keep your mortgage under $3,500 per month. Although the condo is listed for $99K less than the townhouse the difference in your monthly mortgage payment is negligible at only $155. They are within two blocks and both are 1700 sq ft. So which do you prefer if the price is basically the same?

Condo: $520K with HOA $502/M = Mortgage Payment w/ 20% down = $3151
Parking: 1 reserve spot
Outdoor space: Private deck and shared rooftop deck
HOA covers: Common Area Grounds Maintenance, Covered Parking, Exterior Maintenance w/ Roof, Insurance, Sewer, Snow Removal, Trash Removal, Water

Townhouse: $619K with NO HOA = Mortgage Payment w/ 20% down = $3266
Parking: 2 car detached garage
Outdoors space: Front porch, two decks, small fenced backyard
Party wall agreement with neighboring unit, insurance will be a little more expensive, and you will be responsible for mowing and shoveling snow.

Posted in: Blog, Insider Information

Is wholesaling wise or wack?

The real estate industry is very complex and there are many ways to buy ​a ​house. Recently I have been doing research on “wholesaling”. Wholesaling is a term used in the real estate industry to describe the process of finding great real estate deals and getting paid to bring them to real estate investors.

In the Denver market​,​ wholesalers have large teams working to try to find off market​ deals​ through their networks, mailings, etc. They also use the MLS​, where they ​buy​ ​about 50% of their inventory.  When they find a deal with a little bit of margin they quickly see the house​, ​write an offer and get the property under contract. Once the property is under contract they immediately open it up to a pool of investors, acting as a middle man. They benefit by taking the 2.8% commission​ offered on the MLS​ and usually increase the list price $3,000 to $10,000.  Within a few hours or days they have found an​ investor ​who will pay cash​ and do a double escrow closing the same day they are scheduled to close with the original seller.

Real life example:

Property near DU went on the MLS at 9am. By 9:15 wholesale team has a showing and has spoken with the seller. They submit a full price, $384,050 cash as soon as they finish the showing by 10am. They agree to buy the property “as is” and their only contingency is Title with a two week closing. They give the seller one hour to accept. They also sweeten the terms by paying for title and use a company that allows double escrow closings (most title companies do not allow this). The listing agent is representing her family in the sale of her late mother’s home and has no idea that the buyer is really a middle man who is actually just reselling the property to a higher bidder. That evening, a large wholesale team has put together a packet which includes comps, update costs, and an After Repair Value (ARV) estimates which they conclude is $530K by converting the attached one car into a master suite and updating the kitchen and bathroom. Each wholesale team member emails the packet to his/her database of investors. The next day they parade investors through the home (without permission from the seller) until they find an investor to purchase it for $389,500.  They will make $5,500 above the asking price they paid and take the commission of $10,752 equalling a profit of $16,252. The deal closes in two weeks and usually the buyer uses Hard Money to finance the purchase which is also available through the wholesale company. In this particular example, the cost of the hard money is 2.5% upfront ($11K) and 12% per month ($5K). If the rehab takes 6 months, the loan will cost the investor $41K. The wholesale company estimates the cost of the rehab is $55K. This property will be back on the market in a few months and probably sell for around $530K to a home buyer.

Conclusion

Investors prefer to focus on the construction projects and wholesale companies provide a benefit by identifying these properties, getting them under contract, doing the research on comps and ARV, and providing hard money. For a regular homebuyer and real estate agent, it is very difficult to compete against wholesale companies for the same properties. Luckily, they are usually buying the type of properties most buyers would not consider purchasing as a primary residence.

In the Denver market,  buyers are faced with three major challenges: 1) the market moves very quickly, 2) they end up competing against multiple offers, and 3) buyers face off against cash offers. After gaining understanding about how this process works, it is difficult not to point the finger at these wholesale companies and blame them for the escalating prices and difficult conditions buyers face. Wholesalers have figured out the game and homeowners with the right agent and knowledge can benefit from understanding their techniques. When you purchase a home that has been flipped, you are potentially taking on the cost of the wholesaler and investor, they are passed onto you and easier to stomach when you have access to a 30 year loan.

I’ve got an idea!

Let’s play out a different scenario. A homeowner sees the same house on the MLS. They can’t get there immediately, and end up competing against multiple offers and it gets bid up to $400,000. They hire a contractor and pick the exact finishes they like for the home and invest $55K into the property. Rehab loans are a good option for this type of project. After a six month project, they end up with a home they love for $455,000 and have almost $100K in equity.

Disclosure: Managing a large project like this is risky and very time consuming. It’s not a good fit for everyone. Investors have years of knowledge, lots of capital, and strong relationships that make these project less expensive and easier. Now you know! Please let me know if you have any additional questions.

Posted in: Insider Information

Are you composting?

Did you know about 40% of our food is wasted? Composting returns valuable nutrients back to the soil. The City of Denver’s composting program has been steadily increasing since the pilot program in 2014. You can compost too! The city charges $29.95/ per quarter to pickup compost or you can do it yourself and create a rich fertilizer in your own backyard.

Posted in: Homeowner Tips

5280 says “Deal With It”

I’ve been patiently awaiting my May issue of 5280 Magazine because they always do a big feature on real estate this month. Last year, their reporting blew me away and I have every new client read the article before I even meet with them. The gist of the story this year is “… desperate protagonists resigning themselves to paying more than expected for a house that – because it’s smaller, or in a dicier zip code, or less quaint than the house they envisioned  – definitely isn’t the home of their dreams.” It dawns on me, this frustrating market is all I know. I’m now a professional at helping people find that compromise, boost their budget by considering a roommate and looking at the tax benefits that they will see in April. It’s not all as desperate as they make it out to be. I’m overjoyed as I see those dicier neighborhoods revitalized. A smaller house can be a blessing if it means you can live a simpler life with less stuff and spend more of your time enjoying camping and hiking. The big benefit that I’m finally starting to experience – my clients who bought 2-4 years ago are now starting to sell. While they have been out camping, getting married, and enjoying all the new restaurants in Denver, their homes have appreciated significantly; giving them a leg up on their counterparts who have been renting. Definitely take the time to read “The House that Love Built” in this year’s issues. It taught me a term “wabi sabi” the art of embracing imperfection. Like the author, I see my clients fall in love with their home and all it’s imperfections after fighting hard for the honor of owning a place they can call their own.

Posted in: Denver News & Community Updates

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Featured Properties

670 S Raritan Street $400,000

670 S Raritan Street Denver, Colorado

3 Beds 2 Baths 1,772 Sq Ft 0.190 Acres

Sale Type: Active Listing courtesy of BSW Real Estate, LLC

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2738 S Newton Street $460,000

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2 Beds 2 Baths 1,466 Sq Ft 0.190 Acres

Sale Type: Active Listing courtesy of BANYAN REAL ESTATE LLC

1249 S Raritan Street $460,000

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3 Beds 2 Baths 1,754 Sq Ft 0.140 Acres

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167 Vrain Street $470,000

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4 Beds 2 Baths 1,639 Sq Ft 0.160 Acres

Sale Type: Active Listing courtesy of The Gala Realty Group Llc

2182 S Golden Court $475,000

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3 Beds 3 Baths 1,948 Sq Ft 0.150 Acres

Sale Type: Active Listing courtesy of eXp Realty, LLC

2744 W Short Place $495,000

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6 Beds 2 Baths 2,018 Sq Ft 0.140 Acres

Sale Type: Active Listing courtesy of JUANITA KAROLINA CARDENAS

2725 S Grove Street $498,900

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5 Beds 3 Baths 2,190 Sq Ft 0.140 Acres

Sale Type: Active Listing courtesy of MB The Brian Petrelli Team

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1869 S Clayton Street Denver, Colorado

2 Beds 2 Baths 1,166 Sq Ft 0.170 Acres

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3175 S Pennsylvania Street $500,000

3175 S Pennsylvania Street Englewood, Colorado

3 Beds 2 Baths 1,288 Sq Ft 0.140 Acres

Sale Type: Active Listing courtesy of Compass - Denver

7130 W 24th Avenue $500,000

7130 W 24th Avenue Lakewood, Colorado

3 Beds 2 Baths 1,734 Sq Ft 0.330 Acres

Sale Type: Active Listing courtesy of HomeSmart

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3 Beds 2 Baths 2,668 Sq Ft 0.200 Acres

Sale Type: Active Listing courtesy of EXIT Realty Denver Tech Center

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871 S Krameria Street Denver, Colorado

3 Beds 2 Baths 1,783 Sq Ft 0.150 Acres

Sale Type: Active Listing courtesy of HomeSmart Realty

1247 Stuart Street $515,000

1247 Stuart Street Denver, Colorado

3 Beds 2 Baths 1,223 Sq Ft 0.110 Acres

Sale Type: Active Listing courtesy of Coldwell Banker Realty 56

2515 S Raleigh Street $520,000

2515 S Raleigh Street Denver, Colorado

3 Beds 3 Baths 2,355 Sq Ft 0.180 Acres

Sale Type: Active Listing courtesy of Kentwood Real Estate City Properties

3170 W Colorado Avenue $525,000

3170 W Colorado Avenue Denver, Colorado

4 Beds 2 Baths 2,192 Sq Ft 0.160 Acres

Sale Type: Active Listing courtesy of Armor Real Estate

3740 Martin Luther King Boulevard $525,000

3740 Martin Luther King Boulevard Denver, Colorado

4 Beds 2 Baths 1,522 Sq Ft 0.110 Acres

Sale Type: Active Listing courtesy of HomeSmart

3417 E Yale Way $525,000

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3 Beds 2 Baths 1,313 Sq Ft 0.140 Acres

Sale Type: Active Listing courtesy of BAUER & ASSOC

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3 Beds 2 Baths 1,470 Sq Ft 0.360 Acres

Sale Type: Active Listing courtesy of Kris Lindahl Real Estate

2035 S Meade Street $539,000

2035 S Meade Street Denver, Colorado

4 Beds 2 Baths 2,192 Sq Ft 0.150 Acres

Sale Type: Active Listing courtesy of BSW Real Estate, LLC

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3416 N Josephine Street Denver, Colorado

3 Beds 2 Baths 1,672 Sq Ft 0.110 Acres

Sale Type: Active Listing courtesy of RE/MAX of Boulder

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4 Beds 2 Baths 1,994 Sq Ft 0.150 Acres

Sale Type: Active Listing courtesy of Your Castle Real Estate Inc

720 Newton Street $549,900

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3 Beds 2 Baths 1,061 Sq Ft 0.230 Acres

Sale Type: Active Listing courtesy of HomeSmart

5584 W Iowa Avenue $550,000

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4 Beds 3 Baths 2,310 Sq Ft 0.170 Acres

Sale Type: Active Listing courtesy of RE/MAX PROFESSIONALS

2443 S Williams Street $550,000

2443 S Williams Street Denver, Colorado

3 Beds 2 Baths 1,326 Sq Ft 0.060 Acres

Sale Type: Active Listing courtesy of Feder Commercial Realty Advisors LLC

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3 Beds 2 Baths 1,612 Sq Ft 0.150 Acres

Sale Type: Active Listing courtesy of HomeSmart

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3 Beds 2 Baths 1,632 Sq Ft 0.110 Acres

Sale Type: Active Listing courtesy of MB GARARD & ASSOCIATES LLC

1465 S Ivy Way $569,900

1465 S Ivy Way Denver, Colorado

4 Beds 2 Baths 1,916 Sq Ft 0.170 Acres

Sale Type: Active Listing courtesy of Signature Real Estate Corp.

205 S Fenton Street $570,000

205 S Fenton Street Lakewood, Colorado

5 Beds 2 Baths 2,679 Sq Ft 0.280 Acres

Sale Type: Active Listing courtesy of Coldwell Banker Realty 18

871 S Sherman Street $575,000

871 S Sherman Street Denver, Colorado

3 Beds 2 Baths 1,746 Sq Ft 0.110 Acres

Sale Type: Active Listing courtesy of Altitude Real Estate Services, LLC

3009 Depew Street $575,000

3009 Depew Street Wheat Ridge, Colorado

4 Beds 2 Baths 2,023 Sq Ft 0.140 Acres

Sale Type: Active Listing courtesy of Colorado Home Realty

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1891 S Madison Street Denver, Colorado

3 Beds 2 Baths 1,323 Sq Ft 0.150 Acres

Sale Type: Active Listing courtesy of Compass - Denver

3503 W 44th Avenue $589,000

3503 W 44th Avenue Denver, Colorado

3 Beds 2 Baths 1,577 Sq Ft 0.160 Acres

Sale Type: Active Listing courtesy of Equity Colorado Real Estate

2350 S Lowell Boulevard $595,000

2350 S Lowell Boulevard Denver, Colorado

3 Beds 2 Baths 1,333 Sq Ft 0.150 Acres

Sale Type: Active Listing courtesy of Homie

1074 S Cook Street $595,000

1074 S Cook Street Denver, Colorado

3 Beds 2 Baths 1,854 Sq Ft 0.140 Acres

Sale Type: Active Listing courtesy of Savvy Realty

5110 Osceola Street $595,000

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3 Beds 2 Baths 1,339 Sq Ft 0.230 Acres

Sale Type: Active Listing courtesy of Rocky Mountain R.E. Advisors

3013 Zenobia Street $615,000

3013 Zenobia Street Denver, Colorado

3 Beds 2 Baths 1,761 Sq Ft 0.140 Acres

Sale Type: Active Listing courtesy of KENTWOOD REAL ESTATE DTC, LLC

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1830 W 46th Avenue Denver, Colorado

2 Beds 2 Baths 1,177 Sq Ft 0.070 Acres

Sale Type: Active Listing courtesy of Feder Commercial Realty Advisors LLC

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4 Beds 3 Baths 2,720 Sq Ft 0.220 Acres

Sale Type: Active Listing courtesy of Compass - Denver

2034 S Sherman Street $619,500

2034 S Sherman Street Denver, Colorado

3 Beds 2 Baths 1,510 Sq Ft 0.110 Acres

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6691 E Dakota Avenue $619,900

6691 E Dakota Avenue Denver, Colorado

5 Beds 3 Baths 3,220 Sq Ft 0.220 Acres

Sale Type: Active Listing courtesy of HomeSmart

3295 Meade Street $624,500

3295 Meade Street Denver, Colorado

3 Beds 3 Baths 2,700 Sq Ft 0.100 Acres

Sale Type: Active Listing courtesy of Savvy Realty

3175 Lamar Street $625,000

3175 Lamar Street Wheat Ridge, Colorado

3 Beds 3 Baths 1,993 Sq Ft 0.240 Acres

Sale Type: Active Listing courtesy of Redfin Corporation

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