It’s finally time to buy a home! The first step is to find the perfect real estate agent. Your agent will determine the overall home buying experience and be important in guiding you towards a solid investment. With over 40,000 real estate agents in the Denver Metro area, how do you decide who to work with?
1.Gather recommendations from friends/coworkers/family.
2.Google each person and utilize reviews, blogs, and their website to select your top three choices. Check out their social media as well to make sure you would connect with them on a personal level.
3.Email your top three picks a list of questions (ideas below) to evaluate their Knowledge, Availability and Lifestyle + Communication Compatibility. Let them know you are interviewing multiple agents before making a decision.
4.Evaluate their responses and remember, people are predictable: If they are very slow to respond, you will probably experience this again if you decide to work with them.
5.Notify the agent who you would like to work with and schedule an initial meeting to learn about the market conditions and buying process. Notify the other agents about your decision and feel free to let them know why. Constructive criticism is helpful!
6.Do not feel pressured to sign an “exclusive right to buy agreement” until you’ve had several experiences with your agent, and they have proven their value.
7.Go get your dream house!
Make sure you interview multiple agents. Seems logical right? You would interview a nanny before you allowed them to watch your child, right? But people very rarely take the time to interview the person who will be guiding them through the biggest purchase of their life. Buyers agents in Denver typically get paid 2.8% of the sales price by the seller. That is a lot of money! This system was put in place to make sure buyers have solid representation and education from an agent with a fiduciary responsibility to the buyer. You should understand how much money your agent will be earning from the purchase and they should provide at least that much value to you during the transaction. If you walk into an open house and utilize that agent to submit an offer, they are literally making thousands of dollars for only a few hours of work and you’ve missed out on the true value an agent can provide.
Below are the three main qualities to consider.
1. Knowledge/ Education
Your agent should understand your desired area and market trends. It’s always important to do your own homework but if you select wisely your agent will provide you with a wealth of information and resources. They should understand the zoning, have basic home construction knowledge, understand rental rates, and local government policies. Agents are paid to be experts and educate you, consider them your real estate consultant. They should set expectations and be clear about each step in the buying process.
Questions to ask your agent:
Do you have a process to help me understand market trends and the home buying process before we start looking at homes? How long have you been in the Denver area and how long have you been a real estate agent? What market trends do you see that I should be aware of? What type of home do you think is the best investment (condo, townhouse, or single family home)? Do the reviews about the agent mention their knowledge of the market? Can you provide me a list of the homes you’ve helped buy/sell so I can understand your experience in different areas and price points? What architectural style do you think would be a good fit for me? What neighborhood do you think would be a good fit for me given my criteria? Can you provide me market trends for the areas where I’m interested in purchasing? Do you own your home?
Not all agents are full-time. It’s important to know upfront if real estate is your agent’s main priority and if they have other time restrictions. If they are busy from 9AM-5PM Monday- Friday and you prefer to tour weekdays they might not be the right fit for you. With that said, it’s also a great idea to have a grasp of how many clients they are working with. While it is great to use an agent that is active you want to make sure they have plenty of time to focus on you. Buying a home is time consuming and big deal! Be sure to work with someone who has time to dedicate to serving you.
Is your agent part of a team? Real estate agents are people too with social lives and family commitments. It is important to know if your agent is an independent agent (working alone) or working with a team. While there are benefits to working with either having a team or a broker with support is so important. It’s okay if your broker can’t be there for everything but it’s great if someone else can be at your assistance when you need help.
Questions to ask your agent:
Are you part of a team? How many people are you currently working with? Are you a full-time broker? How many deals did you close last year? If you had a family emergency and had to fly out of state who would be available if I found my dream house and wanted to set up a showing and write an offer? What are your business hours? Are you available on nights and weekends?
3. Lifestyle + Communication Compatibility
What takes priority in your life? Think: Children, a career, an animal, family, or hobbies and interests. Whatever your priority it’s important to be partnered with an agent that shares the same values. For example if you bike to work, find an agent who also loves biking and is familiar with the bike lanes and routes from your neighborhood to office. Having an agent with similar interests will benefit your search and you will connect on a deeper level if they can identify with your priorities.
As a buyer it’s important to work with someone who understands and works with your communication style. If you prefer phone calls every few days it wouldn’t be a good match to work with an agent that communicates only via text or email. If your close friend is an agent you probably already have a match for lifestyle and communication compatibility. Make sure to still interview them about the market and their availability to help you.
Questions to ask your agent:
What do you do for fun? What ways do you like to communicate? How often do you touch base? Also ask specific questions regarding your priorities, for example: What do you know about this elementary school? Do you ever bike around the city?
Remember that you’re in the driver’s seat of your home buying experience. If you are working with someone that is not fulfilling your needs, notifying your agent that the relationship is not working and moving on. We’d love the opportunity to work with you! Please consider us when you prepare to buy or sell your next home.
I had the pleasure of selling a townhouse I helped my clients purchase three years ago. When I submitted their offer in 2016, this is how I described my clients to the listing agent: “Phil and Ashli are all-American, hard working young couple. Phil is a veteran and Ashli is a teacher. They are very excited to find an affordable unit that is move-in ready in a peaceful neighborhood. This is the home where they plan to start a family. They hope this is a solid investment that will payoff for them in the long run and create financial security.”
Fast forward three years, Phil and Ashli have a baby girl named Kensington who just started to walk. The townhouse was indeed a solid investment for them! In three years, they were able to make a $60,000 profit from the sale after all fees without any major investment into the property. Not to mention, they had a great place to live the last three years.
I’m overjoyed to help them through this process but sad to see them go. They are building a house from scratch that will be ready in October! It’s a 2 story, 5 bed, 3 bath house with an open floor plan. Sits on a huge pond with a fountain in the center and is across the street from the neighborhood pool in Myrtle Beach, North Carolina. This is a huge upgrade for them and now they are closer to family. Congrats Phil and Ashli and wishing you all the best on this next chapter of your life!
Disclaimer: We are not lenders, we are not financial advisors, we are not accountants, we are not attorneys.
Do you have home equity? Wondering how you can use it to your advantage?
So you bought a home a few years ago and have EQUITY! The value has gone up, but how can you use the gain in value to your advantage? Home value is not a liquid asset, but with a tool called a Home Equity Line of Credit (HELOC) you can utilize your equity on your primary residence without selling your home. There are several institutions that offer this type of credit and we’ve done some shopping around for you to help you pick the best program.
We called the top five banks that were recommended for their HELOC programs. We gave all of them the same scenario. The given scenario was: The homeowner’s agent said their house is worth $500K. The owner purchased the home for $400K two years ago and currently has a loan on the property for $380K. Their credit score is 750, income is $60K, debt = $2000/m for mortgage, $250/m car payment, $3000 in credit card debt.
Disclaimer: Rate fluctuate everyday and are based on your personal scenario, the rates below are just estimate for demonstration. Rates were as of July 2019.
The amount of money you can borrow for a HELOC will be calculated by multiplying the current home value by the percentage (typically 80-90%) and subtracting the current loan on the property. EX: $500K (current home value) x .89 (loan to value) = $445K – $380K (loan on home) = $65,000
Here is how we would rank the HELOC programs that we researched.
1. Bellco – 80% at a fixed 3.99%, 80-90% at a fixed 4.49%
2. Red Rocks – 89% at a 5.5% adjustable rate
3. Vectra – 85% at 5.35% to 5% adjustable
4. US Bank – 85% at 6.3%
5. Chase – 80% at 9.38%
Here are some assumptions you can make about most HELOCs…
1. Will have an adjustable rate and will fluctuate with the market rate during the term of the loan. BELLCO is running a special right now on a FIXED RATE HELOC
2. Can only be taken out a your primary residence
3. Payments are typically interest only
4. You will have to pay for an appraisal, closing cost, and it will usually benefit you to open an account at the institution
5. Unlike a second mortgage, a HELOC gives you access the the equity but you don’t have to pull out a lump sum
So now that you know what some local banks are offering, let’s think through a few scenarios on how you could utilize a HELOC. We must mention, HELOCs are NOT bottomless piggy banks to fund affluent lifestyles that you really can’t afford. The frivolous use of HELOCs in part lead to the Great Recession in 2008.
1. Moving Up – Many homeowners utilize the equity they have in their first home to purchase a second home. In Denver’s competitive housing market it can be extremely difficult to purchase a new home with a contingency to sell your current home. Also, many families don’t want to sell their current home without having a replacement home under contract. HELOCs are a solution many buyers are utilizing to avoid this dilemma. You can make an non-contingent offer, use funds from a HELOC as the down payment on your replacement property, and close on your new home THEN list your first home. With the proceeds from the closing of your first home you will have to pay off the first mortgage and HELOC in full. All the banks we spoke with confirmed that a HELOC can be used for anything… including the purchase of another home, but MAKE SURE TO CHECK WITH YOUR LENDER!
2. Home Improvement – Are there aspects of your home that you would like to improve? If so, a HELOC might be a great option for you. A HELOC allows you to borrow against the equity you already have in your home. Allowing you to finance these larger purchases over time instead of in one lump sum. Keep in mind that many of these rates are typically not fixed and payment are interest only, so having an established payment plan that includes a strategy to pay down the principle will be in your best interest. When considering home improvements, be sure to be mindful and discuss your improvement plans with your trusted real estate agent. Your agent can help you navigate what improvements are going to bring the most value back into the home when you sell. Take it from us, there is nothing more discouraging than putting a lot of money into a home that does not increase the value.
3. Consolidating other higher interest loans – Have you evaluated the interest rate on your student loan and credit cards? It can be extremely difficult to pay off high interest loan debt if you interest rate is 19.24% (average credit card interest rate). It might benefit you to use a HELOC to pay off debt with a higher interest rate.
We can help you with any real estate questions including: How much is my house worth? What is the best strategy to buy a second home? What renovation projects give the best return on investment. Call us: 303-720-8491
Did you get your “notice of valuation” from the city of Denver? The city is working hard to accurately value your property so they can fairly tax households throughout the county and raise money for public services and projects. Denver recently launched a program called the Denver Tax Receipt where you can actually see exactly where your tax dollars go, I highly recommend checking it out!
Your valuation should be close to you Zestimate or actual market value of your property. If you are the worst house on the block, your property value probably came in higher than the actual market value. If the valuation is not accurate, you have the ability to protest it with the city by June 3rd. Please email me if you need help protesting this value (kassidy@LivingRoomDenver.com).
Did you know Colorado is ranked 5th nationally for most affordable property tax valuations? Our taxes here are actually very low. The median household in Colorado is paying about $1500 in taxes per year in property taxes. The highest state property taxes are in New Jersey where residents pay $7840/year. California has a bad reputation for high taxes, but residents are paying about $3414/year. The red state of Texas actually has very high property taxes, ranked 45 of 50 making it one of the most expensive state property taxes. We looked at tax rates at a state level, but remember that your actual taxes will be determined by the combination of state, county, and city taxes.
Once I understood where your taxes go by using the Denver Tax Receipt, I felt very proud to be contributing to fund the important services that make our great city run. I’m also grateful to live in a state that has affordable taxes when compared to other places. It’s a whole new perceptive once you start looking at the big picture!
We have posted the entire series of videos that we made highlighting some of the most important things to know about Denver Real Estate.
Follow the link below to watch the youtube playlist.
I love sharing with my clients the different ways to make their real estate purchases smart investments. I want to share with you my six favorite ways to invest in the market.
The Classic Move Up
Start small and every few years sell your current home and upgrade into something bigger. Great for every phase of your life – condo, townhouse, single family to a mansion. As your life grows, your home grows with you!
Live with roommates who pay the mortgage. This is great for people who like communal living. Room size, privacy, and two living rooms are important. This is a great way to get started as a young person before you have permanent roommates aka a husband/wife and children!
Find a place that has a separate area which can be rented short-term. Great for people who travel a lot and live in highly desirable areas. It is smart to avoid HOAs and in Denver, it must be the primary residence to legally rent short term.
Find a place that needs improvement. This is great for people who are handy and have excess time and cash. Best if you can find these deals off the market! If you do it yourself, you must have cash for the materials. A renovation loan can also be an option if you plan to hire a general contractor. If you are doing a quick flip, remember that if you live in the home less than two years, plan to pay taxes equal about 30%.
Denver & Mountain Balance
Purchase a second home in the mountains and AirBnB your Denver place on the weekends or vice versa. Great for people who love to ski and hike but also have obligations in the city. Live the ideal Colorado life and make a great income while doing it!
Real Estate Retirement
Purchase a new primary residence every two years, converting your old primary into a rental, and never sell. Great for people who want to retire and not work anymore. If you focus on cash on cash return when you make the initial purchase, you should be able to cash flow each investment for monthly residual rental income. Within 10 years you could be making about $5,000 per month. After thirty years it is pure profit and ideally, the values of the homes have tripled.
For every closing, I donate a $150 to The Park People to plant one tree in Denver. On Saturday, April 27th they are distributing trees those trees and can always use volunteers. It is a wonderful organization that is helping to make Denver more beautiful. To find out more information see the link below.
To learn more about The Park People and sign up to volunteer.
Also, on SEPT 5th they are celebrating their 50th anniversary. I’ve been helping plan the celebration at Denver’s City Park Pavilion and it is sure to be a fantastic evening. SAVE THE DATE and attend!