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Smart Timing

Selling a house is a complex journey. The process of selling a home can be filled with though decisions and uncertainty. One of the most important decisions that you will make is determining the right price for your home. If you do not get an offer right away and your home is not attracting the activity that you hoped, what should you do? It is natural to wonder when it is time to lower the price. Smart timing will be important.

Understand the market

Before you lower the price, it will be important to understand the local housing market. That includes the location of your home and how it might affect the price. Other things that can affect the sale of your home are current economic conditions and lastly the season of the year. These conditions can significantly influence your home’s selling price. It will be important to have your agent compare your home to other homes that have recently sold that are similar. Make sure that you notice the days on the market for these homes and the final sales price. Also notice the different between the asking price and the final sales price. Once you have that information, when do you decide that it is time to reduce the price?

What are signs?

What are the signs that you may need to adjust your price? One thing that could show that it is time to reduce the price is a lack of showings. If you home is getting little to no interest, this could mean that buyers are rejecting the home before seeing it in person. Also if you are having showings and feedback is negative about the price, it is clear your home is viewed as over priced.

When you compare your home to other homes on the market, how does it stack up? It is important to know both what has recently sold and what your competition looks like. If similar homes are under contract , priced below you are if other homes have sold for less, you need to get competitive in the market in order to sell. The best way is to reduce the price of your home.

Another thing to consider is how long you have been on the market. If it has been several weeks or even months without an offer, it is time to consider lowering the price. A common rule of thumb is a price change should be considered after 30 to 45 days on the market without an offer. Generally the longer a home sits unsold the less attractive it is to buyers.

Decided when to to lower your price and how much is an important part of the process of selling your home. It is important to understand market conditions, signs that indicate a need for a price adjustment. Selling a home is a significant decision. Making informed decisions taking into account smart timing along the way will help you achieve the best outcome.

Financing your land purchase

There can be challenges in financing your land purchase. Why you ask? The bottom line is banks don’t love dirt. Lending institutions can be surprisingly cautious when lending on raw land. A vacant property produces no income and offer very little collateral. For these reasons, lending institutions see it as a high-risk investment.

So, what does a loan look like on raw land? In order to obtain a loan on a piece of raw land, you could expect to make a large down payment, for one thing. That down payment can be as much as 35 to 50% of the cost of the land. Furthermore, the loan on a piece of land is typically not for a term of 30 years, like the mortgage on a home. The term that can be expected is typically five to 15 years. The approval process can take longer than expected also and the interest rate on the loan tends to be higher than for home loans. So, how is a buyer to make this all work if they want to purchase land? There are other options available.

Construction loan

What are options for purchasing raw land with a loan? One option, if you plan on building a home on on the property soon, is to take out your construction loan for the package of the land and home. The first draw from that loan would be to purchase the land. For the seller of the land, this would look like a cash transaction that would be able to close quickly and also not require loan approval or appraisal. If you do not plan on building on the land right away, what are other options?

Community bank

Another options is to work with a local credit union or community bank for your loan on the land. These institutions understand the regional markets better than large national banks and are more willing to take the risk on raw land. They also are often more flexible with terms on the land loans they provide.

Seller financing

An additional option is seller financing. This type of financing can streamline the process and bypass the banking process entirely. No need to have an appraisal or loan approval. This option also gives both parties room to negotiate terms that are desirable for both. Be aware that not every seller of land is able to provide seller financing. The seller must own the property free and clear of a mortgage and be willing to remain involved in the process for the agreed upon period of the seller financing.

Financing your land purchase is not as simple as financing for a home. You cannot just call up the bank that holds the mortgage on your home and ask for another loan. There are options available, but the terms on a land purchase will be different than those on a home loan. Going into the process knowing things will be different and allowing time for finalization of your financing you can be successful in getting a loan on your land purchase.

Purchasing land

The dream of buying a piece of land and building a home is deeply embedded in the American psyche. It is kind of like apple pie and baseball. The idea of owning land has become a symbol of freedom and opportunity. Buying land gives you the opportunity to build your dream home from the ground up. But unlike a standard home purchase, buying land comes with complexities. These complexities include zoning restrictions, utility costs, financing hurdels and possible environmental red tape. Before you buy it is important to understand what can actually be done with the land that you are interested in.

Due diligence

It is important to do your homework. The number one pitfall that can occur is that you can’t use the land for what you wanted to use it for. When looking at land, it is best to work on the idea that the land is completely unbuildable unless your research and due diligence shows otherwise. Don’t assume anything. All this means reviewing local ordinances for setbacks, height limits, ability to obtain affordable utilities to the property. The property should be surveyed. Doing your due diligence is important. It can make the difference between knowing you are purchasing a usable piece of land and making a big mistake. Let’s look into what should be included in yoru due diligence.

Zoning and permitted use

Verify exactly what can and cannot be built on the land. Not all land labeled as residential will allow for single family homes, for example. The land may have set backs that make it impossible to build a home that you are wanting in the building envelop. It is wise to consider using a land-use attorney to review all documents.

Access

The land isn’t worth much if you cannot legally reach it. It is important to verify that you have recorded legal access, through the use of a road or recorded easement. Also, in Colorado, access can mean that you can reach the property given any type of weather. For example, can you get to the property in the winter time when you would like to spend time there. It is is only accessible part of the year, are you still interested in the land?

Utilities

What will it cost to bring utilities to the property? If public water is not available, what will it cost to drill a well? Also can you provide septic on the property or is municipal sewer an available option. If a septic system is required, it will be important to do a percolation test. This will test to see that wastewater can be absorb by the land. If the soil cannot absorb the wastewater, your ability to build on the land could be denied.

Survey and boundaries

Know what you are buying. It will be important to know where the property lines are. Do not depend on the sellers old survey or tax maps. Spend the money to have a new survey completed on the property. Once the survey is completed you should be able to identify encroachments. Additionally the survey should ensure that the legal description matches the land that you are wanting to purchase.

Environmental assessments

The last thing to check can be considered the most important. A Phase I environmental assessment and possibly a Phase II along with geotechnical testing can be use to uncover conditions that can negatively impact building on the land you would like to purchase. These different tests screen for issues like contamination, soil instability or the possibility of subsurface items that could make building on the land unsafe or too expensive.

As you can see, buying land is not like buying a house. There is research that must be done to ensure that you can use the property the way that you intended. Since this is the case, it is important to take your time. Do your due diligence and make sure that you can live your dream on your land.

Is the appraisal important?

Part of the home buying process is the appraisal. Some agents refer to the appraisal as the last hurtle in the under contract process. Is the appraisal important in the real estate transaction? The answer in a word is, YES! The value of the appraisal can mean the difference between the house selling to a particular buyer or not.

What is an appraisal?

Let’s go over what an appraisal is and details about it. An appraisal is one person’s opinion on the value of a property. It is required by the lender most of the time, if the buyer is getting a loan. Sometimes if the buyer is putting a significant amount down, over 40%, the lender may not requiring an appraisal. A buyer that is paying cash for a property, may decide to get an appraisal just to make sure the price they are paying is fair. The appraisal is ordered by the lender or buyer if paying cash. Once the property has been viewed by the appraiser, the appraiser compares the subject property to others. The appraiser prepares a report and offers an opinion of the value of the property. Most of the time that value is the same as the contract price. But, what happens if it isn’t?

Appraisal is high

If the value of the property is higher, it can make the buyer feel like they got a “deal” on the home. Nothing changes. There is no price increase. The buyer does not have to pay more for the home. They purchase the home feeling like they have a little bit of equity already.

Appraisal is low

If the appraisal comes in below the contract price, there are several options. The buyer can bring the difference to closing and go ahead and close. What does that mean? Let’s say the buyer is under contract on a property priced at $500,000 and the appraisal comes in at $490,000. The buyer can pay the difference in the gap between the two numbers. Meaning, the buyer can bring an additional $10,000 that is not being used as their down payment to closing to cover the gap. If that is not possible, what else can happen? Another option is the seller can agree to sell the home for $390,000. Or also the buyer can choose to walk away from the home without penalty.

Contesting the appraisal

There is one final option for the buyer. This option involves contesting the value/opinion of the appraisal and asking that the appraisal be reviewed. This process is called a reconsideration of value. Often times, in order to have this done, the buyer or their agent needs to find errors in the appraisal. Another possibility is to note that the appraiser did not include important information. It is not common that this leads to a change in the appraised price. Remember, it is the opinion of the appraiser. Most people do not change their opinion.

As you can see, the appraisal is an important part of the process of purchasing a home. If the appraisal does not come in at the contract price, it can be a stumbling block in the transaction. This may be too significant to overcome and can mean the buyer is not able to purchase the home. There is not much that can be done to avoid problems. Involve your agent in determining the price that you arrive at in your offer. Make sure that your agent has comparable properties that can be provided to the appraiser if needed. Know that problems occur very infrequently. Hold your breath and hope it doesn’t happen to you.

Fall buyers can get some deals

In real estate we know that spring is often the best time to sell. Buyers are often told that it is the best time to buy a home. Buyers love that their kids are about to be on summer break. But what about buying in the fall?

Fall flexibility

Fall can be a quieter season with more flexibility. It can be an advantageous time from for home buyers. Seller who listed their home for sale in the spring and have not yet sold, are getting anxious. Furthermore, the sellers that are not very motivated often pull their homes off the market once fall arrives. This still leaves a good amount of inventory. This fall after a tough summer with sluggish home sales, it is a good time for well-prepared buyer to be in the market.

Less competition

Fall also means lower buyer competition and more negotiating power for buyers. Additionally, there are many sellers that have the mind set that they want to close before the end of the year. That can provide buyers with additional leverage in negotiating. Less competition means fewer bidding wars and more power to negotiate the extras. Extras can include closing cast, home warranties and repairs at time of inspection. Here’s an example. A seller knows that they need to replace the roof on their home. The house that they are selling has been on the market all summer without selling. The seller said they would negotiate the $30,000 cost of the roof. Now, when the seller received and offer, they say they will be happy to replace the roof for the buyer. No negotiation needed. What a difference a few months and fall weather can make in sellers attitudes.

Ask your lender for a deal

In addition to getting deals from sellers, buyers in the fall, may be able to look to their lender for savings. Lenders can offer closing cost incentives too. Many financial institutions set year-end volume goals. These can translate into savings for fall buyers. Many times these deals are not advertised and all a buyer needs to do is ask and close before the end of the year. Some lenders offer seasonal deals like discounts on underwriting fees, rate buy-downs or waiving processing fees. Be sure to ask your lender what deals they might be offering.

Builders are ready to deal

Another way to save money buying a house in the fall is if you purchase new construction. If you are considering a newly built home, fall might be one of the best times to make your move. This time of year, builders are eager to offload standing inventory before the end of the year. In fact, according to the National Association of Home Builders, 66% of home builders reported using incentives like mortgage rate buy-downs and discount in August. This is the highest number reported in five years.

Remember when shopping for a home that purchase price is important, but it only once part of the deal. Concessions, credits and agreed upon repairs can save thousands of dollars. Don’t forget to ask your lender if there are any special offers if you close your loan before the end of the year. Also consider buying or at least looking at new construction. New home builders may prove to provide some of the best options for fall pricing and incentives. All in all, fall is a great time to purchase a home!

You bought a fixer upper

Congratulations, you are the proud owner of a fixer upper. You are looking forward to rolling up your sleeves and getting to work. You are hoping that with some elbow grease the place will be the home of your dreams. Buying a home that needs work can be a great opportunity, as long as you know what you are getting yourself into. But, what should your first project be. There are so many things to do. It is tempting to start with the projects that are visible and bring instant joy. Like a stylish light fixture, fresh paint or a new kitchen. But that great new light fixture will not keep you warm if the furnace is on its last leg.

What is first?

Knowing what jobs to tackle and in what order is very important. Here is a simple breakdown. First start with core systems and safety items. Heating, cooling, electrical and plumbing should be looked at and dealt with before anything else. Another thing to look at is major issues like the roof. Also look at hazards that make the home unsafe. This can include things like broken stairs or holes in a deck. These items should be first on the to do list. What is after that? Keep reading.

Next on the list should be high impact living spaces. These include places that get daily use like the kitchen, bathrooms and main gathering areas. You also should look at practical upgrades like replacing the worn-out garage door. Simple outdoor improvements can also make a big impact. Tidy up the landscape, trim the bushes and edge the lawn.

Save for later

Then there are things that should be saved for later after all of the above items have been tackled. These include the cosmetic touches like fresh paint, flooring and new light fixtures. These are the things that it is so tempting to start with. You can tell from this, that the things that will earn you the biggest compliments are not what you should do first. Your friends are not going to get excited about your new roof, water heater or your shining new furnace. But they will appreciate the hot water and the warm house when they come to visit.

Figuring what needs to be done and in what order can feel a bit overwhelming. Experts can help you make smart decisions. The inspector that did a thorough inspection of the home before you purchased, probably outlined problems that were urgent. Your inspector may have even outlined the costs involved in the repairs. Lean on professional, set a budget and a realistic timeline for the work to be completed. Take it one step at a time and accomplish things in the order of importance. Following these guidelines will make your fixer-upper more than just a hopeful term. It can become the home you always imagined.

Sell it or rent it

So, it is fall and you have had your home on the market all summer. You are left wondering, do I continue to try to sell or should I just rent out the home. When a home does not sell as quickly as expected, it is tempting to think, I could just rent it. That idea is becoming more common among sellers that have a low interest rate mortgage on a home that they are trying to sell. The numbers may work for them to rent out the property. They could perhaps even have a positive cash flow if they do. But there is more to look at than just a positive cash flow.

Look at the whole picture

Before you decide that renting is the way to go, you should look at the whole picture. There are some important questions to ask before you decide to become a landlord.

Are you ready to be a landlord?

  1. Are you ready to become a landlord? Collecting rental income and building wealth with someone else paying the mortgage is appealing. But what about the 2:00 am call that there is a problem with the water heater? There is also the issue of finding tenants and collecting the rent. Even if you decide to use a property management company, this does not mean that you can have a completely hands off experience.
  2. Does the property work as a rental? Not every home is cut out to be a rental. Location, condition and maintenance costs all matter. As the owner of the home, you know it better than anyone. Do you have looming repairs? Can you manage those repairs from far away or trust that a property management company will handle them the way that you want? Is the property too large to be a rental or in a location that no one would want to drive to? All of these should be considered before you turn a home into a rental.
  3. Do the numbers add up when looking at all of the costs involved in holding on to the property? Look seriously at all of the costs. There will be the house payment, maintenance costs, advertising and management of the property. There is also the possibility of vacancy and no rent being collected. When all of this is taken into account, do you have a positive cash flow on the property? If the answer is no, can you budget to comfortably add the difference each month? There is also the consideration of insurance costs. Insurance will be more expensive on a rental than an owner occupied property. You should also look at tax ramifications.

Re-evaluate your strategy

If you are considering renting out a property because it has not sold, it may be time to reevaluate your selling strategy. Sometimes all it takes is a price adjustment or some fresh photos or a change in marketing. Renting out a property can be a smart, long-term strategy, but it is not the best fall back position that it may seem. If you are not sure what to do, discuss with your real estate agent and make a plan to reach your goals.

Congratulations!

You found the perfect home, made an offer and the seller accepted. You are under contract. Congratulations! I am sure that you are excited. However, when you checked the status of the home you have under contract, it is marked “accepting back-up offers.” What does that mean?

Accepted offer

Once a seller has accepted an offer on their home, it is an an important first step, but there is no guarantee that the transaction will close. During the under contract period, many things can go wrong. The buyer will need to get final approval on their loan, there is the home inspection and the appraisal. Any one of these steps might cause a problem. If a significant problem occurs at any one of these steps, the buyer may cancel the contract. Then the seller must start all over. This is why many MLS listings say, “accepting back-up offers.” But the seller is under contract. So, what does this mean for a seller to accept a back-up offer?

Pending or active back-up

After a seller accepts an offer from a buyer they have two choices. They can have their agent mark their home pending, or active back-up. A home with a pending status does not have any more showings. The seller is hoping and betting that the buyer that has their home under contract will be able to close on their home. However, the other option for the sellers is active back-up. The seller in this situation continues to allow showings and would welcome another offer. But how can they do that you ask? If the seller accepts a second offer, that second offer waits for something to go wrong with the offer in first position. Perhaps the buyer is not able to get a loan or the buyer and seller are not able to negotiate the inspection. If the first offer cancels for any reason, the back-up offer moves into first position and is allowed to proceed in purchasing the home.

Just wait

The role of the offer in back up position is to be patient and wait. That buyer needs to stay in close contact with their agent. As a back-up buyer you keep your fingers crossed and hope that something will go wrong with the first offer. The back-up buyers do nothing but wait. They do not proceeds with their loan or inspections. Remember when submitting a back-up offer, the offer is binding. You will not be able to renegotiate the terms of the contract later. Be prepared to buy the home at the agreed upon price and with the agreed upon terms.

Submitting a back-up offer on a home already under contract, that you love, is the best chance of buying that home. Only time will tell if it is possible for the home to be yours.

What is a seller to do in today’s market

You are a seller and you have felt the market softening. What is your best approach to get your home sold? What should you do to stay competitive and a avoid sitting on stale listing? Remember that it is still a solid time to sell your home. Here are some suggestions to get your home sold in the market today.

Price realistically

Prepare your home

One of the most important things that you can do to sell your home in today’s market is to price your home realistically. Gone are the days when you could aggressively overprice your home and you will still get an instant bidding war. Today it is important to price your home right. That does not mean price it in hopes of having room to negotiate. Inventory is rising and that room to negotiate may mean the difference between getting an offer and sitting on the market.

Another way to make sure your home sells is to prepare your home for sale. Buyers are drawn to home that are move in ready and clean. The basics matter. Be sure that you have your home staged with quality, professional photos and you have curb appeal. A strong first impression can really bring a quick offer.

Know your market

Because our market is a bit soft, it is very important to know your market. In some price ranges and some neighborhoods, homes are still moving fast. In others, they linger. Make sure that your agent knows the market and can educate you on what to expect and can help you navigate the nuances of the market. Make sure your agent has enough experience that they have seen this type of market before. Then let your agent be your guild for pricing, marketing and timing strategies.

Don’t panic

Just because buyers are gaining some leverage, this does not mean that as a seller you are at a disadvantage. Adjusting to this new reality does not mean giving up value. Well prepared, fairly priced homes are still selling. The market is not suddenly favoring buyers. The reality is more nuanced. We have had a strong sellers market since 2016. Today the market is more of a transitional market. Sellers need to adjust expectations. It is not realistic that you will get multiple offers that push the value over asking price.

Whether you are buying or selling do not count on the headlines to provide you with an accurate picture of the real estate market in your area. Contact an agent that can educate you on local trends and understand the intricacies of your specific market.

Is it a buyer’s market?

When it is time to buy or sell an important question to answer is who holds the power in the market. Today, after years of a strong sellers market with sellers calling the shots and getting what they want, the tide is turning. Homes for sale are staying on the market longer and price reductions are more common. Sometimes sellers are even offering incentives, like help buying down the interest rate for the buyer on their loan. That would have been unthinkable just a couple of years ago.

Still if you are a buyer or a seller do not expect a full reversal when you step into the market today. Certainly price points are leaning more in favor of the buyers than other price ranges. It is important to talk to your agent about the market in your price range.

What is a buyer’s market?

In simple terms, a buyer’s market occurs when the number of homes for sale exceeds the number of active buyers. It is a simple shift in supply and demand. When supply exceeds demand buyers have more choices, more room to negotiate and more time to make a decision. Another way to describe this is there is a high inventory of homes for sale.

What are other indicators of a buyer’s market?

Another sign of a buyers market is slower sales. The number of days on the market is increasing for sellers. The average days on the market now is a median of 51 days. That is longer than one year ago. This is advantageous for buyers because they have time to look and consider their choices.

Price drops are another indicator of a buyers market. With more competition and slower sales, sellers are starting to cut prices to stay in the game. Nearly one in five homes had a price reduction last month. The highest rate since at least 2016.

More motivated sellers can also provide concessions. These concessions can be for a rate buy down, closing costs or because the seller did not replace the carpet and is offering a carpet allowance. All of these indicators show that sellers are no longer in complete control of the market. Most agents working in today’s market would describe our market in Northern Colorado as a buyer friendly market. Buyers that are patient, strategic and ready to negotiate just might get a deal.

Whether you are a buyer or a seller it is important that you are informed. Do not rely on the headlines. Consult with an experienced agent to educate you on what to expect. Then you will know how to best navigate today’s market.