Tag: Home Buyer Information

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.

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.

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.

Don’t skip the inspection on a new home

So you have found your dream home, it is a newly built home that has that fresh paint smell, the beautiful countertops and the latest in flooring. You will be the first one to call this place home. You are thinking, why should I bother with an inspection. The house is new. What could be wrong with it? It turns out, there could be quite a bit wrong. New homes aren’t immune to inspection issues. According to a report from the National Association of Realtors, 65% of home buyers who conducted inspection on their newly build homes found issues. The report also found that 24% of those buyers reported that their homes did not pass the inspection. Builders today are under increasing pressure to build new house quickly and efficiently. Whenever you increase quantity, you decrease quality. Builders cut corners.

A home inspection is completely optional. That is the case whether you are buying new or an existing home. When you have an inspection done on a property, you are buying peace of mind. When you pay for an inspection on a new build you are ensuring that the “i’s” are dotted and the “t’s” are crossed. What are some common issues that can be found at time of inspection on a new build?

Plumbing issues

Plumbing defects can be found at time of inspection. This can include improperly installed pipes. An inspection can also show plumbing fixtures or drains that are not installed properly. Plumbing issues can cause water damage and mold growth, nothing that you want included in your new home.

Drainage and improper grading

Another issue that can be found at time of inspection, in a new build is poor drainage and improper grading. When there is poor grading water from gutters won’t drain away from the home and this can cause water damage and flooding around the house.

Roof and siding issues

An inspection can also uncover damaged siding and roofing problems. Siding can look great to you and me, but a trained eye can notice issues. This can include siding that cracked during installation. Other common problems that can be uncovered in an inspection is siding that is not sealed around vents. This can lead to water infiltration. Another way to have water infiltration into your home is with a hastily installed roof. With a hastily installed roof you could have problems like improper flashing around roof penetrations for exhaust vents.

There is more

Other issues that are possible to discover during an inspection could include framing issues, installation issues and structural and foundation problems. All of these issues can be discovered during the construction process, but may not be easy to detect once the house has been completed. When you contract with your inspector find out if the inspection will be a one time inspection or if you can have the property inspected during the build process. Also check with the builder to see if independent inspections are allowed and when they can occur. Remember that typically new homes undergo building code inspections. These inspections include framing, electrical, plumbing and insulation. These inspections ensure that the home meets building codes but they do not look at safety.

Lastly remember that the purpose of an inspection is to hire an objective third party to evaluate the condition of the property. Some of defects that will be uncovered do not affect your ability to safely occupy the home. No home is perfect. Not even a home that is brand new.

Is it worth it to pay more for an updated home?

If you are in the market to purchase a home you are more than likely wanting to negotiate the best price possible. But in the real estate market getting the best deal is not always about getting the lowest price. Rather it is about making smart financial decisions regarding convenience and long term value.

Remodeled sell for more

As you look at homes on the market you may have noticed that updated homes sell quickly. They also sell at higher prices. There currently is a greater demand for homes that have been “remodeled.” This demand is a shift in the market and what buyers want. In the past, buyers were more interested in purchasing a “fixer upper” and doing what was needed themselves. That leaves us with the question are you better off spending more for a home that has been fixed up? How do you decide whether to pay a premium for an updated home or roll up your sleeves and do the work yourself? From an investment prospective the math behind home improvements rarely favors the buyer doing the work themselves.

Do the math

This math is one of the reasons why buyers are willing to pay more upfront, rather than taking on the renovation costs and stress. Are you still trying to decide? Here are some things to consider when deciding if paying more makes sense.

  1. Do you have the time, patience and know how to do the renovations?
  2. Are the updates worth the premium that you are paying. Check to see if you can purchase the updated home for less or the same cost of a home that his not updated plus, how much the renovations would actually cost. Your real estate agent can help you with this.
  3. Remember that cost predictability rarely comes with home renovations. There is always the unexpected that costs more money. If you purchase an updated home you know what you are getting upfront. The updated home will not have the remodel surprises.

Every buyers situation is different. Sometimes buying a home that needs some work can be a good investment. Make sure that you take off your rose colored glasses and do the research to know the real costs of fixing up the home. No matter what route you choose, be sure to involve your real estate agent. Your realtor can help you evaluate, unemotionally what is best. They can also connect you with contractors for the things that you can’t do yourself. Lastly, your agent can ensure that you get the best price possible for your home.

Tips for buying in an HOA

After considering the pros and cons of an HOA you are ready to go looking at houses to purchase. Knowing that the home that you choose to purchase might in in an homeowner association. Here are some tips to ensure that you are ready for the life in an HOA if your dream home is located in one.

Tip number one:

Read all of the rules and regulations BEFORE buying. In the State of Colorado the contract has dates and deadlines for when the buyers must be provided with all of the HOA information. This includes rules, regulations and the financial information regarding the HOA. Once the information is received the buyer has the right to cancel the contract, due to finding the HOA docs unsatisfactory. This could be because you find out the HOA has a maximum weight for dogs of 25 pounds. You have a wonderful black lab that weights 75 pounds.

Tip number two:

Another things to remember when you are living in an HOA is to follow the rules. Once you have purchased your property and moved in, you need to follow the rules. They are not suggestions. You cannot bend or or change the existing rules. Not following the HOA rules and regulations can mean you are charged fines.

Tip number three:

Stay informed. Your HOA will communicated with you and let you know proposed changes in rules and fees. Your HOA will also provide you with meeting minutes so that you can stay informed about issues before the HOA board.

Tip number four:

Attend board meetings. Reading the minutes is great, but being present for the annual meeting is even better. The more involved you are the more informed you will be. Being involves allows you to have a say in community decisions.

Tip number five:

Join the board. Most HOA.s are needing board members to volunteer their hime to join the board. Serving on the board lets you directly influence decisions that are made that affect your neighborhood. As a board member, you are able to affect policies and advocate for your interests.

HOA’s are not entirely good or bad. Whether you buy a home in an HOA or not is a personal preference. If you valued the amenities and services that the HOA offers, an HOA could be a good fit. Make sure that you know what you are getting into. Making an informed decision is important. Once you are in an HOA be sure to follow the rules and get involved.

Is buying a home in an HOA for you?

Home buyers often have mixed feelings about homeowner association. (HOA’s) On one hand they often have nice amenities like pools and parks. They also can help to maintain the neighborhood standard. On the other hand, they do come with monthly fees. HOA’s come with rules and regulations that need to be followed. These rules may feel a bit stifling.

If you are looking to buy a home, it is important to sort out how you feel about HOA’s. It is getting more difficult to avoid HOA’s. The number of HOA’s has skyrocketed recently. Locally, most homes that have been built in the last 20 years are in a neighborhood with a home owners association. So, let’s weigh the advantages and disadvantages to help you sort out if you would want to buy a home that is apart of a HOA.

Advantages of buying in an HOA

  1. They provide amenities that you might not have if you were not a part of the HOA. Some HOA’s provide swimming pools, workout gyms, parks and clubhouses. These are great features if you use them. If you will not use these amenities, this may not be an advantage.
  2. HOA’s make it possible for you not to have to deal with neighbors that are not taking care of their homes. Most HOA’s have standards that have to be met. Exterior maintenance will need to be maintained. These standards will keep the neighborhood looking good and help keep property values going up.
  3. Another benefit of a home in an HOA is that there are often maintenance items that are taken care of for you. This can be things like snow removal or lawn care. Other times that can be all exterior maintenance. If you do not like doing these things, this is something you will probably consider a huge benefit.

Disadvantages to buying in an HOA

  1. Those wonderful amenities that I talked about under advantages to buying in an HOA, come with a price. Depending on the amount of services you are receiving from the HOA and the amenities, the HOA fees may make be uncomfortable. The HOA fees may be enough to make the home unaffordable.
  2. HOA dues go up. It is rare, but it is not unheard of for the dues to stay the same, or in rare cases, go down. Please expect and plan for the dues to go up an dup.
  3. HOA’s have rules and the rules are enforced. Make sure that you can live within the rules of the community. They may not allow you to fly the flag of your alma mater from your porch. Are you okay with following that rule and all of the others?

After considering all of the advantages and disadvantages you can see that living in an HOA is not for everyone. If you value the amenities, being a part of a community and are able to follow the rules of that community then living in an HOA could be a great fit.