Price negotiations, defect resolution may suffer

Question:  Allison, we are considering buying a property in Keystone, CO and we want to buy directly from the listing broker to save money.  A friend told us that was a bad idea. What do you think?

Answer:  Good question.  Cutting expenses is at the top of most people's priorities today. Many are putting off major purchases like a new car or home until they feel more secure financially. However, not all buyers are taking a wait-and-see attitude.

According to Diane Hymer of Inman News, they're casting worries about the home sale aside and are buying now to take advantage of near-record-low interest rates. In order to get a discount in price, a number of buyers attempt to buy without an agent.

Let's say the sellers signed a contract agreeing to pay 6 percent of the purchase price to their broker when the sale closes. If the property is listed on the multiple listing service, the listing broker offers to pay a portion of the commission to the broker who represents the buyers.

If there isn't a broker representing the buyers, the commission can -- if the listing broker agrees -- be reduced by the amount that would usually be paid to the buyers' broker.

In this case, if the listing broker agreed to pay 3 percent of the purchase price to the buyers' broker and there is no buyers' broker, the sellers would pay the listing broker only 3 percent at closing. On a $700,000 sale price, this would net the seller an extra $21,000, allowing the buyers to pay that much less and still match the price the sellers would receive if they paid the full 6 percent to the sellers.

Whether this is actually a cost-savings strategy will depend on a number of factors. A key issue is knowing how much you should pay in the current market. If you offer a price that's way under market value, the seller might not even respond, particularly if you aren't represented by a knowledgeable local real estate agent who can plead your case, or at least elicit a counteroffer. If you offer more than market value, this might negate any savings you'd realize by a commission reduction.

When no one represents the buyers, the sellers' broker represents the sellers exclusively. This means the sellers' agent cannot prepare your contract for you or give you advice. An exception to this would be if the buyers and sellers agreed to have the listing broker represent both the buyers and sellers, which is not permitted in all states. But the listing broker often requires a larger fee for representing both parties.

Buyers who attempt to represent themselves may have knowledge that's limited to what they've read in consumer-oriented homebuying books. Unless these books were published since 2009, they don't represent the rigors and rules of the current housing market.

The best agents don't rely on books to learn their trade. As with most professions, agents become experts in their field through years of experience working with homebuyers and sellers.

Homebuyers and sellers hire agents to learn the process, understand current market value so they don't sell too low or pay too much, and to facilitate moving the process through the various quagmires plaguing the current market-loan qualification, appraisal issues and renegotiations over property defects -- to a successful closing.

BOTTOM LINE: Unrepresented buyers are at a big disadvantage if they're in a multiple-offer competition. Most sellers and their agents would rather work with a buyer who is represented by an agent, preferably one with a good reputation for closing home-sale transactions.

For answers to your real estate questions, call Allison at 970-468-6800. Email - Info@SummitRealEstate.com.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com   

Add power to purchase offer

Pay attention to 3 market forces

Question:  Allison, we are wanting to make an offer on a condo in Wildernest, but we’re unsure how much to offer.  What do you recommend?

Answer:  Good question!  Figuring out how much to offer on a home you'd like to make your own is never easy. A complicating factor is that although it appears that the housing market may be stabilizing somewhat in other parts of the country, there is no guarantee that prices won't slip further.

With this in mind, don't buy for the short term. Don't buy betting on future appreciation. Buy a home that will work for you long term, at the best price you can negotiate, using financing you can afford.

To avoid paying too much, hook up with a real estate broker who will educate you about how much you'll have to pay for a home that works for you. The Internet is a great resource to help you learn about neighborhoods, current listings and past sale prices.

However, a diligent, knowledgeable real estate broker who has experience helping people buy and sell homes in the area where you want to live can get you up to speed on what's happening in that niche market now.

HOUSE HUNTING TIP: Ask your agent to give you a summary of all listings that you might have been interested in that sold during the last three months to six months, including list price, sale price and how long they took to sell. It's also useful to have information about the change in average sale price over the past year. Have prices declined? Are they flat? Or are they rising?

Also, ask for a list of properties currently available and pending sale. A pending sale is one where the sellers have accepted an offer, but the sale hasn't yet closed. Significantly more active listings than pending sales in an area suggests a high-inventory market where buyers have an advantage. Few active listings relative to pending sales is characteristic of a low-inventory market.

During your house-hunting education, make sure your agent reports back to you about day-to-day changes in the market. If an overpriced listing has a price reduction and is now in your price range, make a point of looking at it as soon as possible. A new price can attract other buyers' interest.

When listings you've seen sell, your agent should let you know the sale price. This will help you develop a sense for when a listing is priced too high, or priced at or under market value. How well a listing is priced for the market affects your offer strategy.

A well-priced listing in a low-inventory market is likely to sell quickly. There could be more than one buyer making an offer. If so, you may need to make an aggressive offer near, at or over the asking price. However, multiple offers don't always result in a sale price higher than the list price.

Becoming savvy about local market pricing enables you to know when to make a strong offer on a new listing, even though the overall market may be lagging.

It's a different story in segments of the market like ours in Summit County where there are plenty of listings that take months to sell. In this case, you have choices, making it possible to offer less than the asking price and negotiate. If this one doesn't work out, you move on to the next. You should be prepared to walk away rather than pay too much.

Buyers making offers that are contingent on the sale of another property usually have to pay more than all-cash buyers who can close quickly. If you've already sold your home and are waiting for the sale to close, you'll be in a better position to negotiate on price. The best bet is to have your home sold and closed. It removes uncertainty in the sellers' minds and may make them more receptive to a lower price.

For answers to your real estate questions, call Allison at 970-468-6800. Email - Info@SummitRealEstate.com.  Would you like a list of properties that meet your criteria automatically emailed to your inbox without having to speak with a broker? Visit www.SummitHomeBuyer.com   

The National Association of Realtors has just released a survey with some interesting facts about the "average" second home buyer:

Vacation Home Buyers
Median age: 46
Median income: $87,500
Median distance from primary residence: 348 miles
Median sale price in 2009: $276,000

Vacation homebuyers were most likely to purchase property in a rural area, small town or resort.  They plan to keep the property for an average of 16 years.

Investment Property Buyers
Median age: 45
Median income $87,200
Median distance from primary residence: 24 miles
Median sale price in 2009: $105,000

Investment buyers were most likely to purchase proeprty in metropolitan areas. They plan to hold it for 12 years.

Source:  2010 National Association of Realtors Investment and Vacation Home Buyer Survey.

If you would like to know more about buying property in Summit County as a second home, please reply to this email or call us at 800.262.8442 and we can give you the inside scoop! 

Warmly,

Allison Simson, Owner/Broker
Lynn Sustad, Buyer Specialist
Kelie Gray, Buyer Specialist
Anna Willis, Buyer Specialist
Kristi Warner, Client Care Manager
Ranay Beddow, Listing Coordinator
Margaret Bowes, Transaction Coordinator

As Dorothy says in the Wizard of Oz...."There's no place like home!"  I just returned from vacation this past weekend.  I had a wonderful, relaxing time with my family, but it's good to be home.
 
You know how it is when you get back from being away....it's payback time!  While plowing through my many emails, I came across this "Round of Reasonable Perspective" and wanted to share it with you...

Another Round of Reasonable Perspective
"There is no question that we face formidable, long-term structural problems with our economy – problems that have made US markets less attractive in recent years. But these problems are surmountable. We have no qualms saying that the spirit of innovation and entrepreneurship that has defined America in past crises will prevail today.

Though housing remains tepid and debt and deficit levels are rising, compared to the rest of the world the United States is in good shape. Our economic fundamentals are sound: manufacturing levels are up and interest rates and inflation are low. What's more, the broader economic recovery is translating into meaningful employment improvements and corporate-profit growth that could potentially reach a record high in this year's third quarter.

Risks clearly remain, but markets are always fraught with risks: there are no perfect markets. To the contrary, when markets seem the most perfect, that's when they are the most risky, as the housing and mortgage markets post-2006 have so painfully revealed. Things still aren't so rosy today, but that's okay, because we're sure that better days lie ahead."

And now for your Tuesday Coffee Break...I want to thank the amazing team at Summit Real Estate for "holding down the fort" while I was gone.  They enrich my life everyday!  Our business wouldn't be where it is today without their commitment, help and support.  Now for today's quote:
 
"Even 'Super-You' needs help and support. There is no shame in asking for assistance. Push aside the pride and show respect for the talent others can bring to the table.

And, remember that there is no such thing as a single-handed success: When you include and acknowledge all those in your corner, you propel yourself, your teammates and your supporters to greater heights.
                                - Author Unknown.

It's beginning to show signs of spring here in the high country...the buds on the trees are coming to life and the melt-off is beginning.  It's been a long winter and the sunshine is quite welcome!
 
I'd like to share an interesting article from "Realty Times" published on May 10th:
 
Real Estate Outlook: Experts Weigh In 
by Kenneth R. Harney
Mega-investor Warren Buffett and a group of top corporate leaders are weighing in on a key issue that's crucial to a sustained real estate recovery: How long will the good economic news we've been getting lately continue?

Are we going to be let down later in the second half of the year, or is the current, slow-moving national economic growth pattern a long term trend?

Buffet told his annual stockholders gathering in Omaha that, the economy is showing "significant" and persistent improvement for the first time since the financial crisis broke in 2008.

Other top business leaders polled by the Conference Board -- and quoted last week by the Wall Street Journal - said they are now "confident that the U.S. will see sustained growth through 2010" - with moderate gains in employment, consumer spending and consumer confidence.

That's hugely important for housing of course - and offers a strong answer to economic doomsayers who predict a sharp drop in home sales and real estate activity following the expiration of the tax credits.

The latest housing and mortgage numbers certainly look encouraging:

Pending home sales jumped by more than five percent in March, according to the National Association of Realtors, and were 21 percent higher than the previous year for the same month.

Home prices are turning at least modestly positive again in the majority of large housing markets. The closely-watched PMI risk index, which looks at price decline potentials for two years out, found that 42 of the 50 largest markets in its latest survey showed diminished risk.

Another index -- from valuation data firm Clear Capital - found home prices gained by five percent nationally year over year. Prices in a handful of what Clear Capital calls "micro" markets are doing better than that. Washington DC, for example, saw an 8.4 percent increase over last year, according to the latest index.

Meanwhile, new applications for loans to purchase houses took another big jump -- up 13 percent over the previous week, according to the Mortgage Bankers Association.

MBA vice president for research, Michael Fratantoni, said that last week's FHA and VA share of home purchase applications soared above 50 percent -- the highest it's been in more than two decades.

Finally, there was some outstanding news for home buyers and sellers in high cost markets: The jumbo loan market is roaring back -- with more banks now offering big loans and cutting rates. One major lender even announced that for credit-worthy applicants, it's dropping rates on jumbos to 5.7 percent for 30 years -- the best ever.

Published: May 10, 2010 in “Realty Times”

In Summit County, we historically lag behind the national economy by 18-24 months.  When the majority of the economy has their big spike in prices in 2005-2006, we were still very steady and flat here, and then when the rest of the country took a nosedive is right when we saw our biggest appreciation in years!   Now, our values in Summit County are depreciating, but it's great to hear some good news on the national front.  Time will tell if history repeats itself or not.
 
And now for your Tuesday Coffee Break....."We tend to forget that happiness doesn't come as a result of getting something we don't have, but rather of recognizing and appreciating what we do have."     ~  Frederick Keonig

Have a great week! 

Warmly,

Allison Simson, Owner/Broker
Lynn Sustad, Buyer Specialist
Kelie Gray, Buyer Specialist
Anna Willis, Buyer Specialist
Kristi Warner, Client Care Manager
Margaret Bowes, Transaction Coordinator

Question: Allison, what is the best way to make an offer on a property?

 Answer: The great number of properties on the market and still-attractive interest rates make now an excellent time for buyers to purchase a first or second property.

Prospective buyers should obtain written mortgage approval from lenders for the amount they will spend on a home, as well as find a Broker who knows the local market and is skilled in negotiating. Your Broker will find answers to questions that could influence the purchase price.

When negotiating, prospective buyers avoid low-balling their first offer; but they should have a good idea of how much room they have to negotiate. Have your Broker give you the most comparable sales, and then take them with a grain of salt.  We are in a rapidly changing market and the only sales that are truly comparable are those that are pending – that have not closed yet, but have a contract on them.  Those sales are the most current and will give you the best idea of property sales in the area you are interested.  Don’t reveal how much you are willing to pay and do be prepared for counter-offers.

Keep in mind that having too many conditions will make your offer less attractive to the sellers. Prospective buyers should focus on trying to get their dream property at a fair price.  Just about every seller in the county right now is saying, “We’re not going to give it away!”  Your job with your offer is to help the seller understand that they are not giving it away, but actually getting fair market value.   

Finally, prospective buyers should never sign a contract for purchase and sale until they have reviewed the document.   You wouldn’t believe how many people we find have not read and understand the contract they have signed.  Take the time to go over it with your Broker.

For answers to your real estate questions, call Allison at 970-468-6800. Email - Info@SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com   

This just in from one of our favorite lenders:

Volatility for home loan rates has already begun. The Fed did what they set out to do - purchasing $1.25 Trillion in Mortgage Backed Securities, and succeeding in their plan to lower home loan rates and help stabilize the housing sector. And even though they stretched out the length of the program slightly - in order to soften the impact of the end of the program - the training wheels are now off, the safety net is gone, and home loan rates have already moved higher. In fact - as the Fed will now gradually become a seller of their massive holdings of Mortgage Backed Securities - rates are very likely to continue to move higher still.   

Even after home loan rates took a jump higher last week, they still remain at reasonably low levels - which makes right now a crucial time to take advantage of the opportunities that exist, including the Homebuyers Tax Credits which are down to their last month. To take advantage of the generous credits, purchase contracts must be signed by the end of April. If you or someone you know has questions about this credit - please don't wait to get in touch with us.

I thought that everyone in the world would have heard about these tax credits, but I just found out that my Aunt (a very smart and savvy woman whose house is on the market) hadn't yet heard the news- so I'm going to continue to get the word out until it's over!

And now for your Tuesday Coffee Break..."Nobody can go back and start a new beginning, but anyone can start today and make a new ending."    ~  Maria Robinson   

Get tax savings for home improvements

Question:  I’ve heard a lot about the tax credit for first time homebuyers and move-up buyers, but I’m interested in more details about tax credits that are available for energy saving improvements we’d like to make to our home in Silverthorne.  What can you tell me?

Answer:  Good question!  According to Mary Umberger of Inman News there are some great improvements you can make in 2010 that not only have the potential to reduce your monthly utility bills -- they also could put a dent in your taxes.

They are tax credits that homeowners can get through a federal stimulus package passed last year.

In particular, the Existing Home Retrofit Tax Credit covers an array of energy-saving fix-ups -- from installing certain kinds of windows to powering your house with a windmill -- that qualify for a credit, according to Calli Schmidt, environmental communications director for the National Association of Home Builders.

The tax credit for many of the energy-saving changes could be good for as much as $1,500, she said. If you want to upgrade your heating or cooling or switch to alternative forms of energy, the potential tax credits can go much higher.

Five things to know about the home-improvement tax credits:

1. The simplest changes that qualify for the credits involve buying and installing approved products that improve the energy performance of the home itself, such as insulation, insulated siding, doors and windows, some types of roofing and skylights, and others.

The credit for these products is 30 percent of the cost (but doesn't include the cost of installation), up to $1,500. NAHB materials explaining the tax credits offer a typical example: Upgrading inefficient insulation (from R-19 to R-38) in the attic of a two-story, 2,000-square-foot-house in Chicago might cost about $1,000, but the tax credit would reduce the cost to $700.

2. If you go the second route and install a new furnace, air conditioning, tankless hot-water heater, heat pump, geothermal system, biomass heater, or solar or wind installation, the credits could go much higher.

Again, the credit amounts to 30 percent of the purchase cost, but there's no dollar cap on these, she said. A big-ticket example: Spending $25,000 for a rooftop solar-heat panels would net a $7,500 tax credit.

3. "In addition to the federal incentives, many utilities and municipal, county and state governments are also offering incentives for buying and installing certain products," Schmidt said.

For example, New Mexico offers tax credits to help cover of the cost of installing geothermal heat pumps; Indiana offers credits for qualified water heaters, furnaces, central air conditioning and programmable thermostats.

A state-by-state guide to these tax credits and other incentives is at the Database of State Incentives for Renewables & Efficiency-- www.dsirusa.com.

4. The federal offering isn't a tax deduction (which whittles down your taxable income), but a credit -- which reduces the actual taxes you owe Uncle Sam. It applies only to your principal residence, not to vacation homes.

Being a tax law, of course, it has myriad details and exclusions. To file for the credit you'll need Internal Revenue Service form 5695; you'll also need to hang on to both the itemized product-purchase receipts and the labels from those products.

The credit also could apply to home improvements you may have made in 2009, so if you did some fix-ups last year that improve your home's efficiency you might be able squeeze them into your last-minute IRS filing or consider an amended return if you've already filed. Again, however, documentation is critical.

5. For further information on the tax credits, you can visit EnergyStar.gov. The homebuilders also have details at NAHB.org/efficiencytaxcredit.

For answers to your real estate questions, call Allison at 970-468-6800. Email - Info@SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com   

I get a lot of questions about buying condos vs. single family residences and came across this blog post from Richard Vetstein that answers many of the questions quite well.  Buying a condominium unit can be more involved than buying a single family home. This is because you have to worry about both the unit itself and the condominium project as a whole.

10 Questions You Must Ask Before Purchasing a Condominium

To borrow from a famous phrase, not all condominiums are created equally. Some condominiums are very well run; some are quite poorly run and underfunded. Buyers interested in purchasing a condominium unit must do their homework:  not only about the condition of the individual unit they are interested in purchasing, but on the financial health and governance of the condominium as a whole. Remember, you are buying into the entire project as much as you are the unit, and your decision will impact your daily living and your ability to re-sell.

Here are the 10 questions buyers should ask when deciding to purchase a condominium unit:

1. What is the monthly condominium fee and what does it pay for? The monthly condominium fee can range quite dramatically from condominium to condominium. The fee is a by-product of the number of units, the annual expenses to maintain the common area, whether the condo is professionally managed or self-managed, the age and condition of the project, and other variables such as litigation. For budgeting and financing you need to know the monthly fee and exactly what you are getting for it.
2. What are the condominium rules & regulations? Condominium rules can prohibit pets, your ability to rent out the unit, and perform renovations. Make sure you carefully review the rules and regulations before buying.  Needless to say, the buyer and possibly the buyer's attorney should review and approval all condominium documents, including the master deed, declaration of trust/by-laws, covenants, unit deed and floor plans to ensure compliance with state condominium laws as well as Fannie Mae and FHA guidelines, as necessary.
3. How much money is in the capital reserve account and how much is funded annually? The capital reserve fund is like an insurance policy for the inevitable capital repairs every building requires. As a general rule, the fund should contain at least 10% of the annual revenue budget, and in the case of older projects, even more. If the capital reserve account is poorly funded, there is a higher risk of a special assessment.  Get a copy of the last 2 years budget, the current reserve account funding level and any capital reserve study.
4. Are there any contemplated or pending special assessments? Special assessments are one time fees for capital improvements payable by every unit owner. Some special assessments can run in the thousands. You need to be aware if you are buying a special assessment along with your unit.  It's a good idea to ask for the last 2 years of condominium meeting minutes to check what's been going on with the condominium.
5. Is there a professional management company or is the association self-managed? A professional management company, while an added cost, can add great value to a condominium with well run governance and management of common areas.
6. Is the condominium involved in any pending legal actions? Legal disputes between owners, with developers or with the association can signal trouble and a poorly run organization. Legal action equals attorneys’ fees which are payable out of the condominium budget and could result in a special assessment.  In most states, you can run a search of the condominium association in the court database to check if they've been involved in recent lawsuits.
7. How many units are owner occupied? A large percentage of renters can create unwanted noise and neighbor issues. It can also raise re-sale and financing issues with the new Fannie Mae and FHA condominium regulations which limit owner-occupancy rates. If your buyer is using conventional financing, check if it is a Fannie Mae approved condo. If FHA financing, check if it's an FHA approved condo.
8. What is the condominium fee delinquency rate? Again, a signal of financial trouble, and Fannie Mae and FHA want to see the rate at 15% or less.
9. Do unit owners have exclusive easements or right to use certain common areas such as porches, decks, storage spaces and parking spaces? Condominiums differ as to how they structure the “ownership” of certain amenities such as roof decks, porches, storage spaces and parking spaces. Sometimes, they are truly “deeded” with the unit, so the unit owner has sole responsibility for maintenance and repairs. Sometimes, they are common areas in which the unit owner has the exclusive right to use, but the maintenance and repair is left with the association.  Review the Master Deed and Unit Deed on this one.
10. What Does The Master Insurance Policy Cover? The condominium should have up to $1M or more in coverage under their master condominium policy. For buyer's own protection, they should always buy an individual HO-6 policy covering the interior and contents of the unit, because the master policy and condo by-laws may not cover all damage to their personal possessions and interior damage in case of a roof leak, water pipe burst or other problem arising from a common area element.

Often a standard condominium questionnaire will answer all or most of these questions. If not, you may want to be prepared to generate this list and incorporate it into your Offer.

Buying a condo in Summit County does require additional due diligence that is different from buying a single family home, but the benefits of having a condo- your home – or home away from home are certainly worth it!  Good luck! 

For answers to your real estate questions, call Allison at 970-468-6800. Email - Info@SummitRealEstate.com.  Interested in a list of properties that meet your specific criteria?  www.SummitHomeBuyer.com   

Question: I am going to remodel an older home in Silverthorne. What types of remodeling projects give the greatest increase in property values?

 Answer: Many homeowners upgrade their residences with property value increases in mind. The key for these consumers is to determine which improvements will produce the most value for the money.

According to Remodeling magazine's annual Cost vs. Value report, kitchen remodels are the most profitable upgrade, offering homeowners an 88 percent return on project costs. Some homeowners actually stand to lose money on a sale if they fail to modernize their kitchens and bathrooms, says Vince Butler of the Northern Virginia Building Industry Association Remodelers' Council.

On the hand, homeowners only recoup an average of 55 percent on the costs of a home office, making it the least profitable improvement. Remodeling investment returns are tied to the properties' values, as well as local market conditions.

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - Info@SummitRealEstate.com or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.