Real Estate Information

Summit Real Estate Forum & Blog

Allison Simson

Blog

Displaying blog entries 511-520 of 535

Remodeling information for those who can't afford a new home

by Allison Simson & Joyce Nenninger

Question: We had thought about buying a new home but just cannot find anything in our price range. Our next option is to do some remodeling. We don’t know how much remodeling we can do and still expect to get that money out of the property when we sell. Do you have any information?

 

Answer: Baby boomers are finding it difficult to find new homes in some markets, so they are instead investing their money in their existing residence.

Before homeowners indulge themselves on expensive upgrades, though, they should consider several factors.

First, keep local building codes in mind and consult their city planning or building department to find out what kind of changes are allowed and disallowed. Some areas also have architectural committees that approve architectural drawings.

The next step is to assess their investment realistically. They should build within the value of their neighborhood, keeping long-term resale values in mind.

It is important to note that while homes represent a considerable economic investment, most major remodeling projects return no more than 80 cents to every dollar spent. Homeowners should consider the personal enjoyment they would get from upgrading their property, however, as well as the economic return. Whatever the case, homeowners should know that it almost never pays to own the most expensive house in their neighborhood. On the other hand, if the home is comparably smaller, a large remodel can be worthwhile.

 

Basements are probably the best area in a home to consider for those who may want to remodel, or expand, their living quarters. The cost of remodeling existing basements start at about $20 per square foot--far less than what it costs to build an addition or enlarge second-floor space.

Not every basement is prime for conversions, however. Controlling moisture; adding ventilation and light; and finding a way around hanging drain tiles, ductwork, and wiring are all key factors in determining the practicality of conversion.

The first consideration for a basement conversion is flooding. A variety of solutions will address this, depending on severity. Simpler solutions include repairing cracks, clearing the gutter of clogs, and sloping the ground away from the house. If the problem persists, installing or repairing foundation drains is in order. The presence of radon is also a consideration when converting a basement. A simple test can reveal the level of radon in the basement; and, usually, the gas be collected and vented to the outside. Building codes are also important to consider when remodeling. Lowered ceilings, altered staircases, and emergency exits must all be accounted for--advisably before the project takes place. Basement walls can create a problem because of excessive moisture. Contractors have methods to handle this problem, usually a seal-tight wall or a looser one that allows the wall to breathe. Flooring is usually a more tolerant area, as most anything will work.

Lighting can be a problem for sub-level basements. It is important to utilize all existing natural light by removing shrubbery near windows and adding glass doors in place of solid ones. Recessed incandescent lighting is the most practical solution, as it is unobtrusive and generally more flexible than other options. Moreover, adding other amenities can drain existing electrical pads; so upgrading to a 200-amp panel is advisable, albeit more expensive. Issues concerning ventilation are, again, best addressed beforehand with an inspector rather then afterwards, when it may be too late. Fresh air is just as important to boilers, furnaces, and gas-fired water heaters as it is to people. Humidifiers or air exchangers are good solutions to regulate and maintain fresh air. Converting a basement may require some time and planning; but considering the alternatives, it is also the most economic and rewarding.

 

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.  

 

Help for first-time homebuyers with financing terminology

by Allison Simson & Joyce Nenninger

Question: We are buying our first home and are very confused about the financing terminology. Could you give us some help?

 

Answer: First-time homebuyers might find financing terminology to be very confusing. One of the most important elements of mortgage finance for borrowers to understand is the interest rate, which is the number that is multiplied by the loan balance to calculate the interest payment owed to the lender. Although the rate quoted on a mortgage is an annual rate, it is applied monthly.

With a fixed-rate mortgage, the interest rate is set for the lifetime of the loan. On an adjustable-rate mortgage (ARM), however, the rate is set for an initial period of one month to 10 years, after which it may change. ARM borrowers have some special considerations when shopping for a mortgage. The fully indexed rate for ARMs, equivalent to the sum of the interest rate index used by the ARM and the fixed margin of profit added on by the lender, tells lenders where the rate will go in a stable interest rate environment. Should interest rates suddenly jump, meanwhile, the maximum rate limits how high the ARM percentage can rise. The second component in the price of a mortgage is points. Each of these upfront fees is expressed as one percent of the loan amount. Points are paid in exchange for a discount on the interest rate. Conversely, rebates are points paid by the lender for high-rate loans and then used by the borrower to, perhaps, offset the costs of settlement.

Finally, mortgage borrowers should recognize that origination fees are imposed by lenders to disguise higher rates. For borrowers, points and origination fees are essentially the same--except that points are tax deductible and origination fees are not. "Junk fees" is a term used to describe any of a bevy of other upfront charges, expressed as a dollar amount of the loan, levied by the lender or mortgage broker.

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.  

 

Internest sites tthat compare different loan scenarios

by Allison Simson & Joyce Nenninger

Question: We are shopping for a loan and would like to be able to compare different loan scenarios. We want to establish the true cost of the different loans that are available. Do you know of any site on the Internet where we could do this?

 

Answer: Fannie Mae has introduced the latest version of its true cost calculator, an online tool providing consumers with an easy way to weigh various mortgage options. The release of true cost calculator 2.0 features the ability to create a file and save multiple loan scenarios for comparison purposes without needing to re-key data.

The technology helps consumers calculate the costs of getting a mortgage, including interest rate and points, mortgage insurance premiums, appraisal and title insurance fees, and other settlement charges. The
True Cost Calculator at HomePath.com also provides a more precise estimate by factoring in how long the consumer actually plans to keep the loan. The tool provides an analysis using four key measures: the true cost rate, which is the true cost of the mortgage, expressed as an annual percentage; the true cost rate after taking into account the borrower's potential tax savings; the monthly mortgage payments; and the estimated equity the borrower can expect to amass during the anticipated loan term.

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.  



Cash-Outs Trade Money for Equity

by Allison Simson & Joyce Nenninger

Question: We are interested in doing a “cash out” refinance on our home. Are there any risks involved with this type of refinancing?

 

Answer: Cash-outs involve refinancing an existing mortgage and trading in home equity for cash. This option is especially popular when interest rates are down, because it allows homeowners to refinance at lower rates while gaining access to extra cash. Even better, their monthly mortgage payment usually remains the same or even goes down.

The benefits of cashing out include stretching the term of the loan to access more money at a lower rate, the ability to replace high-cost debt, and avoiding the need to cash in taxable investments.

Cashing out does involve some risks--including possibly renewing a mortgage for its full life and incurring a higher total interest cost for financing and reducing home equity. It can be detrimental if housing prices decline; homeowners who have little equity in a declining market could find that they owe more on their property than what it is worth. Also, homeowners must manage their finances carefully, using the cash-out funds to handle expenses and then keeping spending under control. Qualifying for a cash-out is also difficult. Because this type of borrowing eats into equity, it raises the risks to lenders, who, in turn, will want to carefully scrutinize applicants.

An alternative to cash-outs is the home equity line of credit, which allows a consumer to borrow on a revolving basis. Homeowners need only pay interest on the amount borrowed and will not have to reapply and pay service charges to gain access to more money. This option is most appropriate for borrowers whose cash-out will not reduce their mortgage payment and also for homeowners who want an extra source of cash for ongoing projects, rather than for a specific purpose.

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.  

 

 

What Fed cuts really mean for mortgages

by Allison Simson & Joyce Nenninger
Commentary: Average rates on mortgages unchanged in recent surveys

According to Lou Barnes with Inman News, contrary to the conviction of deeply confused civilians and reports by lazy news media, mortgage rates are unchanged, about 5.75 percent for the lowest-fee 30-year paper.

Barnes says, if you don't believe me, visit www.freddiemac.com and its weekly survey. It is unbiased by sales jive, although it suffers from "survey lag" (early-week data released on Thursdays always misses real-time reality), and assumes a fractional origination fee. Last week's "5.48 percent" captured the one-day hysterical bottom when the industry could not log onto rate-lock Web sites. Yesterday's "5.68 percent plus 0.4 percent origination" is still about right, and all but identical to the prior week's "5.69 percent plus 0.5 percent."

Yet, the media refer constantly to "dramatically lower mortgage rates." They are better, but ... drama? Freddie's average for the whole of 2007 was 6.34 percent. A half-percent drop is nice for buyers, and a help to a few refinancers, but no fire sale.

"How can it be the same ... !?!" says the client, after a cumulative 1.25 percent cut at the Fed in only eight days? Answers follow.

Brand-new January economic data are not that bad. They're not bad enough to justify the Fed's panic, let alone to anticipate more cuts. Payroll growth slipped to flat in January (negative 17,000 is within the huge range of error and revision), unemployment down to 4.9 percent in a workforce statistical quirk -- soft, but hardly a recession. The purchasing managers reported their first gain in six months, likewise soft, but with persistent strength in foreign orders. Fourth-quarter GDP grew by a mere 0.6 percent; however, aside from a temporary drawdown of business, inventories grew at 2 percent.

The Fed's form is disturbing to long-term investors. Central banking is not figure skating, but Fed Chairman Ben Bernanke has departed his predecessor's 17 years of gradualism for lurching on the rink. A Fed that will lurch down will lurch up.

Investors bought long Treasurys and mortgages at these levels 2002-2004 because former Fed Chairman Alan Greenspan said after every meeting into 2006: Excessive monetary stimulus most likely will be "removed at a measured pace." Translation: You're safe for now, and we'll give you time to get out before we kill you.

In those late Greenspan years, deflation was the problem. Today, inflation is rising all over the world: Australia at a 16-year-high of 3.8 percent core; Europe at a 14-year-high of 3.2 percent; U.K. at 2.6 percent core; China at 6 percent-plus; and an economy completely out of control beginning to export inflation to us. Each time the Fed has lurched to a catch-up ease, all the way back to August, it has rescued stocks, commodities, oil, gold, and tanked the dollar.

I have chewed on the Fed for its inaction and credit-wreck oblivion. However, this situation is NOT a monetary problem: It is a banking-system near-insolvency that may morph into a recession, each making the other worse. The crying need for six months has been transparency of credit loss and bad-asset firewall. Cuts in the overnight cost of money may intercept recession, but inflation means that these cuts cannot be maintained or removed at a measured pace.

A central bank chairman must be prepared for the ultimate sacrifice: No tough inflation problem was ever solved by slow growth. It takes a recession. It takes higher unemployment and crushing the commodity spiral. To get long-term rates down, Bernanke must get the good out of this slowdown: He must let it get ugly. Instead, he has rescued inflation-pushing markets again and again.

Two non-Fed forces holding up mortgage rates: Credit fear about Fannie and Freddie has the spread between mortgages and the all-defining 10-year Treasury (3.57 percent today) over 2 percent for the first time ever. Second, somebody by accident may arrive at an effective credit-wreck bailout: The giant bond insurers, Ambac and MBIA, may be resolved in days. If no collapse, then credit fear will give way to inflation fear.

The Fed's cuts have had a dramatic effect on ARM adjustments, and should revise estimates of housing doom to the better -- also reducing bond-market fear. This month, common one-year Libor-floating loans will adjust DOWN to 5.125 percent.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at [email protected].

 

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.  

Industry reacts to Countrywide, BofA deal

by Allison Simson & Joyce Nenninger
Question:  Allison, we’ve heard so much about the Countrywide/Bank of America merger.  What is the industry buzz?
Answer: Good question.  Most of my research shows that the merger is seen as better than the alternatives. According to Matt Carter of Inman News,Bank of America Corp.'s plan to acquire troubled mortgage lender Countrywide Financial Corp. was welcomed by mortgage industry professionals Friday, who said a merger is preferable to other alternatives including a government bailout of Countrywide or bankruptcy.

Some also wonder whether Bank of America is making the right move, assuming it can close the deal, which must be approved by regulators.

"I have mixed feelings -- I think it's great because the government will not be forced into a bailout if this actually goes through," said Larry Bettag, Midwest region vice president for Denver, Colo.-based Cherry Creek Mortgage Co. "Putting those two together, it's going to be a monster company."

Paul McFadden, a mortgage planner and licensed loan originator with Exact Financial Group of Renton, Wash., said that while he does not originate loans for Countrywide, the company's failure would have caused problems for everyone in the industry.

"The buyout, I think, is a good thing, because on its own, Countrywide wasn't going to survive," McFadden said. Last summer, when American Home Mortgage closed its doors, other lenders tightened up their standards. "I think if Countrywide had not made it, all the other lenders would have reacted" by tightening underwriting further.

The all-stock transaction is expected to close in the third quarter, after an agreement was approved by both companies' boards.

News of the merger failed to cheer Wall Street investors Friday, as the $4 billion deal was overshadowed by a New York Times report that brokerage firm Merrill Lynch needs to raise that much to offset $15 billion in losses on bad mortgage investments.

Bank of America has not been immune to the housing downturn, announcing in October plans to close down its wholesale lending division and lay off 3,000 workers (see Inman News story). With BofA also exiting correspondent lending, one question about the merger is what the bank will do with Countrywide's wholesale and correspondent lending businesses.

Wholesale lenders fund loans that are originated by independent mortgage brokers, which are often bundled together as collateral for mortgage-backed securities that are sold to investors. Correspondent lenders purchases mortgage loans from other lenders such as banks, savings and loans, credit unions and builders.

"If they cut the mortgage broker out of the picture, that creates a potential problem for us," said Robert Ashby, president of Solid Rock Mortgage Corp., a mortgage brokerage in Pembroke Pines, Fla. "It's probably not that big a deal, because we can go somewhere else to get the loans."

McFadden said that he has 40 to 50 lenders to work with, and that if Bank of America shuts down Countrywide's wholesale loan division, he would not be affected.

Bettag said Countrywide has been "a big competitor" to Cherry Creek Mortgage. But Cherry Creek is also a correspondent to Countrywide, selling prime loans to the lender.

"We source a lot of our 'A' paper to them, and we actually grew by a hair last year in a market where everyone else blew up," Bettag said. "So we're curious to see how (the merger) will change the playing field."

In a press release, Bank of America said it "will benefit from Countrywide's broader mortgage capabilities, including its extensive retail, wholesale and correspondent distribution networks." That suggests Charlotte, N.C.-based BofA intends to allow Countrywide to continue funding loans originated by mortgage brokers, and buying loans from other banks.

Bank of America said it plans to continue to operate Countrywide separately under the Countrywide brand until at least 2009.

"I wondered when Bank of America got out of wholesale (lending), whether there might be behind-the-scenes maneuvering to acquire Countrywide," McFadden said, noting that competitor Washington Mutual has kept its hand in that game.

Another question about the merger is whether Bank of America will lay off more Countrywide employees in areas where the two companies have redundancies.

Countrywide employed 50,600 workers at the end of December, down 17.8 percent from 61,586 in July, after laying off nearly 12,000 loan originators.

In a presentation to investors in December, Bank of America Chief Executive Officer Ken Lewis said consumer real estate was "a significant growth opportunity" for the bank.

In 2007, Lewis said, Bank of America became the largest direct-to-consumer consumer real estate lender in the U.S., gaining market share through a "no-fee" mortgage loan and cross-selling home-equity loans to existing customers.

"We have not had the share of this business that our presence would imply," Lewis said, noting that only 9 percent of Bank of America customers hold a mortgage from the bank. Bank of America estimates that it's originated only 12 percent of all loans held by its customers.

Bank of America customers hold more than $4 trillion in loans from other institutions, Lewis said, and the bank's strategy "is to reduce that number."

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.  

Washington Report: Capital Gains Takes on Change

by Allison Simson & Joyce Nenninger

Question:  Allison, I heard that Congress recently changed some of the capital gains laws.  What have you heard?

Answer: Hardly anybody noticed it, but Congress tucked away a valuable bit of holiday cheer for real estate when it passed its final tax bill of the year.

It was the first substantive change in years to the generous capital gains rules governing sales of principal homes.

According to Kenneth Harney, most homeowners and real estate professionals can recite these rules in their sleep: Married, joint-filing sellers of houses can exclude up to $500,000 of gain, and single-filing sellers can take up to $250,000 … provided they've used the property as a principal residence for a cumulative two of the previous five years.

But what happens when a married home owner dies? Does the surviving spouse still qualify for the full $500,000 -- or does she or he only get to exclude $250,000?

The answer from the IRS has been this: you only get the full $500,000 if you sell during the tax year in which you were married and filing a joint return. Otherwise, the tax code sees you as single, and then you're limited to $250,000.

In other words, if your wife or husband died in June of 2007, you can only claim the full $500,000 benefit if you sell before December 31, 2007.

After that, as long as you remain unmarried, you're capped at the $250,000 limit for single taxpayers.

As a practical matter, most surviving spouses inherit their husband's or wife's share of the property at what's known as a "stepped up" tax basis, with no capital gains tax liability at the current market value.

But here's the problem: Some surviving spouses complain that they feel rushed into sales by the current tax rules. This is especially true for people who've lost their loved ones during the final few months of the year.

With everything else going on, they don't want the additional pressure of having to make the decision to sell the family home quickly. They want more time. Fair enough.

Well, now they've got it. Legislation signed into law before the holiday recess gives surviving spouses two full years to qualify for the $500,000 exclusion -- even though technically they're single.

And who says Congress doesn't have a heart?

Since your tax professional may not be familiar with this yet, here's the official citation: The bill is H.R.3648. The capital gains change is in Section 7.

 

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.   

Benefits of working with someone locally versus working with an Internet lender?

by Allison Simson & Joyce Nenninger
Question: Our goal for this next year is to buy a home in Summit County. We want to get some information on financing and are considering using an Internet lender. What would be the benefits of working with someone locally versus working with an Internet lender?
 
Answer: There are numerous advantages when using a local mortgage lender as compared to a mortgage lender obtained over the Internet.
 
Customer service is the number one advantage. A local mortgage lender is familiar with the properties in their area, whereas an Internet lender may have limited knowledge of the requirements associated with a resort area.
 
With a local lender the borrowers will have an individual who is personally working on their loan application, as every borrower's needs and financial situations are unique. The borrower also has a contact person to check the status of their application and to answer any questions they may have. Plus they will be able to speak directly with a local lender without having to play phone tag or leaving messages in voice mail that can be associated with the larger mortgage corporations. This can be frustrating to the borrowers.
 
The lender is responsible for ordering the appraisal on the property, which should be from a local appraiser. This is very important. A local appraiser is familiar with the area and the values of the properties and any changes in the area that can affect those values.
 
When purchasing a condominium unit, local lenders will be familiar with the condominium projects in the area and will know if the project meets the lender's requirements.
 
There is also the working relationship with the local title companies, surveyors and insurance companies to meet the state's requirements to provide each borrower with clear title to the property. There are several steps that must be completed to take a borrower from application to approval to the closing date. Working with the local mortgage lenders, title companies, appraisers and surveyors makes all these steps come together. You have the advantage of the individuals familiar not only with the area but also the requirements of each purchase contract.
 
Purchasing a home whether it's your first home, vacation home or a rental property can be stressful, working with your local professionals can make this process a lot easier.
 
 
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.   

Benefits to hiring an interior decorator to "Stage" your home.

by Allison Simson & Joyce Nenninger
Question: Our Realtor has suggested that we hire an interior decorator to “stage” our home. Is there any benefit in this?
 
Answer: Originally popularized in California, staging helps homes sell quickly and for more money.
Staging concentrates not on changing the interior in terms of painting or adding carpeting, says Carole Talbott of home decorating company Visual Coordinations. These are things the buyers would most likely prefer to choose themselves. Rather staging depends on "selling the space."

When a home is staged, it's reorganized--first with the furniture, then artwork, and finally by accessories. The furnishings remain the same, except for well-worn pieces or those that break up the design. Many times accessories are used to add color to a room.

Stagers charge approximately $500 to $750 for a three-bedroom, two-bath home; Talbott advises owners to stage only the main living areas to avoid high costs.

Some staging advice for homeowners who want to go it alone: furniture should be kept away from walls by grouping at angles in the middle of the room; colors should be chosen from artwork and fabrics, and accessories should be chosen to accentuate them; collections should be kept together; and mirrors should be placed in locations where favorable scenery will reflect. To attract attention to the exterior, the front door should be the first thing painted or decorated.  
 
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.   

How important is it for the Homeowner's association to have a capital reserve fund?

by Allison Simson & Joyce Nenninger
Question: I am thinking of buying a condominium in Summit County and want to find a property with low homeowner’s association dues. How important is it for the association to have a capital reserve fund?
 
Answer: Condominium buyers should be wary of associations that lack adequate reserves--money set aside to pay for emergency or major repairs--because they could be forced to pay special assessments to cover costs when the association cannot. Additionally, a future sale or refinancing could be denied based on the association's reserves; and it is difficult to find a buyer under such conditions.

Insufficient reserve funds can lead to declining property values, as educated buyers refrain from purchasing condos in the community, according to the Community Associations Institute, a national nonprofit organization that educates and provides resources to homeowner groups.

Annually, an association's board of directors is required to predict the next year's income and expenses--usually through a reserve analysis study. This report consists of a property evaluation--architectural and engineering--by qualified engineers. The engineers determine the useful life and repair costs of things like boilers, elevators, and roofs to determine how much money should be set aside each year to plan for future replacement.

The reserve funds are generally collected from the condo owners on a monthly or quarterly basis and deposited into Treasury bills or other secure government-insured funds. If a repair is necessary and the association needs to raise the money immediately, there are three steps it can take: increase the monthly assessment amount; impose special assessments, in which the owner immediately pays a fee based on the percentage interest he/she has in the association (sometimes amounting to hundreds of dollars); or get a loan.

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] 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.   

Displaying blog entries 511-520 of 535

Syndication

Categories

Archives

Share This Page

Contact Information

Photo of Summit Real Estate Real Estate
Summit Real Estate
The Bright Choice
330 Dillon Ridge Way, Suite 10
Dillon CO 80435
970-468-6800
800-262-8442
Fax: 970-468-2195

Allison Simson, Owner/Broker, is a licensed Colorado Real Estate Broker