First, you started with saving and figuring out your better loan options (in the first installment ). Next, you proceeded in your home search with the aid of a professional realtor (in the second installment). Then, you and your realtor wrote and negotiated an offer on your first choice and went through the due diligence to make sure the home would work for you (in the third installment). In some states a lawyer is also used for preparing the contracts. Since loans and property ownership have tax and legal requirements, you may consider including your tax accountant and your lawyer when evaluating offers and what's required of you after you purchase a specific property. When in doubt, ask and check it out! After all this work, you're satisfied this is will be your home. You're ready to close the sale and move!
11. Reserve the movers or a truck.
Try to do this as early as possible. Make sure you won't be charged if something happens at the last minute to delay the moving date. Since the end of the month is the busiest time for truck rentals, schedule early! Whether you're moving across the street or across the country, it's labor intensive. For moves that involve a delay where your goods need to be stored, consider the moving boxes that you pack yourself. PODS is a company our clients have used successfully. My clients get a discount when using PODS, so remember to ask your realtor about promotional discounts they may have for their clients. Many of our clients have used the Moving Coach to get competetive bids for longer moves. We have discounts for our clients here, too. Here's a timeline for your move. When packing, consider this is an excellent time to purge and give away things you no longer need. There are some items movers don't transport, so review these packing tips.
12. Contact your insurance agent.
Have you heard that being a homeowner can result in discounts for your other insurances, like car insurance? Ask your insurance agent for a quote that includes your new home and your other posessions. Your realtor will also know some good insurance agents, so you can get a couple of reliable quotes to compare. Your lender will need to know who your insurance agent is shortly after you have finished the home inspection, because the lending institution will require that your first year of homeowner's insurance is paid at time of closing.
13. Contact the utility companies to change your service locations.
No doubt you've already determined whether or not the cable/internet/power/water/trash utilities and services that you need are available where you're buying. (Yes, some people are off grid and not every location has the same services!) You need to put a change/cancellation order into your current utilities for the day you're moving. For the home you're buying, you need to put in a change/setup order, too. Ask your realtor what utilities you're responsible for in your new home. Your realtor will also have the names of utility and service providers in the area. Many people who work out of a home office will need to setup their internet service as soon as they know when they'll be given posession at the new home. For brand new homes, phone service can take a long time to set up, so start early on this.
14. Contact the post office for change of address.
You can either fill out the change of address form at your post office or do so on-line. Also, for any magazines, periodicals and regular bills you receive by mail, you'l want to submit a change of address with them before you move.
15. Gather materials for the buyer of your home.
If you're selling your current home, gather warranties, receipts for appliances and major home repairs, HOA newsletters, names of neighbors, trash day, service providers, and any other materials you feel would help the new owner in the future. Put them in a kitchen drawer or bring them to closing on your the house you're selling.
16. Close the transaction.
A day or so before closing, your should receive the buyer settlement sheet or a copy of the HUD. These documents show your closing and loan expenses and what money you need to bring to closing. Your realtor will review this document with you before closing. When you compare the loan closing costs to your good faith estimate, there should be no surprising expenses. Under Colorado law, you must bring good funds (cash, wire transfer, or cashier's check) to closing. Title companies have tightened up the requirements even more. For cash transactions, they are requiring the funds be wired to closing from your bank to the title company's bank. (Have your realtor get the routing instructions for you.) For all other transactions, a cashier's or bank check will also provide the good funds. Days of bringing cash to closing are over. Lately, some lenders have been slow to get the loan figures, documents, and funding wire to the title company. A delay in any of these can delay your closing date and posession of your new home. Have the good funds ready for closing and keep in touch with your lender this last couple of days before closing.
By the contract you will also be given the right to have a final walk-through of the property. This allows you to verify the condition of the property before closing and work that was supposed to be completed before closing was indeed done.
Along with the good funds (money), bring a photo ID (a drivers license or passport will do). Some of the real estate and loan documents that you'll be signing must be notarized. You will sign all the paperwork required to transfer the real estate over to your name (called the warranty deed) and all the loan documents to put the loan into your name and make it secured to your new home (called the deed of trust). While the closing can seem a daunting task, the escrow officer at the title company and your realtor can explain the steps along the way. Expect your lender to go over figures with you before closing, too. In some states your lawyer will be preparing your documents and going over them with you. Be sure the loan and property are what you were expecting. Once you sign the papers, it's yours. Keep your paperwork for at least 7 years. You will want to reference them at tax time. The 2008-9 tax credit has specific requirements, and can be applied THIS YEAR in an amendment on your taxes! Congratulations!
17. Move and clean.
In some cases, you'll get the keys to the property at closing, upon delivery of deed (dod). In Colorado, it's standard to get posession from 24-48 hours after closing, if the seller needs to move out and you negotiate that transfer for after closing in your offer. It's also standard that you'll leave your current residence in broom clean condition (per your lease or selling contract). So plan on some time to clean up after the movers are done. You can expect the same for the home you're buying. Some people prefer to have a thurough cleaning before moving in. Your realtor will know some dependable house cleaners, if you want to get help with this task.
18. Settle in.
Congratulations! You're in your new home and ready to get settled. The hubbub of moving often draws out the neighbors. Make time to say, "Hi, what do you like most about this neighborhood?" This will give you a talking point when you see them again and fill you in on good things to look forward to after the boxes are put away. Feel free to contact your realtor with questions you have as you get settled.
Monday, April 27, 2009
Saturday, April 18, 2009
First Time Homebuyer Tax Credit 2008 and 2009
So you're wondering whether or not you can get this $8000 tax credit. Do you qualify as a first time homebuyer, if you've not been paying a home mortgage for 3 or more years? How does this tax credit differ from what was offered last year? Consider speaking with your tax accountant about how this tax credit may or may not benefit you.
There is a table that summarizes both the 2008 and 2009 tax credit details. The tax credit is only good for a homebuyer's primary residence (no investments nor second homes). A first time homebuyer is someone who has not been paying a mortgage on their primary residence for the previous three years nor has been married to someone who is paying a mortgage for their primary residence during the previous three years. People earning less than $75,000/single person or $150,000/joint tax return couple are elibigle. The benefits phase out for singles earning up to $95,000 and couples earning up to $170,000.
In a nutshell, for April 9-Dec 31, 2008 buyers, the credit is really a loan. The maximum a homebuyer can get is 10% of the home price, up to $7500. Then, from 2010-2025 the homeowner will pay back a prescribed portion of the credit in their taxes. If the 2008 homebuyer sells the home before 2025, the unpaid balance of the benefit must be paid back then. If the 2008 homebuyer got help with bond money to pay the downpayment or loan closing costs, then they do not qualify for the tax credit.
Changes for homebuyers from Jan 1-Nov 30, 2009 remove the annual payback requirement, increase the maximum amount to $8000, allow homebuyers using bond money to qualify for the tax credit. But, if the 2009 homebuyer sells the home within 3 years, then the full tax benefit is due back to the government, "recaptured", at time of sale. So if 2009 homebuyers stay put for 3+ years, they don't have to pay back the amount! If the do move earlier, they have an additional payoff to cover.
Furthermore, did you realize that whether you are applying for the 2008 or 2009 tax credit, you can file an amendment to your taxes now? That's right, people purchasing from Jan 1-Dec 1 2009 may claim the tax credit THIS YEAR! The tax form to fill out is simple, but you would be wise to verify with your accountant exactly how this benefit will impact you.
Call Beth at 303-796-1238, if you wonder how to make this work for you.
There is a table that summarizes both the 2008 and 2009 tax credit details. The tax credit is only good for a homebuyer's primary residence (no investments nor second homes). A first time homebuyer is someone who has not been paying a mortgage on their primary residence for the previous three years nor has been married to someone who is paying a mortgage for their primary residence during the previous three years. People earning less than $75,000/single person or $150,000/joint tax return couple are elibigle. The benefits phase out for singles earning up to $95,000 and couples earning up to $170,000.
In a nutshell, for April 9-Dec 31, 2008 buyers, the credit is really a loan. The maximum a homebuyer can get is 10% of the home price, up to $7500. Then, from 2010-2025 the homeowner will pay back a prescribed portion of the credit in their taxes. If the 2008 homebuyer sells the home before 2025, the unpaid balance of the benefit must be paid back then. If the 2008 homebuyer got help with bond money to pay the downpayment or loan closing costs, then they do not qualify for the tax credit.
Changes for homebuyers from Jan 1-Nov 30, 2009 remove the annual payback requirement, increase the maximum amount to $8000, allow homebuyers using bond money to qualify for the tax credit. But, if the 2009 homebuyer sells the home within 3 years, then the full tax benefit is due back to the government, "recaptured", at time of sale. So if 2009 homebuyers stay put for 3+ years, they don't have to pay back the amount! If the do move earlier, they have an additional payoff to cover.
Furthermore, did you realize that whether you are applying for the 2008 or 2009 tax credit, you can file an amendment to your taxes now? That's right, people purchasing from Jan 1-Dec 1 2009 may claim the tax credit THIS YEAR! The tax form to fill out is simple, but you would be wise to verify with your accountant exactly how this benefit will impact you.
Call Beth at 303-796-1238, if you wonder how to make this work for you.
Homebuyer Assistance Still Available
Several people have asked me lately whether or not they can qualify for the $8000 first time homebuyer tax credit. Many buyers are wondering how much money they need to purchase a home. Where are those buyer assistance programs that were available?
First, the tax credit is summarized best on this site. First, make sure you qualify to get a home mortgage. Then, if you have not been paying a mortgage (or married to someone who has) for the past 3 years you may qualify. There are also time and income limits to this program.
Next, there are local bond programs with home buyer assistance. Not all programs are for first time home buyers. Most however have income limits and other restricitons, like where you live or work or that you own no investment properties or that this only be applied to your primary residence. In the Denver Metro area here are some programs to check out:
CHAC for people purchasing their primary residence all over Colorado
CHFA for people purchasing their primary residence all over Colorado
Douglas County Housing Partnership for people living or working in Douglas County when purchasing their primary residence
NEWSED for people living in Denver County when purchasing their primary residence
FUNDING PARTNERS with a variety of banks and programs throughout Colorado
HOAP for Aurora's first time home buyers and seniors choosing a reverse mortgage
Since these programs have very specific restricitons and requirements, I usually bring in experts on buyer assistance programs, Cindy Howeth and Scott Wynn of First Priority Lending.
When you think you might qualify for these programs, and have questions, they're great trusted advisors.
If you wonder how the Homebuyer Assistance fits into the process of buying a home, call me. For over a decade I've helped people purchase homes through buyer assistance programs.
First, the tax credit is summarized best on this site. First, make sure you qualify to get a home mortgage. Then, if you have not been paying a mortgage (or married to someone who has) for the past 3 years you may qualify. There are also time and income limits to this program.
Next, there are local bond programs with home buyer assistance. Not all programs are for first time home buyers. Most however have income limits and other restricitons, like where you live or work or that you own no investment properties or that this only be applied to your primary residence. In the Denver Metro area here are some programs to check out:
CHAC for people purchasing their primary residence all over Colorado
CHFA for people purchasing their primary residence all over Colorado
Douglas County Housing Partnership for people living or working in Douglas County when purchasing their primary residence
NEWSED for people living in Denver County when purchasing their primary residence
FUNDING PARTNERS with a variety of banks and programs throughout Colorado
HOAP for Aurora's first time home buyers and seniors choosing a reverse mortgage
Since these programs have very specific restricitons and requirements, I usually bring in experts on buyer assistance programs, Cindy Howeth and Scott Wynn of First Priority Lending.
When you think you might qualify for these programs, and have questions, they're great trusted advisors.
If you wonder how the Homebuyer Assistance fits into the process of buying a home, call me. For over a decade I've helped people purchase homes through buyer assistance programs.
Monday, April 13, 2009
The Buying Process, part 3
In the first installment you read about how much money to save and choosing a lender and the best kind of loan for your financial goals. In the second installment, last week, you read about choosing a Realtor and your home search. This week, in the third installment, you'll read about writing, negotiating, and due diligence for your offer.
8. Decide which home you want and what's a fair value for it. In your home buying process you'll have the opportunity to consider many homes as you find the best fit for you. When you know the market and yourself well, finding a home can take only a couple of weeks! Once you've identified "your home", you and your Realtor will write an offer for that home. Consider carefully how you want to negotiate for the home. Investors calculate the ROI (return on investment) over the period they intend to hold the property with little concern for the emotional value of the property, since they seldom live in the property and don't emotionally bond to the property and area. A rule of thumb is that they need to purchase the home at a price below market value to make the profit they expect. Is your home purchase simply a real estate investment or more? Your realtor can show you the data your lender's appraiser will use when determining a fair market value for the property. You don't want to overpay nor will the seller be wanting to undersell the property. Every contract includes: people, property, price, terms (inclusions, dates, contingencies, who pays for closing costs, etc.), and consideration (earnest money). When purchasing a home FSBO, for sale by owner, the offer will also include who pays your realtor and how much that will be. (As you know, realtors using the mls advertise coops for agents bringing them a buyer. This means when purchasing a home in mls you, the buyer, don't have to pay your realtor's commission at closing-the seller does!) Your offer will include a check for earnest money. This check will be cashed and put into a trust account until the contract closes or is terminated.
9. Know your timeline and due diligence rights and responsibilities.
In a normal sale you'll have several dates tied to investigations you may perform to make sure the property fits what you want and can live with after closing. This is called your due diligence. It includes:
Title investigations-Research on the title to the property and any related liens, judgements, or deficiencies is done by the title company and delivered to you, the buyer. Read your title commitment and ask questions if something is not clear to you. It is a summary of the recorded legal documents linked to the property. On some occasions a real estate lawyer is needed to clarify title questions. A seller must clear the title of all encumbrances (liens or judgements) before s/he can transfer title to a buyer at closing. You may have something show up on you, too, during the title search. If so, you will need to "cure" the title by proving the person is not you or by paying the judgement and documenting the payment before closing.
Inspections-Every buyer should perform a property inspection to verify s/he knows the state of the property and its improvements. Consider paying a licensed inspector (about $250-$400) for a home inspection. If your property has severe or specific problems/concerns, then consider having these evaluated as well (some common areas investigated further are the roof, sewer line, animals or insects, environmental issues like radon, mold or methamphetamine lab organic levels, structure, electrical, furnace, plumbing, septic, well, plants, zoning, building permits and codes, etc.). This is the most common area when "round 2" of negotiations takes place over what to repair and how.
Survey-Have a surveyor determine the boundaries and easements on your property, so you don't have problems later with building or neighbors (about $250-$350).
HOA investigation-Read any covenants, HOA meeting minutes and financials, so you know you'll be ok living with this very local governance that can put liens on your property if you don't pay the HOA dues or fines.
Appraisal-Your lender will set up an appraisal for the bank lending you money to verify the home is worth at least the purchase price. You don't have any work to do here. You'll make a check to your lender for the appraisal at the time you complete your loan application. You should get a copy of the appraisal at or just after closing, since you've paid for it.
Loan Conditions-Most loans today require full documentation of your finances. Provide the documentation your lender requests as quickly as possible. Since the underwriting guidelines on loans are changing, don't be surprised if there are some last minute requests from your lender. Remember to refrain from any credit purchases or changes until after you've closed on your home purchase. Sadly, some people who have bought things before closing changed their FICO score or debt/income ratios and lost the loan for the home they intended to buy. They sometimes lost their earnest money, too!
10. Some special sellers have additional requirements.
If you're buying property at an auction, know the specific rules of the auction before you go! Know ahead of time what you expect to pay in fix up costs and set the top price you'll pay. Most purchase contracts at auctions do not include an inspection clause or any due diligence, so you'll have to have already inspected the property as much possible earlier. The title is supposed to be preevaluated for any liens and deficiencies. Do your homework, too! Ask your realtor to recommend a title company to work with you on this title investigation before the auction! There will be a cost associated with that title report (each title company sets their own prices for that). Also, ask your realtor what other due diligence may be advisable to consider when purchasing a property. For most auctions, remember the price you bid is not the full price you pay. The auction rules will specify what percentage on top of the price you bid, you, the buyer, will pay for commissions to the auction house and to your agent. Some auction rules also require certified funds for the full amount to purchase if you have the highest/best bid, so plan ahead accordingly. More about auctions later...
In a sale where a bank is involved as the seller (short sale, preforeclosure, foreclosure, lender owned, HUD) expect the timeline until acceptance to be long. When you write the offer on a bank property no one knows exactly when the bank will agree to/counter your offer, so dates can be written using "x days + mec" (mec is mutual execution of contract by all parties). These bank offers can take from 30-180 days for mec! Colorado has a short sale addendum you should include if the home you want to buy is a short sale. (A short sale is one where the bank(s) the sellers used will be shorted funds at closing. Since the banks have to determine how much of a loss they can absorb, it takes time for them to respond. A short sale often happens because home prices fell below the amount of the loans on the home.) Few buyers have the patience to wait for bank short sale processes, so listing agents will gather many offers on a short sale, hoping one will still be in place to close when the bank's processes are complete! Sometimes a buyer's offer is too low for the bank to accept, so a backup offer gets a chance to buy! Sometimes the bank's counterproposal is unacceptable to the sellers on a short sale and the home then is foreclosed on. Banks also have their own addenda that are attached to any contract they accept. Often these addenda include an "as-is, where-is" clause. This spells out what inspections are or are not allowed; how the home can or cannot be dewinterized and who pays for this; what the bank will or will not do if the buyer is not satisfied with the inspection results; how funds will be delivered at closing; whether or not the bank will pay for buyer loan closing costs; etc.
Getting from the offer you've written to the closing table is quite a process. Even in smooth transactions, there are a couple of things that must be completed on time and to everyone's satisfaction. Work closely with your realtor and you'll be able to be confident that you're buying a home that will work well for you from day 1.
Next week, the closing process...
8. Decide which home you want and what's a fair value for it. In your home buying process you'll have the opportunity to consider many homes as you find the best fit for you. When you know the market and yourself well, finding a home can take only a couple of weeks! Once you've identified "your home", you and your Realtor will write an offer for that home. Consider carefully how you want to negotiate for the home. Investors calculate the ROI (return on investment) over the period they intend to hold the property with little concern for the emotional value of the property, since they seldom live in the property and don't emotionally bond to the property and area. A rule of thumb is that they need to purchase the home at a price below market value to make the profit they expect. Is your home purchase simply a real estate investment or more? Your realtor can show you the data your lender's appraiser will use when determining a fair market value for the property. You don't want to overpay nor will the seller be wanting to undersell the property. Every contract includes: people, property, price, terms (inclusions, dates, contingencies, who pays for closing costs, etc.), and consideration (earnest money). When purchasing a home FSBO, for sale by owner, the offer will also include who pays your realtor and how much that will be. (As you know, realtors using the mls advertise coops for agents bringing them a buyer. This means when purchasing a home in mls you, the buyer, don't have to pay your realtor's commission at closing-the seller does!) Your offer will include a check for earnest money. This check will be cashed and put into a trust account until the contract closes or is terminated.
9. Know your timeline and due diligence rights and responsibilities.
In a normal sale you'll have several dates tied to investigations you may perform to make sure the property fits what you want and can live with after closing. This is called your due diligence. It includes:
Title investigations-Research on the title to the property and any related liens, judgements, or deficiencies is done by the title company and delivered to you, the buyer. Read your title commitment and ask questions if something is not clear to you. It is a summary of the recorded legal documents linked to the property. On some occasions a real estate lawyer is needed to clarify title questions. A seller must clear the title of all encumbrances (liens or judgements) before s/he can transfer title to a buyer at closing. You may have something show up on you, too, during the title search. If so, you will need to "cure" the title by proving the person is not you or by paying the judgement and documenting the payment before closing.
Inspections-Every buyer should perform a property inspection to verify s/he knows the state of the property and its improvements. Consider paying a licensed inspector (about $250-$400) for a home inspection. If your property has severe or specific problems/concerns, then consider having these evaluated as well (some common areas investigated further are the roof, sewer line, animals or insects, environmental issues like radon, mold or methamphetamine lab organic levels, structure, electrical, furnace, plumbing, septic, well, plants, zoning, building permits and codes, etc.). This is the most common area when "round 2" of negotiations takes place over what to repair and how.
Survey-Have a surveyor determine the boundaries and easements on your property, so you don't have problems later with building or neighbors (about $250-$350).
HOA investigation-Read any covenants, HOA meeting minutes and financials, so you know you'll be ok living with this very local governance that can put liens on your property if you don't pay the HOA dues or fines.
Appraisal-Your lender will set up an appraisal for the bank lending you money to verify the home is worth at least the purchase price. You don't have any work to do here. You'll make a check to your lender for the appraisal at the time you complete your loan application. You should get a copy of the appraisal at or just after closing, since you've paid for it.
Loan Conditions-Most loans today require full documentation of your finances. Provide the documentation your lender requests as quickly as possible. Since the underwriting guidelines on loans are changing, don't be surprised if there are some last minute requests from your lender. Remember to refrain from any credit purchases or changes until after you've closed on your home purchase. Sadly, some people who have bought things before closing changed their FICO score or debt/income ratios and lost the loan for the home they intended to buy. They sometimes lost their earnest money, too!
10. Some special sellers have additional requirements.
If you're buying property at an auction, know the specific rules of the auction before you go! Know ahead of time what you expect to pay in fix up costs and set the top price you'll pay. Most purchase contracts at auctions do not include an inspection clause or any due diligence, so you'll have to have already inspected the property as much possible earlier. The title is supposed to be preevaluated for any liens and deficiencies. Do your homework, too! Ask your realtor to recommend a title company to work with you on this title investigation before the auction! There will be a cost associated with that title report (each title company sets their own prices for that). Also, ask your realtor what other due diligence may be advisable to consider when purchasing a property. For most auctions, remember the price you bid is not the full price you pay. The auction rules will specify what percentage on top of the price you bid, you, the buyer, will pay for commissions to the auction house and to your agent. Some auction rules also require certified funds for the full amount to purchase if you have the highest/best bid, so plan ahead accordingly. More about auctions later...
In a sale where a bank is involved as the seller (short sale, preforeclosure, foreclosure, lender owned, HUD) expect the timeline until acceptance to be long. When you write the offer on a bank property no one knows exactly when the bank will agree to/counter your offer, so dates can be written using "x days + mec" (mec is mutual execution of contract by all parties). These bank offers can take from 30-180 days for mec! Colorado has a short sale addendum you should include if the home you want to buy is a short sale. (A short sale is one where the bank(s) the sellers used will be shorted funds at closing. Since the banks have to determine how much of a loss they can absorb, it takes time for them to respond. A short sale often happens because home prices fell below the amount of the loans on the home.) Few buyers have the patience to wait for bank short sale processes, so listing agents will gather many offers on a short sale, hoping one will still be in place to close when the bank's processes are complete! Sometimes a buyer's offer is too low for the bank to accept, so a backup offer gets a chance to buy! Sometimes the bank's counterproposal is unacceptable to the sellers on a short sale and the home then is foreclosed on. Banks also have their own addenda that are attached to any contract they accept. Often these addenda include an "as-is, where-is" clause. This spells out what inspections are or are not allowed; how the home can or cannot be dewinterized and who pays for this; what the bank will or will not do if the buyer is not satisfied with the inspection results; how funds will be delivered at closing; whether or not the bank will pay for buyer loan closing costs; etc.
Getting from the offer you've written to the closing table is quite a process. Even in smooth transactions, there are a couple of things that must be completed on time and to everyone's satisfaction. Work closely with your realtor and you'll be able to be confident that you're buying a home that will work well for you from day 1.
Next week, the closing process...
Monday, April 6, 2009
The Buying Process, part 2
Picking up from the first part which discussed financing, the next steps are about using the right Realtor for looking at homes.
4. Choose your Realtor, if you haven't already.
Yes, this was in step 2, and reality is many buyers don't ask a Realtor about financing, because they're not wanting to commit yet. Since the home you purchase is likely to be where you'll be for the next 10 or so years, your choice of Realtor matters. The Home Buyer Bill of Rights sets forth reasonable expectations for you. You deserve a person who listens and will take the time to understand what you want and need. Ask if your Realtor has earned the Acredited Buyer Representative (ABR) designation. To become an ABR, an agent must study buyer representation and services. They demonstrate success working with a number of buyers. And they continue learning and improving their ability to serve you, their home buying client. You hear our real estate market and loan market are in flux. Choose a professional who can guide you well despite the changing markets! Ask your ABR about your FREE Homebuyers Tool Kit, too!
5. Meet with your Realtor to discuss what you want and create a wish list.
Your Realtor should be able to find out what style of home and which locations best fit your needs from an in-depth interview. Sometimes you know exactly what you want and that it's available! And sometimes, if this is your first home or if you are undecided about what you want, a quick tour of five or six different types of homes can help you clarify your thoughts. Some agents say that buyers are liars. Not so in my experience! I've found most buyers are learners-of what they really want, consciously and unconsciously, in a home. This learning is a process for most buyers, so what you want will become clearer as you work through the process of finding your right home in this market.
6. Review the homes your Realtor previews and suggests for you to view.
Based on your interview, your Realtor can look at all the homes in the marketplace and select the homes for you to consider. Our great computer search and on-line tools include arial views and neighborhood information. Expect to get updates as new homes come on the market that fit your general parameters. You can screen what you're most interested in seeing, too. With so much inventory available, it is important to focus. The homes your agent suggests will fit your parameters of quality and be priced at fair market value or lower. A good Realtor will not show you overpriced homes. A good Realtor will also make suggestions of properties that may not fit your initial search, but may fit your desired outcomes.
7. View the best homes with your Realtor.
Set aside three to five hours for a tour of the best homes available. Consider different neighborhoods that meet your wish list. You should feel comfortable selecting one of the top homes you tour to buy and should be prepared to do so. Often buyers find their best home early in their search. In some price ranges and neighborhoods the market has shifted from a buyer's market to a seller's market. Discuss the market where you're looking with your agent, so you don't lose out on getting the right bargain nor move too quickly when deciding! Homes for sale today include traditional sellers, banks, short sales, foreclosed properties, auctions, for sale by owner sellers, lease-purchases, and exchanges. Your agent can help you determine what homes best fit your needs and how the purchase process works for each kind.
Coming next week, placing and offer and negotiating. Click here for Part 3, and Part 4.
4. Choose your Realtor, if you haven't already.
Yes, this was in step 2, and reality is many buyers don't ask a Realtor about financing, because they're not wanting to commit yet. Since the home you purchase is likely to be where you'll be for the next 10 or so years, your choice of Realtor matters. The Home Buyer Bill of Rights sets forth reasonable expectations for you. You deserve a person who listens and will take the time to understand what you want and need. Ask if your Realtor has earned the Acredited Buyer Representative (ABR) designation. To become an ABR, an agent must study buyer representation and services. They demonstrate success working with a number of buyers. And they continue learning and improving their ability to serve you, their home buying client. You hear our real estate market and loan market are in flux. Choose a professional who can guide you well despite the changing markets! Ask your ABR about your FREE Homebuyers Tool Kit, too!
5. Meet with your Realtor to discuss what you want and create a wish list.
Your Realtor should be able to find out what style of home and which locations best fit your needs from an in-depth interview. Sometimes you know exactly what you want and that it's available! And sometimes, if this is your first home or if you are undecided about what you want, a quick tour of five or six different types of homes can help you clarify your thoughts. Some agents say that buyers are liars. Not so in my experience! I've found most buyers are learners-of what they really want, consciously and unconsciously, in a home. This learning is a process for most buyers, so what you want will become clearer as you work through the process of finding your right home in this market.
6. Review the homes your Realtor previews and suggests for you to view.
Based on your interview, your Realtor can look at all the homes in the marketplace and select the homes for you to consider. Our great computer search and on-line tools include arial views and neighborhood information. Expect to get updates as new homes come on the market that fit your general parameters. You can screen what you're most interested in seeing, too. With so much inventory available, it is important to focus. The homes your agent suggests will fit your parameters of quality and be priced at fair market value or lower. A good Realtor will not show you overpriced homes. A good Realtor will also make suggestions of properties that may not fit your initial search, but may fit your desired outcomes.
7. View the best homes with your Realtor.
Set aside three to five hours for a tour of the best homes available. Consider different neighborhoods that meet your wish list. You should feel comfortable selecting one of the top homes you tour to buy and should be prepared to do so. Often buyers find their best home early in their search. In some price ranges and neighborhoods the market has shifted from a buyer's market to a seller's market. Discuss the market where you're looking with your agent, so you don't lose out on getting the right bargain nor move too quickly when deciding! Homes for sale today include traditional sellers, banks, short sales, foreclosed properties, auctions, for sale by owner sellers, lease-purchases, and exchanges. Your agent can help you determine what homes best fit your needs and how the purchase process works for each kind.
Coming next week, placing and offer and negotiating. Click here for Part 3, and Part 4.
Wednesday, April 1, 2009
Absorption Rate-What does it Mean?
In this changing market, some tools remain for evaluating an area. Read on to better understand the tool we call Absorption Rate.
Real estate methodology has changed over the years. In the “old days” title to property was executed via an abstract. An abstract for a property was like a Cliff Notes version of War and Peace. It was a written record of who owned the property, when they owned it and what was being transferred. Each abstract was a brief history of a variety of people’s lives at it related to a specific property. As ownership of a property changed, the abstract was passed onto the new owner. Then title insurance became more prevalent and abstracts eventually followed the path of the dinosaurs and slowly became extinct.
In a similar vein, the marketing of real estate has experienced a shift in perspective over time. Historically, the three words that characterized real estate were Location! Location! Location! You had your condition and financing, but location ruled supreme in the mind of the consumer. Today, location continues to be a critical element in making a final decision whether or not to purchase a particular property, but location has more to do with emotional appeal and the value aspect of a property.
From a factual standpoint, the two most important words in real estate today may be Absorption Rate! The dictionary defines absorption as to “take in and make part of an existent whole”. In real estate terms it could be defined as “taking in homes for sale and making them part of the inventory of sold properties”. The word rate then represents the amount of time at which absorption occurs.
If one were to analyze specific neighborhoods, communities or geographic areas, the Absorption Rate could be determined for both today and the past. By going through this process, it could be established if the real estate market in those areas is up, down or flat. We use this data to tell if an area has a hot market. The same can be said on a larger scale when looking at the entire real estate market. The National Association of Realtors (NAR) uses Absorption rate to determine whether the market is a buyers' market, a sellers' market or balanced. A balanced market has a 6.0 month absorption rate. Anything higher is a buyers' market. Anything lower is a sellers' market. Please remember that real estate is local, so even within an MLS area, some neighborhoods may be selling like hot cakes while others not so quickly. For neighborhood specific data, ask me or your agent for the latest data!
Therefore, below is a brief overview of listings and sales through February of each year for single family homes in the Metro Denver real estate market. All information is from Metrolist, the area Multiple Listing Service. It shows that we are again near a balance in the overall market.
Active Listings Sales Absorption
Year Listings % Change Sales % Change Rate *
2004 2008 --------- 577 --------- ----------------
2005 1780 -13% 549 - 5% 6.4 Months
2006 2157 +21% 603 +10% 7.0 Months
2007 2211 + 3% 651 + 8% 6.7 Months
2008 2548 +15% 597 - 9% 8.4 Months
2009 1848 -38% 570 - 5% 6.4 Months
· Absorption Rate: Assuming sales activity would remain the same, and no new listings were to come into the market, this is the number of months it would take to “absorb” i.e. sell the entire inventory of new listings for each year.
Real estate methodology has changed over the years. In the “old days” title to property was executed via an abstract. An abstract for a property was like a Cliff Notes version of War and Peace. It was a written record of who owned the property, when they owned it and what was being transferred. Each abstract was a brief history of a variety of people’s lives at it related to a specific property. As ownership of a property changed, the abstract was passed onto the new owner. Then title insurance became more prevalent and abstracts eventually followed the path of the dinosaurs and slowly became extinct.
In a similar vein, the marketing of real estate has experienced a shift in perspective over time. Historically, the three words that characterized real estate were Location! Location! Location! You had your condition and financing, but location ruled supreme in the mind of the consumer. Today, location continues to be a critical element in making a final decision whether or not to purchase a particular property, but location has more to do with emotional appeal and the value aspect of a property.
From a factual standpoint, the two most important words in real estate today may be Absorption Rate! The dictionary defines absorption as to “take in and make part of an existent whole”. In real estate terms it could be defined as “taking in homes for sale and making them part of the inventory of sold properties”. The word rate then represents the amount of time at which absorption occurs.
If one were to analyze specific neighborhoods, communities or geographic areas, the Absorption Rate could be determined for both today and the past. By going through this process, it could be established if the real estate market in those areas is up, down or flat. We use this data to tell if an area has a hot market. The same can be said on a larger scale when looking at the entire real estate market. The National Association of Realtors (NAR) uses Absorption rate to determine whether the market is a buyers' market, a sellers' market or balanced. A balanced market has a 6.0 month absorption rate. Anything higher is a buyers' market. Anything lower is a sellers' market. Please remember that real estate is local, so even within an MLS area, some neighborhoods may be selling like hot cakes while others not so quickly. For neighborhood specific data, ask me or your agent for the latest data!
Therefore, below is a brief overview of listings and sales through February of each year for single family homes in the Metro Denver real estate market. All information is from Metrolist, the area Multiple Listing Service. It shows that we are again near a balance in the overall market.
Active Listings Sales Absorption
Year Listings % Change Sales % Change Rate *
2004 2008 --------- 577 --------- ----------------
2005 1780 -13% 549 - 5% 6.4 Months
2006 2157 +21% 603 +10% 7.0 Months
2007 2211 + 3% 651 + 8% 6.7 Months
2008 2548 +15% 597 - 9% 8.4 Months
2009 1848 -38% 570 - 5% 6.4 Months
· Absorption Rate: Assuming sales activity would remain the same, and no new listings were to come into the market, this is the number of months it would take to “absorb” i.e. sell the entire inventory of new listings for each year.
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