Why Choose a REALTOR® Instead of a Real Estate Agent?

REALTOR®

Did you know that there is a difference between a REALTOR®, and a real estate agent? When I first became a real estate agent I thought that if you were a real estate agent you were also a REALTOR®. I was wrong, there’s a big difference.

The real estate industry in Colorado is regulated by the Department of Regulatory Agencies (DORA). There are licensing requirements and common law obligations that must be adhered to in order to hold a real estate license, but there is not a code of ethical standards in which real estate agents must uphold. In short, this means that if you are dealing with an unethical real estate agent who is not a REALTOR®, your only recourse may be to file a complaint with DORA or the courts.

A REALTOR®, in comparison, is a real estate agent who chooses to subscribe to and follow a strict code of ethics and standards of practice as developed by the National Association of Realtors. If a REALTOR® is accused of violating the Code of Ethics they agree, as a condition of membership, to arbitrate contractual disputes and specific non-contractual disputes. New REALTORS® must take an ethics course and pass an ethics exam, and continuing REALTORS® take an ethics refresher course every four years. In short, REALTORS® are real estate agents who want to play by the rules, treat all parties honestly, and submit to disciplinary action if found to be in violation of these ethical standards.

Choosing to work with a REALTOR® also means that you are working with a professional who strives to remain informed on issues affecting real estate and, as knowledgeable professionals, they willingly share the fruit of their experience and study with others. REALTORS® acknowledge that cooperation with other real estate professionals promotes the best interest of those who utilize their services. If you are looking for a real estate agent with integrity, you will find it in a REALTOR®.

Being an honest and reliable person and professional is important to me. I take my commitment to professional and ethical business very seriously and that is why I am a REALTOR® and serve on the Professional Standards Committee of the Denver Metro Association of Realtors.

 

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The Code of Ethics was adopted in 1913 with the Golden Rule as its theme.

Buying in a Seller’s Market

buying in a seller's market

Tips For Buying in a Seller’s Market

Today, a typical buyer in the Denver Metro area who is looking for a home in the $150,000 to $400,000 range will have to compete with multiple offers. This can be an incredibly frustrating experience, especially when a buyer loses out on a house they loved while prices continue to rise.

Nobody wants to overpay on a home, but gone are the days when you could find an inexpensive fixer-upper that’s been sitting on the market. Back in January of 2010 there were 4,578 active listings in the city of Denver between $150,000 and $400,000. This January there were only 1,353. And sadly, this isn’t expected to change anytime soon. Denver was named the sixth fastest growing city in 2015 with over 4,000 people moving to Denver each month.

With rents rising at a rate of 13%, buying a home is still the best option so here are some tips to beat out the other buyers to purchase a home in Denver.

1. Prepare to Buy

  • Meet with a local lender to get a pre-approval letter.
    1. When a listing agent receives several offers on a home they will look for a pre-approval or pre-qualified letter along with the offer. They will also call the lender to find out how strong of a buyer you are. It will pay off if you’ve met with a local lender and begun this process. Offers without lender letters are considered not as strong. Listing agents will favor local lenders they can easily communicate with over those lenders who may be out of state, or a pre-approval letter that was generated by a website.
  • Learn the market.
    1. On average, homes in Denver are selling at 99%-100% of list price. Have your realtor make appointments for you to see a variety of different homes in your price range so that you get a realistic idea of what is available for the price you want to pay. This can be a rude awakening for many buyers but it’s best to learn what you can get for your money before you try to put an offer in on your dream home.

2. The Search

  • Don’t wait until the weekend.
    1. If your Realtor has set up a search for you and in your inbox is a listing for a property that you think could be perfect, go and see it ASAP! With such a small amount of inventory houses are frequently going under contract within hours of being listed. If you see something you like, you’ve got to make a move.
  • Be flexible with what you’ll accept.
    1. There are many things you can change about a home but location isn’t one of them. If the location is ideal but the bathroom has the ugliest toilet you’ve ever seen, take into account that a toilet can be replaced. It can be hard to look past cosmetic imperfections or a messy house, but if you can you may find a great house where no one else is looking.

3. The Offer

  • It’s okay to pay more for something you love.
    1. It is not uncommon for offers to come in $15,000 or more over the list price. With home values in Denver growing at an average of 8.4% a year, you’ll make up the extra cash as equity in no time. If you’ll be heartbroken if the house goes to another buyer for a certain price over yours, offer that price instead.
  • Don’t ask for favors.
    1. You don’t want to ask for the seller to pay your closing costs when they’re just looking at the bottom line. Do what you can to make your offer the most competitive by altering what you ask for to suit the seller’s needs, whether that’s a few extra days after closing to take possession or an agreement to split or pay for closing costs.
  • Tug on the emotions.
    1. Like it or not we have sentimental connections to our homes and sellers will often choose a buyer that they feel a connection too over one with a higher price. I include an introductory letter with every offer I submit. These letters are designed to introduce the buyers to the sellers in a way that they can relate too. Take note of personal items in the home during the showing, you may share a hobby or family tradition that will make a seller want to choose you over another.

The Importance of Using a Mortgage Broker

The Importance of Using an Experienced, Local Mortgage Broker

Times are rough for home buyers in Denver these days.

They spend months searching over limited inventory, race to write offers on properties they like, and often have to offer $10,000 – $30,000 over the listing price just to have their offer considered. When a listing agent reviews offers with the seller one factor they are looking at is the pre-approval letter from the buyer’s lender. A seller may not know the difference between a letter from a national bank, an out of town mortgage broker, or a local mortgage broker, but you can bet that the listing agent will, and likely guide the seller towards the most trustworthy option – the one that is going to get everyone to the closing by the smoothest route possible.

I have worked with buyers who chose to get a mortgage through their bank, buyers who chose an out of state mortgage broker, and buyers who choose a local mortgage broker. My preference time and time again is a local mortgage broker. Seeing how bad things can (and do) go with the other options has made me a local mortgage broker cheerleader for life. Here are the reasons why I feel it is important to use an experienced, local mortgage broker.

  1. Options – Mortgage brokers have tons of information on loan programs, and options. They are used to working with a very diverse assortment of buyers, and those who have been in the business for a while know all the rules, tips and tricks to help just about anybody secure a home loan. They can explain all the programs and options that work for you to give you the biggest financial benefit. Banks can do this as well, but they are limited to share only the programs that they offer. A mortgage broker will always have access to more banks and lenders that may not deal directly with the public, and that can save you money.
  2. Availability – The home loan process can be overwhelming and exhausting. There are so many forms, documents and financial information that lenders require that it’s enough to make you think you’ve promised them your first born. You’ll definitely want a friend, someone you can call outside of “banking hours” if an issue pops up in the real estate transaction or during the loan application process. A mortgage broker can offer the personal service that you need. Unlike a bank, a mortgage broker is doing all of the work, from loan origination to closing, they will know your application inside and out and be able to communicate on your behalf with the lender, title company and the real estate agents. If you work with an out of state bank or mortgage broker you may have to potentially deal with people and documents being unavailable when they’re needed because they’re outside of your time zone. In addition, an out of state broker or bank may not have any idea what the state of the market is and how long it currently takes to order and receive an appraisal in Denver (something that is required of the lender). This leaves you vulnerable to delays in the contract, at risk of losing your earnest money or termination of the contract due to the poor performance of the lender.
  3. Accountability – Most mortgage brokers get paid on commission, so if the deal doesn’t close, they don’t get paid. That means that they are invested in seeing you get to closing because it is mutually beneficial. A local mortgage broker is also likely looking to gather referrals, and your future business (in case you refinance), which means that their local reputation is important to them. Out of state mortgage brokers can hide from angry clients, and real estate agents without much threat to their reputation. Big banks with frequent turn over are also not as concerned about a bad review as an individual or mom-and-pop mortgage broker would be. I don’t think that making money and avoiding threats is how mortgage brokers operate, but it’s nice to know that if you’re three days from closing and a clerical error shows up on a tax document that there is someone who is doing everything they can to make sure you close on your new home in time.

Having a lender letter from an experienced, local lender may help your offer get accepted over another, but at the end of the day (or contract) you want to have the lowest mortgage rate you can. Mortgage brokers will likely be able to get you the lowest rate available, but the bottom line is to shop around. Not all mortgage brokers are good, and not all banks are bad. Just like you would with an insurance or new doctor, compare service providers. Ask questions, check credentials, and read reviews and testimonials. I have a short list of really wonderful, local mortgage brokers that I’m happy to share if you’d like a recommendation. It’s important to find someone you can trust who can provide you with the best mortgage rate, financial education, and personal service.

The Importance of Using an Experienced, Local Mortgage Broker

Move-Up Buyers Win in Denver’s Market

Movin_on_up

I keep telling those that inquire about the real estate market in Denver that it is insane, unless you are a “move-up buyer”.

This week realtor.com ranked Denver fourth in their list of The 20 Hottest Housing Markets in the US Right Now, and with good reason. Last month sales prices in Denver leapt 6.3% over sales prices in February and the average list price per square foot rose from $166 to $235. This is due to the increasingly strong demand for homes in the Metro Denver area and continued low inventory. Population growth, job growth, and low mortgage rates are putting more and more people in a position to buy a home. But, even a surge is new spring listings it is not enough to keep up with the high demand for housing in Denver.

Dozens of buyers are fighting over each available property, and this is where it gets “insane”. In an effort to beat out multiple offers, home buyers are not only offering $10,000 – $30,000 over the list price but are also agreeing to purchase homes “as-is” and to pay cash for any difference between the purchase price and the appraised value of the home. This puts first-time home buyers, and those without large cash reserves, at a great disadvantage. These acts may seem crazy, but they are becoming the new normal, especially for those searching for a home under $400,000.

As stressful and discouraging as this market can be for buyers, there may be one kind of buyer that can greatly benefit from the current market: move-up buyers. Move-up buyers are existing home owners that may have outgrown their current home and are looking to move-up the property ladder.

How Move-Up Buyer’s Win in Denver’s Current Real Estate Market

  1. Profit: Take advantage of your position as a home owner and list your home now. Home prices are at record highs in Denver and that could equal a higher payoff for you.
  2. Timing: In the current market you won’t have difficulty finding buyers who will agree to a lease-back that allows you to stay in your 1st home while you look for your 2nd. It is not uncommon for sellers to ask to remain in their home for up to 90 days after closing. This gives you time to search for your 2nd home after you have a nice down payment in your pocket to work with.
  3. No Waiting: A current average of 36 days on the market means that you won’t have to wait long for your 1st home to sell.
  4. Financing: Continued low interests rates means that you can get a great rate on the new mortgage for house #2.
  5. Finding a New Home: Inventory of homes listed $400,000 – $1,000,000 have shown a slight increase since 2013. If your second home is in that price range, not only will there be more to choose from when you look for house #2, but you won’t have to suffer the same competition as those looking under $400,000.

Movin_on_up

Buyer Boot Camp #2

Financial Boot Camp for First Time Buyers

 

Buyer Boot Camp #2: The Two-Year Rule, Keep Your Job

If you started a new job today, one with higher pay and great end of quarter bonuses, congratulations! But, it will be two-years until you can qualify for a mortgage with that new job. Just like you learned in Buyer Boot Camp #1, it’s not enough to tell lenders you can afford a home loan, you have to prove it to them.

Due to the recent housing crisis, the requirements for securing a mortgage have tightened significantly. Lenders want to see borrowers in the same job for at least the last two-years, and that goes for part-time workers, contract workers and the self-employed. Twenty-four months at the same job making the same stabile income without any breaks, or changes is best. Lenders will not make any assumptions in regards to earning reliability in a new job compared to the old one. So, no matter how much you may want to leave your job and never go back, if buying a house is a priority, stay put until the keys to your new home are in your hands.

If you’re self-employed, or working as a contract worker, you will have to jump through some extra hoops to qualify for a home loan. If you had a high paying corporate job for ten years and last year you went into business for yourself you’ll find it nearly impossible to qualify for a home loan. Even if you have a terrific credit score, because you haven’t been self-employed for two years or more you’ll likely have trouble securing a loan. The other tricky thing that the self-employed need to be aware of is that unlike the salaried employee, your mortgage amount will be calculated from your net income and not your gross income. This means that while it’s nice to have a low net income for tax purposes, a low net income won’t qualify you for a home loan. Basically, you need to decide which is more important to you: qualifying for a larger loan, or paying less on your taxes. Rather than deducting your expenses, consider depreciating some of your purchases. You may also be able to amend your previous year’s tax return to bring up your net income, but keep in mind that this will equal a higher tax payment.

If you’re working one or many part-time jobs, the two-year rule applies to you as well, maybe even more so. This is because unlike the salaried employee, your pay is based on an hourly rate and an average pattern of hours that you work. If you change a job, a lender will not be able to forecast income without seeing a new and established pattern of work hours.

No matter what your work situation has been like over the last two years, lenders will need to see the past two-years’ tax returns, bank statements, as well as proof of any debts or assets you own. If you’re anything but a salaried employee expect to also show paper trails/invoices for any checks received that are over $400, and provide gift letters for any money your family or friends might be helping you out with. Applying for a mortgage can feel like a job in itself, but the process will be a lot easier if you haven’t made any job changes in the last two years. Resist the urge to make a change until you are comfortably living in your new home.

Keep Calm and Wait Till Closing

Buyer Boot Camp #1

Financial Boot Camp for First Time Buyers

You’ve done the research and know that buying a home is the best big-ticket purchase you will ever make, so what’s next?

Buyer Boot Camp #1: Check your credit score.

A FICO score is a three-digit number that determines the interest rate you will pay on your credit cards, car loan, home mortgage, and is connected to just about every part of your life. The higher your credit score the lower your interest rate will be. The real estate world sees your FICO score as the determining factor of whether or not you are able to handle a new loan.

There are three big credit bureaus out there: Equifax, Experian, and TransUnion. You need to check your score with all three because each credit bureau receives information from different sources, for example one may not get the report from your cell phone provider, while two others may receive the report from a credit card. Many credit reporting sites allow consumers a free credit report, and will include scores from all three, just be sure to cancel after one month so you don’t get charged a fee.

FICOIf your score is below 660 you have some work to do before you will be approved for a mortgage. Look your reports over carefully for mistakes or fraudulent charges, 79% of reports contain mistakes that can be cleared up by contacting the credit bureau. Be patient, this process can take some time to resolve.

The best way you can improve your score is to pay all of your bills on time, all of the time. 35% of your FICO score is determined by whether or not you pay your bills on time. Even if you can only afford to pay the minimum, if you pay on time you are on the right track. Just one late payment can screw up all of your hard work. To protect yourself set reminders in your calendar of due dates, or sign-up for automatic payments.

The next best thing is to pay off your credit card debt. Another 30% of your FICO score is a reflection of your debt-to-credit limit-ratio. Your debt is the sum of all of your credit card balances, and installment loans. Your credit is the limit you are allowed to spend on all of your credit cards combined. Lenders will assess your ability to keep up with a monthly mortgage payment. If your debt-to-credit-limit ratio is high then the concern is that you are not able to keep up with your debt. Do your best to pay down your credit cards and ask card companies to boost your credit limit. Cancelling a credit card will lower your overall credit limit so consider simply cutting up or hiding the card if you’re afraid you’ll be tempted to overuse it.

The next 15% of your FICO score is determined by your credit history. You may have been financially responsible for years without ever using a credit card but if a credit card wasn’t tracking your purchases and your payments there is no record of your good financial habits. Lenders want to know you can be financially responsible over the long-term and a long credit history will show a good summary of your money-managing habits.

The final 20% of your FICO score is determined by the mix of the kinds of debt you have and how much new credit activity has been going on. If lenders see that you are able to pay your credit cards, auto loan and retail cards on time they will see a consumer who can manage a variety of responsibility. Do your best not to open up any new credit cards, or make a big purchase within one year of buying a house. Too many credit inquiries can have a negative effect on your score. Maintaining a low balance on your credit cards in the months leading up to buying a home is a good strategy.

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Getting your credit score under control may take some time, be patient and persevere. If you can show that you are consistently responsible with managing your money then you are ready to buy a home.

Next: Buyer Boot Camp #2

Why You Shouldn’t Be Renting in Denver

Sure renting is convenient. Renting makes you feel like you can leave at anytime. You aren’t responsible for major improvements or if the toilet starts to leak. And owning a home is expensive, right?

If you are or have been renting in the Denver metro area for more than two and a half years I recommend you kick that rental relationship to the curb and pursue the path of home ownership. Data shows that the number of years you have to own and live in a home in Denver before you begin to have more money and assets than you would have if you had rented is only two and a half years.

Home ownership is still one of the best investments you can make. The Federal Reserve reports that a homeowner’s net worth is over thirty times greater than that of a renter. An average homeowner has a net worth of $174,5000 while the average net worth of a renter is only $5,100.

Despite new building in Denver and a rental vacancy of 5.1%, Denver’s rental costs continue to climb, up 3% from last year. The Denver Business Journal reports the following data:

County Average Monthly Rental Cost Vacancy Rate
Adams $988 4.7%
Arapahoe $1,026 4.5%
Boulder/Broomfield $1,228 6.7%
Denver $1,093 6.8%
Douglas $1,262 3.7%
Jefferson $1,033 3.4%

The average rental cost in the Denver metro area is $1074. Imagine what kind of home you could have with a mortgage payment of $1074. Buying a home using a 30-year fixed rate mortgage at 4.5% makes buying in the US 38% cheaper than renting, and 43% cheaper in Denver. Homes under $300k in Denver are on the market for an average of 40 days, with many going under contract within hours/days of being listed.  It may not be the same as giving your landlord 30 days notice, but what you get back is far more valuable than that security deposit.

So do yourself a favor and get out of that rental. The process may seem daunting but that’s why I’m here to help. sarah@idealprops.com