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August 2006

OK, it's REALLY too early!

I was just in Phoenix the past couple of days. Average temp during the day was well over 100 degrees.

Dad and I headed out to Cracker Barrel for bruch.  You know Cracker Barrel.  They have artery mud food that is highly salted.  Plus sweet tea!  What could be better?  Then they have the whole front end full of kitsch.

Well, we walked in and they were PUTTING UP THE CHRISTMAS DISPLAYS!  It is August 30th and they are putting up Christmas stuff!!!!

I know it gets earlier every year.  But this is way, way, way too early...

7:32 PM - Aug. 31, 2006 - comments {0} - post comment

Coming up with that down payment

Believe it or not, a majority of respondents paid for the down payment on their first home with personal savings according to the Coldwell Banker 2006 Homeowner Annual Survey.  According to this survey, only 16% of respondents took advantage of "no money down" home loans for their first home.

By the time respondents purchased their second home, most were able to use profits from the sale of their first home as down payment on the second.  Even with the incredible cost of housing in some markets today, an amazing 81% of respondents in this survey do not consider themselves "house poor".  Almost 60% indicated they used 34% or less of their current income on house payments.

Respondents in this survey all made $75,000 or more per year.  We suspect that for buyers making less per year the percentage of those using "no money down" loans would increase substantially.  A large majority of the buyers who purchase those foreclosed homes that we list use either "no money down" financing or both a first and second mortgage in order to avoid making a down payment.  Only when an investor purchases one of our foreclosure listings do we see any sort of cash down payment.

According to the survey, 60% of respondents who are Baby Boomers or older said they planned to bequeath their homes to their heirs.   Only 10% of those 41 or younger said their primary residence factored into their estate planning.

Coming up with a down payment can be the most difficult part of purchasing your first home.  Using "no money down" loans is certainly one way to purchase the home of your dreams.

8:02 AM - Aug. 30, 2006 - comments {0} - post comment

Fix it up or let the buyer do it

According to the recent Coldwell Banker 2006 Homeownership in America Survey,  the do-it-youself trend may be winding down.  68% of the 25,000 respondents indicated the last home they purchased was either brand new or needed little to no additional work.

So, are the days of the fix and flip over?  This survey would indicate that potential buyers will be far more likely to purchase a home that already has the updating completed.  Today's buyer doesn't have the time or inclination to take on a big project to make a home liveable.  Even though they may get more square footage for the money by doing a little work themselves, it seems today's homebuyer is more interested in doing other things.

Investors are always looking for the fix and flip property.  Typically they want to purchase it at a discount, however.  So the chances of getting full price from an investor are pretty slim.

So our advice?  Fix it up before trying to sell it in today's market.

3:53 PM - Aug. 28, 2006 - comments {0} - post comment

We are so lucky

Yesterday's plane crash in Kentucky hit very close to home.  Mack was born and raised in Lexington.  He still has a son and his family who live there along with siblings, nieces, nephews, grandchildren and great grandchildren. His son's home is less than 3 miles from the airport as the crow flies and he has a sister who has a farm that is right on the flight path.

When we first heard of the crash we were very concerned knowing that his son and daughter-in-law had been planning a trip to Florida this weekend.  And when we couldn't reach his son on his mobile (which he sleeps with!) we became even more concerned.

Thankfully for us, everyone is safe.  But because Lexington is more like a small town than a small city (around 270,000 population) almost everyone will know someone who is effected by this crash.

We count our blessings every day and are so thankful for our loving family.  This is just a reminder of how fortunate we really are.

7:42 AM - Aug. 28, 2006 - comments {0} - post comment

Why people move

As a continuation of our series on the Coldwell Banker 2006 Homeownership in America Survey, we will examine the reasons why people move.

Almost half, 48%, indicated they moved as a result of their employment.  Another 45% indicated a better community lifestyle while 27% indicated they were moving as a result of a relationship change.  To no one's surprise, women more than men (53% to 37%) indicated they were moving as the result of a relationship.

The recent hike in mortgage rates do not appear to be affecting the moving process.  67% of the 25,000 respondents indicated increated interest rates would not influence their move.

In what has to be a drastic change from even 25 years ago, 81% indicated they do not live in the place where they grew up and 52% live more than 200 miles from that town.  On the other hand, 56% say they still live in the same state where they grew up.

So the age old adage appears to be true, people want to move away from home - just not TOO far away.

5:46 PM - Aug. 26, 2006 - comments {0} - post comment

How homeownership has changed

In a study commissioned by Coldwell Banker, Harris Interactive polled 25,000 US homeowners who make over $75,000 a year to try to determine homeownership trends.  We'll discuss these trends over several days.  Today we'll look at the difference in homeownership.

The Greatest Generation (ages 61 and up) have owned a total of between 2-5 homes in their lifetime.  Compare that to Baby Boomers who have also purchased between 2-5 homes.  As the homebuyer gets younger, the trend appears that the numbers will go up.  Already those between the ages of  25-41 have owned between 2-5 homes.  58% of them have already owned more homes than their parents did at a comparable age.

According to the survey, homeowners are moving because of lifestyle changes, not necessarily just to purchase a bigger and better home.  In fact 53%, when asked if they would move to "get more home for the money", answered no.

What do these statistics indicate.  For one thing, today's home buyers are not thinking they will actually stay in their current home long enough to pay off the mortgage.  Adjustable rate mortgages and other variable rate loans do not concern them.  Chances are they won't be in the property long enough to experience the steep adjustments in interest rates that concern economic forecasters today.

In our business, we used to say that our clients would move every 7 years.  This number has now decreased.  That indicates a more constant turn over of inventory as people continue to change homes.

Home buyers are moving for "lifestyle changes".  That may mean the addition of children.  All home buyers we know that have children are interested in the school systems where they plan to purchase.  Since all local schools in Colorado must make public their standardized test scores (CSAP), school districts that don't do well will effect the ability of home sellers in their districts to attract home buyers.

5:23 PM - Aug. 24, 2006 - comments {0} - post comment

Wow, we can't afford to live there!

Just got word that the housing affordability index in California for first time homebuyers is at 23%!  That means that only 23% of first time homebuyers in California can qualify for a median priced home in that state.  A year ago that number was 30%.

Since the median home is California is priced at $482,000, that means a person would need to make almost $99,000 per year and would still need an adjustable rate mortgage starting at 6.48% with 10% down.  Another item most first time homebuyers don't have would be $50,000...

In the Denver metro area our affordability index is at 62.4% since the median priced home in the area is $221,000. 10% down would be just over $22,000.  Still not an item most first time homebuyers would have, but it's getting closer.

We always knew there was a reason why we'd rather live here....

2:16 PM - Aug. 22, 2006 - comments {0} - post comment

Books vs. Coca Cola

Just ran across an amazing statistic.  It seems that Americans spend $54 Billion a year on soda pop.  Which is twice as much as they spend buying books.

And we wonder why we are getting fatter in this country.

Seems to me if we read more books and drank a LOT less soda, we'd all be better off.

8:28 AM - Aug. 20, 2006 - comments {0} - post comment

Watch those closing costs

Whenever you purchase a home, there are always closing costs.  These include fees charged by your lender to make the loan - origination fees, document prep fees and overnight express fees to name a few. They also include fees charged by the title company to close the deal (in Colorado the title company closes, in other states it is done by attorneys).  Their fees include title fees for the buyer, fees to close the real estate transaction as well as the loan and fees to prepare the documents.

All these fees have to be paid by you as the Buyer.  Either you bring money to the closing to pay for them or you roll them into your loan and pay for them over 30 years.

But closing costs vary from state to state and lender to lender.  A recent survey by bankrate.com ranked every state based on the average closing costs charged.  As you might expect, New York averaged the highest closing costs followed in order by Texas, Hawaii, Ohio and Florida.  The least expensive state was Missouri with Michigan, New Hampshire, Montana and Wyoming rounding out the bottom five.

Average closing costs across the nation are $3,024.  The difference on average between New York and Missouri?  $1,174.  That's a lot of money to a first time homebuyer who is scraping up cash as it is.

What can you do about it?  You can shop lenders.  Ask up front what their closing costs are and find out if any of them are negotiable.  It is not unheard of for mortgage brokers to eliminate some fees or lower their origination fees (which is usually the biggest ticket item) if a buyer indicates they will go somewhere else.  Every lender is required to give you a Good Faith Estimate up front that tells you what the lender thinks their fees are going to be.  Study this document carefully.  Get a GFE from more than one lender.  If you have a preference as to which lender you use and their fees are higher, show them the GFE from the other lender and ask them to match.  Chances are they will.

It's your money.  Spend it wisely.

12:34 PM - Aug. 18, 2006 - comments {0} - post comment

Sell your house to protect the profit?

Yes, you read this right.  Some people are actually considering selling their primary residence - which has increased in value by thousands of dollars in the latest real estate run up - in order to protect whatever profit they have.

A home is the biggest asset that most people have.  And, we believe, one of the biggest sources of retirement savings.  We think people who say Americans don't know how to save don't understand that savings doesn't always have to be sitting in a passbook account collecting 2% interest.  But that is for another day.

Since most people saw huge increases in the value of their homes in the past 5-7 years they are now concerned that there will be a real estate down turn which will take that profit away.  But, if they sell where will they invest?  We have read about investing in dividend-paying stocks as well as other stock related investments.

Problem is, there is no guarantee that the stock market won't experience a down turn.  Historically, real estate has out peformed the stock market.  And the rate of return on real estate investment has usually been 2% or so higher than inflation.  We can understand being nervous about having all your "eggs in one basket" so if that's the case, consider taking out some of the profit throgh a refinance and spreading your dollars into other investments - stocks, bonds, and other pieces of real estate.

We think selling your primary residence to "protect the profit" may be one of the most irrational ideas we have heard in a long time.

3:53 PM - Aug. 16, 2006 - comments {0} - post comment

Did you lose some money?

Did you know that there is $24 billion dollars sitting around in forgotten accounts just waiting to be claimed by the rightful owner?  Yes, you read that right, $24 billion!!

People move and forget to notify their banking institutions or former employers or other companies and they leave money in accounts.  Small savings or checking accounts, small retirement accounts and utility company deposits to name a few.

After a certain amount of time, these institutions are required to turn them over to the state as unclaimed property.  The state hangs onto the money until it is claimed by the rightful owner.

Now, of course, there are people out there who will offer to find this forgotten money for you - for a price!  But you can do it yourself.  Go to www.unclaimed.org and click on the state you are interested in.  You will be directed to the correct web site.  If you have federal money or money in Canada, click on the links button at the top of the page.

Last year around $1.2 billion dollars was repaid to rightful owners.  This year, maybe one of them could be you.

1:43 PM - Aug. 14, 2006 - comments {0} - post comment

Is a Living Trust for you?

If someone mentioned a Living Trust to you, what would you think?  I don't have those kinds of assets.  I'm young so I don't need this.  Way too complicated for me!!

Maybe you should reconsider.  A will provides for distribution of assets at the time of death - and that's about it.  A Living Trust is effective immediately and is an efficient way to manage assets in the event of incapacity, as well as the distribution at time of death.

The Living Trust document lists three parties - the person who owns the trust (that is generally you), the person who will control the trust (that is usually also you), and the recipient of the trust (your beneficiaries).  The document is changeable throughout life.  Beneficiaries can be changed, the plan of distribution can be changed and, in the case of small children, the person to watch over their interest in the trust can be changed.

Everything a person owns, except for certain retirement accounts, can be place in the Living Trust.  The main reason people use a Living Trust is to avoid probate.  Rather than go through a possibly long and expensive court process, the beneficiaries can receive the benefit of their interest in the trust almost immediately.

If you own property in more than one state, you will almost certainly want to investigate a Living Trust.  Otherwise, your estate may have to open probate in several states with resultant fees and expenses.

Before you decide that a Living Trust isn't for you, contact an estate planning attorney.  It may be the best money you spend.

1:12 PM - Aug. 12, 2006 - comments {0} - post comment

Check that insurance policy

When you purchased your home you also purchased a homeowner's insurance policy to protect the dwelling and the contents in case of fire and other disasters.  Chances are you haven't checked it since.

Is the insurance company still highly rated? Has that company paid recent claims in a timely fashion without hassle?  Sometimes the cheapest plan isn't the best plan.

Make sure the company will still cover your home.  In Colorado there are places of high fire danger where companies are reluctant to renew policies or to write new ones.  If your policy is carried by one of these companies you may want to consider switching. Obviously places like Florida and the Gulf Coast have their own issues.

Are you familiar with the liability portion of your policy?  Do you have an ACV (actual cash value) policy or a replacement cost policy?  One type will allow you to replace your home as it was at the time of loss.  The other will give you a check for the amount of the policy and you'll be on your own trying to find a new home for that price.

Be sure you're carrying the right amount of insurance.  It's not a bad idea to have your home appraised every few years to make sure your insurance coverage is sufficient. 

There are generally three mistakes that homeowners make:

1. They try to be dishonest on an application.  Saying you live in a rental property is automatic grounds to reject your claim.
2. People fail to list detached buildings on their policies.  This could be a garage, a barn or a work shop. Failure to list them may mean they won't be covered in case of loss.
3. Most importantly, people cover the entire value of the property rather than the dwelling or detached structures.  The dirt will still be there in case of a disaster.  Save yourself some money and don't insure the ground.

Finally, if you have remodeled your home and increased it's value, make sure you have increased your homeowner's coverage to match.

12:59 PM - Aug. 10, 2006 - comments {0} - post comment

Colors do matter

If you've ever sold a house, we're sure your real estate agent told you to paint everything "broker beige".  You probably thought she was nuts!

Research indicates she may have a point.  People react very strongly to color.

Reds, oranges and yellows generally evoke feelings of warmth and comfort but can mean anger and hostility to some.  Blues, purples and greens are usually described as calming, but can also bring to mind feelings of sadness and indifference.

Chromotherapy, or light therapy, is used today in holistic treatment settings.  In these treatments:

• Red is used to stimulate the body and mind and to increase circulation.
• Yellow is thought to stimulate the nerves and purify the body.
• Orange is used to heal the lungs and to increase energy levels.
• Blue is believed to soothe illnesses and treat pain.
• Indigo shades are thought to alleviate skin problems.

So, in order for a prospective buyer to feel something other than anger, hostility, sadness or indifference, a more neutral shade is often recommended.

Remember, what is soothing to you may not be to the next owner of your home. 

1:25 PM - Aug. 8, 2006 - comments {0} - post comment

Is it real or is it???

Did you get that urgent email last week about not opening an email from Iraq because Osama bin Laden could get into your computer?  Or how about the one that said that Microsoft and AOL were merging and this one WAS REALLY TRUE - unlike the other thousand or so that have gone around.

Your family and friends probably aren't as appreciative as they might be of your forwarding these items.  Especially as most of them might already know they are hoaxes!!  But how to check them out?

There are two sites that you can use to tell fact from fiction.  The first is www.truthorfiction.com .  It will also list viruses and worms that are currently circulating.

The other site is www.snopes.com .  By filling out the Inboxer Rebellion information you will get a red, yellow or green light that tells you whether or not the story is true.

And on a further note, we think it makes a bad impression - and can be considered spamming - to forward those poems, stories and informational pieces that ask you go send to 7 people within 7 seconds or you'll get bad luck.  Please think twice before sending these on.

1:20 PM - Aug. 6, 2006 - comments {0} - post comment

Free software predicts mortgage foreclosures!!

Consumer Advocate Harj Gill has developed a software program to predict when you will default on your mortgage!

 "Piggyback" loans originated a few years ago.  These loans are really two loans closed at the same time.  The first is for 80% or more of the total mortgage amount to avoid payment of mortgage insurance.  The second is for the remaining amount of the loan and is usually a variable rate loan.  The first may also be a variable rate.   Developed for sophisticated investors, they became very popular with borrowers who had little or no down payment.  According to SMR Research, 48.2% of all loans were piggy back loans by the middle of 2005.

And the default rate on these loans is 43% - with a staggering 50% default rate if the FICO score is under 660.

Problem is, when the variable interest rate kicks in increasing the monthly payment.  Borrowers who barely qualified at the time of the home purchase may have real problems making the increased payment.

Gill has created a "crystal ball" software program where you can enter your current income and debt and it will tell you - to the exact month and year - when you will default on your mortgage.  But the good news is, by changing some items, it will also tell you how to avoid default.

To get a copy of this software go to www.mortgagefreeusa.com

You can't afford not to do this.

2:56 PM - Aug. 4, 2006 - comments {0} - post comment

Can you still flip?

Remember the days when you could buy a property, slap on  a coat of paint and some new carpet and sell it for several thousand dollars profit all in a few weeks time?

Well, those days are pretty much over.  Yes, you can still buy investment real estate and you can still fix it up and sell it for a profit.  It will just take longer in today's market.

Here are some of the new ground rules:

• Hold onto the property longer.  Double digit appreciation is all but gone with the exception of a very few markets.  You will need to hold it longer to make the profit.
• 
  
  Fix it up: The better it looks, the better the resale value.
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  Know your market: Research the city, neighborhood, etc. where you plan to make the investment purchase to see if the area is on the upswing.
• 
  
  Consider the area job market. If unemployment is on the rise, the number of possible buyers is shrinking.
• 
  
  Profile buyers.  What is the amount you hope to get for the property?  How does that stack up with the pool of available buyers.
• 
  
  Enlist the help of agents.  Real estate brokers know the market inside and out.  They can provide valuable insight - and maybe marketing!
• 
  
  Pay attention to neighborhood (a worse house in a good neighborhood is better than the best house in a bad neighborhood.)
• 
  
  Pay attention to appreciation.  Don't plan on double digit appreciation in today's market.

1:30 PM - Aug. 2, 2006 - comments {0} - post comment

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