Now that the congress has changed colors from red to blue, it's nearly a certainty that one of real estate's bugaboos will become a thing of the past in 2007.  Both the House and the Senate passed a bill which included a Federal deduction for PMI, a considerable monthly sum going to lenders when borrowers have less than 20% of their own funds invested in their purchase.  The real estate community has been pushing for such a deduction for years, but the Republican controlled congress was never a big fan of giving buyers a tax break on their PMI.  The bill is almost certain to be signed by the President, giving home buyers an incentive to wait till January 2007 to close on a home.

Broderick Perkins explains the details in an article in Realty Times.  Check it out for how it will affect you.

Update:  The Rocky Mountain News has an in-depth article this morning about the implications of the new mortgage insurance deduction.

Update 12/23/06:  Another in-depth article about the new law in the Wall Street Journal.

People often ask me if they need insurance when buying a condo.  The answer is yes, you need insurance, but not the same kind you'd buy if you were buying a stand-alone home.

A great explanation of the difference between a residential homeowner's insurance policy and a condo insurance policy is offered at Realty Times by Benny Kass of the Washington Post.  Benny explains why you need a condo insurance policy and a suggestion about who to buy it from.  Check it out.

Castle Rock, Colorado, has been named one of the nation's top 25 affordable suburbs, according to Business Week, with a median home price of $240,000, a cost of living index of 133, and a low crime rate.  Castle Rock school report cards indicate mostly highly rated schools.  As reported in the Real Estate Journal (of the Wall Street Journal), these suburbs may not be the least costly, but all things considered they're among the most desirable and most affordably priced in the U.S.

Read all about Castle Rock at my website.  It's a place to check out!

The media is in full court press mode about the real estate market in Denver, and it's about time.  The Denver market has been the center of frustrating and confusing information about foreclosures.  The market is dropping in value, and everybody has a point of view of why that's so.

This morning's Rocky Mountain News discusses the kind of square footage included in descriptions of homes for sale and whether or not some misleading figures are contributing to the high foreclosure rate.  One of Denver's top real estate brokers, Sonja Leonard, argues that including finished square feet in the home's description gives a misleading picture of how big the home is.  In her market, which is in central Denver, basements don't count for much.  They're not the large professionally finished basements you can find in suburbia.  Other brokers who work in suburban markets say that professionally finished basements are common and ought to be included in total finished square footage.

The article suggests that people shouldn't buy homes they haven't seen.  Excuse me?  I know a lot of that happens with investment buying.  But people who want to relocate generally DO want to see the home they're buying before they move in.  In my ten years in real estate I can count on the fingers of one hand the number of clients who didn't see the home they were purchasing before they moved in.  And even in those few cases they trusted me to pick their home because I had extensive knowledge of what they wanted. 

Buyers need to exercise their own "due diligence" when buying a home.  If you have a competent agent, preferably an Exclusive Buyer's Agent who represents only your best interests, then that agent will provide you with all the information you need to make a responsible decision.  At the very least you should expect to know how long a home has been on the market, whether or not other offers have been made on the property during that time, what the current sellers paid for the home, how much they owe on it (as far as can be determined), whether the home is in pre-foreclosure, meaning the sellers are working with the bank to get it sold before it goes into foreclosure, or whether it's owned by a bank, meaning it has already been through the foreclosure process and now the bank owns it.  You need to know what's included in the purchase and what's not, the square footage of the main floor, the upper floor, and the basement, and whether or not the basement has been professionally finished, or whether it's a "homeowner's special" which may not be the best work.

Another article this morning, this time in the Denver Post, talks about homeowners who have adjustable rate mortgages (ARM) and whose payments are about to go up because interest rates have gone up.  The article cites one homeowner who refinanced several times to fund her business.  Now the rate increases are forcing her monthly mortgage payment to jump from what was affordable when she refinanced to an amount she can no longer afford to pay.  The mortgage industry has come in for its share of criticism about the way they push "exotic loans," loans that have the potential to force homeowners out of their homes when the payments become too steep to afford. 

But where's the criticism of the individual making decisions to continue refinancing with potentially escalating payments until they have no choice but to let their homes go into foreclosure?  Many homeowners treated their houses as "cash cows" during the period when rates were low and refinancing was easy.  But tomorrow always comes, and if they'd been paying attention and exercising their own "due diligence" they should have known that the sky might fall and prepare for it.

All these issues are reasons to suggest that potential home buyers should be choosing a real estate professional to represent them who's looking out for their best interests and who will honestly advise them about the home they want to buy and the loan they want to use to buy it.

"Caveat emptor," let the buyer beware.  There are many things to know when you make one of the the biggest purchases of a lifetime, so be a smart home-buyer.  Get the facts before you buy. 

This morning's Rocky featured a big article about a stringent effort by the new chief of the Colorado Division of Real Estate, Erin Toll, to yank the licenses and prosecute, if necessary, of appraisers who phony up the value when submitting the appraisal to lenders.  She says she's currently investigating one where the appraiser "has inflated more than a dozen appraisals."  One case she cites gave a value $100,000 over what it should have been.

And then we ask why Colorado has the highest foreclosure rate in the nation?

There are more causes than the article would suggest, but certainly overinflated appraisals is one.

Earlier this year my dependable Tennessee lender notified me that she had stopped using the appraiser I had suggested she use, and couldn't tell me why.  I have to wonder this morning, did my appraiser inflate the value of one of my client's homes?

The problem is that if other appraisers (and real estate agents) use one of these overinflated homes as a comparable in trying to establish market value, that value will also be inflated, causing buyers to pay a hyperinflated price for the home they're buying..  Then when the house needs to be appraised for refinancing, or value needs to be established when a homeowner needs to sell, the danger is they'll instantly lose whatever equity they thought they had.

Overinflated value caused by greedy appraisers causes a domino effect.  Apparently Ms. Toll thinks that there's more of a problem in Colorado than meets the eye.  Stay tuned for developments on this newly emerging issue.

Today (9/17/2006) the Denver Post, in one of a series of articles on foreclosures, talks about the dangerous nature of 100+ per cent financing, not to all buyers, but to buyers who otherwise wouldn't be able to buy a home and who don't have the reserves to handle the many problems inherent in such loans, or to cover unexpected medical costs, the loss of a job, or another incident that may make mortgage payments impossible.  (Whew, that was a LONG sentence!)

If you're going to use 100% financing, be sure you know what you're doing.  Some real estate agents and some lenders will work overtime to provide marginal buyers with mortgages that will help them buy a house, but have them "upside down" on their mortgage (meaning that your house doesn't have enough value to support what you owe) in a matter of months, either from a general decrease in values, or by having what the Denver Post says lenders call "exotic" mortgages.  The Post says that every single foreclosure in Jefferson, Adams and Arapahoe counties filed in August was an "exotic" loan.

What's really the problem here is that prospective home buyers see that now they can buy with "zero down" when zero down financing should be limited to people who have a strong reserve either in cash or in assets they can quickly convert to cash, and a strong financial position in general.  Then if anything happens they have some money to fall back on during down times.  No solid financial profile here.

Zero-down loans are great for people who have great income but no cash for a down payment, and have a great financial profile.  One of the stories in the Post's story today was a man whose income was from his disability checks plus his new live-in girlfriend's tips as a casino worker.  When they split up he was in trouble. 

103% loans are common, where you can get more than the cost of the home when you buy.  But what happens if you get downsized at work and have a few large unexpected expenses.  A woman I heard about the other day on the radio didn't have insurance because she said "no" to the plan her employer offered, thinking she was too young to get sick (in her early 30s, and thought she could always buy insurance.  That's worth a whole other story, but she said when she finally tried to buy insurance that it was far too expensive, half her take-home pay!).  She was diagnosed with ovarian cancer and couldn't afford to pay the bills that mounted up for treatment -- a hefty $300,000+ dollars.  She didn't say anything about losing a house, but if she'd been in an "exotic" mortgage, there's no doubt what would have happened.  Yes, that's a lot of money.  But you never know when something like that could happen to you.

And that's the point.  Your financial future is always unknowable.  That's why you need a reserve and why you should know what you're doing when you borrow money to buy a house.

Some lenders, by no means all, offer these loans to marginal buyers because "If we don't do it, they will go down the street," as Mike Thomas of Hyperion Capital Group in Aurora said in the Post article.  Unfortunately, they don't have enough business to say "no" to buyers who may "look good" on the surface, but underneath you'll find either a gambler or somebody who's desperate to buy a house and will take these "exotic" loans just to be able to move into a house of their own.

Two reports indicate a sinking market in Weld County with Greeley leading the state in the number of foreclosures in August.  And Colorado is still number 1 with the highest rate of foreclosures among all the states.

I haven't been reporting on the foreclosure rate.  It's a new phenomenon, just starting to make a showing this year.  But since it's an indicator of the economy here in Colorado, and since we just had a report from one of the area's leading economists, Tucker Hart Adams, that Colorado is headed for a recession soon, either in 2007 or 2008 depending on what happens in the national economy, I'd better start paying close attention to the foreclosure rate.

As an Exclusive Buyer's Agent, which means I don't list any homes and all I do is help find homes for buyers, I have seen an enormous jump in the number of foreclosures in the MLS over last year.  I don't specialize in foreclosures, but now I'm beginning to realize that I may begin to have buyers who want to buy foreclosures, though when I've told them about the process they generally change their minds.  Maybe I should begin to specialize in foreclosures, although I can't visualize that.

The Denver real estate market is getting better and better for buyers.  Sellers are reducing the price of their homes by about $10,000 a month, if not more, until they're finally sold.  They're even offering incentives to the Buyer's Agent who brings them a buyer, to say nothing of the incentives for buyers -- down payment assistance, help with closing costs, I even saw a trip to the Carribean the other day.

We've already had our downturn in the market beginning in 2001.  Now, five years later, we're seeing the results of an overheated market prior to 2001.  Foreclosures are at an all time high.

But it's not just foreclosures from then that we're seeing.  It's new foreclosures, people purchasing in January of this year who have been forced into foreclosure.  I'm working with a couple now who are getting ready to make an offer on a pre-foreclosure property (bank owned, not yet foreclosed) where the seller bought the home in January and is now offering it for $8,000 less than she paid for it.  It's an amazing deal for my buyers, but the seller is certainly on the short end of the stick.

So what does all this portend?  If you listen to Tucker Hart Adams it could mean trouble for the Colorado economy, whose forecast for the 2007 Colorado economy is "Unstable Equilibrium," well, at this point it's the same thing I've been saying since 2001.  It's a great buyer's market, and with interest rates not going up by much, it's still a great time to buy.

Yesterday I had a call from a woman who had identified a property here in Denver, but since she had already "done fhe legwork and found the house" she wanted half the commission back, and she wanted help with the contract, plus shepherding it through to the end, at closing.

I don't work like that.  Identifying the property is the easiest part of the transaction.  Negotiating a contract and seeing the details of the transaction through to closing is the hard part, and the one with the most legal pitfalls for an agent.  Naturally, I turned down her offer for compensation

What I WILL do is work as a consultant for a fee.  My fee is negotiable, but only within reasonable limits.  I recently served as a contulant on a transaction where the demands weren't too bad.  I charged a flat fee for that one.  If someone wanted to negotiate an hourly fee, I'd be agreeable to that.

Normally the way I work is to collect my usual commission from the seller or the listing agent, and only if that isn't forthcoming, say when dealing with a For Sale By Owner (FSBO or fizzbo, as they're called in the trade) does the buyer have to pay anything.  But in all my years in real estate, no client has ever wound up paying the commision.

I can't help but wonder who these folks found to respresent them as an Exclusive Buyer's Agent.  Lots of agents will offer to do a transaction for almost nothing, but not many in the National Association of Exclusive Buyer's Agents (NAEBA).  The ones who do probably don't have a lot of business and will do anything to pick up $750 or so.  So the buyers probably will get an inexperienced agent to help which could cost them in the long run.

Yesterday as I was driving by Buckingham Square in Aurora (Mississippi and Havana) I wondered what would happen to the old mall now that Dillard's has moved to Aurora Town Center.  It looked like the ghost of shopping centers past with an empty parking lot and just a few stores still open.

Today we learn that a mixed use retail-housing development will be built with large stores, specialty shops, restaurants -- very much wanted by the community -- and likely rental housing.  It remains to be seen what form it will take.  Will it look like the development at I-225 and Alameda Parkway -- Aurora City Place, also developed by Miller Weingarten Realty LLC, an Englewood firm?  Or will it look like Belmar on West Alameda and Wadsworth, the redeveloped site of Lakewood's old Villa Italia mall?  Or maybe City Center in Englewood, the redeveloped Cindarella City mall?

Open air retail shopping areas are the 21st century's replacement for shopping malls built in the 1950s and -60s.  Lots of space for walking and gathering, while still making space available for parking. 

Denver's real estate market continues to provide great opportunities for buyers, but sellers will have to wait for better news.

Average prices in July for single family homes in Denver dropped slightly from June, but were up 4.59% over June 2005. Inventory rose to a new high of 31,989, 21% higher than last year, but just 3% over last month, indicating an increasingly stagnant market. The number of homes sold or under contract in July also dropped slightly from June's number, but when compared to 2005 the drop was nearly 10%. The length of time it takes to sell homes (both residential and condominium) increased over last year by over 15% to 95 days on market. On average residential homes are taking 90 days to sell, while condominiums and townhomes are taking 113 days to sell.

As was the case last month, the average price might have dropped even more if it hadn't been for several high-end home sales during July acting as outliers. Anecdotal evidence confirms the statistics. Agents are pointing to homes in high-end neighborhoods like Hilltop selling for close to $3 million, which drives up average prices. Median prices are a better reflection of actual market value.

Average price for a residential home (not a condo or townhome) was $328,721 compared with $335,111 in June, a 2% drop. Median price dropped slightly from $261,750 to $259,500. Condos fared better with a rise in price from $159,900 in June to $163,000 in July or a 2% increase, and a 5.5% rise in the median price to $194,705 in July from $184,566 in June.

Experts attribute falling prices and the decreased in number of sales to rising gas prices which don't affect the discretionary spending of higher-end buyers as much as mid-level buyers.

But national economic news has shaped a "wait and see" attitude. Most economists are optimistic about the housing market, believing that the housing "bubble" won't burst, but slowly deflate to more normal levels. Other economists, such as Paul Krugman of Princeton, are more concerned that housing will take a real hit and affect the national economy more significantly, possibly providing the underpinnings for a recession.

Because I'm an Exclusive Buyer's Agent (EBA -- I never list homes) people ask me all the time, "When's the best time to buy a house?"  Sometimes they want to know when they can get the best deal on a house, sometimes they want to know when the inventory (number of homes on the market) is high so they have lots to choose from, other times they just want to know whether "now" is a good time to buy or should they wait.

We have "seasons" of inventory in the Denver real estate market.  During the winter holidays the season is slow and fewer homes are on the market.  Sellers don't want to be bothered during the holidays having to keep the house clean 24/7 when they have other things to do.  So during the holidays is a good time to buy because sellers are more willing to make concessions, more anxious to sell.

Spring is our biggest season, with more homes on the market and more buyers looking.  The inventory continues to be fresh as new homes are added and homes sell that have been on the market awhile.  So if you want the best inventory, spring is the time to buy.

Summer is a busy season, too.  Buyers want to get into houses before school starts in mid-August, so by the time September rolls around things have settled down a bit.  Sellers may be less willing to agree to concessions during the spring and summer months, but it all depends on how long the house has been on the market and how anxious they are to sell.  In a buyer's market, like the one we have now, when houses have been on the market for awhile sellers are offering concessions.

So the best time to buy a house is when you need to.  There are benefits and drawbacks to buying in any season.  It's your call.

Give me a call at 303-587-3509 with any questions you may have about today's market or just about buying a house.  Or you can email me at Judith@Buyers-Advantage.net