An article in the Wall Street Journal points out a successful strategy for making a low offer in a stagnant market. During a hot market sellers were used to turning up their noses at lowball offers. But with the real estate slump affecting many parts of the country sellers should learn that a low offer isn't an insult. According to national real estate expert Danielle Kennedy, a low offer is "an expression of interest," and should start the ball rolling to a successful sale.

Making low offers is part of the stock in trade of Exclusive Buyer's Agents (EBAs). Not that it's a standard practice in every market. But we do want to make sure that our clients don't pay more than a property is worth. The secret is knowing market values and being able to demonstrate to a seller that the offer price is reasonable given sale prices of comparable properties in the neighborhood. EBAs have to give the seller strong justification for a low offer.

Denver's real estate market is uneven. Prices in some neighborhoods are stable, even appreciating, while in others are dropping slightly, and in still others are dropping drastically. This kind of a market suggests that buyers should be careful in who they choose to represent them. Buyer's Agents who don't work exclusively with buyers can be affected by their expertise in representing sellers, wanting to be fair to the seller, sometimes to the detriment of their buyer client. Exclusive Buyer's Agents don't have that kind of a mindset. Their mindset is on getting the best price for their buyer clients.

When you first start thinking about buying a home -- whether you're moving up or buying your first home -- you'll be offered all kinds of advice from friends, family and co-workers. Their one purchase (maybe two or three) makes them an expert on home-buying. They'll recommend inspectors, lenders, insurance agents they've used.

But wait! They've only had one (okay, maybe two or three) experience. But any REALTOR® has had experience with hundreds, maybe thousands of transactions. That does make them an expert! And they've had a lot of experience with the professionals they recommend.

I've had ten years of experience working with home buyers to buy the home of their dreams.  I've learned a thing or two about what it takes to get the job done. Here's what makes me different from your advisors.

I work with a virtual team.  Markelle Harden in Arizona is my Online Transaction Coordinator.  She uses Settlement Room to help clients through the final process of final loan approval, appraisal, home inspection, and a host of other details that must be attended to.

Lynn Payge Hoppe maintains my website from Texas.  Ed Robisheaux in Virginia helps to maintain my position on the internet.  Kathleen Allardyce helps with web search engine optimzation.  

My team helps me keep my business on track so that I have more time to work with you when you're considering making the largest purchase of a lifetime.  Your advisors, though well-meaning, have no financial stake in making sure your best interests are served. I do. Helping people make their dreams come true is my business.

There’s a myth out there in the real estate ether that buyers are “sitting on the fence” waiting till condition are more favorable before they buy. In my experience that doesn't’t really happen. Oh, maybe with a few buyers, but not enough to constitute a pattern.

First time home buyers now have a site to help them make that scary decision to leave apartment living to buy their first house.  The site is MoveOutMoveUp.com, an ING marketing effort to attract young buyers.  But you don't have to be young to have fun on this website!

Just in the last few days two of my former clients have had babies, one on December 29th and the other on the 30th.  Both were prepared, having bought homes to accommodate their growing need for space.  Here's a pic of one of the happy families.

ING Direct is that fun orange banking site where you can stash your extra money and get a great interest rate.  It's an online financial institution, meaning they're able to avoid the overhead of a bricks and mortar bank and offer their customers better rates on a variety of financial products.  I use an ING Direct account for my short-term saving needs (not a paid ad, just giving you a little advice!).

The MoveOutMoveUp site features games to help you avoid your bad neighbors, what to do when moving in together, and a lot more.  Take a look and have some fun.

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.

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. 

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.

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.

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

A report planned for release on Monday, but getting plenty of press in the industry, will say that real estate companies are a "cartel" out to steal money from the pockets of home-selling and home-buying consumers. 

As usual, there are two sides to this story, maybe more.  The Consumer Federation of America, a nonprofit research and advocacy group, believes that consumers are getting caught in the crossfire between "discount" brokers and "traditional" brokers.  Discount brokers are offering all kinds of incentives to home sellers to list with them; and now they're beginning to offer home buyers the same kinds of incentives to buy from them.

What's lost in all these stories is the fact that if a buyer uses the seller's agent to buy a home, that agent is legally obligated to represent the BEST INTERESTS OF THE SELLER, not the buyer.  And if home buyers use their own Buyer's Agent, that agent is legally obligated to represent the BEST INTERESTS OF THE BUYER.  If consumers use either discount OR traditional brokers to BUY a home, they're potentially ripe for getting caught in a conflict-of-interest squeeze where the buyers' interests may not be represented at all, and the listing broker winds up with the FULL commission since they represented both buyer and seller. 

If home buyers use an "EXCLUSIVE Buyer's Agent," (EBA), where the broker NEVER lists homes, thus avoiding any potential conflict of interest between seller and buyer, then the consumer's interests will be well served.

The way a real estate transaction works is that a real estate brokerage will take a listing and charge a certain percentage of the final sale price.  Remember, that percentage is ALWAYS negotiable.  But, and here's the catch, in the commission negotiated with the seller normally up to half will be offered to any broker out there who brings the buyer.  If the seller's broker brings the buyer, she gets to keep the WHOLE commission, not just the half she gets for representing the seller.  Now remember, her job is to represent the best interests of the seller, not the buyer.  She can treat the buyer as a "customer," but she has a fiduciary responsibility to her seller to get the highest price and the best terms for them.

Let's say the broker representing the seller decides to limit what she offers to a cooperating broker representing the buyer to a level low enough that few cooperating brokers will offer to show that property to their own buyers, figuring that if the commission offered is that low, chances are good that the rest of the transaction will likely short the buyers.  And believe me, this has happened.  Now let's say too that the listing broker works hard to bring her own buyers, but now it'll take more time because fewer agents are willing to show the home.  She wins the whole commission, but her seller hasn't been well served.  Even if she lowers the cooperating commission out of a desire to save her sellers money, she still disserves them by effectively limiting the house's exposure.

But let's look at another scenario.  This time the discount buyer broker offers to represent the buyer with a discount on the fee paid BY the buyer.  Unless you're using an Exclusive Buyers Agent who belongs to the National Association of Exclusive Buyers Agents, this is not a good deal.  Why not?  Because the listing broker has offered the cooperating selling broker up to half of the commission paid by the seller.  A buyer's agent shouldn't be charging a buyer, (unless the buyer has an arrangement with a NAEBA broker which includes a commission but builds it into the price of the house).  The arrangement is the same as in the prior example, but the buyer receives full protection under the law, the same protection afforded by an Exclusive Buyers Agent who offers her services free to the buyer, expecting to be paid out of the transaction from the listing commission.

Now, what about rebates/refunds to the buyer as one newly national franchised brokerage is offering?  Is that a good deal?  Well, the plan is that consumers can do much of the work of finding their own house because of easy access to all the listings using the internet, but the franchise doesn't show houses, taking the buyers around on a house-hunting trip which could take two or three days.  Two or three days of an agent's time could cost a brokerage up to $300 a day.  So they don't do it.  Seeing the house will be up to the buyer.

The discounter will set up the showing with the listing broker, and the listing broker will be there to show the house and answer all the buyer's questions.  Does that sound like a good idea to you?  You know the listing agent is out to get the most money and the best terms for the seller.  They have a built-in bias.  Where's YOUR advocate, the one who will represent YOUR best interests?  Back in the office taking orders over the interest from other buyers.  They promise to shepherd the transaction through escrow, but how do you know they know enough about it to faithfully represent you?

You may be asking, what can go wrong in a real estate purchase?  Buying a house is likely the single-most expensive purchase of a lifetime.  It's a complex financial transaction.  At any stage of the transaction many things can go wrong, and they do.  An Exclusive Buyers Agent who does not ever list houses and faces no conflicts of interest  is your best bet to keep you out of trouble and to assure a successful escrow of the biggest purchase of your life.  And it should be FREE to you. 

But it does cost your Exclusive Buyers Agent to represent you.  It's not free for them.  Overhead can eat up 25% of a commission, and taxes up to a third.  So an EBA won't be taking 100% of the commission to the bank, only from 42 to 45% will belong to them.  Let's put that in perspective. 

Let's say you buy a home and pay $350,000 for it.  Let's say the seller has offered to pay the cooperating broker bringing the buyer a 2.8% commission (typical in Colorado), or $9,800.  After costs, the Exclusive Buyers Agent will receive from $5,390  to $5,684.  This is compensation after perhaps months of working to find your perfect house, negotiating with the seller's agent for the price you want to pay, negotiating for the inspection items you want fixed, shepherding the contract through endless telephone calls and emails to the inspector, the title company, the lender, the listing broker, conversations with you keeping you informed about what's happening every step of the way, and finally at the closing table receiving a commission.  Oh yes, keep in mind that if in the middle of the process you decide to back out or that it's better for you to rent for awhile, all that work by your Exclusive Buyers Agent doesn't get compensated at all, because agents only get paid for a successful purchase.

So now that $5,000+ has to cover the costs involved in the two or three transactions that weren't compensated, not just the one at hand. 

So it's a bit more complicated than the  Consumer Federation of America (a nonprofit "research and advocacy group" but accepting contributions from Bank of America -- who incidentally has been fighting to be allowed to sell real estate as a bundled service after a century of keeping banks and real estate brokerages separate for good reason, that would lead to a REAL cartel) suggesting the real estate profession is out to hurt consumers!

Check out an article written by Blanche Evans, Editor of Realty Times, a widely read industry newsletter, who has her pulse on the real estate industry. 

Realtor.com is a favorite place for homebuyers to look for homes (54% of buyers using the internet to find a house use the site), but it's not the best.  But the Denver MLS posts the following data.

Res Condo Income Land REALTOR.com 94.03% 94.29% 89.89% 89.72% REcolorado.com 94.61% 94.70% 91.89% 90.21% IDX 99.25% 99.16% 98.94% 97.33%

REColorado.com is the public Denver MLS site, but it still doesn't post all listings.  IDX (internet data eXchange) posts nearly all listed homes in the metro area.  My IDX home search function is available to anyone who wants to use it at Power Search.  If  you have any questions about how to use the feature, post a comment here.

If you're thinking about buying here's a short list of some things you shouldn't forget.

1. Don't forget to get preapproved before you look.  If you don't, and you find a place you love enough to make an offer, you run the risk of the seller not taking your offer seriously.  You may have to scramble to get preapproved while another offer with a preapproved buyer sails through.  The risk is losing your dream home.  And you'll need to know exactly how much you can afford.
2. If you want to make an offer, make it toward the end of the month if you plan to move at the end of the following month.  That way the seller won't have to wait for another month while you give notice (if you're renting).
3. Hire an Exclusive Buyer's Agent (EBA) to represent your best interests.  Don't rely on the Seller's agent to look out for you -- their fiduciary obligation is to get the highest price for the Seller.

If you have any other questions, post it here and I'll respond pronto!