What are Closing Costs?

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The closing process in a real estate transaction finalizes the terms of an agreement between the buyer and seller, leading to the transfer of the property’s title. This step of the buying/selling process comes with its own set of costs. Before a buyer can hold the keys to their new home, and before a seller can celebrate the sale of their property, closing costs must be paid.

What are closing costs?

The term “closing costs” refers to the various expenses, taxes, and fees paid by both the buyer and the seller to finalize a real estate transaction. The purchase agreement—signed by both parties—will dictate the terms of how the closing costs are paid, but there are some standards about who pays what.

In general, buyers can expect to pay about 2-5% of the total purchase price in closing costs, while sellers’ costs can range anywhere from about 6-10%; the difference being that buyers are using extra cash to pay for their closing costs while the amount sellers owe is typically deducted from the proceeds of the sale of their home. Note—these percentages may vary depending on property taxes, insurance rates, and other factors involved in the transaction.

Closing Costs for Buyers

Typical mortgage-related closing costs for buyers include an application fee, an underwriting fee, and prepaid interest (the accrued interest cost between your settlement date and first monthly payment). If you make less that a 20% down payment on the home, you can expect to pay your lender for private mortgage insurance (PMI), as well.

Two main property-related closing costs for buyers are the appraisal and the home inspection. Lenders will require an appraisal to double-check that the value of the property matches your mortgage loan amount, which will typically cost you a few hundred dollars. A home inspection provides the buyer with a clear understanding of the home’s condition and what repairs need to be made, either in the future or before closing. In competitive markets (a seller’s market), it’s more common for sellers to conduct pre-listing inspections and for buyers to waive the inspection contingency to make their offer more appealing. Buyers will also pay a variety of title, insurance, attorney, escrow, and property tax fees to finalize the home purchase. Usually, your lender will require you to purchase homeowners insurance before settlement to protect against insured disasters that may occur on the property.

These are just some of the costs inherent in the closing process for buyers, which are a fraction of the total costs of buying a home. Working with a Buyer’s Agent will help you stay organized as you navigate through these crucial final steps of your home purchase.

 

A young man and woman shake hands with their real estate agent at their kitchen table.

Image Source: Getty Images – Image Credit: PeopleImages

 

Closing Costs for Sellers

The seller will pay the agent commissions on the sale, typically to both the buyer’s agent and the listing agent. Agent commissions usually come in at around 4-6% of the sale price of the home. Other closing costs for sellers may include attorney fees, title insurance, a transfer tax, and the home’s property taxes for the current year if they have not yet been paid. The terms of the agreement will spell out what the seller is additionally responsible for, including HOA fees if applicable and any escrow money promised to the buyer.

Typically, escrow fees are shared between the buyer and seller, which cover the costs of distributing the funds involved in the transaction. In buyer’s markets, it’s more common for sellers to agree to pay for a portion of the closing costs—what is known as “seller concessions.” A common example of a seller concession is when the seller agrees to pay for repairs discovered during the buyer’s home inspection. 

 

So, whether you’re buying or selling a home, it’s important to remember that a series of fees and payments must be completed to finalize the transaction. Learn more about the costs of buying and selling a home here:

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Tracking Change

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The market is changing. The change is slight, not drastic.

Both potential sellers and potential buyers need to know that the pace of the market has slowed since the Spring.

Here is one way we track this change…

A review of the August numbers shows the pace of sales in each of our Front Range markets:

  •  Larimer County = 18 closings per day
  • Weld County = 16 closings per day
  • Metro Denver = 165 closings per day

Based on the pace of sales, we can determine the inventory of current homes for sale measured in days:

  • Larimer County = 24 days of inventory
  • Weld County = 23 days of inventory
  • Metro Denver = 18 days of inventory

Then we can measure the increase in days of inventory versus April of this year:

  • Larimer County = 26% increase
  • Weld County = 15% increase
  • Metro Denver = 20% increase

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Buying and Selling a Home at the Same Time

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Successfully selling a home and buying a home are significant accomplishments on their own, but when their timelines cross it can be difficult to manage both. If you’re thinking about doing both simultaneously, it’s equally important to understand the steps you can take to make the process go smoothly as it is to have a backup plan in case it doesn’t. Above all, the balancing act required to pull off both deals highlights the importance of working closely with a trusted and experienced real estate agent.

Do I buy or sell first?

One can imagine a perfect world in which the two transactions go through one right after the other. However, this is not usually the case. So, should you list your current home first or start by putting in offers on a new one? There are pros and cons to both.

Selling your current home first allows you to make offers on a new home with cash in your pocket, increases your buying power, and avoids having to juggle two mortgages simultaneously. On the other hand, it creates a gap of residence, often leaving homeowners wondering where they’ll stay until they move into their new home or whether they may need to rent before they can buy again. Sellers may also negotiate a rent-back agreement with the buyers, allowing them to rent the house from the new owners before they move in.

Buying before selling solves the need for any temporary housing and makes the overall moving process much easier. Having a residence established ahead of time means you’ll only have to move once, which can save you some serious stress during this time of transition. Oppositely, buying a new home before you sell your current one will put an added strain on your finances. Having two concurrent mortgages equates to taking on more debt, which could result in less-than-favorable loan terms for purchasing your new home. Without the lump sum generated by a home sale in your pocket, coming up with enough money for a down payment may be a challenge and obtaining private mortgage insurance (PMI) may be in the cards. Finally, buying before selling comes with an obvious assumption—that your current house will sell.

Ultimately, the order of operations depends on your situation. Perhaps you’re moving due to a change of employment, and you need to direct all your energy toward buying a new home by a certain date before you can even think about selling your current one. No matter which route you take, it’s important to communicate your timeline to your listing agent or your buyer’s agent so they can strategize accordingly.

Buying and Selling a Home at the Same Time 

Local Market Conditions

Buying and selling at the same time will come with a certain duality: at each step in the process, you’ll have to balance your responsibilities as both a buyer and a seller. For example, when assessing your local market conditions, you’ll be looking at not one, but two housing markets.

  • Seller’s Market: Selling in a seller’s market means that that you’ll need to be prepared to move once you list, since you could be looking at a short selling timeline. However, relying too heavily on the assumption that your house will sell quickly could make things dicey down the road. If you’re buying in a seller’s market, finding a new home may take longer than expected. You could potentially be waiting weeks or months for an offer to get accepted.
  • Buyer’s Market: Selling in a buyer’s market typically means that homes stay on the market longer. If you proceed with a new home purchase just after you’ve listed your current house, know that it may take a while to sell. If you’re buying in a buyer’s market you can afford to be picky, knowing that time is on your side. With fewer people buying homes, sellers will be more flexible, giving you leverage to negotiate your contingencies.

Having a Backup Plan

If only you could wave a magic wand and make both transactions go through as planned. That’s why it’s important to have a backup plan in place to right the ship should things go sideways at any point in the buying or selling process. Talk to your agent about which options may be right for you. Here are a few:

  • Sales Contingency: Buying your new home with a sales contingency allows you to opt out of the purchase contract if your home doesn’t sell by a specified date. Purchasing contingent on the sale is rare in highly competitive markets.
  • Bridge Loan: If your current home hasn’t sold yet and you’re not able to afford the down payment on a new home, a bridge loan may be a fitting solution. Bridge loans can be used to cover the down payment on a new house and are repaid once your existing home has sold.
  • Rent-Back Agreement: A rent-back agreement is a clause in the sales contract that allows the seller to rent their old home from the buyer for an agreed-upon period of time before the buyer moves in. This can be especially helpful in situations when the seller is having trouble finding a new home.

For more information on buying and selling a home at the same time, give your local Windermere office a call to get connected with an experienced agent!

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Want a house in Fort Collins? Grab $500,000, get in line and join the housing Hunger Games

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“Buying a house in Fort Collins these days can feel like a combat sport. Maybe more like the

‘Hunger Games.’ Or Charlie Brown and the football — every time you get close to the ball,

Lucy whisks it away…”

 

Pat Ferrier at the Fort Collins Coloradoan breaks down the housing market in Northern Colorado with the help real estate professionals across the front range. Click the link below to read on!

 

Fort Collins real estate_ Average home price near $500K in market

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5.5 Million Short

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New home construction is behind by 5.5 million homes over the last 14 years.

Since 2007, new home starts have lagged significantly behind the long-term average.

The Census Bureau started tracking National new home starts in 1958.

Between 1958 and 2007, an average of 1,102,938 new homes were started each year.

Between 2007 and 2020 the average fell to 708,186 which represents a shortfall of 394,752 per year.

That adds up to a total shortfall of 5,526,525.

The under-supply of new homes is of course a significant reason why the market is under-supplied overall.

credit Inman News as the source of this story

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Q1 2021 Colorado Real Estate Market Update

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The following analysis of the Metro Denver & Northern Colorado real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

REGIONAL ECONOMIC OVERVIEW

Following the decline in employment last winter, Colorado has started to add jobs back into its economy. The latest data shows that the state has now recovered more than 219,000 of the 376,000+ jobs that were lost due to COVID-19. This is certainly positive, but there is a long way to go to get back to pre-pandemic employment levels. Denver and Fort Collins continue to have the greatest improvement in employment, but all markets show job levels well below pre-pandemic levels. With total employment levels rising, the unemployment rate stands at 6.6%, down from the pandemic peak of 12.1%. Regionally, unemployment levels range from a low of 5.6% in Fort Collins and Boulder to a high of 6.7% in Greeley. COVID-19 infection rates have started to increase again, and this has the potential to negatively impact the job market. I am hopeful that the state will not be forced to pull back reopening, but this is certainly not assured.

COLORADO HOME SALES

❱ 2021 started off on a bit of a sour note, with total sales down 1.2% compared to the same period in 2020. Sales were 29.2% lower than in the final quarter of 2020 as 8,645 homes sold.

❱ Sales were higher in four of the counties contained in this report, were essentially flat in one, and dropped in seven. It was pleasing to see significant sales growth in the large counties of Denver and Adams.

❱ Another positive was that pending sales, which are an indicator of future closings, were 4.8% higher than in the fourth quarter of 2020 and 5% higher than a year ago.

❱ The disappointing number of home sales overall can primarily be attributed to the woeful lack of inventory. Listings in the quarter were down more than 61% year over year and were 40.6% lower than in the fourth quarter of 2020.

 

COLORADO HOME PRICES

❱ Prices continue to appreciate at a very rapid pace, with the average sale price up 16.5% year over year, to an average of $556,100. Home prices were also 4.4% higher than in the fourth quarter of 2020.

❱ Buyers appear to be out in force, and this demand—in concert with very low levels of inventory—continues to heat the market.

❱ Prices rose over last year across all markets covered by this report, with the exception of the very small Gilpin County. All other counties saw sizeable gains and the trend of double-digit price growth continued unabated.

❱ Affordability levels are becoming a greater concern as prices rise at a far faster pace than wages. Even though mortgage rates have started to rise, they haven’t yet reached the level needed to take some of the heat out of the market.

 

DAYS ON MARKET

❱ The average time it took to sell a home in the markets contained in this report dropped 20 days compared to the first quarter of 2020.

❱ The amount of time it took to sell a home dropped in every county contained in this report compared to the fourth quarter of 2020.

❱ It took an average of 25 days to sell a home in the region, down one day from the fourth quarter of 2020.

❱ The Colorado housing market remains very tight, as demonstrated by the fact that it took less than a month for homes to sell in all but two counties.

 

CONCLUSIONS

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The relatively low level of home sales is not a surprise given how few choices there are for buyers. Sellers are certainly benefitting from strong demand, as demonstrated by the significant price growth. I maintain my belief that there will be an increase in inventory as we move through the year, but it is highly unlikely that we will see a balanced market in 2021.

Given these factors, I am moving the needle a little more in favor of sellers, as demand is likely to continue to exceed supply.

ABOUT MATTHEW GARDNER

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The post Q1 2021 Colorado Real Estate Market Update appeared first on Windermere Colorado REALTORS.

Q1 2021 Colorado Real Estate Market Update

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The following analysis of the Metro Denver & Northern Colorado real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

REGIONAL ECONOMIC OVERVIEW

Following the decline in employment last winter, Colorado has started to add jobs back into its economy. The latest data shows that the state has now recovered more than 219,000 of the 376,000+ jobs that were lost due to COVID-19. This is certainly positive, but there is a long way to go to get back to pre-pandemic employment levels. Denver and Fort Collins continue to have the greatest improvement in employment, but all markets show job levels well below pre-pandemic levels. With total employment levels rising, the unemployment rate stands at 6.6%, down from the pandemic peak of 12.1%. Regionally, unemployment levels range from a low of 5.6% in Fort Collins and Boulder to a high of 6.7% in Greeley. COVID-19 infection rates have started to increase again, and this has the potential to negatively impact the job market. I am hopeful that the state will not be forced to pull back reopening, but this is certainly not assured.

COLORADO HOME SALES

❱ 2021 started off on a bit of a sour note, with total sales down 1.2% compared to the same period in 2020. Sales were 29.2% lower than in the final quarter of 2020 as 8,645 homes sold.

❱ Sales were higher in four of the counties contained in this report, were essentially flat in one, and dropped in seven. It was pleasing to see significant sales growth in the large counties of Denver and Adams.

❱ Another positive was that pending sales, which are an indicator of future closings, were 4.8% higher than in the fourth quarter of 2020 and 5% higher than a year ago.

❱ The disappointing number of home sales overall can primarily be attributed to the woeful lack of inventory. Listings in the quarter were down more than 61% year over year and were 40.6% lower than in the fourth quarter of 2020.

 

COLORADO HOME PRICES

❱ Prices continue to appreciate at a very rapid pace, with the average sale price up 16.5% year over year, to an average of $556,100. Home prices were also 4.4% higher than in the fourth quarter of 2020.

❱ Buyers appear to be out in force, and this demand—in concert with very low levels of inventory—continues to heat the market.

❱ Prices rose over last year across all markets covered by this report, with the exception of the very small Gilpin County. All other counties saw sizeable gains and the trend of double-digit price growth continued unabated.

❱ Affordability levels are becoming a greater concern as prices rise at a far faster pace than wages. Even though mortgage rates have started to rise, they haven’t yet reached the level needed to take some of the heat out of the market.

 

DAYS ON MARKET

❱ The average time it took to sell a home in the markets contained in this report dropped 20 days compared to the first quarter of 2020.

❱ The amount of time it took to sell a home dropped in every county contained in this report compared to the fourth quarter of 2020.

❱ It took an average of 25 days to sell a home in the region, down one day from the fourth quarter of 2020.

❱ The Colorado housing market remains very tight, as demonstrated by the fact that it took less than a month for homes to sell in all but two counties.

 

CONCLUSIONS

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The relatively low level of home sales is not a surprise given how few choices there are for buyers. Sellers are certainly benefitting from strong demand, as demonstrated by the significant price growth. I maintain my belief that there will be an increase in inventory as we move through the year, but it is highly unlikely that we will see a balanced market in 2021.

Given these factors, I am moving the needle a little more in favor of sellers, as demand is likely to continue to exceed supply.

ABOUT MATTHEW GARDNER

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

The post Q1 2021 Colorado Real Estate Market Update appeared first on Windermere Colorado REALTORS.

The Benefits of a Pre-Listing Inspection

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Pre-listing inspections can help sellers better understand the condition of their home before putting it on the market. They can also strengthen a home’s appeal to potential buyers and help to streamline the offer process, which is especially important in competitive markets. However, pre-listing inspections can also open sellers up to added liability. Talk to your Windermere agent to understand if conducting a pre-listing inspection is right for your home.

 

What is a Home Inspection?

Conducted by a licensed home inspector, a home inspection is a detailed review of the condition of a home and property. Inspectors examine everything from a home’s electrical work and sewage to its heating and cooling systems, searching for any evidence of damage or structural issues that may affect its value. By having your home inspected before you sell, you’ll have the chance to discover whether it needs any repairs or upgrades.

 

Pre-Listing Inspections

Pre-listing inspections not only help identify repairs, but they can also make the selling process more efficient. A pre-listing inspection discloses a home’s condition to buyers up front and gives them confidence that the seller is being transparent about any possible issues. This can save significant time for both buyers and sellers, especially in competitive markets where there are multiple offers on the table.

Something for sellers to keep in mind is that if a home in a competitive market does not provide a pre-inspection report, buyers may be hesitant to make an offer knowing the time it takes to perform an inspection and the fact that they are likely competing against several other buyers who are willing to waive this step.

 

The Benefits of a Pre-Listing Inspection

Home inspections give a good baseline of your home’s condition. The information gathered during this process is exactly the kind of in-depth knowledge that buyers want to know when considering placing an offer on a home.

Since buyers will know right away what repairs are needed, they can factor them into their initial offer, as opposed to discovering them during the inspection contingency and getting entangled in negotiations. Being forthcoming about your home also reduces the chances of an offer falling through and the buyer walking away.

An added benefit of a pre-listing inspection is that it helps your real estate agent more accurately price the home and enables them to market it with the knowledge that everything is being presented in the most transparent way possible.

 

If you have any questions about home inspections or any of the steps in the selling process, we’re happy to connect you with a Windermere agent here: Connect with an agent

The post The Benefits of a Pre-Listing Inspection appeared first on Windermere Colorado REALTORS.

The Benefits of a Pre-Listing Inspection

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Pre-listing inspections can help sellers better understand the condition of their home before putting it on the market. They can also strengthen a home’s appeal to potential buyers and help to streamline the offer process, which is especially important in competitive markets. However, pre-listing inspections can also open sellers up to added liability. Talk to your Windermere agent to understand if conducting a pre-listing inspection is right for your home.

 

What is a Home Inspection?

Conducted by a licensed home inspector, a home inspection is a detailed review of the condition of a home and property. Inspectors examine everything from a home’s electrical work and sewage to its heating and cooling systems, searching for any evidence of damage or structural issues that may affect its value. By having your home inspected before you sell, you’ll have the chance to discover whether it needs any repairs or upgrades.

 

Pre-Listing Inspections

Pre-listing inspections not only help identify repairs, but they can also make the selling process more efficient. A pre-listing inspection discloses a home’s condition to buyers up front and gives them confidence that the seller is being transparent about any possible issues. This can save significant time for both buyers and sellers, especially in competitive markets where there are multiple offers on the table.

Something for sellers to keep in mind is that if a home in a competitive market does not provide a pre-inspection report, buyers may be hesitant to make an offer knowing the time it takes to perform an inspection and the fact that they are likely competing against several other buyers who are willing to waive this step.

 

The Benefits of a Pre-Listing Inspection

Home inspections give a good baseline of your home’s condition. The information gathered during this process is exactly the kind of in-depth knowledge that buyers want to know when considering placing an offer on a home.

Since buyers will know right away what repairs are needed, they can factor them into their initial offer, as opposed to discovering them during the inspection contingency and getting entangled in negotiations. Being forthcoming about your home also reduces the chances of an offer falling through and the buyer walking away.

An added benefit of a pre-listing inspection is that it helps your real estate agent more accurately price the home and enables them to market it with the knowledge that everything is being presented in the most transparent way possible.

 

If you have any questions about home inspections or any of the steps in the selling process, we’re happy to connect you with a Windermere agent here: Connect with an agent

The post The Benefits of a Pre-Listing Inspection appeared first on Windermere Colorado REALTORS.

Relocating for Remote Work

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As the ubiquity of working from home continues, many homeowners are making the decision to move. Whether the motivation for relocating is to lower the cost of living, to be closer to family, or simply a fresh start, there are various factors to keep in mind when relocating for remote work.

Before You Relocate

Before you make the jump to a new life in a new place, making time for some strategic planning will help ensure your relocation goes as smoothly as possible. A logical first step is to consider the financial impact of your move. Depending on your company’s policy, there may be adjustments to your pay when you relocate. If this is the case, factor in your pay change as you form your relocation budget. Research the cost of living in your new hometown to understand how a compensation adjustment may affect your home search and your lifestyle once you move.

If you are moving out of state, relocating could affect your benefits and your taxes as well. There’s a chance that your employer’s health insurance plan does not offer coverage in the state you’re moving to. Talk to your employer to discuss your options. Before moving out-of-state, find out whether the two states have a reciprocal tax agreement, especially if you’re moving between states that have differing income tax regulations.

Your New Home for Remote Work

Working remote has given homeowners the freedom to choose their desired location, unbound by a work commute, especially if their company has indicated that there are no clear signs of returning to in-person work anytime soon. Knowing your desired work environment will help to tailor your home search. If you’re looking for peace and quiet while you work, explore listings in rural areas. If the hubbub of city life is your idea of a comforting backdrop, direct your attention to metropolitan areas.

For the remote worker, it’s more important than ever that your home accommodates your working needs. As many homeowners have experienced throughout the pandemic, you spend a great deal of time in your home office, so finding the home with the best workspace for you should be a priority. If you desire a private area where you can focus, a home with an open floor plan may not be the best choice. Instead, you may want to look for homes with a separate bonus room or extra bedroom.

Once you’ve moved into your new home, it’s time to put together your home office. Whether your previous home office was a professionally curated environment or a makeshift workspace in the corner of a room, a new home means a fresh start for your remote work. Like many homeowners, by now you’ve likely got a solid grasp on what your ideal home office looks like. Keep those elements alive when you relocate and enjoy productive workdays in your new home.

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