Interest-ing

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The recent increase in mortgage rates has started some home buyers to look at programs that have fixed rates for 7 years or 10 years instead of 30 years.

If a buyer believes it is likely they will move or even refinance within this timeframe, these types of programs can be a good option.

The obvious benefit is a lower monthly payment compared to a 30-year program. 

Another benefit, which most people underestimate, is the savings in interest.

Today, for example, a buyer would have these options:

  • 5.25% 30-year fixed
  • 4.375% 10-year fixed
  • 4.125% 7-year fixed

Over the first five years of the loan, the buyer would pay the following amounts in interest for each loan program for a $400,000 loan:

  • $101,126 for 30-year
  • $83,764 for 10-year
  • $78,831 for 7-year

So the savings in interest over the first five years compared to the 30-year program is:

  • $17,362 for 10-year
  • $22,295 for 7-year

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Renting vs Buying: Which is better for you?

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Deciding whether to rent or buy can be a difficult decision, but with the right analysis, you can determine which is best for you. Knowing whether it’s the right time to rent or buy depends on your buying power, what you’re looking for in a home, your local market conditions, your plans for you and your household, and the responsibilities you’re prepared to take on at your residence.

Renting vs. Buying: Which is Better for You?

Renting gives you greater flexibility to relocate, fewer home maintenance responsibilities, and can often be more the more affordable option, depending on where you live. The extra costs associated with owning a home—interest payments, taxes, repairs—may be too much for some renters to handle. Becoming a homeowner has its respective advantages. You’ll have stable monthly payments and greater freedom to customize your living space. Advocates of buying will contend that purchasing a home is an investment in equity, which can increase in value every year you live in the home, whereas if you rent a property, you’re essentially paying for someone else’s mortgage. 

Ultimately, the right decision depends on your situation. If you don’t plan to be living in the same place for at least five years, renting might be more logical, as it allows you more flexibility when it comes time to move again. If you’re looking to settle down for the better part of a decade or longer and can afford to buy a home, becoming a homeowner may be the better option. Here are a few additional considerations to guide your renting-versus-buying decision making process.

What are the local real estate market conditions?

Investigate the local sales and rental markets. Industry groups put out reports every quarter stating the average national sales price for a home and the average monthly payment for a rental. These reports are typically based on an average of all the cities in the U.S. But what really matters is what the numbers show when you dig into them on a local level. When looking at these reports, you’ll see there are some cities that fall below that average, while others rise above it. When comparing housing costs, be sure to base your evaluation on what’s happening in your city and neighborhood, not the nationwide averages.

For a quarterly breakdown of local market conditions, explore our Market Updates page. With data analyzed by our Chief Economist Matthew Gardner, each report breaks down the latest figures in home sales, home prices, and days on market for regions throughout Windermere’s footprint. Gardner also provides his estimation of where each market sits on the buyer’s-market-to-seller’s-market spectrum.

What can you afford?

Making the jump from renter to homeowner is often a question of affordability. Your mortgage rate will depend on your financial strength, your credit score, and other factors, so make sure to talk to a loan officer before you start looking for a home. Getting pre-approved for a mortgage will identify what you’re able to afford and helps strengthen your offer when the time comes.

To get an idea of what you can afford, use our free Home Monthly Payment Calculator by clicking the button below. With current rates based on national averages and customizable mortgage terms, you can experiment with different values to get an estimate of your monthly payment for any listing price. By using the Home Monthly Payment Calculator, you can make a well-informed estimation of whether it’s the right time to buy.

 

Will you need to make repairs to your new home?

Buying a fixer-upper may seem like a great way to get a deal on a house, but if the money you spend on the repairs is too great, your profit could be diminished when it comes time to sell. The same is true for remodeling and improvement projects. There are various renovation financing loans available to you that can help with the costs of home repairs, though extra consultations, inspections, and appraisals are often required in the process of securing these loans. Ultimately, if you can only afford a home that demands major improvements, and you don’t have the skills to do much of the work yourself, you may be better off renting.

Can you rent part of the house you’re buying?

If you buy a house with rental-capable space (extra bedroom, mother-in-law unit, etc.), you could use the rental income to pay off your mortgage faster and contribute more to your savings. But, of course, you need to be willing to share your home with a tenant and take on the responsibilities of being a landlord or working with a professional property manager to help you with those duties. Renting out a space in your home will also require you to purchase landlord insurance on top of your existing homeowners insurance policy.

Making Your Decision to Rent or Buy

At the end of the day, the decision is up to you. Based on the conditions laid out above, it simply may not be the right time for you to buy. Fortunately, when it comes to being a homeowner, it’s not now or never. A real estate agent will be your ultimate resource in gauging whether it’s the right time to buy and guiding you through the process toward homeownership.

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Active Average

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While we frequently research and discuss average prices for properties that sell, it is also interesting to look at the average prices for properties that are active on the market but not sold yet.

These are the average prices, by area, for properties currently listed for sale and not sold yet:

  • Metro Denver = $954,000
  • Larimer County = $878,000
  • Weld County = $880,000

If you are surprised that Weld County is higher than Larimer County, it’s important to note that there are several large acreage properties listed for sale in Weld County which are skewing the average.

These average active prices are all roughly 30% higher compared to a year ago and further emphasize the strong activity in the Front Range market.

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Common Real Estate Contingencies

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Contingencies help to spell out the specifics of a real estate transaction by dictating what must happen so the contract becomes legally binding. If certain conditions aren’t met, the applicable contingency gives the buyer and the seller the right to back out of the contract per their agreed-upon terms. When selling your home, a buyer may make their offer with contingencies attached. Here are some common contingencies you might see in a buyer’s offer and what they mean for you.

Common Real Estate Contingencies

Home Inspection Contingency

A home inspection contingency allows the buyer to have the home professionally inspected within a certain window of time. If the buyer finds outstanding repairs that need to be made, they can negotiate them into their offer. If the seller chooses not to make the repairs outlined in the buyer’s home inspection report, the buyer can cancel the contract.

As a seller, it’s important to be transparent in listing any issues with the home. This is why many sellers find a pre-listing inspection to be beneficial: it provides transparency about the home’s condition ahead of time and can help to streamline the buying process, which can be especially helpful when selling in competitive markets.

Financing Contingency

Also known as a “mortgage contingency,” a financing contingency gives the buyer a specified period of time to secure adequate financing to purchase the home. Even if a buyer is pre-approved for their mortgage, they may not be able to obtain the right loan for the home. If they are unable to finance the purchase, the buyer can back out of the contract and recover their earnest money, and the seller can re-list the home.

The seller won’t be on the hook if the buyer fails to cancel the contract. Even if the buyer is not able to secure financing by the agreed-upon date, they are still responsible for purchasing the home if they do not terminate the contract.

 

A man and a woman review their real estate contingency paperwork for the sale of their home.

Image Source: Getty Images – Image Credit: fizkes

 

Appraisal Contingency

An appraisal contingency states that the home must appraise for, at minimum, the sales price. It protects the buyer in that it allows them to walk away from the deal if the property’s appraised value is lower than the sales price, and typically guarantees that their earnest money will be returned. This can be an issue in certain markets where demand is driving prices up to numbers that appraisals don’t reflect. Depending on the agreement you make with the buyer, you may be able to lower the price of your home to the appraised amount and sell it at that price. When selling your home, remember that there is a difference between appraised value and market value. An appraiser’s value of a property is based on several factors using comparative market analyses, whereas market value is what buyers are willing to pay for a home.

Home Sale Contingency

If a contract includes a home sale contingency, it means that the buyer is tying their purchase of a home to the sale of their existing one. Though it is common for homeowners to buy and sell a house at the same time, attaching a home sale contingency to an offer does create some added variability in a real estate transaction that sellers should be aware of before accepting such an offer. This contingency allows buyers to sell their current home and use the proceeds to finance the purchase of their new one. Although you will have the right to cancel the contract if your buyer’s home is not sold within a specified time, you’re still waiting on them for the deal to go through, which means you could potentially miss out on other offers while you wait.

Title Contingency

Before the sale of a home goes final, a search will be performed to ensure that any liens or judgements made against the property have been resolved. A title contingency allows a buyer to raise any issues they may have with the title status of the property and stipulates that the seller must clear these issues up before the transfer of title can be complete. If an unpaid lien or unpaid taxes turn up in the home’s title search, this contingency also allows the buyer to back out of the deal and look for another home. A majority of sellers will pull a pre-title report to provide transparency for a smooth transaction.

These are just some of the contingencies you may encounter in a buyer’s offer. Work closely with your agent to understand the terms of these contingencies and how they impact the sale of your home as you go about finding the right buyer. For more information on the process of selling your home, read our blog post on common mistakes to avoid:

7 Mistakes to Avoid When Selling a Home

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No Foolin’

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This is not an April Fool’s joke.

 

Average prices in Metro Denver just exceeded $700,000 in Metro Denver.  Larimer County isn’t far behind.

 

For the month of March, the average residential sales price in the 5-county Metro Area was $704,000.  This does not include Boulder County.

 

Larimer County was $691,000 and we expect to see an average exceeding $700,000 in the very near future.

 

It’s also interesting to note the average price for properties currently listed for sale and not sold yet.  In Larimer County it is $848,000 and in Metro Denver it is $1,100,000.

 

You might be asking, why have prices appreciated to this level?  Quite simply, supply and demand.

 

The Front Range has a healthy, growing economy plus an incredibly high quality of life.  Meanwhile, standing inventory is low which results in upward pressure on prices.

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Rate Perspective

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Given the recent increase in mortgage interest rates, we think a little perspective is in order.

  • The average 30-year rate for the last 40+ years is 7.5%
  • Rates are now back within the range where they were between April 2018 and February 2019
  • Between January 2000 and December 2009, the high was 8.15% and the low was 5.05%
  • Between January 1990 and December 1999, rates never went below 6.25%

Bottom line, while the increase in rates is challenging for active buyers, rates are still incredibly low historically speaking.

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How to Prepare for an Open House

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To successfully sell your home, you need to attract buyers. This is why open houses are an integral part of the selling process: they allow buyers to experience the property for themselves and envision what life will look like in their new home. To prepare for an open house, you’ll need to work closely with your agent. They can advise you on what buyers in your area are looking for to increase your chances of selling your home.

To successfully sell your home, you need to attract buyers. This is why open houses are an integral part of the selling process: they allow buyers to experience the property for themselves and envision what life will look like in their new home. To prepare for an open house, you’ll need to work closely with your agent. They can advise you on what buyers in your area are looking for to increase your chances of selling your home.

How to Prepare for an Open House

The earlier you can begin prepping your home for an open house, the better, since getting it in prime showing condition will take time. Start by decluttering and organizing room by room. To truly get your home sparkling clean, you can’t miss those hard-to-reach areas like the baseboards, under your furniture, and your appliances.

To best position your home to sell, consider hiring a professional stager. A well-staged home helps it appeal to the widest possible array of potential buyers, not only for in-person showings, but in online photos as well. Professional staging is equal parts science and art. Stagers are experts in depersonalizing a home while maintaining its stylistic qualities to give buyers the opportunity to imagine the space for their own use. It isn’t just about psychology, though. Staging is a high-ROI expenditure that can add real value to your home.

It may feel counterintuitive, but your absence can be your greatest asset in making your open houses successful. Buyers will often feel uneasy in the presence of the seller as they tour, which will limit their ability to envision their own lives in the home and get excited about the prospect of ownership. Accordingly, you may need to arrange for temporary accommodations during the times your home is being shown. It’s helpful to solidify these plans several weeks in advance to avoid an eleventh-hour scramble.

 

A graphic for Windermere’s Open House playlist on Spotify.

Put buyers in a feel-good mood with Windermere’s “Open House” playlist on Spotify. Click the image above to listen.

 

Working with Your Agent

Your agent will be your greatest asset in preparing for open houses. They are experts in understanding how to effectively market your home and how the local market conditions will impact their marketing plan. Once you know it’s time to sell, they’ll analyze data to accurately price the property and keep it competitive in the current market. They’ll also work with you to schedule open houses at the times when buyers are maximally available and actively searching for listings.

Your agent will also help you to stay safe while selling your home. The reality of open houses is that you’re opening your doors to an influx of unfamiliar faces, and it’s worth it to take a few safety precautions beforehand. Perform a thorough walkthrough of your home with your agent to make sure all valuable belongings, medications, family heirlooms, and other important items have been properly secured and/or removed. Once you’ve given your home a clean sweep, discuss your process for screening potential buyers.

For more resources on preparing to sell your home, our Home Selling Guide has everything you need: selling tips, moving checklists, our Home Worth Calculator, and info on how an agent can help.

 

Seller Essentials – Home Selling Guide

 

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Buy Before 5

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30-year mortgage rates just exceeded 4% for the first time in three years according to Freddie Mac.

We have new advice for anyone considering a home purchase in the next couple of years.

Buy before 5.  This means buy before rates go to 5%.

Even though rates have been ticking up over the last several weeks, we believe that in a few years we will look back on this time and realize what a tremendous opportunity it was to have a mortgage under 5%.

So, don’t be discouraged by recent uptick in rates.  Instead, feel great that you were able to buy before rates hit 5%.

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New Construction: Why Work with a Buyer’s Agent?

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If you’re a buyer, you may have considered purchasing a new construction home. After touring the model home and talking to the builder’s sales representatives, you begin to wonder if it’s necessary to work with a buyer’s agent. Although it’s possible to move forward with the purchase of a new construction home without a buyer’s agent, you may be missing out on the benefits of having a representative at your side. Take a look at how a buyer’s agent can provide value in the purchase of a new construction home. 

 

Buyer Agent vs. Builder’s Agent
Who Works for Who?
A sales representative is the builder’s representation in the sale of a new construction home. They can assist buyers by providing insight into the construction process, available upgrades, and answer questions related to what the builder is able to offer. That said, they represent the builder and will always advocate in favor of the builder. Think of it this way: in new construction, the builder is the seller and the sales representative is the listing agent. 

 

An Expert on Your Side
Knowledge is Power 
Working with a buyer’s agent gives you an advantage. Not only do they have experience with new-construction home purchases, but they are also familiar with major builders in the area and can speak to their quality of work. Moreover, buyer’s agents bring a working knowledge of the housing market to the table and can provide insight into current home prices. Tapping into a buyer agent’s knowledge and experience could save you time, money, and stress as you navigate the purchase of your new home!

 

An Agent is Your Advocate
Your Best Interest Comes First
A buyer’s agent will:
  • Negotiate on your behalf
  • Clarify what is included in the base price
  • Help you navigate the purchase amidst rising building costs
  • Help you obtain the best financing available
  • Provide guidance with regard to builder’s warranties and home inspections 

 

Agent Commission
What’s the Cost to Me?

Traditionally, sellers are responsible for paying real estate agent fees. In the case of new construction homes, the builder will likely cover all or most of the agent’s commission. You may be able to work with a  real estate professional at no cost to you. 

For additional inquiries, please contact our office or your Windermere real estate agent directly. 

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3.2 Trillion

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The new CoreLogic Homeowner Equity Insights report shows that homeowners in the U.S. have seen their equity increase by a total of $3.2 trillion over the last 12 months.

Their data shows that 63% of all homes have a mortgage.

On average, U.S. homeowners gained $55,000 while the average increase in Colorado was higher at $75,000.

The other piece of good news from the report is that properties with negative equity reached the lowest amount in several years.

Only 2.1% of all properties across the U.S. have a value lower than the mortgaged amount.  Negative equity peaked at 26% of all mortgaged properties back in 2009.

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