Wonderful Denver Homes

When you first put your house up for sale most people want to show off all the great features of their home through an open house.  Properly done these can be extremely effective in promoting your house and getting qualified buyers.  However, as with most marketing techniques there are certain tactics that work.

Keep in mind the purpose of an open house is to meet people.  It is rare that anyone from your open house will actually purchase your home.  Rather, it’s about meeting others who can refer qualified buyers to you.  This could be from the real estate community, so you should be prepared to deal with Brokers who visit your open house.

Preparing your property is critical to any social occasion.  First, put all of the valuables away.  Since you are inviting the public into your home, please put away all of the jewelry, electronics or other easily stolen merchandise out of sight.  Your home should be cleaned and looking like you were having 40 guests over for dinner. 

Prepare a quality brochure as a handout.  Most people want to walk through a house with the facts and figures in their hand so they can comment on the property to their friends or family.  Do not follow people around.  Set up the fliers in a central location.  Include a list of other properties that have sold and closed in the immediate neighborhood.  This establishes your asking price and gives you superior knowledge.

Post small placards outside a room highlighting specific features, like walnut flooring, travertine tile, granite counter tops, steam shower, five piece bathroom, etc.  Include details on the builder if they are active in the area and establish your knowledge of the neighborhood.  If there is a homeowners association, include the details including the dues and what they cover. 

Keep in mind you are there to meet people so having a guest register book or some other way to gather names is the best method.  Then after the open house you can follow up with them so see if they know someone who might be interested in your property.  If you have Real Estate brokers stop by, gather their cards and tell them to get back to you if they have buyers.  Or, you can use the open house process as a way to interview prospective broker to represent you.

Open Houses work if they are done properly, so next time you need advice, contact Paul Larson at Wonderful Denver Homes.com

Homeowners Associations can take many forms within a specific real estate development.  The purpose initially is created by the developer to maintain and manage common areas and improve the quality of the subdivision.  Once  the developer sells out the majority of their lots or units they will turn over the management to the owners themselves.  This is where the real fun begins.

HOA’s are deeded with the property meaning you don’t have a choice of membership if you want to live in that home.  They can be very active or inactive especially about enforcing the covenants and conditions outlined in the original incorporation of the association.  The management can be delegated to a professional company or a group of homeowners and is governed by a board of directors.   HOA’s are usually non-profit and covers planned unit developments, condominiums, townhouses and co-0p apartments.

They have the power to levey dues covering simple things like exterior maintenance, snow & trash removal or common area property insurance.  The dues are not tax deductible if this is your primary residence.  They can also assess larger lump sum amounts for their reserves.  These would cover things like roof replacement, paving, striping the parking lots, exterior painting, tree maintenance, etc.

The real burr under the saddle is when the HOA’s are perceived to overstep their authority and take on a tyrannical disposition.  Some of these depend on your perspective, but they are very powerful.  Here are some examples.  During a drought in Colorado a few years ago the HOA required the homeowners to maintain green lawns.  But, the city had imposed watering restrictions so the lawn inevitably turned brown.   The HOA filed a complaint against the homeowner, so he painted his lawn green in order to avoid a penalty. 

Some of these can be very restrictive such as not flying certain flags, keeping your dumpster hidden, exterior colors, landscaping, no storage on the balconys, no parking of RV’s, boats or multiple vehicles, etc.  These can be all enforceable provisions and if you challenge them you will generally lose.

Before you get serious about a property that has an HOA have your broker get the Covenants and Restrictions from the Title company and READ THEM!    If nothing is objectionable or you like the security that HOA’s provide you’re ready to close.

Next time you need advice on Real Estate, contact Paul Larson at Wonderful Denver Homes.com

The broad category of contingencies is something that sounds very boring but can make or break a transaction in Real Estate.  The entry into this often vague world is through two little words: “subject-to.” A contingency is an event that might, but is not necessarily guaranteed will happen.

So, what kind of things are contingencies?  They can be pretty much anything you want.  The most common is for financing.   Another are the inspections that usually consist of general home, structural, sewer, HVAC, etc.  The sale of an existing home is another big one.  Note that the wording should be the “closing” of the property and not just the sale.  Especially if you are using the proceeds from one property as the down payment for the next.

Contingencies might take the form of a third-party approval.  This would be if a bank or trustee would need to review and approve the transaction.  Even though they are not one of the owners of record, they have a vested interest in getting the best possible offer on the market. 

There could be some kind of outside investigation like subject to the verification that a swimming pool can be built.  Or, if there is a change of zoning pending that would affect the property.  If it is adverse, then the transaction will fail.

Contingencies can take the form of clear title.  If there is a cloud on the title that may impede the sellers ability to close the transaction such as an encroachment, easement, boundary dispute or even water rights can interfere with the closing and cause the sale to fail.

The resolution of a divorce or other legal proceeding such as bankruptcy, tax liens or outstanding child support are contingencies.    The filing of a “lis-pendens” will stop the transaction and will need resolution if the transaction should go forward.  This is if there is a disgruntled buyer and they file a lawsuit to keep anyone else from purchasing the property.

The key to minimizing contingencies is to place a specific time frame on the event.  An example might be if the inspection will be completed 10 days after mutal acceptance.  Or, financing will be approved not later that July 31st, etc.  Contingencies are a very powerful tool and should be used properly to benefit the buyer and seller.

Next time your looking for advice about Real Estate, call Paul Larson at Wonderful Denver Homes.com

When you’re selling a house, the easiest part is getting an offer.  Now What? 

First, an offer must be in writing.   Anyone who is serious about purchasing your property must actually submit something in writing.  And, I’m not talking about a few figures scribbed on a cocktail napkin.

To be considered, an offer must have several important elements.  It must have either a check or a promissory note.  This is called “consideration” and it is required to make a binding contract.  There must be an formal offer and accpetace by the seller in writing.  And, there must be a legal subject matter.  For example, you can’t buy a meth-lab and call it income property based on the cash flow.  Once you get the written offer, run it by an attorney or real estate broker.  Sometimes they will charge a closing fee and it will be well worth it. 

Find out the source of their money.  If they are talking about paying cash, then they should submit a copy of a bank statement confirming the funds.  If they are bringing in a suitcase of cash, remember anything over $10,000 is a violation of the banking laws and smells illegal.  If they are getting a loan, the should have a lender letter giving them a “preapproval.”

Confirm their time frame.  How soon do they want to close?  The normal time is 30 days to use as a benchmark.  Shorter time frames can be difficult for the other third-party vendors such as the title company, lenders or inspectors to complete their work.  Longer time frames usually indicate there is some reason they might not be telling you.

Any contingencies?  These are tricky since they can take many forms.  The most commmon subject to financing.  Often, the buyers might have a house to sell and their not telling you.  Or, they could be waiting for a payout from their great aunt’s estate.

Price.  This is the crux of the matter but it can be misleading.  Buyer should be offering within 10% of the asking price.  If they are dramatically lower, you can reject the offer outright.  But, you can also counter at list price.  If they are offering greater than list price with a credit back to the buyer at closing you could be participating in loan fraud.

The point is be critical but also do your best in putting the deal together.  You’ll be way on your way to the next purchase.

Next time your need Real Estate advice, contact Paul Larson at Wonderful Denver Homes.com

With the lousy market we have throughout the country, it’s easy just to throw your hand up and just give the property away.  Don’t do this!

Recent articles have extolled the ranks of homeowners who owe more than their loans and just walked away from the property.  This is an incredibly bad idea.  The bank will not consider this a viable option although they may be forced into.  Foreclosure is not their business.

You will ruin your credit not just for homes, but for all other sources of credit.  You can literally price yourself out of the  market for any future items.  You might not have considered that your insurance is pegged to your credit report as is possible is future employment.  It will substantially increase your cost of living.

Working with the banks to have an orderly “crash-landing” is always preferable.  Yea, it will be more time consuming but it will cost you a lot less over time. 

The first item on your list is to hire a good real estate broker.  This is not just the neighbor or a friend from the bridge club.  Find someone who is a good negotiator and works well with lawyers and bankers.  The will need to have a thick skin and be willing to see the transaction through to the end. 

The key is marketing of the property.  If you have allowed the house to deteriorate and there a many maintenance issues that will have to be considered in the pricing of the property.  The realtor should submit a Broker Price Opinion (BPO) to the banks when you first contact the lenders the property is for sale.

The BPO is a powerful report and should reflect the reality of the current market not blue-sky or hoping you can get the price you want.  It’s not about you anymore, it’s a business proposal.  The broker should reflect the listing price to sell in the first 30 days.  Taht  could be 10-15% less than what you think the property is worth.  Get over it!

This is about avoiding the property going into foreclosure and saving they potential liability you may have of any other assets that could be seized either through a deficiency judgement or bankruptcy proceedings.

Selling a distressed property is all about pricing.  If you get the price down in the beginning you will avoid “bottom-fishing.”  The buyers will perceive the value and make full price offers.  This will allow you to survive a “crash landing.”

Next time you need help with Real Estate, contact Paul Larson at Wonderful Denver Homes.com

When buying investment property especially residential homes for rent most people ignore the most fundamental requirement, Cash Flow!

Whether your buying a shopping center or the corner flophouse, the key to your success is the return on your investment.  To do that you must have an income stream that you can count on.  Here’s how it works.

Start with how much you think you can rent the property, realistically.  Then, deduct a vacancy factor of say 3% so now you have 97% of what you collected.  This is your net rent.

Now add up all of the expenses it will take to operate property.  Utilities and yard maintenance can be negotiable with the tenant.  Don’t skimp on these cause they can break the deal.  Include HOA dues, interior maintenance like painting, plumbing and other  repairs.  These are called your operating expenses.

Consider adding a reserve for roof or fence repair.  Put in an escalation factor since costs always increase as the property get older.  Include seasonal variances.

Then break out any financing costs you have and separate the interest, principal, insurance and property taxes.   You will need to make sure all these numbers are covered with the existing cash flow.

Now determine the depreciation you’ll be deducting on your tax return.  This is a non-cash item so it goes last.

Now you’ve got all of the elements figured out, put them all  together.  Here goes: start with Gross Rent minus your vacancy percentage to get to Net Rent.  Then deduct your Operating Expenses to arrive at Gross Operating Income. 

This is your pretax cash flow.  Now deduct your principal, interest, insurance and property taxes.  This is your net cash flow.

Add back your principal payments, deduct depreciation and the result is your taxable income.  If it’s positive, go for it!  The ideal is to have a postitive net cash flow but negative taxable income.

You can determine the return on your investment by taking your net cash flow income divided by your equity.  So, if your taxable cash flow is $1,200 per year divided by a $20,000  equity your yield is six percent.

Now you can compare that estimate to what other investments are yielding and real estate will  do pretty well.  Repeat the process to build up a portfolio and don’t let yourself get off track!

Next time you need advice on Real Estate, contact Paul Larson at Wonderful Denver Homes.com

OK, so your offer has been accepted and you’re under contract to purchase a house!  Holy Moly!  How did this happen?  Don’t worry because you still have the home inspections to complete at your expense and approve before you move on to the next step!

First, understand the home inspection is not going to tell you everything about the property.  It is a general home inspection and the report will reveal areas or issues you should check into further if necessary.  For example,  the inspector with tell you the roof is not leaking.  That could mean the roof is at the end of its life and should be replaced.  It just means the roof is not leaking as of the date of the inspection.  Big difference.

If there is an area the home inspector brings up as a “concern” that is the code word for call out a special contractor who knows about roofs, HVAC, plumbing, infestations, water well & septic systems, EFIS, etc.  These are contractors who know the specifics about each system in the house.  A seller may represent the sewer drain as “never had a problem” and they may not know that the piping has collapsed and ready to fail, but a sewer scope would tell you that before you take ownership.  Total savings to the buyer $8,500!!

Look for carbon monoxide, fire alarms and extinguishers throughout the house.  They should be obvious and outside all of the sleeping areas.  Be sure the furnace is working properly as that is the cause of most CO poisonings. Have a HVAC contractor check out the entire system and if it’s not working properly, ask the seller to repair or replace the system.

On septic systems,  there usually is a one acre minimum unless they have been exempt due to age.  That makes it even more important to get a qualified water and septic inspector to test the system.  The septic system needs a proper collection tank and drain field to work properly and they can easily fail if the owners have been putting inorganic waste into the tank.  Have the tank pumped before moving in to the house.

Spending $1,000 on inspections is not unreasonable and can save you major headaches in the years to come.  If the house passes inspection?  Great!  Let’s move on!

Next time you need a good Broker, contact Paul Larson at Wonderful Denver Homes.com

All of the headlines scream about the trials of residential real estate of the last several years  But what about tenants?  Many people purchase houses as an investment mainly as way to get tenants to pay their mortgages and generate cash flow off the property.  That’s fine, but what happens when the seller defaults on their mortgages?

Do you have a lease?  Generally, month to month rentals do not have to be in writing.  Anything for a year or longer should have a formal written lease outlining all possible contingencies.  READ THE LEASE!   It should be signed by all parties and some landlords will “record” them at the county records.  This makes the lease a document of record and any transactions concerning the property will be subject-to the rights of the tenants specified in the lease.

Do you know your rights?  Tenants are protected by a federal law passed in 2009 that allows them to stay in their units for 90 days after a foreclosure.  They can insist on staying in their property until their lease expires.  The exception is if the new owner is going to use the house as their primary residence.  All communications should be in writing and any kind of harassment such as lock-outs, shutting off utilities or entering the premises without permission is illegal.

Will the house be put up for sale?  The seller has the right to do that and the tenants will have the state Landlord-Tenant acts for their protection.  You can’t interfere with the selling process.  You still have to cooperate  by making the property available for showings with reasonable advance notice.  And, the new owner can purchase the property subject to the your existing lease.

Sometimes the banks will make a claim upon the rent payments or security deposit to stop the negative cash flow on the property.  And, they have the right to inspect the property to assure the safety of their collateral.  But, banks are not in the business of owning or managing rental property.  Often, they feel if the house is vacant it will sell faster.  There are no facts supporting this notion.

There are numerous resources that you can get information, don’t listen to hearsay.  You should consult an attorney to be sure of what you’re being told.  When is comes to this kind of emotional and financial situations there is a lot of misinformation or to use the common name, “lying.”

Next time your looking for a good Broker, contact Paul Larson at Wonderful Denver Homes.com

Homeowners pick a Real Estate Broker for various reasons, a friend, family member, acquaintance, or neighborhood specialist.  The result should be the same, sell the house!  However, getting to that goal can be accomplished smoothly or a tortured path.  Regardless of how you choose your Broker the questions are the same. 

What do you know about my house?  The Broker should spend some time with you in your home getting to know your house.  They should know all the facts and the condition of the entire property.  Do not withhold any information because it will just come back to haunt you later.  If you have obvious maintenance problems get them fixed before you put the property up for sale.

What do you know about me?  You have to be honest with the Broker since you are hiring them to represent you.  If you withhold information like,”we’re in foreclosure” that will make a big difference in how the property is marketed and the strategy once you get an offer.  You don’t have to tell them your life story, just confine your disclosures to the real estate.

How much do you think my home is worth?  Any Broker who will give you a number immediately, don’t hire!  The correct answer, “I don’t know, but let me check the current market values.”  The listing price should be well thought out based on the information in their Comparative Market Analysis.  Without going through that process their listing price is a WAG (wild ass guess).  Listen carefully to their recommendations.

Why are you a neighborhood specialist?  Brokers are usually knowledgeable about specific areas.  The might live in the area or have other property listed or they just might like the neighborhoods.  Regardless,  a Broker who has “roots” in the area will be a good pick.

What is your marketing plan?  Brokers should present to you a specific plan on getting your house sold.  The plan should detail all of the specific action items they intend to do.  Some things seem simple like a good sign, lock box, or flyer’s.  There is nothing worse for other Realtors browsing through the multiple listing service or on-line, and see  crummy pictures of a house or a photo of your house with snow on the ground in August!

Next time your looking for a quality Broker, contact Paul Larson at Wonderful Denver Homes.com

During this recession instead of trying to purchase another house, consider remodeling!  You might need more space, less space or different space.  Either way, remodeling is one of the fastest ways to add value to your property.

Your remodelling budget should start with about 10% of your home’s current value.  Anything greater could price you out of your neighborhood values.  Keep your eye on how it will affect the resale value and if you will have a multiplier effect.  That’s where the cost of the remodel results in two or three times increase in market value.

In addition to the neighborhood, the thinking behind remodeling is dependent on the structure, floor plan, the condition of the house, the lot size and the length of time you intend to live there after the project is completed.

Contact the city building department to make sure that the plans you have drawn will pass their codes.  If you don’t not build to the specification on the plans the city or county will shut you down or make you rebuild what you thought was finished.  Don’t rely solely on the contractor.  Be diligent!

The primary areas to start with are the kitchen, bathrooms, basements, siding and windows.  If you start to look at a second story and or adding more living area you get into another dimension.  Consult an architect if you have grand plans to “pop-the-top”  since not all houses can handle the extra loads from a second story.

Consider having an appraisal if your taking out a loan from you bank.  Some banks will do a “wrap-around” loan where you can have a construction loan followed by a mortgage once the project is completed.

Imagine the new space and visualize how you will use it.  Talk to others who have done it be honest about the pros & cons.  Watch the movie, “The Money Pit.”  Check out your contractor.  Ask for references and see if there are any complaints filed.

Think about where you’ve going to live during construction.  Living in a work zone is stressful unless you have a large house.  Rent a trailer, move in with relatives.  The more you are out of the way from the contractors, the faster the project will go.

The better you plan the better the finished product right down to the new lighting, furniture and appliances.  You will benefit in the years to come and enjoy the satisfaction of a job well done.

Next time you have questions about Real Estate, contact Paul Larson at Wonderful Denver Homes.com