The Hardest Part of Real Estate

Education!!!  Educating buyers on the realities of this market has to be the hardest part of being a Realtor.

Preparation and speed are key to getting an offer accepted in Northern Colorado these days.

With homes receiving multiple offers within days of being listed, buyers need to be available at a moment’s notice to go see a home that has just been listed.  It is important to be flexible with time and availability.

Most offers will not be considered without pre-qualification and no contingencies.   It might be a good idea to offer the seller a delayed possession date to accommodate the closing date on their new home.

Flood Insurance

Do You Need Flood Insurance?

If you have ever lived through a flood you know first-hand how devastating they can be. Not only can they destroy a home and its belongings but in the ensuing aftermath they can bring about mold, bacteria, and unsafe living conditions. It is not surprising they are the most common natural disaster in the world, accounting for billions of dollars in damage and countless claims each year.

Some of the more common reasons for flooding are:

• Dams/levees
• Flash floods
• Heavy rains
• Ice jams
• Mud slides
• New/under developed areas
• Snow melt
• Tropical storms

Flood Tips You May Not Know

A common misconception is that if you do not live near a body of water you are not at risk of flooding. The truth is every home is at risk of being flooded! An overflowing dam, a broken sewer line, an unkempt or overwhelmed drainage system, or even a major storm can cause flooding. It can happen anytime, anywhere, to anyone with devastating results.

Another misleading thought is that the Government will step in and bail you out. Think again. Unless your area is a federally declared disaster area (i.e. New Orleans and surrounding coastal towns after Hurricane Katrina hit or nearly the entire eastern seaboard after Hurricane Sandy), you could find yourself without federal, state, or often even local assistance. If you are in an area that does receive assistance, it is important to note you will have to pay back (with interest) whatever amount you receive. This assistance is not meant to compensate you for your losses, but rather, it is given out as a low interest loan to assist you with critical expenses incurred as you start the process of getting things back in order.

Most alarming is that many homeowners believe that when a flood disaster occurs, their home insurance will pay for the damages. That misnomer is quickly replaced with panic as they check with their insurance company and find their insurance policy does not cover for floods. A typical home insurance policy will cover damages in case of a fire, robbery, and other incidents, but will not include flood related damages, meaning homeowners must take care of their flood losses from their own pocket. All the more reason to make sure you have a flood insurance policy on your home.

What is Flood Insurance and Why Do You Need It?

As you would expect, flood insurance takes care of damages relating to flood and is the first and most important step to take if you want to protect yourself from a flood disaster. What you need to know about flood insurance is something every homeowner should consider! The National Flood Insurance Program (NFIP) a program directed by the Federal Emergency Management Agency (FEMA) and is the leading provider of flood insurance policies to protect homeowners from flood related losses.  Here are 3 reasons you need to consider getting flood insurance:

The primary reason is because you live in a Special Flood Hazard Area (SFHA) that requires a mortgage from a federally regulated lender. In an SFHA, where it is likely flooding will occur while you own your home, flood insurance is mandatory. This could include oceanfront or near-ocean properties or living next to a major body of water like a big river, lake, or creek. For some of these areas, heavy rainfall can cause the body of water to swell over the banks, flooding houses and destroying properties. For others, the potential of large waves or tropical storms puts them in the highest risk category. While the allure of living near water has its advantages, there is an inherent flooding risk that consumers need to be aware of and understand.

A second reason you should consider getting flood insurance is because you live in a community that benefit’s from the NFIP. The benefit is receiving flood insurance that is backed by the government. Whether you reside in a SFHA or low risk area, as your community benefits from the program, and nearly 21K communities do, it is hoped that all the residents will take advantage of the program. There are no fees to live in an NFIP community but each area is required to have a flood plain management ordinance, enforced by a local official. The official ensures the flood plain is periodically inspected and that no violations of the ordinance occur. If your community is not NFIP supported, then you would have to look for a federally supported private insurance company that offers flood insurance.

Third, although they are not the most dangerous natural disaster in the world, floods are the most common, causing incredible amounts of damage around the globe every year. According to Floodsmart.gov, the cost of flooding goes up exponentially with each inch of water in a home. For example, one inch of standing water can cause nearly $21,000 worth of damage while one foot of water puts the damage over $52,000. While these are only estimates, it is clear that any amount of flooding can have serious consequences for every homeowner and property affected.

How Flood Insurance Works

When you pay for flood insurance, and your insurance policy is handed out to you, it takes a whole month (thirty days from the issued date) to take effect. So if you decide to wait until the storms come a calling before getting a policy, you will definitely be paying for your losses yourself. If you have not gotten your flood insurance policy yet, it is advisable to seriously consider it before a calamity occurs.

Your flood insurance policy is dependent on how much coverage you are willing to buy. You could decide to cover both your home (the building) and the contents of your house, with the maximum limits of flood coverage for your house of $250,000 and the contents of your home with a ceiling of $100,000. The flood insurance policy pays for the estimated value of the damaged property, or the total cost of replacing your property up to the coverage limit.

In addition, the cost of flood insurance may vary depending on the flood zone you live in. High risk zones usually pay a higher sum compared to the medium and low risk zones. The FEMA maps out the flood risk zones, and it is advisable to check out your address on FEMA’s flood risk zones chart to find out what zone your locality falls under.

If your community has taken preemptive measures to reduce flood risks, you get as much as 45 percent off on flood insurance costs. You should meet with your insurance agent to find out what coverage and cost would be suitable for you, or you could decide to use the website calculator on the NFIP site to have an idea of the cost and the benefit.

Flood Insurance Advice

Like any other insurance policy, obtaining flood insurance should definitely put your mind at rest, especially with the unpredictability of floods and flooding occurring at a moment’s notice. As a reminder, it takes 30 days for your policy to take effect, so if you do not currently have flood insurance, it would be of great benefit to get a policy immediately.

If you think you are safe because you live in a low risk area, think again. A report from FEMA says that twenty five percent of all flood insurance claims since 1978 has been from low risk zones. Every homeowner is potentially at risk, regardless where you live!

Unless it is mandated to have flood insurance, many will roll the dice and opt to save those extra funds for something else. Depending on your tolerance for risk and where you live, that may be a bad gamble. For most, the results of a flood would be devastating, and the ensuing financial burden crippling…all it takes is better planning to give you peace of mind and security knowing your home is covered. Why risk it!

Reasons to Hire a Real Estate Professional

Whether you are buying or selling a home, it can be quite an adventurous journey. You need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO. The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but have rather been strengthened due to the projections of higher mortgage interest rates & home prices as the market continues to recover.  1. What do you do with all this paperwork? Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality. 2. Ok, so you found your dream house, now what? According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream? 3. Are you a good negotiator? So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process. 4. What is the home you’re buying/selling really worth? It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $208,000 compared to $235,000 among agent-assisted home sales.” Get the most out of your transaction by hiring a professional.   5. Do you know what’s really going on in the market? There is so much information out there on the news and the internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer? Dave Ramsey, the financial guru advises: “When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.” Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear. Bottom Line: You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?

No Matter What the Groundhog Says… You Should Sell Before Spring!

Is spring closer than we think? Depending on which Groundhog you witnessed today, you may have less time than you think to get your home on the market before the busy spring season. Many sellers feel that the spring is the best time to place their home on the market as buyer demand traditionally increases at that time of year. However, the next six weeks before spring hits also have their own advantages. Here are five reasons to sell now. 1. Demand is Strong Foot traffic refers to the number of people out actually physically looking at homes right now. The latest foot traffic numbers show that there are currently more prospective purchasers looking at homes than at any other time in the last 12 months, which includes last spring’s buyers’ market. These buyers are ready, willing and able to purchase… and are in the market right now! Take advantage of the buyer activity currently in the market. 2. There Is Less Competition Now Housing supply just dropped to 2.4 months, which is under the 6 months’ supply that is needed for a normal housing market. This means, in Northern Colorado, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices. However, additional inventory is about to come to market. There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. Homeowners are now seeing a return to positive equity as real estate values have increased over the last two years. Many of these homes will be coming to the market in the near future. Also, new construction of single-family homes is again beginning to increase. A recent study by Harris Poll revealed that 41% of buyers would prefer to buy a new home while only 21% prefer an existing home (38% had no preference). The choices buyers have will increase in the spring. Don’t wait until all this other inventory of homes comes to market before you sell. 3. The Process Will Be Quicker One of the biggest challenges of the housing market has been the length of time it takes from contract to closing. Banks are requiring more and more paperwork before approving a mortgage. There is less overall business done in the winter. Therefore, the process will be less onerous than it will be in the spring. Getting your house sold and closed before the spring delays begin will lend itself to a smoother transaction. 4. There Will Never Be a Better Time to Move-Up If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by over 23.5% from now to 2019. If you are moving to a higher priced home, it will wind-up costing you more in raw dollars (both in down payment and mortgage payment) if you wait. You can also lock-in your 30-year housing expense with an interest rate close to 3.5% right now. Rates are projected to be a full point higher by the end of 2015. 5. It’s Time to Move On with Your Life Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should? Only you know the answers to the questions above. You have the power to take back control of the situation by putting your home on the market. Perhaps, the time has come for you and your family to move on and start living the life you desire. That is what is truly important.

5 Reasons You Shouldn’t For Sale By Owner

Some homeowners consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons this might not be a good idea for the vast majority of sellers. Here are five reasons:

1. There Are Too Many People to Negotiate With

Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:

• The buyer who wants the best deal possible
• The buyer’s agent who solely represents the best interest of the buyer
• The buyer’s attorney (in some parts of the country)
• The home inspection companies which work for the buyer and will almost always find some problems with the house.
• The appraiser if there is a question of value

2. Exposure to Prospective Purchasers

Recent studies have shown that 88% of buyers search online for a home. That is in comparison to only 21% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?

3. Results Come from the Internet

Where do buyers find the home they actually purchased?

• 43% on the internet
• 9% from a yard sign
• 1% from newspaper

The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.

4. FSBOing has Become More and More Difficult

The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 9% over the last 20+ years.

5. You Net More Money when Using an Agent

Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission. Studies have shown that the typical house sold by the homeowner sells for $208,000 while the typical house sold by an agent sells for $235,000. This doesn’t mean that an agent can get $27,000 more for your home as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.

Bottom Line

Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.

2015: A Year of Housing Opportunity

Keeping Current Matters

Many believed that when the housing market crashed, so too would the desire of American’s to own a home again. Many reports have shown that, especially among younger generations, the American Dream of homeownership is still very much alive.

Julián Castro, Secretary for HUD, recently summed up what it means to own a home in a speech at the National Press Club.

“Homeownership is still the cornerstone of the American Dream — a fact you can see in the lives of everyday folks.

It’s a source of pride. It’s a source of wealth, providing both a nest and a nest egg. And it strengthens communities and fuels growth in the overall economy.”

Castro appropriately named his speech, “2015: A Year of Housing Opportunity”, a theme that rang true throughout.

“Opportunity is not an abstract concept – it’s a path to a more prosperous life, and housing often serves as its foundation. T.S. Elliot once said that “home is where one starts from.”

“A home is often a primary source of wealth in a family… Having a home is generational way to pass that wealth on. We want people responsible enough to own a home to have that opportunity.”

Bottom Line

“Over the years-through decades of economic downturns and wars-the American people have always held on to this Dream, and always will.”

As the economy continues to improve, more and more Americans will qualify for homeownership, allowing more families to obtain the American Dream.

The Difference Between A Home’s Cost vs. Price

As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first time or repeat buyer, you must not be concerned only about price but also about the ‘long term cost’ of the home. Let me explain. There are many factors that influence the ‘cost’ of a home. Two of the major ones are the home’s appreciation over time, and the interest rate at which a buyer can borrow the funds necessary to purchase their home. The rate at which these two factors can change is often referred to as “The Cost of Waiting”. What will happen in 2015? A nationwide panel of over one hundred economists, real estate experts and investment & market strategists project that home values will appreciate by almost 4% by the end of 2015. Additionally, Freddie Mac’s most recent Economic Commentary & Projections Table predicts that the 30-year fixed mortgage rate will appreciate to 4.5% by the end of 2015. What Does This Mean to a Buyer? Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $250,000 today: