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Small, Exterior Home Improvements Offer the Best Value Investments in 2015, Say REALTORS®

Homeowners often consider various remodeling and replacement projects as a way to add value to their homes. Some projects add more value and better recoup their costs than others, according to REALTORS® who rated small and exterior projects as the most valuable home improvement projects in the 2015 Remodeling Cost vs. Value Report. Compiled annually in collaboration with Hanley Wood’s Remodeling Magazine, the report compares changes in home improvement project costs with REALTORS®’ perceptions of what those projects contribute to a home’s price at resale.

“It can be a daunting task to even decide on what home improvement projects to undertake, let alone to physically tackle and complete them,” said National Association of REALTORS® President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Arkansas. “REALTORS® know what buyers are looking for during their search, and curb appeal is and always will be important. That explains why REALTORS® once again rated exterior projects as some of the most attractive and valuable for homeowners.”

HouseLogic.com, NAR’s consumer website, highlights the results of the report in its “Best Bets for Adding Value to your Home in 2015” slideshow. The site also provides information and advice on numerous home improvement projects, including bathroom remodeling ideas that will add style and value to a home.

Just as they did last year, REALTORS® identified a steel entry door replacement as the project expected to return the most money, with an estimated 101.8 percent of costs recouped upon resale (compared to an estimated 96.6 percent recoup last year). The steel entry door replacement is consistently the least expensive project in the annual Cost vs. Value Report, costing little more than $1,200 on average and was the only project on this year’s list to recoup more than 100 percent of its cost at resale on a national level.

REALTORS® also identified several other projects that would make the biggest financial payoff upon resale, most on the exterior of the home. Rounding out the top 10 projects in terms of cost recouped include a manufactured stone veneer (newly included in this year’s report) at 92.2 percent, a garage door replacement—midrange project (88.5 percent), a siding replacement with fiber cement (84.3 percent), a garage door replacement—upscale project (82.5 percent), vinyl siding replacement (80.7 percent), a wood deck addition (80.5 percent), a minor kitchen remodel (79.3 percent), wood window replacement (78.8 percent), and foam-backed vinyl siding replacement (77.6 percent).

REALTORS® provided their insights into local markets and buyer home preferences within those markets for the report. Since 2003, replacement projects resulted in a higher financial return than remodeling projects. However, the gap between replacement and remodeling projects became bigger this year as both categories declined in value. REALTORS® reported a 2015 average return for replacement projects at 73.2 (slightly below the 2014 number of 73.7 percent), while remodeling projects fell to 60.8 percent in 2015 (down from 65.1 percent last year). This results in an overall cost-value ratio of 62.2 percent, a drop from 66.1 percent last year. The biggest contributing factor to the slip is the consistent rise in costs for these projects, with home values rising at a slower pace.

The 2015 Remodeling Cost vs. Value Report, now in its 17th consecutive year, compares construction costs with resale values for 36 midrange and upscale remodeling projects comprising additions, remodels and replacements in 102 markets across the country. Data are grouped in nine U.S. regions, following the divisions established by the U.S. Census Bureau.

“This report is a fantastic resource for homeowners looking to add value to their house without breaking the bank, but every community is different,” Polychron said. “The best way to really know what investments would work for you and your home is to talk to a REALTOR®. As shown in this report, REALTORS® know their market and the local inventory, what buyers are looking for in a home, the overall economic climate and neighborhood conditions.”

As in previous years, the Pacific region experienced the best overall cost-value ratio of 74 percent. The region, which encompasses California, Oregon, Washington, Alaska and Hawaii, typically sees higher cost-value ratios on account of higher resale values. That region also holds the only market—San Francisco—that experienced a combined cost-value ratio of over 100 percent for all 36 projects.

To read the full project descriptions and access national and regional project data, visit www.costvsvalue.com. “Cost vs. Value” is a registered trademark of Hanley Wood, LLC.


 

Founded in 1976, Hanley Wood, LLC, is the premier media and information company serving the housing, commercial design and construction industries. Through its operating platforms, the company produces award-winning magazines and websites, marquee trade shows and events, market intelligence data, and custom marketing solutions. The company is also North America’s leading publisher of home plans.

HouseLogic is a free source of information and tools from the National Association of REALTORS® that helps homeowners make smart decisions and take responsible actions to maintain, protect and enhance the value of their home. HouseLogic helps homeowners plan and organize their home projects and provides timely articles; home improvement advice and how-tos; and information about taxes, home finances and insurance.

The National Association of REALTORS®, The Voice for Real Estate, is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

Marijuana and Real Estate — New Rules Coming from DORA

The legal landscape concerning the cultivation, sale, distribution and use of marijuana has become very complex over the past dozen or so years.  Beginning with an amendment to the Colorado constitution in 2000 concerning the medical use of marijuana and more recently another amendment in 2012 relating to the cultivation, sale, possession, and use of recreational marijuana, the voters have carved out some exceptions to the general rule that marijuana use, possession, sale, etc. is illegal under Colorado law. (Sec. 18-18-406 C. R. S.) Essentially, the constitutional amendments offer the people of the state an affirmative defense to what would otherwise be considered illegal conduct.

While at first blush this carve out would seem to be relatively straightforward, what makes the situation much more complex is the interplay between federal law regulating marijuana use and possession and the provisions in the Colorado state law. Even in the wake of the constitutional amendments in Colorado, local news media have been carrying recent stories of Federal raids, arrests, confiscation of property and ill-gotten gains.  In short, the Federal government continues to regulate, on a criminal enforcement basis, the use of marijuana under The Controlled Substances Act.  It also has jurisdiction over money laundering transactions, tax evasion and other criminal activities that can be associated with or arise out of marijuana related activities. Unfortunately, there are no clear or distinctly drawn lines at present as to when the Federal government will act, even as the State of Colorado may decline to act due to the recent amendments to it’s Constitution. Stated differently, it is possible to conceive activity that would be considered non-criminal in Colorado which could still result in Federal prosecutions.

The situation created by the conflicting regulatory schemes could produce some complicated outcomes for those engaged in the real estate industry, whether they be real estate brokers, appraisers or mortgage loan originators. For example, each of these professionals enjoy licensing that is subject to disciplinary action when the licensee engages in certain conduct, including but not limited to actions that are considered criminal in nature. What will be the outcome, for example, if a licensee has partaken in the ‘recreational use’ considered legal in Colorado, but illegal by the Federal government? Is that individual’s license subject to discipline or even revocation? Other questions tend to present themselves, such as:

  • Does a real estate broker who becomes aware of a grow operation in the basement of a property offered for sale have an obligation to disclose that to prospective purchasers? Are there circumstances where that disclosure might be mandated, whereas in others, restricted?
  • Similarly, when an appraiser makes an inspection of the premises on behalf of the lender, does that appraiser have to make special note of, or call attention to, the fact of the existence of the grow operation or even evidence of a recently closed down grow operation?
  • What, if any, obligations or mandates does the use of property, considered legal in Colorado, but criminal by federal standards, impose upon the mortgage loan originator who is engaged in what is typically defined as a federally-regulated mortgage transaction?
  • Will the originator be obliged to disclose any knowledge of marijuana type uses on the property, or may the originator let the other participants deal with and be responsible for that knowledge, disclosure and ramifications?

These and other questions will become the subject matter of discussions which will be presented before the Colorado Real Estate Commission, the state Board of Appraisers and the Board of Mortgage Loan Originators. Licensees will soon be hearing about policy statements, position statements or even new rule making directed at helping them navigate the challenging landscape created by the conflicting state and federal provisions regulating marijuana cultivation, use, possession and sale. Obviously, once this guidance is issued by the carious bodies of the Division of Real Estate, licensees should be prepared to adjust their conduct and business practices accordingly when dealing with affected properties.

December Home Buyers Keep the Denver Area Market Active

Prices Reach a Record High While Inventory Levels Dip to a Ten-Year Low

The holiday season did not slow the pace of the housing market as consumers continued to snap up available properties in December, pushing prices up as supply levels declined for the third consecutive month.

According to the latest monthly report by REcolorado, Colorado’s largest MLS, the average sale price for a single family home was up three percent over last month and 11 percent as compared to last year, bringing home prices in the Denver area to a record high of $339,636.

2014-market-stats-single-family-average-sold-price

Single family home sales totaled 3,983 units, an increase of four percent over last month and a two percent increase year over year. The market absorption rate—the rate at which the market absorbs the inventory of homes that are for sale—dipped to a six week supply, versus a seven and a half week supply last month and an eight week supply December last year.

“During the holidays we typically see slowing in the housing market, but this year, home buyers kept the market more active than usual,” said Kirby Slunaker, president and CEO of REcolorado. “Inventory levels remain tight, which is keeping Denver-area average sales prices strong and the absorption rate significantly lower than the national supply of approximately five months of inventory.”

In December, 5,352 active listings were on the market in the Denver metro and surrounding area, an 18 percent decrease as compared to last month, and a 27 percent year-over-year decrease. These numbers reflect inventory levels lower than we’ve seen in over a decade.

single-family-month-end-inventory-2011-to-2014

Typical for December, the number of new listings that came on the market dipped. New listings were down 22 percent as compared to last month and relatively flat as compared to December 2013.

“It was exciting to see buyers continuing their home searches through the holiday season,” said Mark Trenka, owner of Trenka Real Estate and chair of REcolorado. “This will be good news for sellers as the days lengthen into the late winter and early spring season. I anticipate buyers will see more selection in inventory as the first quarter gets into full swing.”

Stronger Economy, Solid Job Growth Expected to Boost Home Sales in 2015

WASHINGTON (January 7, 2015) – Existing-home sales are forecasted to rise about 7 percent in 2015 behind a strengthening economy, solid job gains and a healthy increase in home prices, according to National Association of REALTORS® Chief Economist Lawrence Yun in a newly-released video on his 2015 housing market expectations.

In the NAR-published video, Yun discusses his expectations for the U.S. economy and housing market in 2015 and points to the expanding economy, continued growth in the labor market and home prices rising at a moderate but healthy clip as his reasons for an expected increase (from 2014) in new and existing-home sales (view infographic).

“Home prices have risen for the past three years cumulatively about 25 percent, which boosts confidence in the market and traditionally gives current homeowners the ability to use their equity buildup as a downpayment towards their next home purchase,” says Yun. “Furthermore, first-time buyers are expected to slowly return as the economy improves and new mortgage products are made available in the marketplace with low downpayments and private mortgage insurance.”

Despite his forecasted increase in sales, Yun cites the anticipated rise in interest rates, lenders being slow to ease underwriting standards back to normalized levels, and homeowners unwilling to move because they are comfortable with their current low interest rate as potential speedbumps that could slow the increased pace of sales this year.

With one month of data remaining in 20141, Yun expects total existing-homes sales to finish the year around 4.94 million (down 3.0 percent from 2013), but then rise to 5.30 million in 2015. The national median existing-home price for 2014 will be close to $208,000, up 5.6 percent from 2013, and is expected to moderate to a pace between 4 and 5 percent in 2015.

When Homeownership Makes Cents

It’s been a long, long debate: Should you rent or buy your home?

To help make this decision, consider these five questions.

Is it expensive for you to rent in your community?
If you’ve noticed that rents are rising lately, you aren’t alone. The Associated Press reported in the spring of 2014 that nationwide apartment rents averaged 6% annual increases from 2000 to 2012. And in some markets, such as downtown areas of major cities, rents have soared even higher. If the rents in your preferred neighborhood keep rising, it might be time for you to buy a home, take out a new mortgage loan, and lock in monthly payments that won’t rise each year.

Do you want to establish new roots?
Have you found the perfect neighborhood for you and your family? Do you plan to live there for seven years or more? If so, buying a home may make sense for you. Renting is a good choice if you expect to have to move soon. But what if you don’t have to move in the near future? Buying a house gives you the chance to become part of a community — and build equity from loan payoff and rising home values.

Are you ready to start or grow your family?
If you’re ready to add children to your family or take back an elder relative, a larger home makes perfect sense. You might also want to get a large backyard. You might find that living in an apartment may feel a little too cramped for your growing family and their needs.

Are you a creative person?
This might seem like an odd question to ask. But think about it, when you’re renting an apartment, you’re often restricted to decorate the way that you might like. But if you own your home, you can paint your walls almost any color of the rainbow. You could even turn your kid’s bedroom into a kind of jungle fort. And if you wanted to, you could even paint your fireplace mantel pink.

Are you in need of another income stream?
If you buy the right kind of home, with a separate live-in unit, you can rent out some additional space to generate extra income for yourself. This extra rental income might come in handy if you’re looking to save for a long-term expense, or even to give your own retirement fund a boost.

So if you’ve answered “yes” to some or even all of these questions, it’s probably time to buy a home. The Hagre Group has the knowledge, experience and dedication to help you find the home of your dreams. Contact us today to learn more about the home buying process.

Closing That Credit Card Account Might Hurt Your Credit Score

Closing a credit card account, even one that you never use, might not boost your three-digit credit score. In fact, closing a credit account may even have a negative impact on your credit score.

That’s because of something called the credit utilization ratio. This ratio simply compares the amount of credit that you’re currently using with the amount of credit that you have available to you.

For an example of how this credit utilization ratio works, let’s say that you have three different credit card accounts with a combined total credit limit of $10,000. Now, let’s suppose that at the moment, you have $3,000 of credit-card debt, spread across those three credit card accounts that you have. With these numbers, you would have a credit utilization ratio of 30% (the $3,000 of debt divided by the $10,000 of available credit).

Your credit score will be higher the lower your credit utilization ratio is. Now, let’s imagine that you still have three credit cards, but that $3,000 balance we talked about is spread across only two of the credit cards which you have. Also, the credit limit on your remaining card (which currently has a zero balance) is $3,000. If you were to close out this remaining card, the total available credit that you would have available to you would decrease from $10,000 to $7,000. However, your credit utilization ratio will have risen dramatically, up from 30% to 43%.

Having a higher credit utilization ratio could cause your overall credit score to fall. An estimated 30% of your FICO credit score is made up of the amount of money you owe and how it compares to the total amount of credit that is available to you.

Unpaid Medical Bills Will No Longer Be a Big Drag on Your Credit Score

Struggling to keep up with your medical bills? A change in the way the most important of your credit scores is calculated could make missed payments for doctor visits and hospital stays less damaging to your three-digit FICO credit score.

FICO announced last August that it would place less emphasis on missed medical bills when determining the credit scores of borrowers. According to FICO, those borrowers whose only financial missteps are unpaid medical bills could see their FICO credit scores jump by as much as 25 points.

This is good news for consumers who always make their auto-loan credit-card and mortgage loan payments on time but have been struggling with higher healthcare costs. FICO’s decision to make unpaid medical bills less of a drag on consumers’ credit scores could also mean that a greater number of these consumers will now be able to qualify for mortgage loans. Of course, this doesn’t mean that you shouldn’t pay your hospital and doctor bills on time. After all, if you do, your credit score will be even higher than it already is. Remember, the surest way to a strong credit score is to pay all of your bills on time. And if you want to provide another boost to your score, pay down as much credit card debt as possible.

These two steps will provide you with the surest path to qualifying for a mortgage loan.

Denver Area Housing Market Remains Strong

Residential real estate in the Denver metro and surrounding area continues to reflect strong demand, according to Metrolist, Colorado’s largest MLS and the provider of REcolorado.com.

 Days on market, or the number of days a home takes to sell, dropped to 26 days—the lowest point in a decade. Although the number of active listings increased seven percent over last month, overall inventory levels are lower than the same period last year, a sign of a sellers’ market. Currently there is a supply of approximately 7 weeks of inventory.   

 Denver area homes continue to sell at a rapid pace and at almost 100 percent of asking price, a testament to a strong housing market,” said KirbySlunaker, president and CEO ofMetrolist.  “Inventory levels remain tight in the Denver metro and surrounding area, showing strong demand and a competitive marketplace.”

 The pace of home sales cooled slightly in July. The number of new homes that went on the market dropped five percent month over month, and saw a three percent decrease as compared to this time last year. Listings that went under contract decreased four percent month over month, but were up five percent year over year. 

In July, average sold prices for single family detached and attached homes continued their steady rise, reaching $335,427, up just slightly over June, and a five percent increase as compared to July 2013.

The condo and townhouse market continued to see increased activity as compared to last summer, as more listings came on the market and prices continued to steadily climb. The number of new listings for condos and townhomes saw a year-over-year increase of 23 percent. Compared to July 2013, sales of condos and townhomes also increased 23 percent, and listings that went under contract increased 30 percent. The average sales price reached $223,834, a 12 percent increase over this time last year.

“Homes are continuing to move quickly, some spending just days on the market,” said Slunaker. “Using the innovative tools on REcolorado.com, along with a REALTOR®, will help buyers and sellers know if it is the right time to enter the market.

Rooftop Solar Panels: “The Rest of the Story”

Written by Bruce Jordan

It seems like no matter where you go, you are bound to see a rooftop sporting an impressive array of solar panels collecting those rays coming from the sun and converting them into electrical current. The story, of course, is electrical energy is fed back into the grid and the homeowner can look forward to years and years of reduced energy bills as a result of having gone green and installed the panels on the roof of the home. In some parts of the country, like Colorado, where the sun has a reputation for shining for much of the year, the use of solar panels has become prolific and very much common place.

 

In spite of the newfound popularity, homeowners, sellers, prospective buyers and their real estate agents would be well advised to exercise some caution when it comes to solar panel installations. They can, and often do, affect title and financing transactions, producing unanticipated outcomes for the parties involved.

 

In many cases, the company providing the solar panel installations is not receiving payment in full from the homeowner for the panels when installed on the rooftop. Instead, a lease arrangement is created which provides for many years of payments to cover the cost of the panel installation, sometimes as much as twenty years into the future. The outstanding payment obligation associated with the lease is then secured by a recorded financing statement or installment contract against the owner in the office of the County Clerk and Recorder. When that occurs, an encumberance comes into being, affecting the ability of the homeowner to convey title to his or her property.

 

Let’s assume a homeowner, who has entered into a solar lease arrangement, decides to sell the property a couple of years later, when there are eighteen years left on the lease term. With this continuing obligation, the secured lien creates a priority against any future activity, such that a new buyer might not be able to obtain a new first mortgage because the new lender will not be able to obtain a first mortgage position. The seller and buyer could then have several hurdles to navigate:

 

  • One option would be to have either the seller or the buyer pay off the entire remaining balance due on that eighteen year leasehold — a prospect that neither had probably considered when they started the transaction.
  • A second possibility might include an effort to have the holder of the lease agree to the assumption of the lease by the new buyer, and a subordination of the leasehold to the new deed of trust. Many leaseholders have minimum credit score requirements that will preclude the possibility of certain buyers being able to assume the outstanding lease.
  • Assuming the holder of the lease will approve the assumption by the new buyer, some lenders have been known to require the consideration of the assumed lease payment in the debt-to-income calculation used to qualify the buyer for the mortgage financing. In such cases, the additional debt service may well push the buyer/borrower over the maximum debt ratios, resulting in denial of the loan.

 

The message of this bulletin is not that solar panels are a bad thing, or that houses with solar panels are to be avoided. Rather, it is important to recognize there are consequences that can flow from these sorts of arrangements which might not be readily apparent when people focus on the expected, advertised benefits of this green energy alternative. A good strategy would be to exercise caution and due diligence whether a homeowner is considering an initial installation or when a buyer and their real estate agent is contemplating an offer on a property with solar panels. It is a good time to make sure that all the necessary documentation is obtained and reviewed by competent professionals. Only after that review has been accomplished and a full understanding of the consequences has been obtained, should the parties consider proceeding.

International Home Buyers Continue to Invest in Profitable U.S. Market

WASHINGTON (July 8, 2014) – Favorable exchange rates, affordable home prices and rising affluence abroad continue to drive international buyers to the U.S. to purchase properties and make real estate investments.
According to the National Association of Realtors®2014 Profile of International Home Buying Activity for the period April 2013 through March 2014, total international sales have been estimated at $92.2 billion, an increase from the previous period’s level of $68.2 billion.

“We live in an international marketplace; so while all real estate is local, that does not mean that all property buyers are,” said NAR President Steve Brown, co-owner of Irongate, Inc. Realtors® in Dayton, Ohio. “Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability, and an incredible opportunity for investment in their future.”

International buyers and recent immigrants purchased homes throughout the country, but four states accounted for 55 percent of the total reported purchases – Florida, California, Arizona, and Texas. Florida remains the destination of choice, claiming a 23 percent share of all foreign purchases. California comes in second with 14 percent, Texas with 12 percent and Arizona with 6 percent. According to realtor.com®, the top five cities searched online by international buyers in 2014 were Los Angeles, Miami, Las Vegas, Orlando and New York City.

Foreign buyers take many factors into consideration when deciding where to purchase abroad, such as proximity to their home country, the presence of relatives and friends, job and educational opportunities, and climate and location. European buyers are generally attracted to states with warmer climates such as Florida and Arizona while the West Coast tends to attract Asian purchasers. Indian buyers tend to gravitate towards states that are home to large information technology companies, such as California, New York and North Carolina. Within markets in an individual state, it is not unusual to find concentrations of people grouped by nationality, possibly indicating that word-of-mouth and shared experiences influence purchases.

Twenty-eight percent of Realtors® reported working with international clients this year. International sales tend to be handled by specialists and only 4 percent of those who reported having an international client saw 11 or more international transactions in a year. Of those who reported having an international client, approximately 54 percent reported that international transactions accounted for 1 to 10 percent of their total transactions, a decrease from 2013 but still in line with past years’ levels.

International buyers are more likely to make all-cash purchases when compared to domestic buyers. In 2014, nearly 60 percent of reported international transactions were all cash, compared to only one-third of domestic purchases. Mortgage financing tends to be a major problem for international clients due to a lack of a U.S. based credit history, lack of a Social Security number, difficulties in documenting mortgage requirements and financial profiles that differ from those normally received by financial institutions from domestic residents.

Most homes purchased by foreign buyers, about 42 percent, are used as a primary residence. Non-resident foreigners are limited to 6-month stays in the U.S., so these buyers largely use the property for vacation or rental purposes or as an investment. Approximately 65 percent of purchases involved a single-family home. Nearly half of international clients preferred properties in a suburban area, about a quarter preferred a central city or urban area, and about 13 percent choose to purchase in a resort area.

International buyers come from all over the world, but Canada, China (The People’s Republic of China, Hong Kong and Taiwan), Mexico, India and the U.K. accounted for approximately 54 percent of all reported international transactions. Canada maintained the largest share of purchases, dropping from 23 percent in 2013 to 19 percent in 2014; however, China held the lead in dollar volume, purchasing an estimated $22 billion with an average sale cost of $590,826. China was also the fastest growing source of transactions, now accounting for 16 percent of all purchases, up 4 percent from last year. Mexico ranked third with 9 percent of sales and India and the U.K. both accounted for 5 percent.

“Foreign buyers who choose to work with a Realtor® have a substantial advantage,” said Brown. “Realtors® who have completed the Certified International Property Specialist designation have received specialized training and are prepared to help clients with the unique difficulties of being an international buyer. CIPS designees understand the challenges buyers face when purchasing property in the U.S., and have the experience and expertise to help them navigate the complex, time-consuming and overwhelming world of international real estate.”