Mary Beth: Senior Real Estate Specialist

I became a realtor right after I helped my parents move out of my childhood home. They had lived there for 40 years (almost to the day). They had reached a point where the house didn’t fit their needs any more. They wanted a new home with minimal maintenance. They didn’t want a condo or a townhouse or anywhere they had to share walls. They still wanted to have a yard. But they didn’t want to maintain it. I found the perfect place – a new patio home community where the HOA handles the yard work and shoveling. (In fact, I did such a good job finding them a home that I moved into the same neighborhood the next year!)

And then I spent two months helping them with the move. We prepared the old house for sale. We sorted through 40 years worth of belongings. We packed some of it. We gave some of it away. We sold a lot of it – in antique and “retro” shops on Broadway, on Craigslist, and finally at our family garage sale. (If there’s a way to sell or donate household items, I know about it now.) We made decisions and chose mortgages and I did everything I could do to make this really enormous transition easier for them.

And I enjoyed every minute of it. (Well, almost every minute!)

After that experience, I decided I’d like to have the opportunity to help other peoples’ parents the way I’d helped my own. I had learned so much, and I’d found it all so rewarding, that I wanted to do it again. (Well, okay, I wanted to do most of it again. The packing part I didn’t so much need to repeat!)

I got my real estate license six months later. And the first specialized designation I received was as a Senior Real Estate Specialist.

My dad served in Europe during World War II. My parents are part of the “Greatest Generation.” I really love working with that generation, our “seasoned citizens.” They’re straightforward. They look you in the eye. Their handshake is their word.

I have made a special effort, as a real estate agent, to learn a lot about the senior market. I know the types of housing available to them. (I’m a big fan of the patio home concept!) I know the programs available to them. And I know the unique challenges they face in transitioning from a home shared with a family to a home that fits their needs in their retirement years.

I’d like to help your parents the way I helped my own!

Mary Beth: Certified Residential Specialist

There are over one million realtors in the world. That’s right, a million.

A lot of them are “hobby” agents. They don’t do a whole lot. Maybe close a transaction or two every year. Maybe not even that much. A lot more of them are mediocre agents. They make a living at it, sort of. But they’re not necessarily that good at what they do.

So how do you find that one-in-a-million agent who’s going to do the best job for you?

One way to start is by looking for an agent who has earned the Certified Residential Specialist (CRS) designation, which has been called “the most rigorous and professional residential designation available to Realtors.”

Only 4% of those one million realtors attain the CRS designation. We’re the ones doing the lion’s share of the work in the real estate industry. CRS designees earn, on average, three times more than other realtors without the designation.

To become a CRS designee, an agent has to prove high levels of production. In other words, we have to actually close business – sell houses. And then we take classes – lots and lots of classes. We keep learning – about the market, about the business and about looking out for the interests of our clients.

I decided to pursue the CRS designation for the same reason that I decided to join RE/MAX. I wanted to demonstrate that I’m one of the serious ones. I’m not a “hobby” agent or a part-time agent or a mediocre agent. I’m one of the top 4% -- the successful ones, the ones who take this business seriously. I’m not one of the agents who’s in it only when the market is good and the sailing is smooth.

I’m in it for the long haul.

Great New Patio Homes at Lowry

I love Lowry. It's a great neighborhood, the town square is adorable, and it's all just a hop, skip and a jump from the center of town. If living on that side of town made sense for me, I'd move there in a heartbeat. Alas, my family is all on the west side, so I only look longingly eastward.

I spent this afternoon at Lowry with some clients of mine, looking at a new patio home community -- Arbors at Lowry -- going up in the East Park section. They were having a lovely grand opening celebration with sandwiches and cookies, which always makes me happy.

And I have to say the houses are really, really nice.

I'm a big fan of the patio home concept. So much so that I live in one myself. They encompass the best of both worlds -- a detached home on a lot with a yard, but with no lawn care and no shoveling. The HOA handles it all. That works very well for me. When I owned a "normal" home, I used to water my lawn once a month for a day. Not deliberately. I'd just forget to water until the lawn got all dry, then I'd water the heck out of it and eventually the water was running down the street and one of the neighbors would come over and turn it off.

The thing is, I'm not the only one who wants a real house and a real yard without the real work. That's what the Baby Boomers want as they retire. The kids are moving out, and they're tired of the mowing and pruning and shoveling. But they're used to having a real house with a yard. They don't want to go to a condo or a townhouse where they have to share walls.

The Baby Boomers create a seismic demographic shift every time they enter a new phase of life. And as they retire, they're creating an increasing demand for low maintenance detached homes. They don't want yard work. What they do want is ranch floor plans or at least main floor masters so they can get still get to their bedrooms on their creaky, arthritic, ACL-scoped knees. They want patio homes.

That's why I bought mine. It wasn't just the personal convenience. It was the investment. I knew the demand for patio homes -- especially those closer to the center of town -- would grow. And it has. In the three years since I built my home -- three years that have been relatively flat in the Denver real estate market -- my home has been appreciating. Homes rarely go on the market in my neighborhood. And when they do, they sell quickly.

That's why I'm a big fan of the patio homes I saw today. Homes in Lowry are already beating the appreciation odds in Denver, increasing in value in the midst of a flat market. I think that trend is only going to increase as gas prices soar. People like newer houses, but they want to live closer to the center of town. They don't want to waste a ton of money on gas driving to work (or to play!) There are only a few places to find new houses close to the center of Denver. There's Lowry, Stapleton and a few smaller infill areas (like my neighborhood in Lakewood). That's about it.

So take the appeal of patio homes, the past performance of Lowry and the rising gas prices, and the Arbors at Lowry starts looking like a danged good investment. Nice houses, too. Floor plans are well laid-out, and the finishes are high end. Slab granite, alder cabinets and extensive hardwood floors are all standard. Plus (this floored me) the back yards are fenced. That's a big deal in a patio home community. In my neighborhood we can't fence our yards, because the HOA needs to have access to them for mowing, etc. At the Arbors, the HOA actually comes into the fenced yard and mows it. Best of both worlds.

So check 'em out. Better yet, call me and I'll go along! (See June 23rd blog entry below "Do You Need a Realtor To Buy From a Builder?") If you go without me, at least tell Judi Phillips in the office that I sent you. She's very nice.

If you want to learn more about patio home communities throughout the metro area, let me know. I'd love to help!

MB's Client Testimonials Broadcast To Thousands At RE/MAX International Convention

So every year RE/MAX has a big international convention. Thousands and thousands of agents and owners from all over the world gather in Las Vegas to learn, to network and to celebrate all things RE/MAX.

Ad every year at the convention, with much fanfare, they roll out a big new project for all of the agents and bigwigs collected there. This year the big project was a series called "Connecting With Clients", which consists of seven brief video segments featuring RE/MAX clients talking about their wonderful experience with their RE/MAX agent. Agents from all over the world can download these segments from the RE/MAX web site and send them to their clients to demonstrate how great it is to work with a RE/MAX agent.

And, out of those seven segments, two of them featured my clients talking about their experience working with me!!

So, out of all the agents in all the offices in all the world, they chose my clients. Okay, so I do work in Denver, where RE/MAX International is headquartered -- which made it easy to interview my clients. But hey -- there are well over a thousand RE/MAX agents here in town, so that's still pretty good!

Anyway, you can see the segments for yourself. Just click here to see my clients Quinston and Regina, and here to see the Tirella sisters. This one was particularly fun. I was present for the taping. My clients Chuck and Angie were nice enough to allow the RE/MAX film crew to come over to their new house on moving day. Between their families and the movers and the film crew and the poor hapless cable guy who showed up in the middle of it all, it was a bit chaotic. (There were a few family members telling the neighbors that the house was going to be the the set for MTV's latest season of "The Real World.") I left the house while the taping was going on so they wouldn't feel self conscious talking about me while I was there. But as I was leaving, I heard "cut" several times because they kept saying my name when they were supposed to be saying "our RE/MAX agent."

I'm very excited and happy about this. It tells me that I'm on the right track in always striving to put the needs of my clients first. And it tells me that RE/MAX International knows what I already knew -- that I have really terrific clients!!

Home Buying 101 -- Do You Need A Realtor To Buy From a Builder?

The other day, I ran into someone I hadn’t seen in a while. She had just moved back into town, so I asked here where she was living. She looked at me sheepishly and said “I bought a house. I was going to call you but it was new construction and I didn’t think I needed to and the whole experience was awful and I really wish I’d called you first.”

A lot of people think they don’t need a real estate agent when they’re buying a new home from a builder. After all, they don’t need help finding a new house. The builders advertise all over the internet and the newspapers, and they have those nice models with the helpful salespeople who walk buyers through the whole process. What’s left for a real estate agent to do?

Plenty. First of all, those nice helpful sales people work for the builder, not for you. They’re not looking out for your best interest. They’re looking out for the employer’s best interest. If you don’t have representation, then there’s nobody in the transaction looking out for your interests.

Buying new construction from a builder is a lot different than buying an existing home from an individual seller. First of all, when you buy a home from a homeowner who is working with a real estate agent, the contract guiding the transaction must be the official Colorado Contract To Buy and Sell Real Estate. That contract was drafted by the Colorado Real Estate Commission, and is amended every year, to make sure that buyers and sellers are protected.

But not new construction. If you buy a house from a builder, you use the builder’s contract. The contract drafted by the builder’s lawyers, to protect the builder’s interests. Do you think those lawyers sit around trying to think of ways to look out for your best interests as a buyer? Don’t bet on it.

Second, you have those on-site sales people who, if you have no representation, will be instructing you and guiding you through the whole process. They’re often very nice people. I’ve worked with several of them whom I liked very much. But don’t forget who’s signing their paycheck. It’s not their job to see that your interests are protected.

How often, in this market, do you think unrepresented buyers pay too much for new construction? It’s easy for a buyer to assume that a builder knows the market, and that their homes are priced accordingly. But that’s not always the case, especially in a stale market. There are times when new homes are priced too high. When builders first set prices for a new development, there’s a little bit of guesswork involved. They don’t necessarily know that those initial prices will hold. That can be a big bummer for the first people to waltz in during the initial excitement period and pay the asking price. Because if the homes are overpriced, sales will usually peter out fairly quickly, and the builder winds up dropping the price. And that leaves the initial buyers in the position of having paid more for their homes than everyone else who moves in later. Guess what happens when it’s time to sell?

A good real estate agent will tell buyers when a new home is overpriced, and attempt to negotiate a better deal. If the builder isn’t dealing, he or she will advise the buyers to move on.

Sometimes, buyers attempt to purchase new construction without representation because they think they can get a better deal if the builder doesn’t have to pay an agent’s commission. That isn’t going to happen. Builders know that charging less to buyers without representation means charging more for buyers with representation, which amounts to penalizing buyers for having representation. That doesn’t make them look so good. It also hurts their relationships with local real estate professionals, and they really don’t want that. They need buyer’s agents to show their product to their clients. So they won’t stab us in the back by penalizing our buyers.

The cost of paying a buyer’s agent commission is built into the price of a house. The buyer is going to pay it whether or not any commission is paid. If the buyer is unrepresented, that money just goes back into the builder’s pocket.

The thing is, most builders expect Realtors to accompany clients on their first visit to a community in order to allow that agent to represent the clients. So call your Realtor before you start wandering through open houses. (Not working with a Realtor yet? Call me!) Personally, I'm happy to go wandering with my clients, even if they're not sure they're serious yet. And keep a stack of your agent's cards with you. That way if you happen to pass by a model home and just have to go in, you can hand the card to the onsite person, tell him or her upfront that you're already working with an agent, and make sure the builder will honor your relationship before you go traipsing through the model.

Pick up the phone before you start looking. Call a Realtor. You’ve got everything to gain and nothing to lose.

Home Buying 101 -- How Much to Offer?

So you've found it. It's the right house. It's the one you want. It's home.

So how do you go about making it yours?

Once you've decided on the house you want to buy, your agent will prepare an offer. "Making an offer" isn't as simple as having your agent call their agent and say "We'll give you 400K for it." No, that would be much too simple.

What you will be preparing is in reality much more than an "offer." It is a complete contract which, if accepted, will be the document that guides your entire transaction through its closing. It's done here in Colorado on the official contract to buy and sell real estate that the Real Estate Commission changes every year. As of today I believe the entire contract is 16 pages long. It covers just about every contingency that could possibly occur in a real estate transaction.

So you have to make decisions about much more than just the price you're willing to pay. You'll be laying out all of the dates and deadlines involved with the transaction, including the date of the final closing. You'll be telling them how much you'll be borrowing, how much you'll be giving them as earnest money and how much you'll be putting down at closing. You'll specify whether the purchase is contingent on the sale of your existing home. Etc., etc.

So you've got some decisions to make.

The most obvious is the price. This is a tricky one. Everybody's looking for a formula. "People tell me that the market is depressed, so buyers should always start out 20% lower (or 10%, or 30%, or whatever mood "people" are in that day.) Let me tell you, "people" don't always know all that much.

There are a lot of factors that go into determining the price at which to begin bidding on a house. First and foremost is the market value. That is determined by looking at what other similar houses in the same area have sold for recently. Not, that's sold, not just listed. People can ask any price they'd like for their house. It doesn't reflect reality unless somebody is actually willing to pay it. Market value is important because it reflects the price that the seller can reasonably expect to get for their house, and gives the buyer a clue as to how low they'll be willing to go.

Your agent will research the neighborhood, to find out what the sold "comps" (comparable sales) tell you about how the seller has priced the house. Maybe they've priced it high and they're dreaming if they think they can really get that price. Maybe they're realistic and they have a good agent who has researched the market and they've priced their home exactly where it should be for today's market conditions. Maybe they're very eager to sell, so they've deliberately priced it low for a quick sale. All of that will determine what your offer looks like. If they're wildly overpriced, an offer that reflects reality (accompanied by some sold comps demonstrating that reality) would be perfectly appropriate. If they're priced just right or low for market conditions, then the odds of their going for a lowball offer are probably slim to none. If they're particularly eager to sell for some reason, they might be more likely to accept a lower offer. In general, sellers are most likely to negotiate on a house that's been on the market for a while than one that was just listed. In the first few weeks, people tend to actually believe they're going to get the price they're asking. If they've priced low, they may be right. Right-priced properties sell much more quickly than those that are overpriced. Either way, nobody is likely to come down significantly within days of listing a property.

Too many of today's buyers actually believe everything they hear on the news. They figure every seller must be desperate, that they can get a home for pennies on the dollar, and home owners will jump at the opportunity to give their homes away for considerably less than market value. So they sail in with incredibly low offers, and they're shocked when the sellers say "No, thanks."

I once received an offer on a recently-listed, vacant property that was already priced very competitively (ie low) because the sellers wanted to sell quickly. The offer we received was for $50,000 less than the already low asking price. The sellers, who had already moved out of state, were offended and said that they weren't going to counter because they didn't consider this a serious offer. The other agent was astonished that they wouldn't even bother countering. She actually asked me "Do they realize they have holding costs?" As if the sellers didn't know that they were writing a check for the mortgage every month. They saw the vacant listing and assumed the sellers were desperate and would take any offer that came their way. They assumed wrong. The house went on to sell -- to someone else -- for about 2% under the asking price.

I often warn buyers against "offending" sellers with a lowball offer. It's not because I'm worried about hurting somebody's feelings. This is a business transaction. But people who are selling their own homes are not "all business." They're sentimentally attached. They've lived in the home, decorated the home, improved the home. Sometimes they've even done the work themselves. And so, reasonable or not, they get offended when a stranger comes in and essentially says "We think your house is worth waaaaay less than you think it's worth."

The danger isn't that the sellers' feelings will be hurt and they won't invite the buyers to their Christmas party. The danger is that a) the sellers refuse (as my sellers above did) any further negotiation, or b) they negotiate, but defensively and halfheartedly because they don't like you. They don't want to do business with you. They don't want you to live in their precious, precious home because you clearly don't appreciate it. Trust me -- as the sellers' agent who has had to deliver plenty of lowball offer to my clients -- it's very hard to get them back into the game once they're offended. Even if a deal is reached, the bad feelings tend to color the entire transaction. Inspections are more difficult. Every little issue becomes a major issue because the parties don't trust each other.

Obviously, you want to get the best price you can for the home you want. And it's your agent's job to help you do that. But part of that is bidding smart, understanding the psychology of the process and acting accordingly. Your agent, if he or she is good, can help you do that.

And that's the only "formula" I know.

Home Buying 101 -- Buyers are Liars

There’s a saying in the real estate world that “buyers are liars.” It’s not that buyers walk in and deliberately tell lies to their real estate agents. It’s more that what buyers think they want in a house and what they actually wind up wanting are often two very different things.

Case in point: my brother, whom I love very much and who is definitely not a liar. He wanted to buy a house. A house, as in “detached property with a yard.” He was very adamant about this point, because he has a very sweet yellow lab named Jake who needs space to run around and survey his empire and do his occasional duty. So we traipsed around town looking at lots of houses with lots of big yards.

And then I get a call. That very same brother is very excited. He’s spent the entire morning with a sales rep over at Riverfront. They have a great place that he really loves, and . . .

“Riverfront? Those are condos. What about Jake and the yard and surveying his empire and all that?”

“I think I can teach him to pee in a box on the balcony.”

That’s what we mean when we say that buyers are liars.

The point is that, when you’re all pre-approved and it’s time to go out looking at houses, you need to keep a dialogue going with your agent about what you need, what you want and what you don’t want. Those needs and wants may change over time, once you’ve seen a couple of houses and get a clearer picture of what’s available. That’s okay. Just keep the conversation going.

Most buyers have a pretty clear idea of what they want. Some have ideas that are too clear. (“It has to be made of stucco, sit on a corner, and have a kitchen with a window over the sink that faces to the south and looks over a peony garden that’s four feet wide by eight feet deep with a tree in the middle.”) Others aren’t clear enough. (“I don’t care what the house is like or what part of town it’s in, as long as it’s a good deal.”)

The first time you meet with your agent, be clear about what you know you want – area, size, number of bedrooms, age and condition of the house, etc. He or she will ask you a lot of questions, so you don’t have to come in with a list all prepared or anything. Just talk to him or her about what you think you want, and why.

You may prefer a newer house. But would an older house that’s been nicely remodeled be an option for you as well? You may say you need four bedrooms, but is that because you need four bedrooms, or do you need three bedrooms and a home office? If it’s the latter, then a three bedroom home with a study might work for you as well.

People sometimes ask me “How many houses do buyers generally look at before finding the one they want?” That depends completely on the buyer and the circumstances. I had one buyer who decided he wanted the first home we looked at. (Well, the first one we looked at after he realized he wanted a house in Park Hill instead of a condo in the Highlands.) I had another who claims we looked at 70 houses before finding the right one for her. I stopped counting, but I don’t think we hit 70.

It’s okay to fall in love with the first house you look at. It’s okay to say “Look no more, this is it!” It’s also okay to walk into a house and say “No, this isn’t it” and walk right back out without seeing the rest of the house. You won’t offend your agent. He didn’t build the house, after all. It’s okay to say “this isn’t it” before you even walk in. You don’t even have to get out of the car if you’re certain you don’t like the house, or the area, or whatever.

Remember that you probably aren’t going to find perfect. But you will find “right” for you. I’m a big fan of giving buyers the time and space they need to find the best house for their needs. It may happen on the first outing. It may not. Some buyers are in a bigger hurry than others, and thus have to choose more quickly. However it works, you should never, ever be pressured by a realtor or anybody else to buy a particular home when you’re not comfortable with the decision.

The way I see it, the transaction will be over soon enough. But the buyers are going to live in that house for a long, long time. I don’t want them to wake up every morning cursing me because I talked them into buying something they didn’t really want.

Talk to your agent. Listen to your agent. He or she will probably have suggestions and ideas about your various options, about resale values and a host of other issues related to your search. Take all of that into account. And then remember that, in the end, the decision is yours, and yours alone.

Well, yours, and the sellers who accept or reject your offer, and the lender who will tell you whether or not you can have the money to buy it . . .

Home Buying 101 -- Tales of Mortgage Horror

If anything is going to go wrong in a home purchase, it's probably going to have something to do with the loan. Borrowing money to buy property in today's environment is very, very complicated.

For your sake, for the sake of your realtor and the sake of everyone's sanity, please choose a good, reliable loan officer with a verifiable track record of successful closings and happy customers. In today's climate, a bad or lazy or irresponsible loan officer can make everybody's life miserable, and can delay a closing or even completely sink a deal.

A few true stories:

Loan officer is planning to come to closing. Loan officer doesn't show up. Neither does the money that is supposed to be wired to close the transaction. Buyer, seller and their respective families -- which include four sick children and a woman with Alzheimers, sit in a room at the title company for two hours, waiting. Finally everybody signs and leaves. Next day, loan still hasn't funded. I spend the morning on the phone with underwriters, etc., until it funds. Loan officer calls me that afternoon and says "I'm sorry I didn't return your call. I was at lunch." You don't get to go to lunch when your loan hasn't funded.

Buyer decides to work with a national mortgage company he's heard advertised on the radio. "Loan officer" doesn't return calls, is nearly impossible to reach. After weeks, loan officer realizes that buyer is receiving too many concessions from seller to approve the loan. She suggests that some of those concessions be passed from seller to buyer outside of closing and not be disclosed on the HUD-1 statement. This is loan fraud. Loan officer seems very surprised when I point this little fact out to her. Buyer winds up having to switch lenders two weeks before close. I have several heart failures.

Buyer chooses to work with out-of-state mortgage company his employer recommends. This lender's out-of-state loan processor, unfamiliar with Colorado real estate practice, estimates closing costs over $10,000 higher than they will actually be. Buyer calls his loan officer to express his displeasure. Loan officer proceeds to essentially disappear, not returning my calls nor buyer's calls. Buyer is upset, wants to back out of the deal. Closing cost mess is straightened out with the help of my friend, the good lender who isn't even involved in the transaction, and buyer elects to continue. Then, two days before closing, I receive a call from the processor telling me that underwriting has denied the loan because they don't like the appraisal. The appraisal, mind you, valued the property at the purchase price. Plus, the buyer is putting 20% down, so lender is only risking 80% of appraised purchase price. But it turns out that the loan officer, who has long since disappeared, didn't choose an appraiser who was approved by the lender. Buyer calls an officer of the mortgage company. A heated discussion ensues, culminating in the mortgage officer shouting an expletive (that rhymes with "duck stew") at the buyer and then hanging up on him. Buyer's options are to either pay several hundred dollars to have the property appraised by an approved appraiser and hope the results are good, or switch to a new lender at a higher interest rate (rates have risen since he locked the original loan). Either option will delay close by one to two weeks. Buyer once again thinks he wants to back out. That afternoon, I get a call saying mortgage has been approved after all because officer who hung up on buyer felt guilty and pled buyer's case to underwriting. But buyer isn't sure he wants to go through with it. Buyer finally decides to proceed. Closing is delayed two additional days. The day of closing, loan funds aren't showing up at title company. We discover that this is because lender is waiting for some random form that Colorado doesn't require. Loan finally funds. I check in to cardiac ICU unit.

I'm not the only real estate agent with stories like this. Fortunately, Colorado now requires loan officers to be licensed with the state. So if somebody screws up, they can be reported. This will hopefully, over time, sift out the riff-raff.

So how do you find a reliable loan officer? Start by asking your real estate agent. He or she has sat at enough closing tables to know who's reliable and who isn't. Most agents have lenders they deal with regularly. Those loan officers are probably going to go the extra mile for you, because they want those agents to keep referring business to them.

Other avenues? Ask your friends, family, co-workers what lenders they've worked with, and how it went. If they say "Okay, I guess," move on. Look for the one who says "She was fantastic!"

Whatever you do, if you live in a state that requires loan officers to be licensed, be sure to work with a licensed loan officer. Not "well, I'm not licensed, but the paperwork will show an agent who is." Work directly with someone who is licensed in your state. And, preferably, someone who actually works in your state. Laws vary widely from state to state. Unfamiliarity with your local laws and real estate customs can be deadly for your deal.

Home Buying 101 -- Lenders and Mortgages

After you've chosen a realtor, your next task should be to get pre-approved for a loan. Unless you're one of those rare and coveted creatures who is in a position to pay cash for a house, in which case you can disregard all of this and go on your merry house-hunting way.

For the rest of us, there are several good reasons to get pre-approved before beginning the search. First of all, you want to make sure you're qualified. Second, you want to see how much money they're willing to loan you. It's a big bummer to fall in love with a house, only to discover you can't borrow enough money to buy it! And finally, in order to make an offer, the seller will most likely want to see a letter from your lender. So it's best to start the process right away.

Here's how it will work. You will meet with the loan officer, either in person or over the phone. You'll fill out an application, either in person or online. The loan officer will run your credit report. Then you'll discuss your options -- how much you're qualified to buy, how much your payments will be, different programs you can choose, etc.

Note: In my experience, lenders are often willing to loan borrowers far more money than a prudent person would spend on a home. That's probably changing to a certain extent in this market. But nevertheless, don't think you have to spend as much as they'll loan you. Pay attention to the monthly payment, and make sure it's something you can live with for a long time.

Things in the lending world looked very different just a year ago. Back then, buyers could borrow 100% of the cost of a home. If those buyers negotiated with the sellers to pay buyers' closing costs, they could actually show up at closing without a nickel. Buyers with lower credit scores could also borrow money, using what were called "sub-prime" loans at slightly higher interest rates. Buyers could also get "stated income" loans where they didn't have to prove or document their income and assets.

Life is much different today. There are virtually no 100% loans available. Nor are there sub-prime loans. And only the most qualified borrowers can manage to get stated income loans.

So, you'll have to show that you can put at least 5% down -- unless you're using certain FHA loans that allow you to try to get the seller to pay your down payment for you. You'll also have to provide pay stubs and/or tax returns, bank statements, etc.

And then, once you're approved, you'll begin the search for the perfect house. Once you've found it and negotiated a price and terms, your loan officer will (hopefully, if he or she is good) swing into action to make sure your loan closes. He or she will review the contract, forward it to the underwriters and follow the results of the inspection to make sure nothing is discovered that will affect the deal or the loan. Then the appraisal will be ordered. The lender will want to make sure that you aren't buying the property for more than more than it's worth, since that lender will own the property if you default on the loan. Lenders usually have their own lists of "approved" appraisers whom they trust to give an assessment of the home's value. If the property "doesn't appraise" -- if the appraiser finds the value to be lower than the purchase price (or at least the amount the bank is lending the buyer), the bank will lend no more than the appraised value minus the required down payment. In this case, the deal is usually dead unless the buyers come up with extra cash, or the sellers reduce the purchase price.

The lender gives final approval to fund a loan by the "loan commitment deadline", which is usually a few days before closing. This is where the last-minute surprises usually show up. If all of the conditions are cleared, a loan is given "clear to close", which means the lender is committing to fund it. The loan officer then sends "figures" -- a complete accounting of the money due from the buyer for the loan and closing costs -- to the title company, which prepares the buyer's settlement statement. The loan officer should go over these figures with the buyer, and tell him or her how much money to show up with at the closing table. Then, on closing day, the lender wires the loan amount to the title company, the buyer signs a jillion loan and closing documents, and a new homeowner is born!

Home Buying 101 -- Buyer Agency

I received an email the other day from a dear reader in Chicago who's getting ready to buy a house and wanted to know some of the ins and outs of working with a buyer's agent. She also suggested that instead of just responding to her, I should respond on the blog so that others may benefit from these little nuggets of wisdom. (Does mild sarcasm come through on your average blog post?) At any rate, it seemed like a good idea. So here goes:

I'll never forget when I bought my first home, in Arizona. I was driving around with the random real estate agent fate had somehow dealt me. (I seriously don't at all remember how I found him or how he wound up representing me.) As we were chatting, he offhandedly mentioned, "Oh, and you should keep in mind that I work for the seller, not you."

Excuse me? Hadn't he been driving around trying to help me me find my best home? Hadn't I told him all about what I wanted, and what I could afford? Hadn't he been the one to recommend a lender to me? How could he not work for me?

'Cause Arizona law said so. The agent working for the buyer was paid by the seller, so he or she owed allegiance to them that was signing the check. What were the implications? Was the agent expected to tell the seller how much the buyer was willing to pay? I never asked. I don't think I wanted to know. The property I bought was a new house in a hot (literally and figuratively) market, so there wasn't a lot of negotiating involved. Just a list price and a contract. If we had been been in a negotiating situation, I can't imagine how compromised it would have been by this "my agent works for the other side" mentality.

Fortunately, Colorado law is different. We have buyer's agency laws that specify clearly -- the buyer's agent works for the buyer, and owes loyalty and fiduciary responsibility to the buyer. So legally, when you tell your buyer's agent how high you're willing to go in a negotiation, that information stays with the agent and doesn't meander its way over to the other side.

There was another "blip" in the law that Colorado has remedied -- dual agency. In many states, an agent working for both the buyer and the seller is legally allowed to represent and advise them both. For instance, if I'm representing sellers who are selling their house, and a buyer comes to me without being represented by an agent, I can represent them both in the negotiations.

There are obvious ethical implications to this. I already know how low the sellers are willing to go, because I've been working with them for a while. Now the buyer has told me how high he's willing to go. And I get to advise both sides. "Hold out for more. I know he can afford it." Or "don't offer than much. They'll go lower."

Colorado corrected this situation by instituting "transaction brokerage." There are two ways an agent can work with a client in Colorado. One way is agency, in which the agent advises and advocates on behalf of the client. The other is transaction brokerage, in which the agent moves the transaction forward, but doesn't advise or advocate. A transaction broker draws up forms, sees to it that everything is signed and official and legal, but doesn't stick his or her two cents on on what the buyer or seller should do.

If an agent is handling both sides of a single transaction, he or she must operate as a transaction broker. In other words, that agent can't advise either side, nor can that agent disclose what he or she knows about the other side. Agent has to say "sign here" and nod a lot. Can't say "go higher" or "go lower." Just put on the poker face and say "What would you like to do now?"

If you're buying a home anywhere but Colorado, one of the first questions I'd ask the agent is how buyer's agency works in your state. To whom does the agent owe allegiance? Will your confidential information stay confidential?

Multiple Bid Situation #5

Yup, it happened AGAIN last night. Seriously, this is NOT the sign of a bad market. Yet another buyer put an offer in on a property only to have another offer appear the same night. We'll see who gets it. But regardless, it tells me that there are more than a few buyers out there. After all, not only is this a slow market, but this is supposed to be a slow time of year. And yet, here's a condo with two offers in a day. Again.

Fun with Foreclosures

Everybody wants to buy a foreclosure. After all, a foreclosure is such a great deal. You can get a house for pennies on the dollar, right?

Well, maybe not quite.

Foreclosure properties in the Metro Denver area tend to sell for 5% to 10% less than their non-foreclosed neighbors. That's still a pretty good deal. (10% of a $200,000 property is $20,000 -- not exactly chump change!) But it's not the half price bargain that some people have come to expect.

And it comes at a price. The hassle factor on a foreclosure is HUGE.

I have a buyer under contract with a foreclosure. It's scheduled to close in two days. And the obstacles just keep coming. The loan officer and I are batting them out of the park one by one. But our swinging arms are getting tired.

Because of the foreclosure mess, lenders are making themselves look better by "cracking down" on foreclosure loans. And, like most "cracking down" programs, I don't really see any changes that are particularly useful or effective. They're just making a lot more busy work for the rest of the world.

Case in point -- three days before closing, the loan underwriter decides that an extremely minor issue found in the inspection simply HAS to be repaired before the loan will be funded. Of course, we argue that we can't make repairs to the property, what with the fact that the buyer doesn't own it yet and all. It's all worked out now, since we convinced the underwriter that it would be okay to escrow the money at closing to pay the electrician to make the minor repair.

Ugh.

The good news is that foreclosures in Colorado are discounted less -- in other words, sell for more -- than foreclosures in other markets. Why is this good news, you ask? Simple. The reason lenders don't discount their foreclosed properties as much here is because they believe this market is poised for a rebound, so they're not as desperate to unload them as they would be in, say, Alabama, where foreclosures are generally priced around 40% under market value.

Four Multiple Bids and Counting

Okay, so now I'm up to four multiple bid situations in two weeks. Still don't know whether my buyer got the property.

I was contemplating this situation, and have concluded that it indicates that buyers are indeed out there. They've just been waiting for prices to adjust -- which in some segments they have. Two of my multiple bids have been foreclosures. Another was home on a large lot in a popular "scraping" neighborhood. And the fourth was a family home in an established, suburban neighborhood.

At any rate, it strikes me as a good indication of the direction of our market!

Dealing with Multiple Bid Situations

I've been involved in three multiple bid situations in the past week and a half. Three.

A multiple bid situation is where more than one buyer is competing to purchase a property. It used to happen a lot back in the "hot" market of the 1990's, where multiple offers would frequently come in immediately after a home was listed.

And in this "slow" market, I've had it happen three times in the past week and a half. Twice I was representing the seller, and once the buyer.

Things aren't as slow as you may have been led to believe.

In two of those cases, the final contract price wound up being higher than the original asking price. In fact, in this most recent case, my buyer offered $6000 over asking (on a property priced just over 200K), and still lost out to another buyer who apparently went even higher.

So I thought it might be fun to look at how these situations come about, and what factors to consider when in the midst of one.

More often than not, multiple offer scenarios happen in the first day or two a property is one the market. This was the case in two out of the three I was involved in. (The other had been on the market for several months when two offers suddenly came in on the same day.)

The first thing that usually happens is that the listing agent contacts both buyers' agents, notifies them that they are in a multiple bid situations, and invites them to submit their "highest and best" offers within a defined time period. (Usually no more than 24 hours, sometimes a lot less.) The sellers then review all of those "highest and best" offers. Usually they accept one and reject the other(s). Sometimes, if neither offer is high enough, they will counter one (with a "binding counter") or more (with "non-binding counters.").

This can be really tricky for the buyers involved.

For the buyer who really wants the property, it's a bit of a guessing game to try to figure out how much the other buyer or buyers want the property. That's especially tough because these buyers are completely anonymous. One buyer generally knows absolutely nothing about the others. What was there original offer? How much will they offer now? WIll they go over asking price? How far?

Sometimes (but not often) a buyer won't even bother raising the original offer. That happens when a) the buyer was only throwing the offer out to see how low the sellers would go, and has no intention of paying full market value, or b) the buyer really wants the house, but is foolish and/or stubborn.

When I'm representing buyers in that situation, here's the advice I give to them. First of all, this is most likely your one chance. I can't believe how many times I've seen this when representing a seller in a multiple bid. A buyer's agent submits, as the buyers' "highest and best", a relatively low offer. When they learn they lost to the other party, they say "Oh, we would have gone higher" or "we would have dropped the request to pay closing costs." Then they always say "We were expecting to get a counter."

Highest and best means highest and best. Odds are good there isn't going to be an opportunity to counter.

I always encourage buyers to stop looking at the asking price of the house and start to look at the value. If neighborhood comps show that the property is priced low, then a buyer can easily pay over asking price and still be getting a very good deal. And, in a multiple bid situation that happens when a property is first placed on the market, that is frequently the case.

The question comes down to how badly the buyers want the house, and if the numbers back them up. Obviously, if a property were overpriced and they were bidding over asking for purely emotional reasons or just to "win", I'd be questioning their motivation. (But if it were overpriced there probably wouldn't be multiple offers on the same day.) But if it's the right home for them, it just appeared on the market, and it's priced right, I usually encourage them to bid over asking price. I've just been in this situation many times, and the final price is literally ALWAYS over asking. How much over asking they should offer depends on 1) how far below market the property is priced, 2) how high they could go and still be getting a good "deal", 3) how high their budget will allow them to go, and 4) how badly they want the house and how likely it is that they'll find another one they like as much.

Another trick with multiple bids -- the terms of the offer start to matter more. If two bids wind up offering the same price, the other factors start to come into play. How much money is each putting down? (More down payment means more financially stable, less likely to flake out before closing.) How soon is each one willing to close? Is either asking for the seller to pay closing costs. I'm a firm believer that buyers in a multiple bid situation should never ask for the seller to pay closing costs? Sellers don't like that -- at least my sellers never have. Even if the net price winds up being the same (ie buyer asking for closing costs is offering the same amount as an increase in purchase price), sellers will most likely choose the buyer who isn't asking for closing costs. One, the purchase price is higher to incorporate the closing costs, therefore the property has to appraise for the higher amount. Two, not being able or willing to pay one's own closing costs makes a buyer look less financially stable. Three, every seller I've ever worked with just plain resents it.

When deciding how much to bid in a multiple offer situation, I always ask buyers this: "Which regret would you rather live with -- not living in this particular house because you bid a few thousand dollars too low, or living in it and wondering if you could have bought it for a few thousand dollars less?"

There is no right or wrong answer. But it sure helps clarify a buyer's thinking.

The Art of Negotiation: More is Not Always Better

Part of being a good realtor is to negotiate well on behalf of clients. That, after all, is supposed to be the reason we exist as a profession -- to look out for what is best for those clients when they're buying or selling real estate.

But being a good negotiator is more than just the ability to be cagey or slick. It's about understanding human nature and knowing what kind of behavior or "tactics" are appropriate in a given situation.

Case in point. Sellers get an offer on their house. The offer is significantly under market value, no doubt because the buyers have watched too much television news, and are convinced that all sellers are desperate and that they can swoop in and pick up real estate at bargain basement prices. The agent's cover letter lists a couple of minor issues -- like the color of the bedrooms and the "need" to replace a small area of perfectly good but not perfectly new carpet -- as the reason for the low offer.

Sellers are annoyed, and have no interest in selling at the offered price. They're preparing to counter at a reasonable price, and gritting their teeth because they suspect that even if they do reach a mutually acceptable price, these won't be easy people to work with.

And then, lo and behold, another offer comes in. So it's a multiple bid situation. (Yes, it still happens in this market -- more often than you might think.) Throughout the negotiations, agent #1 and her buyers are clearly "playing the angles" -- refusing to commit to or sign written counters, keeping their offers verbal, trying to stay as low as possible until the last possible moment and then suddenly bumping up. Meanwhile, agent and buyer #2 are cooperative and pleasant. Buyers don't hide the fact that they're in love with the home. They sign and return counters immediately. They work in good faith within the framework sellers have set up.

In the end, both prospective buyers have come up to a price very close to asking -- about 75% higher than #1's original offer. #1's final offer winds up being slightly higher (after literally bumping it up $6000 in 5 minutes after realizing they were falling out of the running).

And yet the sellers choose #2. Why? Because a real estate transaction is about more than raw numbers. Determining a mutually agreeable price is just the first in a long series of negotiations culminating in the close of the sale. There's inspection, negotation on what repairs will be done and when, and the host of unanticipated issues that can arise during the contract period. Even if buyers and sellers never meet, they're working together. They know when the other party is being difficult, and it affects everybody involved in the transaction. I've seen it happen over and over again. When you get one party, be it buyer, seller or agent, who is overly defensive and paranoid, the stress level goes up all around. Everybody becomes defensive, and subsequent negotiations are drawn out and difficult. When everyone is cooperative and looking to be fair and reasonable, the entire contract period can actually be a pleasant experience.

The sellers in this case are good people who want to be fair and want to do the right thing. And they want to work with somebody they trust to be on the same page.

None of this is to say that there's anything wrong with seller's working to get the best price they can for their home, or with a buyer trying to get the best deal possible. That's what we do for our clients. But are better and worse ways to go about doing that. In an impersonal corporate situation, or in a case where one party has proven untrustworthy, perhaps cagey game-playing is the way to go. But when families are buying and selling their homes, it's not the time to play slippery ace negotiator.

It can backfire. Badly.

Forbes lists Denver in Ten Best Cities to Buy a Home

They say all real estate is local. And it's really true.

Forbes magazine recently did an analysis of estimated 2008 housing inventory, sales rates and turnovers to determine where there is most likely to be an increase in sales in the near future.

Guess what city came in at #5?

The article, called Best Places for Real Estate Deals, said that a pure "buyer's market" is one where there are far more sellers than buyers. That creates a drop in demand, which leads to a drop in prices. Or, in Denver's case, a stall. The article shows Denver's price growth since 2006 at exactly 0.0%. But if that market is expected to drop further, buying may not be a good idea.

So Forbes set out, using sales and inventory models from Moody.com, to determine which markets are expected to experience upswings that will make buying today worthwhile.

About Denver, they said While other markets have experienced meltdowns, Denver has been quietly correcting its inventory glut, which at the beginning of the year was one of the worst in the country. Though prices aren't expected to rebound quickly, if Denver sellers continue to unload their properties at discounted rates, it could be a strong year for buyers, with less risk than the past two years.

So don't believe the gloom and doom you read in the local papers. Now may be a very good time to buy!

Just because a house has been on the market for a while . . .

. . . don't assume it'll still be around tomorrow. Or even later today.

Last week, I was sitting at a seller's table signing an offer when another agent literally showed up at the door with a buyer ready to make an offer.

Background: I received an offer for one of my listings that had been on the market for several months. It was a good offer. I went over to present the contract to the sellers. We were sitting at the dining room table, pens in hand, preparing to sign it when the phone rang. Another agent was sitting outside the house with her clients and they wanted to see the house. I walked outside and told the agent that they were welcome to look at the house, but we were literally in the midst of signing another offer.

The wife thumped her husband on the head as if to remind him that he could've had a V-8, and said "See, I told you we should have come back sooner!" They had apparently seen the house the previous week and had been planning to make an offer ever since. We took our unsigned contract over to Starbucks and waited while they took another look at the house.

Three hours later we had an offer in our hands from Buyer #2. Still, sellers chose to go with Buyer #1. If Buyer #2 had submitted that offer a couple of days earlier, the seller probably would have accepted it and they'd be on their way to home ownership.

The market may be slow, but it's probably not as slow as you think it is. Don't take anything for granted!

Beware of brokers bearing bucks

A while back, a real estate agent's flyer showed up in my mailbox. In it, Mr. Agent announced that he would pay $300 to anyone who referred a client to him.

Three hundred bucks. That's a lot of money -- enough to make anybody want to start combing through their mental Rolodex to find this guy a prospect or two. It's a pretty good deal for Mr. Agent, too. After all, $300 really isn't a lot of money to get him a client and a closed transaction he wouldn't have had otherwise.

So why wouldn't every real estate agent offer a deal like that?

Simple. Because it's illegal.

And it's not just a "little bit" illegal, or illegal only here and there. It's prohibited by federal law. The Real Estate Settlement and Procedures Act (RESPA) governs all real estate transactions that involve a goverment entity (like FHA loans) or a financial institution that is regulated or insured by the federal government (like every bank and mortgage provider). So RESPA applies to every transaction involving a loan, unless the funds are coming from underneath Uncle Barney's mattress.

12 USC Section 2607 (a) says, "No person shall give and no person shall receive any fee … [pursuant to a referral agreement]." The paragraph goes on to exempt referrals between two people who are both licensed to sell real estate. But referral fees between agents and nonlicensed people are not exempted. Both broker and recipient would be guilty of a violation. And what a violation it is -- punishable by fines up to $10,000 and a maximum of one year in prison!

Suddenly that three hundred bucks isn't looking so good, is it?

What baffles me is how any competent real estate agent could not know that. In our world, RESPA looms large over everything. It regulates what gifts we can receive and from whom we can receive them. It regulates what fees we can pay and to whom we can pay them. We're constantly being reminded of the long arm of RESPA and the penalties of running afoul of the regulations. If an agent doesn't know about RESPA policies, it makes me wonder what else he doesn't know.

Even if this practice wasn't illegal, I'd have a problem with it. After all, if you asked a friend for a referral to a good realtor, what criterion would you want them to use? Would you prefer "I know and trust this person" or "I know nothing about this guy, but I get three hundred bucks if I can get you to use him." I want people to refer me because they know I'm good at what I do and that I'll take good care of their friends, not because I've paid them off.

At any rate, beware of brokers bearing bucks!!

What exactly is happening to the mortgage industry?

You've probably been reading the headlines about tumult in the mortgage industry. Nothing truly bad has happened to me (or to any of my clients), but we have had one close call. A lot of mortgage lenders are closing their doors, which gets kind of scary when you've got listings under contract and getting ready to close.

It's not as bad as the newspapers would have you believe. But it is an unpleasant situation.

I'd love to explain to you exactly what's going on, but to be perfectly frank, it's kind of hard to understand exactly how it all works, much less explain it. Fortunately, the Certified Mortgage Professionals Institute did a really good job in this article, The Saga of the U.S. Mortgage Industry.

Check it out!

Are housing prices going to drop?

Everybody asks me. "Should I sell this year or next?" "Should I wait to buy until prices drop?" "ARE prices going to drop?"

I always tell them I don't have a crystal ball. And I don't. And neither do the people at PMI Mortgage Corp. But apparently they have much more sophisticated market forecasting tools than I do. And they have released a report detailing the likelihood of declining home prices in the 50 major U.S. markets.

It's not such good news if you live in Florida or California. But it's really not bad if you live here in Denver.

The report was based on the percent likelihood that a specific market will see declining home prices. The average likelihood across the U.S. was 34.6%. The "top" markets (and by "top" I mean "most likely to head towards the bottom" were Riverside/San Bernardino California (65.2% likelihood), Phoenix (64.6% likelihood), Las Vegas (61.4% likelihood) and West Palm Beach/Boca Raton (60.7% likelihood).

Where did Denver fall in the list? 38th out of 50, with a 15.6% likelihood of declining prices.

Real estate is local. So many people read books about falling real estate values, and they're convinced that the real estate "market" is going to fall like the stock market falls. And it just doesn't work that way. Real estate is not one "market." It's a collection of smaller markets, each of which rises and falls based on local factors. Sure, there are national trends -- recession, inflation, interest rates -- that can affect a local market. But those factors are mitigated by what's going on in that area. After all, people have to live somewhere, regardless of how the economy is doing.

So why are some areas poised to take a dive while others are relatively stable. One of the main factors is a recent history of rapidly appreciating prices. Real estate values as a whole tend to increase over time. But what goes up too fast is bound to come down. When home prices rise much faster than wages, affordability declines. The people who live there can no longer afford to buy there. And so demand dries up and prices drop. In Phoenix, housing prices have climbed steeply for the past few years. One agent there says that, two years ago, homes were appreciating at a rate of 54% annually. Last January, there were about 3500 homes listed for sale on the MLS. Now there are about 54,000.

Why has Denver been spared? Our growth the past few years has been slow and steady. Yes, we had a pretty big run on prices back in the '90's. But it was never anywhere near 54% annually. Our prices leveled off around 2001, and we experienced what experts call a "soft landing." No big price drops. We just stopped growing at 10% - 20% per year and dropped down to 2% - 5%.

I've always believed that Colorado's desirability as a place to live factors into the equation as well. Even when prices climb, people are willing to try harder to find a way to stay, because it's a danged nice place to live!