Even Within Denver, Some Areas Are Doing Better Than Others

I have a buyer who's trying to decide between Thornton and the northwest Denver Highlands area. Well, he's actually pretty well decided, but I did some research anyway, to demonstrate that all real estate is TRULY local, right down to the neighborhood. I checked sold statistics for each area over the past 12 months. What I found was fascinating.

Let's start with Thornton, a suburb north of town. I have other buyers under contract up there, and I've been amazed at how much house one can buy up there for around $200,000. No wonder. Prices have come down significantly. Over the past 12 months, the average home price in Thornton has decreased 7.7%, while the median price is down 5%.

Meanwhile, in the Highlands neighborhood, the average price is UP 17%, while the median is up 16%.

Of course, it's important to keep in mind that there is a lot of scraping going on in the Highlands neighborhood, which can skew the price statistics. If you scrape a $100,000 house and erect a $750,000 house in its place, the average sold price in the neighborhood is going to skyrocket, but it won't reflect the increase in value of the individual homes. So, since my buyer is looking in the 200K price range anyway, I searched the Highlands for sold properties under 300K, to eliminate the "scrape effect." And I still found that the average sold price was up 1.3%, while the median was up a whopping 14.3%.

So, what's a buyer to do? Well, if he needs a lot of house for the money, and plans to stay a while, and wants to take advantage of recent price drops, he might want to look at Thornton. However, if he's buying with resale in mind (and wants a very cute, charming area) he might want to stay in northwest Denver, knowing that it has held its value even in a declining market.

This kind of knowledge is important, not just for buyers, but for seller, and for everyone who owns a home or who follows the market. So often we hear news reports that say "Home values in Denver dropped x% over the past year" or even "Home values nationally dropped x%", and we automatically think "Well, what's x% of the value of my house? That must be how much value it has lost."

But it doesn't work that way. Not only are different cities appreciating and depreciating at different rates, but so are neighborhoods within those cities. Often values can shift fairly dramatically within a block or two. Even though a metro area (like Denver) may be depreciating, neighborhoods within that metro area can be appreciating -- sometimes significantly.

Location, location, location.

What If You Have To Sell Your House?

So what happens if you have to sell you house in a down market? Say you’ve been transferred. Or you got married, and two houses is one more than you need. Or your family is growing, and more square footage is now a necessity instead of a luxury. Or you need to downsize your home to meet your newly-downsized income.

As I said last time, (did I promise to write again “tomorrow”?) that isn’t necessarily a bad thing in this market. Many Denver neighborhoods are plugging right along, appreciating at a lovely rate. Others have just stagnated for the past few years. And yes, some have taken a market-value tumble.

Regardless, homes are still selling in this market. There’s more competition, to be sure. Gone are the days of sticking a sign in the yard and watching the buyers line up. If you want yours to be the one that sells, you need to put some thought into it.

The first step is to check out your competition. You obviously can’t see all of the competition, because most buyers are looking at more than one neighborhood. But you can see the immediate competition – the other homes on the market in your price range that are near your house. Have your realtor show you pictures of the listings. If possible, schedule an appointment with him or her to actually go see those houses.

These are the other houses your buyers are looking at on the same day they look at yours. They are your competition.

First of all, your house needs to be nicer than theirs. Obviously, if they have a remodeled kitchen and you don’t, you won’t remodel yours just to get the upper hand. But whatever is in your control that makes your house better, do it.

Update

A lot of updates don’t make sense when you’re selling a house. Others do. Flooring is one. If your carpet is old or worn or just unattractive, install new carpet. Sellers constantly say to me, “But won’t the buyers want to choose their own carpet?” Maybe, if they really thought about it logically. The problem is, buyers are not at their most logical when choosing a home. They’re emotional. And when they see ratty carpet, they think “ratty house.” New carpet looks good, it smells good, and it screams “new!!”

Paint is another good, easy, inexpensive fix. New paint, like new carpet, gives the house a “new” smell. It’s like new-car smell. It affects buyers on a level they can’t really describe. Plus, in warm neutral colors, it looks good. Incidentally, if you have any, umm . . . “bold” colors in your house, it’s especially important to neutralize them. With my buyers, houses get names. You don’t want yours to be “Purple Wall House.”

Minor kitchen improvements are also helpful. If your countertops or appliances are particularly dated, investing in new will pay off in the end. If your cabinets are old and worn, look into painting them. Put new hardware on them. There’s a lot you can do to make them look better without having to replace them.

Clean

Your house needs to be the cleanest. Trust me, buyers notice this. Not just the obvious things like trash in the middle of the room. Everything. You want shiny chrome. Dust-free corners. Clutter-free surfaces. Streak-free windows. Have the house professionally cleaned before it’s listed, and then keep it clean until it’s not yours any more.

Smells are really, really important. I’m a freak for smells. If a house smells funny or “off”, buyers notice. I have buyers who walk out if they don’t like the smell in a listing. Pets, food, trash – they can all affect the smell of a house.

The thing is, people often don’t notice the smells in their own houses. So ask a friend. Ask your realtor. Ask someone who will be straight with you. And then deal with it. If you have pet smells, thoroughly clean the carpet and any other surface the pet is exposed to. And then, ideally, send the pet on a vacation to Aunt Sally’s until the house sells.

Never ever try to cover up smells. It doesn’t work. I once showed a condo where the owner had obviously sprinkled cologne around to cover up some kind of obnoxious odor. It smelled like obnoxious odor mingled with cologne. It was disgusting.

Stage

To stage a home means to strategically arrange furniture and accessories to make the house more appealing to buyers. This is really important. I bring a professional stager in on all of my occupied listings.

If you have a vacant listing and you want to sell it fast, you might want to look into staging that as well. A vacant property can seem stark and cold. Stagers rent furniture to go into vacant properties, to make them look more warm and “homey.” It makes a big difference. Staged properties tend to sell sooner, and for more money, than those that aren’t staged.

Price

So after your house is updated and cleaned and staged, you need to price it. And not only does it need to be the nicest property in the neighborhood, it needs to be the best-priced.

Seriously. In the old days, we’d tell people that they needed to spruce up and stage their homes so they could sell them for more money. Today, we say that you need to spruce up and stage your home so you can sell it. Period. It’s hard to sell a house when there’s so much competition on the market. Buyers look at a lot of houses. Yours has to stand out.

Of course, your house may not be the nicest house in the neighborhood. Your neighbor’s house may be full of cherry and granite and marble. They may have diamond-studded stairs. All the more reason to price uber reasonably. The less your house stands out for being the nicest, the more it needs to stand out by being clean and well-priced for the market.

There are two kinds of houses that sell in this market. The first type is the junky, ripped up foreclosures that sell for far less than market value. The second type is homes that are nicer and better priced than their competition.

Trust me, you want to be in one of those two categories.

Is Now a Good Time to Sell?

In a word (or two), “it depends.” Obviously, conventional wisdom says that you don’t want to sell when prices are at their bottom. So, in general, if you don’t have to sell right now, you might want to think about staying put.

There are, however, a couple of caveats to that. First of all, what do you do if you’re selling in order to buy a new place here in town? You want to get in on the great deals inherent in a buyer’s market. But you have to sell to make that happen.

Obviously, the best case scenario would be if you didn’t have to sell to make that happen. Renting your current property might be an option. That way, you can wait until the market turns around to sell it. Plus, during the interim time, you’ll have someone else making payments and contributing to the equity on the property. There are disadvantages, however. First and foremost, you have to be (or hire) a landlord. Second, you wouldn’t have the proceeds from the sale of that home available as a down payment on your new home. You could borrow against the equity you already have to make your down payment, but that would increase the amount of rent you would need to cover the mortgage payment. And finally, you would need to be financially stable enough to cover that mortgage payment yourself on any months that the property remained vacant.

So let’s assume that renting isn’t an option. Well, then the question remains – is the loss you’d take on your current home made up for by the gain on the new house you’d be acquiring?

That all depends on where it is and what’s been happening in that neighborhood.

The trick is to look up the sales for houses like yours, in your area, for the past few years. (I know you can’t do that. But I can.) See if prices have dropped, remained stable or increased. Trust me – there are plenty of parts of town where values are still rising. Given those figures, can you sell the home for enough money to cover your mortgage and closing costs? Would you have enough left over for whatever down payment money you need?

And then look at where you want to move. What are housing prices doing in that part of town? Flat? Dropping or rising?

If you’re moving from a flat neighborhood to another flat neighborhood, it’s probably a wash – especially if the homes are in a similar price range. The same is true if both are depreciating or appreciating at roughly the same rate. This might not be a good time to move from a depressed neighborhood into an appreciating one, unless you’re afraid that your current home will continue to drop in value, and you want to cut your losses and jump onto the uphill train.

And finally there are the cases of sellers who have to sell. They’re being transferred, moving out of state, need to get out from under the mortgage – whatever. All is not necessarily lost in a case like that. But it’s a big enough topic that it deserves its own entry.

Which I’ll do tomorrow

Did My House Drop 14%?

So I’m sure at least some of you were reading yesterday’s post about the Denver real estate rebound, and kinda got stuck at the part about the average home price dropping 14.8% in the past year. "Did my house drop 14.8%?"

Don’t panic. It probably didn’t. Heck, it may have even increased in value. It all depends on where you live.

All real estate is local. Not just “local” as in “city.” “Local” as in “neighborhood.” When you average the prices of all of the houses in all of the neighborhoods that sold this September, you get a figure 14.8 lower than the same data for last September.

Values are falling fast in certain neighborhoods. Neighborhoods that have seen a lot of foreclosures, for example. Foreclosures tend to sell for less. The banks want to be rid of them. But when all of those low-priced foreclosures show up in a neighborhood, their non-foreclosure neighbors can’t get as much for their houses any more, and prices drop.

Prices are also falling in the market segments that have seen the greatest decrease in the number of buyers, namely the higher end. The number of homes sold in the 500K to 1M range dropped nearly 22% in the past year. The number of million dollar plus homes sold dropped over 40%.

Of course, that fact in itself contributes to the decline in the average sales price. Sales in the under 200K category are brisk, because demand is high for well-priced, low-end foreclosures. So if a lot of lower priced houses are selling, and very few high-end houses are selling, the average price will be dragged downward.

Some neighborhoods are appreciating. That privilege goes to neighborhoods that in demand for some reason. Areas that are close to the center of town. Areas that have unique architecture. SmartMoney magazine says:

. . . established, close-in neighborhoods are often holding up better than suburbs, because they didn’t endure overbuilding and because higher-income owners were less likely to need subprime or adjustable-rate mortgages.

Of course, another reason many of those neighborhoods are appreciating is because of the “scraping” going on. When you buy a shack for 200K, and then tear it down and build a mansion on the lot that sells for 1.5 million, you’ve upwardly skewed the average sales price for that neighborhood.

There are other reasons. My house has appreciated in the three years since I bought it because it’s fairly close to downtown and it’s a patio home. There’s a higher demand for these types of homes among retiring baby boomers, and very few of them have been built in the close-in suburbs, so the value goes up.

What’s happened to your house’s value? I don’t know. But if you’d like me to find out for you, drop me an email at mb@mblovesdenver.com and let me know. I’d be happy to check it out!

The "Smart Money" is on the Denver market

Haven’t I been telling you that the Denver market was ready to turn around? The Wall Street Journal’s Smart Money magazine has confirmed it. In their November issue, they published their list of cities most likely to rebound. And guess which city was in the top seven? You guessed it. Our very own Denver.

According to the article:

Denver’s overall outlook is sunnier than for most western cities because neither inventory nor prices spiraled out of control during the boom. Dinged by a telecom bust earlier in the decade that cost the city 5 percent of its jobs, the local economy wasn’t primed for irrational exuberance. Now with six months’ worth of homes in inventory—the level most experts judge to be roughly in balance—the city offers considerable upside.

So why do we find this so hard to believe? The media tends to focus on national averages, which are dragged down by the hardest hit markets – Phoenix, Las Vegas, Miami, etc. These are the markets where prices spiraled out of control during the boom. If the four hardest-hit states – California, Arizona, Nevada and Florida – are taken out of the mix, the statistical picture for real estate looks much better.

Will the Housing Bill Rescue You?

Today, President Bush signed the “Housing Rescue Bill.” So it seemed like as good a time as any to learn about it. There’s a lot to it, and a lot of fine print. But a couple of things stood out to me, as someone who represents buyers and sellers here in the real world:

Foreclosure “rescue”: Homeowners facing foreclosure can refinance into low-cost fixed rate loans insured by FHA. But “can” is a tricky word. There are a lot of hoops to jump through first, and not everyone will be able to clear them. Homeowners must be spending at least 31% of their income on the mortgage. (Where do they come up with these numbers?) They must be able to prove that they can’t continue to make the payments. They must “retire” any second mortgages or lines of credit taken out against the home’s equity.

AND – here’s the biggest “but” – the new loan cannot exceed more than 95% of the current appraised value of the house. This is the whole reason homeowners are in trouble in the first place – their current mortgage balances are for more than the home is worth, and they don’t have the cash reserves to make up the difference. So if the new loan will be used to pay off the old loan and the new loan can only be up to 95% of the value, then the new loan won’t be enough to pay off the old loan. Which means the whole system will only work if banks are willing to accept less than the full value of the loans and “write off” the difference. I don’t know if government pressure will make them more likely to do that, but my experience with “short sales”, where the lender agrees to take less than the full balance when the home is sold, it won’t be easy. Short sales are notoriously difficult transactions.

Also, seller down-payment assistance will go away. There are several loan programs, including one FHA program, where the seller can contribute up to 3% of the buyer’s down payment. I’ve never been a huge fan of these programs, because what ends up happening is that the seller just adds 3% to the price they expect to get from the sale. But in today’s market, appraisals are a lot closer than they used to me. Adding 3% to the price can mean the house doesn’t appraise and the deal dies. That happened to one of my listings last spring.

Nevertheless, it seems like most first-time buyers these days – at least those in the lower price ranges -- are using these programs. On October 1st, when they’re no longer available, my guess is that a lot of those buyers will be looking to rent instead. Not only will they have to come up with the down payment money, but the amount required will go up from 3% of the purchase price to 3.5%.

That, of course, might be a good thing in terms of keeping people from buying homes when they can’t afford to buy homes. But I don’t see it doing anything to stimulate housing sales.

The flip side is that first time buyers will be eligible for a tax credit of 10% of the purchase price of their home, up to $7500. That sounds great, too, until you read the fine print. You don’t get to keep the money. It has to be paid back to the government, in equal payments over 15 years. It’s really more of a no-interest loan.

Buyers don’t get the credit until after they’ve purchased their homes, so it won’t go toward the purchase price. It’d be charming if they put it into an interest-bearing account or invested it or something, but most people will probably just spend it, and then face an extra $500 on their tax bill every year for the next 15 years. Of course, if they sell the home, they have to pay the remaining balance back in one lump sum. Which will make it even more difficult for them to break even if housing prices don’t rise.

There are other provisions, of course. A bail-out of Fannie Mae and Freddie Mac. Money for states to buy homes and fix them up for sale. Etc., etc.

As I read about this, my main thought was a) this is sort of ridiculously complicated, and b) what do these Congresspeople really know about real estate in the real world?

Whatever. They’ll keep passing laws, and we’ll keep selling houses.

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.

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!!