Is the Denver real estate market in a bubble? I was recently on a news program discussing this very topic. In the video below, I go over what is happening to our real estate market in Denver and what we can expect over the next few years. I hope you find it useful!
How can you determine your home's value? Below is a video I created on how the professionals do it! I hope you like it.
Valuing a home is a complicated process and it takes years of experience to hone your skills. There are many variables to consider such as lot size, location, neighborhood, build quality, upgrades, landscaping, garage/parking, amenities, potential noise pollution, views, etc. Before considering any of these items, there is a basic way to determine value and it typically consists of 5 steps.
1. Find Comparable Sold Homes
The first thing you are going to want to do is find homes of comparable size that have recently sold in your neighborhood. By comparable size, what I mean is within 10% of the total "above ground" square footage of your home. Above ground square footage is the living space excluding the basement, and it has much more value than basement square footage. For example, if your home is 2000 square feet above ground, you are going to look for recently sold homes in your neighborhood that are between 1800-2200 square feet. (10% equals 200 square feet +/- of your home's square footage.
2. Figure Out the Basement Value and Subtract It From the Sales Price
Once you have found several properties comparable in size that have sold in the past 6 months, you are going to take each property and figure out what the basement is worth. GENERALLY speaking, and I mean generally as there are many variables, an unfinished basement is worth approximately $20 per square foot, and a finished basement is worth $40 per square foot. Again, this isn't exact. Many variables such as location, size, neighborhood etc. will determine how much the basement square footage is worth.
3. Determine The Price Per Above Ground Square Foot
Once you have valued the basement square footage of a specific property, you will take that amount and subtract it from the total sales price of the home. This will give you a rough idea of how much the above ground square footage is worth. You will then divide the sales price minus the basement value by the total above ground square footage to give you a cost per square foot above ground. You will do this with several homes to get a good range based on the condition of the homes in your area, upgrades, etc.
4. Determine The Price Per Square Foot Of Your Home
After you have determined the value per above ground square foot of several homes, you will have an idea of how your home ranks. For example, if you were using 4 comparable properties and you determined two of the uglier homes were worth $150 per above ground square foot and two of the nicer homes sold for $200 per square foot, you would simply rank yours based on the condition of those other properties. If your home is in slightly above average condition, you could estimate that your home is worth approximately $180 per square foot. Once you have determined this, you will multiply your home's above ground square footage by this value per square foot.
5. Add Back In the Basement
If your home has a basement, you will then take your above ground square footage value and add that to your basement value. Again, a rough estimate is $20 per unfinished basement square foot, and $40 per finished basement square foot. If your basement were 1000 square feet unfinished, then it is likely worth somewhere around $20K. You would add this amount to your above ground square footage value and voila, you have just done a rough appraisal on your home.
As you can see, this is a complex process and to get a really accurate value, working with professional is going to be your best bet. If you would like to save yourself this work go to my valuation site ColoradoMarketValues.com to get a rough idea what your home's value is. Life is too short to spend hours doing something a qualified professional can do for you. :)
Overcoming multiple offers in a seller's market is a real challenge for most buyers. You spend a lot of time searching for your perfect home, and once you have found it there are many other people who want it also. In the video below, I go through some strategies that my team uses to help our buyers.
There are 4 strategies a buyer can use in order to increase their chances of getting an offer accepted on their dream home.
1. Don't Wait
When you see a home you like online, or via yard sign, you want to go see it right away. In a hot seller's market, if you wait 4 or 5 days to go see a home it will likely be snatched up by the time you have a chance to look at it. It's important to have a Realtor that is available for showings on short notice.
2. Waive the Inspection
It's not the most ideal situation, but by offering to buy the home as-is the seller knows that he isn't going to have to make any repairs to the home. This will give you a considerable competitive advantage over the competition. You will still want to inspect to property to rule out any structural, health, or safety issues, but aside from any major concerns you are agreeing to move forward with the transaction without asking the seller to fix petty items.
3. Offer to Beat the Appraisal Price
Sometimes buyers offer too much money for a home. For example, if you offer $260K for a home that you and the seller both know is worth $230K, you are likely to run into problems during the appraisal. The bank will only loan a buyer what a home is worth, so if the appraisal comes back at $230K on a $260K offer, you and the seller have problems. By agreeing to make up the difference between the appraisal price and purchase price by X amount of dollars, you are going to have a significant advantage over other buyers. SEE VIDEO FOR MORE DETAILS
4. Use An Escalation Clause
The escalation clause is probably the best tool for buyers facing multiple offers. In a nutshell, an escalation clause is a clause written into the contract that says you are willing to beat any competitive offer by X amount of dollars up to a maximum of X amount of dollars. Since you don't know where your competitive offers are in the price spectrum, this will keep you from overpaying and from getting outbid. You always want to make sure that you ask for proof of the competitive offer to verify the amount you are paying. For example, if you make an offer on a home listed a $250K, you could make an offer of $245K and agree to beat any competitive offer by $1000 up to a total price of $261K. If the highest competitive offer comes in at $255K, this means you are willing to pay $256K with proof of the competitive offer in writing.
These are just a few strategies that you and your Realtor can use to help get an offer accepted. Shoot me an email if you have any questions about the home buying process by clicking here.
You are also welcome to call my team at 303-280-4950 anytime. We are always here to help you!
So you have decided to buy a home. Congratulations! Buying a home is a process with many steps. Today I'd like to talk about loan pre-approval. The first step in purchasing a home is obtaining loan pre-approval. Without visiting with a lender it's difficult to know how much you are going to be approved for and what your options with be. Connecting with a great lender will put you in an advantageous position, as you will know the maximum amount of financing you will be able to obtain, and how much your monthly payments will be. Without this information it's tough to know what price point you should be looking in. The last thing you want to do is look at a home that you fall in love with only to be disappointed that it's out of your price range in terms of your monthly budget, or your maximum loan amount. Obtaining a loan pre-approval letter will give you piece of mind and put you in a position to make a credible offer to a potential seller.
Why Obtain Loan Pre-Approval
Aside from the aforementioned items, the main reason to obtain loan pre-approval is to ensure that when it's time to make an offer on a home, you can prove to the seller of the property that you are qualified to purchase their home. Any good buyer's agent is going to recommend or even require you to obtain loan pre-approval prior to showing you homes. Without this information, it's not possible to make a credible offer on a property. If the seller doesn't know for sure that you are approved for a loan, he or she will likely accept an offer from another buyer, and you will be left standing in the cold disappointed that you didn't get your dream home. Needless to say, this isn't a good situation to be in. Getting loan pre-approval will not only save you from this unpleasant experience, it will allow you to spend your time wisely. You don't want to look at homes that are valued at $350,000 or more when you are only approved for a $250,000 loan. You could waste a lot of time and energy. Looking at properties that you are qualified to buy will make the process much more pleasant and easy for you.
What You Will Need
The first thing you will need to do in order to get pre-approved for a home loan is to contact a reputable lender. Often times your Realtor, a friend, or a family member can refer you to someone reputable who can help. If you would like to get int touch with a reputable lender, my lender's name is Jerry Garcia. If you would like to connect with him, you can reach him HERE or you may call him at 303-914-3820. He will take great care of you.
Regardless of which lender you choose, they are going to need a few items from you. The first thing they will need for you to do is fill out an application. They will ask for your W2's and tax returns for the last two years. They will also require copies of your bank statements and pay stubs. Once your lender has received this information from you they will check your credit and issue an approval or a denial based on your specific situation. If they deny you, a good lender will give you information and tips on how to improve your situation and obtain financing. If they approve you, congratulations! You are ready to move on to the next step of the process, buying a home!
What Happens After You Are Pre-Approved
Once you have been pre-approved for a home loan you will know where you are at and what you can afford. That's when the fun begins. You get to look at homes with 100% confidence, and make an offer that is much more likely to get accepted. Once your offer is accepted you will go through the process of inspecting the home. After the inspection process comes the appraisal. The appraisal is ordered by your lender. If the appraised value of the property is equal to or greater than the amount you offered on the home, you will move to the next step, underwriting. Once underwriting is complete, you will be clear to close on your new home. There are many details to this entire process, most of which I will discuss in future articles, but there is one very important thing that any home buyer must know. This is extremely important, so pay close attention. Once you get an offer accepted your lender is likely going to ask you for additional documents. You must get these items to your lender as quickly as possible. Your lender will not approve your loan if you don't give them what they need. If you delay getting the proper documentation to them, it could delay your closing and put your earnest money deposit at risk. A good Realtor like myself can prevent this from happening, but you don't ever want to get to this point. Always get your lender the documents they require in a timely manner. It can be a pain because it often seems like they want everything, including your second grade report card. Just keep in mind that they are loaning you hundreds of thousands of dollars and they are going to be thorough.
That's it! It's just that simple. As I mentioned earlier, there are many steps to buying or selling a home, and it's important to have someone on your side who can make the process smooth for you and give you good advice along the way. I would be glad to guide you or your loved ones that are buying or selling a home through the entire process. Contact me if I can be of service.