During the just mentioned two-week period I wrote two contracts for one client and both failed because of mold in the crawl spaces of the respective homes.  These homes were in the $400,000 range so it was not a case of lack of resourses to do maintenance.  It may just have been lack of knowledge.  I do not quite get the latter.  As long as I can remember, inspectors have always reminded buyers of this maintenance activity.  Perhaps these two owners passed on an inspection, did not have a good inspector, or just did not pay attention.

Even in our relatively dry climate, moisture control is important.  Check your enclosed spaces frequently!

At this time of year plants are having major growth spurts and can get ahead of your trimming.  Take a walk around your house and cut back where needed.

These communities can range from high-rise condominium buildings to stand-alone patio homes.  What they share in common is that the owners write a check each month to pay for various maintenance costs.  That last comment is important.

Know What Your HOA Dues Cover

Some cover “everything” including heating and cooling.  These can be among the more expensive.  The most typical HOA covers grounds maintenance, trash collection,  exterior maintenance (including roof) and insurance.  We can break those down even further so that you know what questions to ask.

Grounds – This is usually everything outside but if you happen to be in a patio home, areas inside your fence may not be included.  Ask!

Exterior – Again, usually everything from painting to deck maintenance.  What about windows?  Again, read and ask BEFORE YOU PURCHASE!

Insurance -  This will usually include the structure but find out how much of the finish work is included.  Some policies go only “to the paint” and the owner is responsible for cabinets, fixtures and appliances.  Ask.  If you need a separate policy it will be very affordable. (But very expensive if you don’t have it!)

What is the Association’s financial condition?

This becomes a little more difficult to evaluate and if you are not working with a broker who can provide good support, you may even want the financials reviewed by a trusted financial professional.  An important category will be something like “Reserve for Replacement” or “Capital Reserves”.  These will be the funds used for other than month-to-month and year-to-year maintenance activities.  Items that will typically be budgeted here are replacing paving and concrete, roof replacement, swimming pool equipment replacement and HVAC replacement.  Repainting is sometimes in this category and sometimes in the annual budget as an ongoing activity.  A good HOA will have a “reserve study” performed every five years or so by an outside company and you should ask to see it.  Then compare the recommendation with the budget.  You should be able to acquire all of this information from the HOA management company or from the HOA board.

Other Questions to Ask

When was the last dues increase?  This is important because the HOA Board can usually approve small increases and it can be in the best interests of the community for them to do so because large increases later may be difficult if approval by the residents is required.

Has the BOD recommended and/or approved a dues increase that is not reflected in the current disclosure?  You need to know your immediate obligations and if they are changing.

When was the last “special assessment” and/or is one approved and/or recommended?  Special assessments occur when an association has not paid attention to “replacement reserves”, finds that a major item requires attention and there is no money available.  Special assessments can be devastating to many owners.

What is the current delinquency?  I am writing this in June 2010 and with a significant increase in loan defaults, there can also be non payment of HOA dues.  The problem is obvious and while the delinquent dues are almost always collected, the short-term affect is significant.  If this gets over about 15%, many lenders will not make loans for purchase within the community.

What is the current percent of non-resident owners?  You will always find that owner-occupants take more interest in, and better care of, a home.  When investor ownership approaches 30% there will be some limitation to financing a purchase.

Okay, I have satisfactory answers and I am purchasing.  What now?

Now become involved!  Serving on the BOD or committees may not be the most rewarding of activities but it is the best way for you to know what is happening with your HOA and to have more influenc in its management.

Need help?

I have covered a lot in a short time and you are right to be concerned.  If you want excellent representation and help with this evaluation, it is available.  I am an Exclusive Buyer Agent (EBA) and always and only represent the interests of my buyer-clients.

Russ Murray       russ@buyerbroker-denver.com       303-721-1100

One of the most interesting observations of our discussions is that we are not talking about “how to make more money”.  We are always talking about how to better serve consumers and help them to have a better home buying experience.  You will find that quite different from the education portions of most traditional broker’s meetings.

Exclusive Buyer Agents (EBA’s) work always and only in the best interests of their buyer clients.  If you or anyone you know is anticipating a home purchase, you will want to include interviewing an EBA as a part of that process.

You can contact me at russ@buyerbroker-denver.com or 303-721-1100, ext. 1.

Russ Murray

If you do not have instructions, try the following:

First, turn off or unplug the refrigerator.  We don’t want anyone to be injured.  There will be a removeable panel at the very bottom.  You may need to open the door(s) for access.  Usually this pulls off but check.  Some may need to have several screws removed.

Once the panel is removed, used the crevas tool on you vacuum to remove the lint, pet hair, food, etc.  HINT – Spraying with anti-static spray before and after will make this job easier.

Now pat yourself on the back.  Your refrigerator will be working better and saving energy.

Make your best offer – And stick with it!

Interesting.  I think that most buyers (and perhaps many licensees) believe that you go in low and then work up to a price that you, the buyer, are willing to pay and that the seller is willing to accept.  The theory is that you will get the best price.  Well, three of my recent transactions, all in the $400,000 to $500,000 range, suggest that is not always the case.  I did extensive market analysis for my clients and they each had a number that was acceptable to them but, in various degrees, below the value that I had derived.  Because of the lower figures, I suggested that we offer their “highest and best” up front and to let the seller know of the buyer’s position.

Three different results

In the first case, the seller promptly accepted the offer.  We had learned that the transaction was to be via Power of Attorney.  I have learned that in these cases the objective is often “get it sold”, not “get the absolute best price”.  My buyers did not need a loan and could close quickly.  Done!

In the second case, my clients were also cash buyers with flexibility in the closing date and looking for a really “good deal”.  In this situation we were able to learn that the owners had recently divorced.  A divorce is also an indication that the “sale”, rather than the “price” can be more important.  We went in with an agressively low offer which was countered.  I discussed this with my clients and we dicided to reject the counter and to let the seller know that if they changed their minds to let us know.  Five days later I received a call from the listing broker saying the seller would accept my client’s offer. Done!

The third situation was slightly different.  My clients directed an offer below the range that I had calculated which was $25,000 under the asking price.  The seller countered with just $10,000 below asking.  My client did go up by $5,000 which seemed to irritate the listing broker.  The seller rejected that counter and we once again said “let us know if you have a change of heart”.  Less than twelve hours later I received a call that the sellers had accepted my clients.  Done!

So, how do you know when to use this technique?

Try to have a broker on your side who is willing to do some research into the seller’s situation and motivation and who has enough experience to be able to evaluate conditions.  Of course, you also need to be willing to walk away from a particular house.

If you are in the Denver area, you can contact me for that expertise.

Russ Murray     russ@buyerbroker-denver.com   303-721-1100, ext. 1

Late one night, just blocks from the Capitol, a mugger jumped into the path of a well-dressed fellow and stuck a gun in his ribs.  “Give me your money,” the thief demanded.  “Are you kidding?” the man said.  “I’m a U.S. Congressman!”  “In that case,” the mugger growled, cocking his weapon, “give me my money.” –  Playboy Magazine

I could not help myself from venturing into this territory.  I acknowledge that other than having paid taxes for the past 40-plus years this is out of my area of expertise.  However the internet is a wonderful place, particularly if you limit it to verifiable facts rather than opinion or hyperbole.  This information is from www.taxfoundation.org which labels itself “non-partisan”.  My observation is that their data seem to be accurate and factual.  The editorial content will probably appeal more to people who are fiscally conservative.

Who Pays What?

This information reflects 2007 data; the most recent year for which the IRS has finalized the results.  Also, these figures are for INCOME tax.  Social Security, Medicare and other state and local taxes are not included.

- The top 5% of taxpayers, with “Adjusted Gross Income” (AGI) above $160,000 had 37% of the AGI  and paid 61% of the income tax collected.

- The top 25%, with AGI above $67,000 had 69% of AGI and paid 87% of taxes.

- The bottom 50% with AGI below $33,000 had 12% of AGI and paid 3% of taxes.

Preliminary figures for 2008 indicate the following

Taxpayers with AGI at $250,000 and above had 26% of AGI and paid 46% of taxes.

Estimate for 2010

47% of taxpayers will pay NO income tax.

How painful is it to pay your taxes?

Those of us who are self-employed have a really good idea of the “system”.  I reserve 40% of each check received to pay my quarterly deposits which do include, along with income tax, social security, medicare and Colorado income tax.  Yours are probably not that different, just more hidden due to “withholding” and the employer paying half of the social security deposit.

Think about the above

Taxes are a price we pay for our society.  47% of filers not paying any income tax is a pretty high percentage of citizens without a stake in our government.

That was when a  Denver Post reporter used information provided by a local real estate broker to announce “Metro-area home prices rise 15% over a year ago”.  The broker (who presumably provided the data) was quoted and named in the article and did not refute the conclusion.  I guess “any press is fine.  Just spell my name right”.  In my evaluation, I concluded that it was an irresponsible use of “median” data and an irresponsible conclusion.

S & P Case-Schiller Wins Again

You will continue to see me refer to Case-Schiller because they use “same house sales” to make their evaluation.  And guess what?  Denver prices are up an overall 2.6% for January 2009 to January 2010.  And what else?  The same broker who seemed to support the “15%” increase is right there supporting and being quoted regarding the 2.8% increase. (Disclaimer – The 15% increase was generated as a “median” for February of 2010 and 2009.  The 2.9% is a year-to-year for January.  Case-Schiller is a little (lot?) more conservative and waits for final data.)

Is your home value up by 2.6%?

It may well be.  But as you are reading my blog you know that I continue to maintain that values are very local and what may be true for a home in Parker, may be different for a home in Green Valley Ranch.  Talk to a professional if you need to know.

Is this 2.6% a “sign”?

I am not so sure.  The tax credit “stimulus” has had some effect.  That ends from an “under contract” perspective on April 30th and a closing perspective on June 30th.  After that we will see how the unencumbered market responds.  There is still a lot of unemployment and not much job growth and we will need to see both of those before we have vibrant housing market.

Agree, disagree, have questions?

Leave a comment and I will respond.  Or, contact me directly.  I am an Exclusive Buyer Agent (EBA).  I choose to always and only represent the interests of my buyer clients.

Russ Murray               303-721-1100, ext. 1    russ@buyerbroker-denver.com

Several years ago the EPA announced new requirements.  These requirement are in full effect beginning April 2010.

What is the problem?

Lead has been found to cause significant health problems to both children and to adults.  Lead based paint in a home is not a problem as long as it is encapsulated and undisturbed.  The problems occur when it is found to be chipped or flaking or if scraped, sanded or otherwise disturbed during painting or remodeling.

What homes are affected?

The homes that fall under the guidelines are homes for which a building permit was issued prior to January 1, 1978.  For the Denver area, that is about 80% of the housing stock.  You can usually find the construction date for you home in the county records for your county.  You may want to call the county or the building department if that is a 1978 or 1979 date to learn for certain when the permit was issued.  My own observation is that the use of paints containing lead was very limited after the mid-1960’s when water based paints began to be used extensively by production builders.  I will still be found on some of those home in exterior paint and some woodwork.  By the mid-1970’s it would have been typical only in more custom homes and then primarily on interior woodwork.  Testing in several locations with very minor “destruction” will tell you whether or not your home is affected.

What do I need to know or do?

If you engage a contractor for any remodeling, including painting, window replacement or cabinet replacement, ask to see their EPA certifications.  From reading the EPA web site, there appear to be two.  One is more of a “registration”, with the second being the actual “training”.  The contractors are obligated to follow EPA protocols during their work.  All seem to agree that this is going to increase costs.  There does not seem to be agreement as to how much.  The fines for contractors not following protocols and/or not being “approved” are in the $30,000 range so this is considered by EPA to be a big deal.

What if I do the work myself?

Good question.  Homeowners are not subject to the same restrictions.  But, lead is a real hazard and you should check EPA protocols and follow them.  You do not want lead dust air born in your home or flakes on the floor.  Test first and know your homes conditions.

Comments or Questions?

Please add yours or contact me directly if you would like assistance.  I am an experienced Exclusive Buyer Broker and always and only represent the interests of my buyer clients.

Russ Murray              russ@buyerbroker-denver.com    303-721-1100, ext. 1

Why can’t you believe newspaper headlines?

Because they are written to attract readers, NOT to inform.  This may be one of the more egregious misrepresentations.  If  consumers read the headline and then the article, they would likely come away believing that their house has indeed risen in value and/or that they should buy now because prices are rapidly increasing.  Neither is really true.

Why not?

Because for the purposes of most consumers, medians are not useful and gross market statistics are even less so.  Medians simply indicate are that half the homes sold above this figure and half sold below.  Consumers want to know how the market affects them.  While I could not check every neighborhood and Zip Code, I did check two areas.  One, a popular area in the City of Denver and one, a desirable area in the suburbs.

The results tell a different story from the article

Using the same methodology as the article, the Denver neighborhood showed a 16% decrease in the median and the suburban neighborhood a 6% decrease.  Even within these individual neighborhood there are varying results for individual types and prices of home.  Medians can change a lot based on the distribution of sales prices above and below.

What information can I trust?

The best will be from a market analysis prepared by someone you know and trust who is in the real estate business.  That analysis will compare your home to recent activity in your neighborhood.  Another option is to watch for articles that reflect information from the “Case-Schiller” index.  Those of you following my blog know that I place more credibility with this index because it traces “same home sales”.  Even with Case-Schiller you will want to look at the “micro”, not the “macro” figures.  Just as with politics, all real estate is local.

Need some help?

You can contact me.  I am an Exclusive Buyer’s Agent and have been representing only buyers for 20 years.

Russ Murray        russ@buyerbroker-denver.com        303-721-1100, ext 1