Do I really need a 20% down payment?

down-payment

Dear Dave,

We are looking to buy a home this year and have been saving our money so we can put as much down as we possibly can. We have great credit. We recently ran into some unexpected expenses and our savings account is down a bit more than we would like. My wife and I are not buying more than we can afford, but we may not have 20% to put down this year. What are your thoughts on how much is enough to put down to buy a home? We appreciate the help.

Joe and Rebecca
Grand Junction


Joe and Rebecca,

This is an awesome question and one that we deal with a great deal. The great news is, there are great options available to you at far less than 20% down, but I understand where you are coming from. When the real estate bubble burst several years ago and credit standards and requirements tightened, it became a widely held myth that you needed at least 20% down to purchase and although that would be best, there are wonderful alternatives that don’t require that much down and still allow you to remain fiscally responsible. For lending questions I often lean on a good friend, James Pulsipher who is Senior Vice President at Fidelity Mortgage here in Grand Junction. As James goes on to explain, he agrees there are options for less than 20% down.

“The place where the 20% idea comes from, involves mortgage insurance. If you put less than 20% down, then you have to purchase mortgage insurance as part of your mortgage. Mortgage insurance is an insurance that protects the lender in the event of default. In short, if the lender forecloses the property, sells it, and loses money when they do – this insurance covers part of that loss. Because of that mortgage insurance is good to avoid, if possible, because the buyer gets zero benefit from it. It only benefits the lender.”

“In the lending world today, you can put as little as 3% down for conventional financing. Conventional mortgage insurance can be paid in several ways. Monthly – a premium is added to your monthly payment. Up-front, you can pay a single premium up front, and then there is no mortgage insurance in the payment, and finally – through the rate. This is a lender paid, or NO mortgage insurance loan, where you pay a slightly higher rate, and don’t pay any mortgage insurance at all. The bottom line is that there are a lot of choices.”

“In the case that a buyer chooses the monthly mortgage insurance (which is the most common), then that insurance will terminate when the loan is paid down to 78% of the initial price of the home. After two years, if the home is worth more, you could also ask the lender to re-appraise the home and terminate the mortgage insurance sooner, based upon that new equity position.”

“So at the end of the day, not having 20% down is okay. There are a lot of purchasing options without it, you simply want to consult with your lender and determine what the best approach to mortgage insurance should be for you.”

As it is with everything, knowledge is power and teaming up with a good lending professional who can help you assess what is best for you and your individual situation is the key. Find someone you trust and whom you can communicate with and utilize their expertise to help you navigate your mortgage and down payment options. I bet you will be delightfully surprised at the plethora of options you have available! Happy house hunting.

Dave Kimbrough
The Kimbrough Team

Should I add to my current garage or build a detached shop?

shop-tools

Dear Dave,

I have been throwing around the idea of building a shop at my house. I live on about an acre lot and have a fairly new home, built in 2007. I have room to build a detached shop and also room to add onto my current 2 car garage.

My question for you is, what do you think would make the most sense when I go to sell the house someday? Do people appreciate a detached shop or would they like it connected to the house?

Thanks for the help-
Robert, Grand Junction


Robert,

I believe this is an idea that virtually every man throws around from time to time, where can I build a shop? Building a shop has almost become part of the American dream. Right behind the dream of a detached shop is a three car garage or three car garage with large storage shed! As you wander through life accumulating “things” that you probably no longer need, but can’t force yourself to part with the idea of more and more storage becomes increasingly important.

A detached shop can be a man’s private kingdom and it is hard to put a price on that.

In my opinion, build a detached shop. The nice thing about a detached shop, over one that is attached, is that what is in or what is happening at the detached shop is less likely to spill over to the main garage and house. This is a simple function of being “detached”. A detached shop can be a man’s private kingdom and it is hard to put a price on that. The fact that a garage or shop is detached from the rest of the house implies that not everyone is invited, there is limited access.  Having a shop that is detached also gives one the opportunity to separate his or herself from the chaos or activities of the main structure and provide a place of solace and privacy where anything goes and being clean are not words that need to be feared! Having a place that is a safe haven is valuable and for those who are used to having it, it is VERY valuable.  

Go detached and live longer and more prosperous and when you go to sell, enjoy the rewards of having a detached shop! I am kidding about the longer and more prosperous part, but the rewards will be no joke! It will, no doubt, be a big selling feature that will have you seeing more green! ($)

Dave Kimbrough
The Kimbrough Team

Spruce up your curb appeal this spring!

spring-spruce-up

Dave,

This spring like weather has me and my husband anxious to get into the yard and start doing some work! We will be selling in the next year or two, but in the meantime we and are looking to do some improvements to the outside of our house and yard.  First, the house really needs repainted.  Is this something we should do prior to selling?  And if we do, what is the color that would attract a potential buyer?

We also have some shrubbery and bushes in the front and back yard with some old bark around them?  What do you think is best to put in those areas if we replace the old bark- rock or wood?

Thanks for your help, we could use a little help and thought we should get an expert's opinion!

Thank you - Tracy, Grand Junction, CO


Tracy,

This “spring like” weather has us all ready to get out and get going in the yard.  This kind of weather typically does not come our way for another 60 days or so, but it’s a blessing to have it and taking advantage of it is a great idea. Getting the outside of your home in tip top condition is very important. As you know, your home's curb appeal is instrumental to getting potential buyers to want to go inside to see more. 

Buying a house is a little like dating…if you like what you see on the outside, you are much more likely to make an attempt to see what is on the inside and see if it is a fit! Dressing up for the date is important. If your home needs painting, paint it before putting it on the market. Many people put it off by saying that the buyer will want to choose their own colors etc. Honestly the majority of people will choose a palette neutral color that is consistent with our area and other homes in the neighborhood. You can’t go wrong by choosing a neutral color and putting a fresh coat of paint on your home to make it pop. Don’t forget to also paint the corresponding trim and door a complementary color to set it off and also look to see if shutters are appropriate or planter boxes can be added to really spice up the curb appeal and have people dying to get inside!

Taking some time to spruce up the house and at the same time whip your landscaping and beds into shape is a great idea. I love the use of bark or rock, depending on the look you are trying to achieve.
landscaped-house

Taking some time to spruce up the house and at the same time whip your landscaping and beds into shape is a great idea. I love the use of bark or rock, depending on the look you are trying to achieve. The bark will give it a more mountainous feel and the rock a bit more of a desert edge, go for the look that fits your neighborhood. Many times I find the bark appealing on older, more established neighborhoods with larger trees etc…  and the rock more fitting in the newer subdivisions. Keep in mind that both the bark and the rock will need to be refreshed every so often and bark is an easier task to refresh because you can buy it by the bag and is generally easy to carry and overall much lighter. Remember when you freshen up your old beds, make sure to trim back your old bushes and plants at the same time and that will help give the overall appearance of a total face lift.

Taking advantage of this wonderful weather and focusing on your exterior curb appeal is very smart and will pay you big dollar for dollar returns on your investment. You may not love the sweat you are putting into it now, but will love the equity it provides when you do decide to sell. Best of luck and maybe the fruit of your labor will make you happy enough to just stay put for a bit longer and enjoy!

Dave Kimbrough
The Kimbrough Team

Current Real Estate Market Update

Dave,

current-real-estate-market

What’s is the current state of the real estate market in Grand Junction? Is it a buyer’s or a seller’s market? I’m also curious how long it takes to sell a home in our neck of the woods compared to other places like Denver or Fort Collins. It always seems like I’m hearing how Denver is booming and has been for the last couple of years. How do we measure up over here on the Western Slope?

Thanks for the market update!

Steve, Grand Junction


Steve,

Great question! When I wake up in the middle of the night I am either thinking about ways to improve my marketing plans or pondering what is really going on with our real estate market?  How will this year be, compared to last year?  Will we finally see the job and wage growth start to flow or remain stagnant like a rivers eddy? Is there enough development being initiated to keep pace with present and future housing demands? I spend way more time than I should pondering questions just like this and will admit that I waft back and forth like a wind swept balloon, but will give you what I know as of now! Keeping track of what is happening is hard enough, however trying to predict what will happen typically proves a fools game. Today I am happy to report that the state of the Grand Junction real estate market is strong and holding steady. 

Steady is the new normal for us and has been for the past several years, as we have seen steady and sustainable growth year over year since 2012! 

Steady is the new normal for us and has been for the past several years, as we have seen steady and sustainable growth year over year since 2012! Having a real estate market that demonstrates sustainable growth is a real blessing, as that kind of market generally does not lead to a bubble and keeps affordability in reach for most of the residents. Our prices have not gotten too far out in front of our wages and income and that helps any market remain on the healthier side of things. The average days on market for a home in Grand Junction in 2016 was 103, down from 142 days in 2012. 103 is good. Not great, but a healthy good. In stark contrast the Metro Denver area has an average days on market of 27 and Ft. Collins you are looking at 59 days on average. 27 Days is really hard to believe, but Denver has been sustaining that kind of market for 3 years now. What seems like it has to end, has no end in sight. The average days on market for Ft Collins is impressive, however not when compared to Denver! The real test is median sales price and we will see that the prices on the Front Range are soaring!

Since 2012 the median home price in Denver has gone from $233,500 to $350,000, an increase of 50%! Ft Collins went from $228,000 to $344,000, an increase of 51%. WOW. Here in Grand Junction the median house price has gone from $175,000 to $211,000 in the same time span, an increase of 21%. Not as impressive as Denver, however very solid and most importantly very sustainable.  Being able to sustain the growth is very important to the long term viability of our local real estate market. Although the real estate numbers here are not as impressive as the Front Range, I personally believe it is to our benefit over the long haul. Having a real estate market that consistently shows sustainable growth and appreciation will lead to an overall healthy local economy and one where housing will remain affordable to the majority of our residents and that is a very important part of community.

I for one am thankful for where our valley is and where it is headed! As the author Robert Fulgham wrote, "The grass is not, in fact, always greener on the other side of the fence. No, not at all. Fences have nothing to do with it. The grass is greenest where it is watered. When crossing over fences, carry water with you and tend the grass wherever you are.” 

Dave Kimbrough
The Kimbrough Team

Purchasing an investment property in the Grand Valley

Rental-Property

Dear Dave,

My wife and I are considering our first residential investment property. We would like your take on what is a good investment opportunity on the Western slope of Colorado? We have looked at small houses, a couple of duplexes and a small multi-family unit. We just want to make sure we are moving in the right direction and don’t do something where we get in over our head. 

We wanted to get your input on what is happening in the market right now and where we might have the best outcome for our investment.

Thanks and take care,

Jon and Kristyn - Grand Junction, CO


Jon & Kristyn,

I believe you are wise to be considering a real estate investment property! It is great diversification of your portfolio, whether just getting started or if you have a lengthy financial resume. In my opinion our market is a very good market for income producing properties. We have a high number of renters in our community and the continued growth of Colorado Mesa University means we have a consistent influx of students who need a place to live. We have a very low vacancy rate in Mesa County, somewhere between 1-2% which helps create a great environment for dipping your toes into the rental market. As you can see that we have a good market for finding tenants and also might foresee some rising rent prices because of lower availability.   

It is also important to consider what type of property you are comfortable with.  Different properties bring different challenges. 

It is also important to consider what type of property you are comfortable with.  Different properties bring different challenges. The older they are the more maintenance you can expect, but that may be great if you are retired, handy and looking for something to keep you busy. It will also likely cost less to procure.  The newer it is, obviously, the less maintenance it will likely require, but the acquisition costs will be higher. Multi-family presents its own challenges, as you must consider they are typically larger, cost more to maintain (as there are multiple units and more things to go wrong), however having multiple tenants spreads out your risk. If you own a 4 plex and 3 of the 4 are rented, you should still be able to make your payment. If you have a single family home and it is not rented, then you better have a slush fund to make the payment if you don’t own it outright. Having multiple tenants gives you some insulation, but also can increase the headache and work. The bottom line is to narrow down what kind of property you want and what kind of renter that property will attract.

If you get a home just off North Avenue and 19th, you are likely to have students as your prime renter candidates. If you have a single family home in the North area you are more likely to attract families… etc. You also need to consider if you will manage this yourself or hire a property manager? Different strokes for different folks. I would never manage my own properties, however I have friends who would never hire someone to do it for them. I personally favor the hands off approach and see far less nightmare scenarios when a “good” property manager is involved.

This is such a complex decision with many facets to consider, but I would encourage you to start simple, a single unit, to get your feet wet and find out if being a landlord is right for you. If you find you like it, then broaden your horizons on the type of properties you look at in the future and achieve even more diversification in your growing portfolio. Hope all goes well.

Dave Kimbrough
The Kimbrough Team

What happens when a home appraises for below the contract price?

Dave,

appraisal-value

We sold our home last year and during the process our appraisal went by without a hitch, actually everything went as well as we could have hoped for. However, recently it was brought up in a discussion between my wife and I—what happens if the appraisal on a home comes back less than what the buyer offered? Are the buyers able to change their offer accordingly or are they contractually obligated to continue through and purchase the home with their original offer? Like I said, the appraisal on our house was smooth as silk, but it just got us curious about what the options would have been if things had not gone so smoothly.

Thank you for taking the time to answer our question!

Sarah and John, Grand Junction


Sarah and John,

Congratulations on your smooth transaction last year! It’s always a blessing when all aspects of a sale go smooth and without any significant speed bumps. As I am sure you are aware, speed bumps are just part of the process and a low appraisal can be one of the most significant speed bumps one can encounter on the road to closing!

Low appraisals become more common when a market gets very active and rapidly appreciating prices are hard to substantiate with past sales. It can also be an issue, like it was here in 2011 & 2012 when the large number of foreclosures cloud the data and keep an artificial lid on potentially rising market values. Luckily on the Western Slope we have been seeing very sustainable and verifiable appreciation levels and although we occasionally see low appraisals, it is the exception not the rule. When an appraisal does come in low, there are several options, but all the options generally lead to give and take from both parties involved in the sale.

Unless the buyer waives their right to an appraisal, there is an appraisal provision in every Colorado Contract to buy and sell that provides the buyer an escape clause if the home they have under contract does not appraise at the contracted price. There is no contractual obligation to purchase any property that does not appraise. In fact, Colorado real estate contracts are designed with the intent to protect the consumer. Remember, if the appraisal comes back low, you still have options.

The first most logical option would be to get a second appraisal, if both parties agree that the first one was, for one reason or another, not as accurate as it could have been.

The first most logical option would be to get a second appraisal, if both parties agree that the first one was, for one reason or another, not as accurate as it could have been. If the lender will allow a second appraisal, then this is a reasonable choice and both parties can hope that the value comes in at the contracted price.

The next option is to amend the purchase price down to the appraised value. This is not a very popular option for sellers, however very popular with buyers! Funny how it works out that way.  On the flip side, the next option is to keep the agreed upon purchase price and have the buyer make up the difference between the appraised price and purchase price in cash at the time of closing. Funny how this is a very popular option for the seller, however not very popular with buyers. Another option, and by far the most popular, is they meet in the middle. Say the appraisal comes in $6K low, the seller lowers the price $3K and the buyer brings an extra $3K to the closing table to bridge the gap and get the deal to the closing table.

Ultimately a low appraisal generally comes down to how bad the buyer wants to buy and how bad the seller wants to sell and thus the reason that the “meet in the middle” option is the most popular! There are far too many scenarios to go over here, as a low appraisal can have other, more far reaching impacts. More often than not it just takes everyone coming to the conclusion that a win/win is better than a loss! Count your blessings and I hope this gives some simple insight into a complicated and very unwanted situation! 

Dave Kimbrough
The Kimbrough Team

For Sale by Owner: Advice for working with a buyer's agent

tulip-home-vase

Dave,

I’m am going to sell my home by owner this spring and I am willing to cooperate with agents who want to show it to their buyers. One of my friends told me that agents would not show it without offering “agent protection” and I am not exactly sure how that will work or what it means. If I sell my home to a buyer with a realtor, do I still have to pay the typical agent commission? I know I am asking a real estate agent for advice on selling on my own, however I am confident you will shoot me straight. Thanks for your advice.

Jody, Grand Junction


Jody,

There is one thing I can guarantee, I will always shoot you straight! I think it is great that you are going to try to sell your home by owner! Selling by owner is not for everyone, however it is an option for many and some are successful. According to the National Association of Realtors, 8% of all home sales were by owner and the success rate for by owner properties is 20%. So the success rate is not high, however you never know till you give it a whirl. So you have decided to go by owner, how can you incorporate real estate agents to increase your success rate?

I am confident what your friend meant by “agent protection” was simply referring to your willingness or lack thereof to cooperate with real estate agents in paying a commission. Let's face it, real estate agents are in the business of selling houses and they generally try to sell the homes that offer to pay them a commission if their buyer ends up purchasing the property. You need to decide what commission you are willing to pay and then let the agents know what that is and agree to offer them some kind of assurance that if their buyer purchases, you will cooperate with an agreed upon commission. If you are willing to cooperate, then offer to sign a commission agreement or proactively provide them with an agent commission form that identifies what percentage or flat fee you are willing to pay and allow them to sign it for their buyer. This will protect the agent and probably substantially increase your chances of getting Realtor cooperation! One way I have seen this successfully done is to deliver fliers to the real estate offices and have curbside fliers that openly advertise your willingness to cooperate with paying a real estate commission.

As far as the amount of commission to be paid, you can negotiate this with each agent individually or just figure what amount you are willing to pay and advertise that rate. More often than not the real estate commission is at or close to 3%, but there is nothing set in stone and it is completely up to you!

Remember, the more you embrace the Realtors, the more cooperation you will get from them.  Trust me, word travels quickly about those for sale by owners that are not cooperative or who are abrasive in their dealings with local agents. Bottom line, remember you generally get back what you give! Best of luck on selling your home by owner and If you are not successful, I know a good agent that would be happy to help you out!

Dave Kimbrough
The Kimbrough Team

Is Radon common in Grand Valley homes?

Dave,

inside-of-home

Our question is not as much a question as it is to get your opinion. We recently purchased a new home and during our inspection process we asked our agent about getting a Radon Test and she told us there really was not any radon in the valley and we did not need one. Well, we are from the Midwest where there is Radon, so we insisted. We got a Radon test done and much to ours and our agents surprise there was radon that registered above acceptable levels and thus had a radon remediation system installed prior to closing. Was this a “one in a million” finding or is Radon something you see in Grand Junction.  Really more curious about your thoughts, than anything. 

Thanks for your time,
Ralph & Cheryl, Grand Junction


Ralph and Cheryl,

Great question. First let me say that I am not a Radon expert, but I will say from my experience your finding of Radon was not “one in a million” and the presence of Radon in the Valley is more prevalent than most people realize, but by no means does it exist in unsafe levels in every home tested. It is my experience that the majority of homes are safe and do not have an elevated radon level and need no remediation done at all, but overall state and local numbers say there is statistically a 50/50 chance a home will have unsafe levels of Radon. Of course, if you are concerned about Radon, it is still a great idea to have it checked so you can be confident you are not living in an unsafe environment.

For those who are not familiar with Radon or know what risks it poses, Radon is an odorless, colorless and tasteless gas. Underground Uranium decays into radium and radium’s decay product is radon that escapes from the ground in the form of gas.

For those who are not familiar with Radon or know what risks it poses, Radon is an odorless, colorless and tasteless gas. Underground Uranium decays into radium and radium’s decay product is radon that escapes from the ground in the form of gas. Radon enters a home through the lowest level in the home that is in contact with open ground, which are typically cracks in foundations, cracks in walls, gaps in suspended floors etc. Once radon has entered into your home it is easily inhaled into the lungs and has been shown to increase the risk of lung cancer. According to the United States EPA, radon is the second most frequent cause of lung cancer and is completely preventable, if remediated properly.

According to a local Radon expert Cory Lindbo at Western Slope Home Inspectors and Radon Service, radonreserve.com, the good news is a radon problem can be completely and permanently resolved for as little as $1500-$2500 and most mitigation jobs can be completed in as little as 1 – 2 days. A radon test generally takes 2 days, but the home needs to be closed down with as little outside air transfer as possible.  This means that you need to close all windows and doors and keep traffic inside and outside to a minimum during the test period. This will allow for a proper reading where you do not get a lot of air transfer from outside. If you cool your home by evaporative cooler a test can be very difficult to do during the summer months. National Radon month is January, as the winter is the easiest time to do a radon test, because most homes have very little air exchange during the winter months.

Radon is no doubt something to be aware of and in most instances you should test for it, but feel confident that if there is an unsafe presence of radon in your home there is no need to panic, the fix is not a bank buster and can be solved quickly and professionally. In this case the solution to radon is as easy as knowing it is there and hiring a professional to again make your home environment safe.

Dave Kimbrough
The Kimbrough Team