Refinancing Your House: Adjustable vs. Fixed Rates

Dear Dave,

We’re considering refinancing our house and have gotten lots of advice on the type of loan we should go with. What is your opinion on adjustable rate mortgages these days? I have heard adamant opinions both ways. We would really like to hear your take on this.

Thanks -

Steve and Lynne - Grand Junction, CO


Money coins stack growing graph and piggy bank nature background, business concept.

Steve and Lynne,

Well, amazingly enough the interest rates are still incredible and we are seeing 30 year fixed rates just over 4.25%, 15 year fixed rates at about 3.75 % and 5/1 adjustable rates hovering right around 3.875%. These are all fantastic interest rates, regardless of if you choose a fixed rate or an adjustable one. 

Adjustable rates are quite attractive as they are set for a specific number of years, in the case of a 5/1 ARM it is set for the first 5 years at a low or “teaser” rate that is very attractive and generally lower than a fixed mortgage, however after the initial “fixed” rate time frame it will periodically adjust in response to the treasury bill rate or the prime rate. The initial low rate is a very attractive and that incentive provides the “teaser” for the potentially higher rate to come as it potentially adjusts and increases your monthly payment. Generally these adjustable rate mortgages have a “ceiling rate” that would be the maximum rate it could achieve and that offers some protection against a potential run away upswing in interest rates. 

In my opinion Adjustable Rate Mortgages only make sense, in our current low fixed rate climate, if you are positive you will only have the mortgage for less than the initial fixed rate time frame. If you believe you will remain in the house for the long term, go with the fixed rate and enjoy the benefits of what is again, near historical low rates and not have to worry about potential market fluctuations. 

Dave Kimbrough
The Kimbrough Team

Have a Question? Ask Dave!

Name *
Name

Are Open Houses Effective in the Winter Months?

Snowy+House.jpg

Dear Dave,

Our house has been for sale for about 2 months now.  It is in a higher price bracket and we aren’t having many showings at all.  What is your opinion on open houses this time of year?  Are they worth the work and the hassle for us and our Realtor? 

We would appreciate your opinion.

Thanks,

Bob - Montrose, CO


Bob,

I believe this to be our first question from Montrose, thus I can’t resist a quick answer. Open houses are not a significant part of our marketing efforts, not because we don’t want to sell houses, but because they are not statistically effective at selling houses. Open houses are a very good place for real estate agents to meet new home buyers and sellers and add them to their client list, however they are low on the impact meter for directly impacting home sales.

Open houses are a very good place for real estate agents to meet new home buyers and sellers and add them to their client list, however they are low on the impact meter for directly impacting home sales.

In summary, it is my opinion that open houses are overall fairly benign as a marketing tool. If you and your agent want to have one then you should have one, as any activity is at least “activity”… you know the blind hog theory? To that end, I would advise you to not hold your breath while you are away from home that Sunday afternoon, as it is statistically not probable to produce a sale, but it may help get you more traffic through you home if traffic is what you are looking to achieve. Realize the open house is another tool to potentially sell and advertise your home, however like most marketing methods it will not be the silver bullet you are likely wanting it to be. Try to be patient, we are just about to enter prime selling season…Winter is almost in the rear view mirror!

Dave Kimbrough
The Kimbrough Team

Have a Question? Ask Dave!

Name *
Name

What happens when a home appraisal comes in low?

Real estate investment

Dave,

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

Have a Question? Ask Dave!

Name *
Name

Timeless Style for Kitchen Renovations

Modern Kitchen with Teal Base Cabinets

Dave,

We’re starting plans to remodel our kitchen (finally!). Right now we’re collecting samples and checking out different styles online. We’ve come across some trending ideas that I just love, but I’m worried if we use them in our remodel, our kitchen will be out of date again in 5 to 10 years. If we spend money now to update, then it becomes outdated again, will we ever see a return on our investment? I know you’ve probably seen a bunch of trends come and go in all your years of real estate. When it comes to current kitchen trends, what are some you think will last and some that we should avoid?

Thanks a ton!

Autumn, Fruita


Autumn,

Congratulations on your new kitchen remodel! Sounds like it has been a while in the making and I know from experience that when you save for years and the finish line is in sight it is a very exciting time. I am super excited for you, but your concerns about short-lived kitchen trends are valid and you are wise to focus on a more “timeless” remodel.

Modern new light interior of kitchen with white furniture and dining table.

Nothing gives away a home’s age more than the kitchen…ok, maybe bathrooms would run neck and neck for the time machine give away. As I am writing this, I am listening to my “Best of the 70’s” iTunes playlist and I can’t help but think about those 70’s bathrooms. Nothing screams “boogie nights” like shag carpet and avocado green toilets…oh yeah, mix in a little wallpaper to complete the effect and you have a real winner! Ok, back to your kitchen! It is so hard to know what will stand the test of time and what won't.  When we did our remodel we tried to focus on things that would stand up over the years, but we placed a higher value on what we wanted vs. how long would the style hold. We had decided that we would not be moving anytime soon and that the remodel was for US and not the future owner. If you believe you will be in the house another ten years I would suggest you do the same! Regardless of how hard you try, you can be confident that no matter what cabinets you choose today, in ten years there is a good chance they will be out of style. I am sure the same can be said for the back splash! Keep in mind that even though the updates you do now may be somewhat dated in ten years, they will be ten years closer to current than what it would be if you did not do anything at all!

In my opinion things you should avoid include tile counter tops, any kind of shiny brass hardware, dark wood cabinets (unless it’s a dark island to offset other lighter cabinets), inexpensive speckled granite, open shelving (I know its super cool now, but I am not confident how long everyone will think it’s all that), bold color statements that are difficult to change, avoid dark timber or a heavy “Tuscan” feel or faux painted walls. Dark and heavy are out! These items are either out or well on their way to a well-deserved extinction! I would encourage you to concentrate on the things that remain a bit more timeless and much of creating timelessness comes by focusing on functionality.

 I would encourage you to concentrate on the things that remain a bit more timeless and much of creating timelessness comes by focusing on functionality.

Make sure to incorporate a pantry, focus on plenty of counter space and storage. There is no substitute for natural light (maybe add a window or two). Include space for gathering in or near the kitchen so that entertaining is effortless. Make your statements with lighting, knobs, mix matching textures, back splash tile and things that can be changed (relatively inexpensively) over time to help maintain an up-to-date appearance! Maybe go with glass door cabinets instead of open shelving, Quartz counter tops instead of Granite and I think if done correctly white cabinets are still the closest bet to timeless as there is in the cabinet world. As for flooring, I think real wood floors or wood look tile (not travertine or tumbled anything) are the best way to ensure a timeless look.

What an exciting adventure! The most important thing is that you LOVE what you do and enjoy living there after the remodel is done. When the time comes to sell, I bet you find someone that will love it just as much as you do! Best of luck and have fun with it!

Dave Kimbrough
The Kimbrough Team

Have a Question? Ask Dave!

Name *
Name

Countless Showings & Open Houses—No Offers....Help!

Female Real Estate agent offer home ownership and life insurance to young couple.

Dave,

Our house has been on the market for what seems like quite a while! We would really like to sell it as soon as possible because the whole process is beginning to wear us out! We’ve had countless showings and even a few open houses. Why we don’t have any offers is a mystery to us. The house is in good condition and we think we are in a great location. Have you had houses in the past that just don’t seem to sell? Do you have any ideas on why we aren’t getting any offers? What can we do differently to ensure our home gets sold in the near future?

Judy and Bob, Grand Junction


Judy and Bob,

Fear not, you are not alone!  Yes, I have had houses that just would not sell and believe me, there is no magic bullet or secret sauce to end the frustration of the house that is a chronic non-seller! There are times when, even if you reduce the price to a below market value buyers still find them unsavory and not offer worthy. I have heard it said in the medical field that the disease with no diagnosis and no known cure is always the hardest one to treat! The same is true in real estate, but ultimately in real estate there is always an answer! Keep the faith, because unless you have one of the chosen few that just stubbornly refuse to sell, I am going to be able to give you some idea of where to look and adjust to get your desired result.

I tell people all the time, I am not the sharpest knife in the drawer and I am living proof you don’t have to be a rocket scientist to be successful at selling homes. The process, when boiled down to the basics, is really quite simple regardless of how complicated people choose to make it. You want to be on target with the three things you can control, Price, Condition and Marketing. It sounds like your agent is doing their job effectively from a marketing perspective. You have had many showings and they have even held open houses to help generate traffic and attract buyers to your home, yet no offers. It also sounds like the condition is good. If you have not received feedback that indicates that you need to make some changes to the condition in order to entice buyers, then it is likely that you are in good. Now what we have left is price. Price is always the most difficult subject to tackle for any agent or any seller!

Where price is concerned there are a couple ways to attack it. You will either be willing to listen to the market and adjust the price accordingly or you will choose to set it and forget it and wait till you find the right butt for the saddle. 

Where price is concerned there are a couple ways to attack it. You will either be willing to listen to the market and adjust the price accordingly or you will choose to set it and forget it and wait till you find the right butt for the saddle. There are cases that can be made for both approaches. First, statistically speaking, you should have had an offer within 12 showings (on average) all else being equal. If “countless” showings means in excess of 12 then you really need to start considering a reconsideration of your pricing strategy. If you are nearing or over 18 showings it is likely time for action. I have heard sellers say this countless times, “All the feedback indicates that the price is ok, nobody is objecting to our price so it must be something else. If the buyer is interested they will surely make an offer.” I can tell you, this is faulty (but VERY common) logic. No offers and no or few second showings means they are objecting to your price by purchasing something they perceive is a better value at a similar price. Believe me, if a buyer smells value they will pounce! The “real” feedback you need to listen to is the lack of offers…sometimes that silence provides truth. If you decide to wait long enough one of two things will happen, the market will catch you (assuming the market is going up) or you will find the perfect butt for your seat! I have seen both methods be successful, one just typically takes a lot longer than the other and is ultimately more frustrating.

To move the process along at a faster pace, be willing to adjust your price until you get the desired result. The good news is you have had a lot of showings so you probably are not way off, probably a 3-5% adjustment will do the trick! Talk to your agent and get their input, but my guess is you are closer than it feels! Hang in there and best of luck. I hope this helps.

Dave Kimbrough
The Kimbrough Team

Have a Question? Ask Dave!

Name *
Name

What's Next for Grand Valley New Construction in 2019?

grand-junction-new-construction

Dave,

It seems like a ton of new construction neighborhoods have been sprouting up and growing across the valley over the last year—which we think is a great thing! What’s next for 2019? Will the new construction market continue to grow? And what areas of the valley will we see more new neighborhoods pop up?

Thank you as always for your insight!

Johnny, Grand Junction


Johnny,

Great question and I completely agree…new home building and new subdivisions are a great thing and a welcome sight for our local economy. New home building and new subdivisions bring excitement, good financial growth for our local businesses and just an overall positive vibe that helps set the tone for many other sectors of our local economy! Moving forward I believe we will continue to see good things on the horizon, but there are a couple of potential storm clouds that require monitoring!

Architect working on blueprint. Architects workplace - architectural project, blueprints, ruler, calculator, laptop and divider compass. Construction concept. Engineering tools,selective focus

Seems like each and every year (at least since 2012) we have seen steady home building growth and almost all of the building growth from 2012-2015 was by home builders purchasing and building on existing lots that were left over from the last recession. When we entered the last recession there were literally hundreds of lots that were un-built and those lots largely sat empty until we started to recover in 2012. Inexpensive foreclosures drove market prices down and created an environment that made building very difficult and not very profitable. However, once the foreclosures were in the rear view mirror, our builders started dipping their toes back into the new home business and eating through the existing lot inventory. During the recession lot prices dropped significantly and were very affordable, which was an added bonus to jump starting new home construction. Once that inventory stated to dwindle down (2015ish) many realized that there would soon be a need for new lot inventory. 

With the realization that our existing lot inventory would soon run thin, many builders and local developers started the process of creating new subdivisions and new lots.  Some big, some small, but those yellow signs started popping up all over signaling the start of the next wave of growth in the Grand Valley that continues today.

Overall residential building growth was up 20% in 2018 for a grand total of 802 residential single family building permits pulled by our local builders! Again, this is incredible news for our local economy. For some historical perspective there were over 1,200 permits pulled in 2008 at the height of the last boom. To go along with residential construction, commercial permits held their own and remained neutral in 2018 with a total of 48 commercial (47 in 2017), but the value of these permits was up nearly 30%, so the project numbers were the same but the project sizes were substantially larger! Again, nothing but good news and I expect the good news to continue into 2019! 

There are many more subdivisions on the horizon from Fruita to Palisade and all points in between, so 2019 should again provide plenty of new subdivisions and homes to look at. 

There are many more subdivisions on the horizon from Fruita to Palisade and all points in between, so 2019 should again provide plenty of new subdivisions and homes to look at. I believe new home construction will remain strong and we may not see another 20% gain, but we should easily see an additional 10% and with that we should continue to see good commercial growth that typically follows in a more supportive role to residential growth. Even with all of the good news and positive outlook there are always reasons to keep a watchful eye.

Interest rate increases are the low hanging fruit here, but for me the rising building costs and a slowing national economy are the two kind of under the radar things that I am keeping an eye on. Building costs are soaring and this could start to put significant pressure on affordability. A slowing national economy creates issues as it may become harder to sell in other markets as demand and prices begin to shift downward! If you sell for less when you sell, you logistically have less to spend when you buy.  Again, I do not believe these are immediate threats, but worth keeping a watchful eye. Hope this helps and onward and upward in 2019!

 Dave Kimbrough
The Kimbrough Team  

Have a Question? Ask Dave!

Name *
Name

Which Decking Material is Best for Resale Value?

Back yard house exterior with spacious wooden deck

Dear Dave,

 We have been considering a deck “make over” in the spring and are undecided about what type of material to use for our decking. We really have no intentions of moving, however always have the “what would be best if we did have to sell?” mentality when making home improvements.  What are your thoughts on composite deck material, like Trex, versus a standard redwood or natural wood decking material? I want something that is going to last, add value to my home and stand up to kids and dogs. I am leaning towards a Trex type decking, but it seems to cost a lot more.

Thanks for the help!

Joel - Orchard Mesa, CO


Joel,

Good question and paying attention to your outdoor living space is VERY smart.  It is nice you can make this decision based on what you want and not have to make the decision based primarily on monetary return will be. Since you are going to keep living there, then the return on your investment is not paramount and getting what you want becomes a larger part of the equation. Outdoor living space has become increasingly important and buyers will absolutely pay more money for a home if the outdoor living area is top notch and dialed in! Decks can be an awesome feature on any home, especially in Western Colorado where we enjoy over 300 days a year of sunshine. A deck can also be a huge liability to any home if it is in disrepair or in bad need of a major overhaul. Much of your decision should be based on your homes setting, price range, and your budget.

What do I mean by your setting? Your home’s setting is a crucial part of deciding how far to take this endeavor. If you back up to wonderful views, a private field, the Gunnison River or Valley floor then spending extra money will pay off and might pay off in a big way. If you have a special setting then the value of an awesome outdoor living area takes on a higher value and will become a significant selling feature in the eyes of future buyers. In turn, if you are located in a typical neighborhood setting with smaller yards and rows of fence line, then the importance of the material is less important as you are not really capitalizing on a special setting. The location of the deck on your home is also a major player in this decision. How does the deck lay out in reference to the rest of your home’s living space? If you have a large deck that extends from your kitchen/eating or main living room and is easily usable in the day to day and for entertaining, then the importance is heightened. If, for instance, your deck is off the side of your home and accessible only through the office then the importance is significantly diminished and I would suggest finding another feature to highlight.  

The price point of your home is also a major player in the decision making process.  The higher the home value, the more likely the extra cost of a Trex decking or more exotic natural wood will be appreciated.

The price point of your home is also a major player in the decision making process.  The higher the home value, the more likely the extra cost of a Trex decking or more exotic natural wood will be appreciated. I have seen some amazing exotic wood and Trex wood decks that were no doubt a serious selling feature and were significant value ads, especially for those who live and covet the outdoor lifestyle. The one thing you do not want to do is over build or over improve your home and the value of homes in your neighborhood. If you add a $10k deck to a $160,000 home it is not as likely you will get all that money back.  In turn, if you add a $25k deck to a $400,000 home there is a good chance you can recover those costs.  

The bottom line is this, if you are looking for durability, low maintenance and can afford the larger investment then I would go with a high quality TREX product. Be careful of going with a copycat product, not all composite decking is created equal. If you are looking for a more budget friendly option, go with natural wood and water seal it every year to ensure it looks great for years to come and does not become a maintenance issue. Even if you go with a pressure treated natural wood deck and keep it maintained it will look great and last for years. You don’t have to go expensive to be fabulous, but you will have to maintain it. I hope you love your new deck and it provides incredible memories for years to come!

Dave Kimbrough
The Kimbrough Team

Have a Question? Ask Dave!

Name *
Name

From a Value Perspective is an Older Home as Good as a New Home? 

Modern new light interior of kitchen with white furniture and dining table.

Dave,

My wife and I are moving this spring. She likes the charm of older homes, but I tend to like new construction homes. We’ve talked a lot about the pros and cons of each but when it comes down to it, we’ve decided that value is the “make it or break it” for us. From a value perspective is an older home as good as a new home? 

Thank you!

Betty & Steve, Grand Junction


Betty & Steve,

Value, like beauty, is in the eye of the beholder and very subjective to “what” value means to you. What you value, another may not, and thus the reason true value is a very individual determination and really must be done on a case by case basis. Keep in mind that “value” to some people is measured in happiness, peace, comfort, or a myriad of other things and may only be minimally impacted by monetary considerations! For others, monetary value is the “bottom line”. How much will the value go up on one house vs. the other? For the purposes of this article we will simply look at the monetary perspective, as that is typically the main goal when people are seeking information about “value”.

I would say, in my experience, appreciation will be greater on newer homes than it will on ones that are older. This is of course a broad generalization and not an “absolute truth”. For example, if you have two homes in the same neighborhood and one is 4 years old and one is 15 years old, the newer home will gain value at a comparatively accelerated pace. This does not mean that the older home is not a good home, it simply means that the newer home is most likely more in tune with current buyer wants, finishes, and floor plans because it is only 4 years old. The house that is 4 years old most likely has oil rubbed bronze or brushed nickel finishes and the older one may have polished brass fixtures. It is simply not as up to date and thus will not gain value at the same pace. 

On the flip side, while we are on the topic of value, your best value in the long run can also be the older home! If you can purchase the home that is 15 years old for a good price, change out some of the dated features and finishes and bring it up to a more current look and appeal then your best “value” may be the older home that just needs some cosmetic updating. Let’s add one more twist, the older home has an incredible view and the newer one does not. Which one will do better given that change in scenario? I would say, all things being equal and age being the only major difference, the home with the view will outperform the newer home!  Homes with unique features or benefits tend to have exaggerated value gains. As you can see, there are so many things that go into measuring value that it gets very difficult to determine which houses will perform best over time from an appreciation perspective.

You have to evaluate each one on a case by case basis and by using all the factors involved to make the best decision possible at that point in time.

You have to evaluate each one on a case by case basis and by using all the factors involved to make the best decision possible at that point in time. Go with the one you love and the one that you will most enjoy living in and don’t focus only on monetary value, but  lifestyle, peace and happiness value! Focus on your house being your home and don’t worry about what you can’t control, like the future of the real estate market! Live happier, live longer! Now that’s what I would call “real” value. Hope this helped a little! Best of luck.

Dave Kimbrough
The Kimbrough Team

Have a Question? Ask Dave!

Name *
Name