Buying a Home

Two Options for Paying Property Taxes In Colorado

moving 3If you are responsible for paying your own property taxes and they are not being escrowed with your mortgage payment, you have two options available in Colorado.  The first option is to pay the entire amount of the prior year’s taxes in full on or before April 30th.  The second option is to pay your property taxes in two installments – the first installment is due on or before February 28th and the second installment is due on or before June 15th.

Property Taxes and Your Closing. Depending on the time of year that a property closes and which method the Lender uses to pay property taxes, the Title Company will follow one of several procedures for collecting taxes at closing.

  • If  you’re closing during the first couple weeks of the year, before the counties have certified the new mill levies, the Title Company will normally escrow from the Seller 125% of the prior year’s property tax amount.  Once the mill levies are certified and the actual tax amount is available, the prior year’s taxes will be paid from the escrow and the difference will be refunded to the Seller.

Lender’s Procedure for Handling Property Taxes.  If you are selling your home and closing early in the year, your Lender will direct the Title Company handling the closing on how to collect the property taxes. Lenders typically request the Title Company to handle the payment of the prior year’s taxes in one of two ways:

  • The first option is to collect from the Seller (by means of a debit entry on their Settlement Statement/HUD-1) the entire amount of taxes due and remit that amount to the appropriate County Treasure prior to April 30th.
  • The second option is for the Title Company to collect and pay only the first half of the prior year’s taxes. In this case, the Seller will be debited and the Buyer credited for the entire amount of the prior year’s taxes.  The Buyer will then be debited for the first half of the prior year’s tax amount and the Title Company will pay the amount to the County.  The Lender will collect a tax escrow and will pay the second installment when it comes due on or before June 15th. 

By the first part of February, parties to a real estate transaction often encounter the problem of what to do when the mortgage payoff statement indicates the prior year’s taxes have been disbursed from the escrow account by the existing Lender, but have not yet been received by the Treasure. The Title Company will have a procedures in place for this scenerio.

The bottom line, the Title Company is responsible for conveying clear title to the new owners.

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Smaller Spaces

We appear to be exiting the era of the McMansion.  Several recent reports from new home builders make it clear that, despite the increased affordability of housing, the average size of a new home is smaller than it was a few years ago. Buyers are beginning to embrace the concept of the “big-enough” home. If you have embraced this trend and have chosen to make do with reduced square footage, here are some suggestions on how to make smaller rooms look larger and function effectively:

  • Choose furniture wisely. While small furniture takes up less space and makes a room feel more open, it may not be as comfortable as larger pieces. The solution may be to make do with fewer larger pieces.
  • Let in as much natural light as possible. Natural light makes rooms seem airier, so take steps to add natural light. Adding a skylight will capture light and make a room appear larger. When choosing your window treatments, remember that curtains block light – the less you cover, the more natural light can flood into your home. Choose a sheer fabric, or chose blinds and shades that expose the entire window when drawn. If you need privacy, consider replacing a window with glass blocks, which provide privacy while allowing light in.
  • Avoid straight lines. Round tables, rugs and pillows, and sofas and chairs with curves, help small rooms feel less boxy.
  • Organize your collectibles. Removing all the knick-knacks from a small room will make it appear more spacious, but also more sterile and less homey. Instead, edit your collectibles carefully and display them in just one or two places, not scattered throughout the whole room.  A group of similar items, or different objects of the same color, creates a visual destination in a room and avoids a sense of stifling clutter.
  • Use tables made of clear materials.  Clear surfaces such as glass or Lucite give the impression of openness while delivering function.
  • Choose contrasting colors to visually expand small rooms. In the past, interior designers have suggested that painting everything white.  But today, while they still like white for cabinets and ceilings, they are suggesting that you add a warm contrasting color that will cast a glow to the room. A different approach to making a room appear larger is to paint the walls and ceiling the same shade, so the eye doesn’t stop at the ceiling line.
  • Strategic use of lighting. Lamps placed at different heights will brighten a small room and make it seem larger.
  • Use floating shelves instead of cabinets. These provide useful storage, but look airy and chic.
  • Determine your priorities. Make rooms fit your needs and lifestyle. If having a desk is more important than having a dining table, you can eat at the kitchen counter or coffee table.
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Coloradans Protect Yourselves During a Move

moving 1Coloradans protect yourselves during a move.  How should Coloradans protect themselves from problems during a move?  This well written article by Lisa Greim, was recently published in The Denver Post newspaper. It was part of a larger story, but I have copied this segment in its entirety because of the important information that it provided.

  • Understand that any estimate, even a “flat-rate”, “guaranteed”, or “binding” estimate, can be revised if the conditions of the move change.  If you estimate 1,000 pounds of stuff, and it actually weighs 1,200 pounds, or an hourly move took six hours instead of four, or there are two flights of stairs when you listed one,  your mover can lawfully charge your for the difference.
  • Get in-person, written estimates form three different companies.  An online inventory is a useful tool, but nothing beats having somebody walk through your house, look at your stuff and evaluate conditions that could complicate the move, such as street parking or stairs.
  • Make sure you have adequate insurance.  Required liability coverage is 60 cents per pound.  This means your 4-pound MacBook is insured for $2.40.  Check your homeowner’s or renter’s policy, or purchase full replacement coverage from your mover.
  • Some things were never meant to go in a box.  Play it safe and move that laptop, other electronics. valuables and family treasures yourself.
  • READ THE FINE PRINT, and don’t sign blank forms or documents.

 

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Homeowner’s Insurance Policy

Money BarWhen buying a home, pay close attention to the terms and conditions of your homeowner’s insurance policy.  Overlooking them could result in delayed, reduced or denied claims and higher premiums.

The Consumer Federation of America (CFA) and United Policyholders (UP) say it behooves you to read your insurance policy carefully – especially the fine print.  More insurers are shifting the risks and costs to the policyholders.

Pay close attention to:

Exclusions.  Most policies contain exclusions for floods, earthquakes or landslides. If you live in an area prone to any of these, you’ll need special coverage.   Policies also may not cover, or will have limited coverage for mold damage, non-flood water damage, high-value items (art, collectibles, jewelry etc.), work-at-home equipment, and other specific items.  “There are new exclusions in property insurance policies today that consumers are not aware of that can blow their financial security to shreds after a serious loss”, said Amy Bach, Executive Director of United Policyholders.

Deductibles.  These are up-front costs you pay before benefits kick in.  Most policies have two different deductibles – a flat dollar amount for most losses and a higher deductible for wind-related losses.  High wind losses can be very costly.  Clarify with you agent or insurer what your out-of-pocket costs will be in the event of a high wind related loss.

Building Codes.  Building code compliance issues will increase rebuilding costs, but they aren’t always covered by your policy.  Some policies exclude any additional costs caused by local construction ordinance or building code upgrades.  You’ll have to purchase this coverage as an add-on to your basic policy.

Price.  Homeowner insurance policy prices are based on a host of other factors.  Compare price when you initially purchase coverage and again if you experience a large rate increase.  Also, shop around once every few years to make sure you are getting the best rate for the coverage your need.

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What is Title Insurance?

Green & Red HousesThe main reason behind Title insurance  is that you and your mortgage lender want to make sure that the property is indeed yours and that no one else has any lien, claim or encumbrance on your property.  A Title insurance policy contains provisions for the payment of the legal fees in defense of a claim against your property which is covered under your policy.  It also  contains provisions for indemnification against losses which result from a covered claim.

Title companies maintain “title plants” which contain information regarding property transfers and liens reaching back many years. Maintaining these plants, along with researching and examining title, is where most of your (one-time) premium dollars go.   Title insurers work to identify and eliminate risk before issuing a title insurance policy, by identifying and eliminating potential risks, therefore, preventing future losses caused by title defects that may have been created in the past.  For example, a person might claim to have a deed or a lease giving them ownership or the right to possess your property.  Or perhaps a person could claim to hold an easement giving them a right of access across your land.  Another person may claim they have a lien on your property securing repayment of a debt. There could be an IRS lien.

You should never purchase a property without Title insurance even if you know the owner.  People go through life changes.  They get divorced, change their wills, engage in transactions that limit the use of the property and have liens and judgments placed against them personally for various reasons.  There may also be matters affecting the property that are not obvious or known, even by the existing owner.  A Title search and examination seeks to uncover these defects.

 

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What is a Qualified Mortgage?

Online HomesOn January 10, 2014, the Consumer Financial Protection Bureau placed into effect the new Ability-to-Pay rule. This new rule amends regulation Z under the authority of the Dodd-Frank financial industry reform. It requires mortgage lenders to consider the consumer’s ability to repay home loans before extending them credit.  There is also a category of loans, called “Qualified Mortgages”, that limit how much of a home buyer’s income can go towards debt.

A lender is presumed to have met the “ability-to-pay” requirements if the lender makes a Qualified Mortgage. A Qualified Mortgage must meet certain requirements and and cannot have certain risk features such as:

  • An “interest-only” period, when you pay only the interest without paying down the principal.
  • “Negative amortization”, when the loan principal increases over time, even though you are making payments.
  • “Balloon payments”, which are larger-than-usual payments paid at the end of the loan term.  However, these are allowed in some cases.
  • Loan terms that are longer than 30 years.   
  • Generally your monthly debt, including your mortgage, cannot exceed more than 43% of your monthly pre-tax income (there are some exceptions).
  • Qualified Mortgages don’t allow lenders to charge excessive upfront points and fees, and have limits on discount points.

The highlights above were provided by the Consumer Financial Protection Bureau and the Federal Reserve.  More information can be found at http://www.consumerfinance.gov and http://www.federal reserve.gov.

 

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Ability-to-Pay Rule (2014)

Online HomesOn January 10, 2014, the Consumer Financial Protection Bureau placed into effect the new Ability-to-Pay rule. This new rule amends regulation Z under the authority of the Dodd-Frank financial industry reform. It requires mortgage lenders to consider the consumer’s ability to repay home loans before extending them credit.  There is also a category of loans, called “qualified mortgages”, that limit how much of a home buyer’s income can go towards debt.

Consistent with the act, the proposal would apply the Ability-to-Pay requirement to all consumer-purpose mortgages (except home equity lines of credit, timeshares, reverse mortgages or temporary loans). At a minimum, creditors’ must consider these eight underwriting factors :

  1. Current or reasonably expected income or assets.
  2. Current employment status.
  3. The monthly payment on the transaction.
  4. The monthly payment on any simultaneous loan.
  5. The monthly payment for mortgage-related obligations.
  6. Current debt obligations, alimony, and child support.
  7. The monthly debt-to-income or residual income.
  8. Credit history.

The highlights above were provided by the Consumer Financial Protection Bureau and the Federal Reserve.  More information can be found at http://www.consumerfinance.gov and http://www.federal reserve.gov.

 

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Getting Set Up in Your New Home

Automobile Registration…303-205-5607

Online HomesDriver’s License…303-205-5694

County Information:

  • Arapahoe…303-795-4400
  • Denver…720-913-2000
  • Douglas…303-660-7400
  • Elbert…303-621-3136
  • Jefferson…303-279-6511

Electricity:

  • Intermountain IREA…800-332-9540
  • Xcel Energy…( all but Elbert County)…800-895-4999
  • Mountain View… (Elbert County)…800-388-9881

Gas:

  • Xcel Energy…(all but Elbert County)…800-895-4999
  • Mountain View…(Elbert County)…800-388-9881

Newspaper:

  • Denver Post…303-832-3232

Post Office:

  • 800-ASK-USPS
  • For nearest location…800-725-2161

Telephone:

  • Qwest…866-642-0444
  • AT& T…800-288-2020

Television/Cable/Satellite:

 

 

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How Does the Legalization of Recreational Marijuana Affect Residential Real Estate?

It is impossible to ignore… Colorado has legalized recreational marijuana.  And while state law recognizes recreational marijuana as legal, federal law currently does not.

According to the Denver Post, of the ten largest cities (by population) in the State of Colorado, only Denver is currently accepting license applications for recreational pot stores.  The majority of counties have postponed making a decision and instead are watching closely to see how enactment is working in other parts of the state.

Home buyers are  concerned how legalized recreational marijuana use will affect their purchase of residential real estate.  Will it affect the neighborhoods where pot shops might open up? Will it affect crime? Traffic? Property values?  It’s important to note that as of this writing,  grow operations are only allowed in areas zoned industrial.

However, this new law does allow for in-home cultivation of up to six plants and that is the area of concern for residential real estate. If there is evidence of an extensive grow operation, buyers need to be aware that there is potential for widespread mold. Under this new buyers need to have an increased level of awareness during the inspection.

According to Colorado Inspection Services, large scale in-home growers cut holes in ceilings to allow for ventilation and to run water lines.  They also change the duct-work and rewire the house to accommodate higher voltage grow lights.  You should pay special attention during the inspection to unsafe wiring, over-sized fusing, damaged fixtures, holes for vents and electrical access, wood rot, rusted gas appliances, damaged vents, and mold from venting to interior, attic or crawlspaces.

Investor/landlords will also have to pay close attention to their rental properties and the behavior of their tenants.  While personal pot use is legal, pot use on a rental property may result in violations in loan covenants relating to “illegal activities”, or issues with hazard insurance coverage.

 

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When Buyers Can’t Agree on What Home to Buy

DartMany home-buyers get exasperated when they can’t agree on a home purchase. Some buyer’s become angry, others will use the  the silent treatment, and some withdraw from the process.  But there is hope…even for people with widely divergent views.  Here are some steps you can take to improve your chances of agreeing on a home:

  1. Engage an agent who is thoroughly acquainted with the area.  Experienced agents like Robert and Jani can often locate a compromise property that will satisfy the key preferences of both parties. 
  2. Define your preferences and set priorities.  Each person should make a “wants and needs list”,  in order of preference and provide this list to your agent.  Understand, that if you get 75% of what is on your list you are doing great! It is rare to get 100% of everything you want.
  3. Go on an “Exploration Tour”.  Sometimes it is difficult to find the words to describe what you are looking for.  You may need to see an array of possibilities, so that your preferences reveal themselves.  For this reason, Robert and Jani will often start your home search by showing you a wide variety of neighborhoods, floor plans, and architectural styles.  Your verbal and non-verbal reactions will reveal your true preferences.
  4. Try to look at homes together, rather than separately.  Several years ago, Robert and Jani were showing homes to a recently married executive who was transferring to Colorado.  The executive found a contemporary home that he fell in love with.  But, when his bride flew in to finalize the purchase decision, she did not like the home.  She had been dreaming of living in a much more traditional home.  So, all the time he had spent looking at homes turned out to be a waste of time and they had to start all over again. Both parties were frustrated.
  5. Don’t put the selection of a home ahead of your relationship.  Trying to force your partner to accept a home he or she doesn’t like can jeopardize your relationship.  On the other hand, a compromise can strengthen your relationship.  A fair compromise will help both of you feel that your needs have been recognized and respected.
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