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What Should I Know BEFORE I Buy a Home in the Colorado Springs Area?
Until just a couple years ago, Colorado Springs real estate worked at a very fast and competitive pace. During the past year and a half, however, the market has begun to even out and hold steady. As a result, many buyers from a few years ago find they got carried away and paid too much. Many sellers think their home is worth much more than it actually is at this time. Today’s buyers are relieved to know the market is stable and the craziest days of routine multiple offers and head-spinning pace has given way to more sensible purchasing. But, every situation is different and needs to be approached wisely in this ever-changing market.
To get the most out of your home search, know as much as you can about the buying process and how you’ll fit into it. As you begin, here are 9 Prime Topics I suggest my clients explore:
1. Know the price that’s right
8. Know how a Realtor finds a good Realtor 9. Know the value of a good professional
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1. Know the price that's right.One of the first things to establish is your shopping budget. For most of us, this means borrowing money from a bank. Sit down with a good mortgage broker to find out exactly what type of funding you’ll qualify for, then decide what you can afford. Lenders have been changing their criteria dramatically recently, so if you pre-qualified with a lender over 4 months ago, do it again now! Many buyers enjoy shopping in their “dream” range. Yet, few things are more disappointing than falling in love with a home only to discover it’s not in the budget. After that, nothing else seems to measure up. Working within a firm price range, not a guess, is key to setting the right expectations from the beginning.
2. Know today’s vision – and tomorrow’s.Before house hunting begins, let your Realtor know your short and long term goals. How long do see yourself living in the house? Are you planning for a growing family? Are schools or certain activities important? Do you work from home? Do you want to volunteer at the hospital, or take up gardening? Understanding these things will help your Realtor pinpoint homes designed to help you achieve those goals. For example: If you entertain a lot, a home with open airy spaces would be ideal. If you work from home, you’ll need a house with a place to create an office. If you’re a frequent flier, a refuge from the hustle and bustle with an easy commute to the airport will enrich your lifestyle. By sharing your goals, your Realtor will be able to focus your house hunting, save time, and alert you to key aspects in keeping with your vision.
3. Know the pulse of this market.The Colorado Springs and Pikes Peak real estate markets typically change as often as our weather! (We have a saying: If you don’t like the weather, wait an hour.) Our sub-markets and neighborhoods are even more particular, especially when you factor in military bases. Getting the pulse on such a dynamic market is impossible without an expert. It is in your best interest to work with a licensed Colorado Realtor who is deeply familiar with the histories of our various neighborhoods and their current market conditions.
Colorado Springs boasts homes with spectacular mountain views everywhere, easy access anywhere. Want to live in the mountains, but hold a job downtown? No problem. Commutes average 30 minutes yet can be worlds apart! Plus, skiing or snowboarding is just an hour away, with world-class fishing and hiking closer still. Colorado Springs is home to a thriving athletic community, including the nationally renowned Olympic Training Center. It would be hard, if not impossible, to find all this together in any other city.
4. Know the local Foreclosure Facts (not the myths).Let’s separate the myth from the facts: In Colorado Springs, foreclosure inventories have risen, but when adjusted for population growth the true percentage is only 3 out of 100 homes listed. Not much higher than normal. Have you read about gluts of repossessed houses on the market, driving prices into the basement? Not true here. In fact, in 2008 there are 7% fewer homes for sale in Colorado Springs than a year ago. Meanwhile, the price of a home, on average, has fallen only 1.3%. Although “screaming deals” can be found they are not extremely common, and are usually discovered by Realtors who have lots of practice in foreclosure deals. (Most of the time, such deals are not truly Foreclosures, but something called a “Short Sale” - read #5 to learn about Short Sales.) Looking squarely at the facts, this all means the Colorado Springs real estate market is relatively healthy and recovering faster than most areas of the country!
5. Know your way around Short Sales.To buy a truly underpriced home, you’re looking at a Short Sale purchase. Many people confuse this with the foreclosure process, because in both cases you’re dealing with a bank. In a Short Sale the bank does not own the property, but the Owner is trying to sell it for less than the amount remaining on the loan. Because the Bank will be “shorted”, they become the third party in the transaction. The Bank must agree to the purchase price, repair allowances, and all financial terms of the deal. An important thing to realize is that the Bank is on absolutely no timeline to provide their approvals! They are not held to the dates in your contract with the Owner. Short Sales tend to take much, much, longer to complete and are more difficult to navigate than a “normal” sale. But, buyers who have the flexibility to be patient can really capture a great value!
6. Know how the Seller got that Magic Number.From time to time I come across a property and wonder, "How did they come up with that?" Sometimes, the owners themselves set the price and their agent just goes along with it. Too often lately, Realtors get pushback from owners who want a higher price than we know makes sense today. I’ve been in that situation and, although I've advised my client what the price ought to be, I’ve sometimes had to oblige for a while until reality kicks in. The longer an overpriced home stays on the market, the more negotiating power the buyers gain!.
Typically, though, an agent does a Comparative Market Analysis – often called “pulling comps” – to determine value. The CMA, is a good hard look at what sold during the past six months in the same neighborhood. The agent gauges how similar those homes are to the one being sold, and comes up with a comparable listing price.
7. Know how the Seller’s Agent does math.Remember This: The Seller’s Agent represents only the homeowner’s best interests at all times!! By law. His job is to get the highest possible price, as quickly as possible, for his client. The owner signs a commission agreement to establish his Agent’s paycheck. In Colorado Springs, commission is typically 6% of the sales price. The Agent doesn’t necessarily get to keep it all; if the buyers are represented by an agent, he’ll need to split his commission with their agent. Typically, it’s a 50/50 split so each ends up with 3%.
Suppose you walk into an open house, fall in love with it, and ask the Seller’s Agent to write your offer on his client’s home. First, he’s thinking: “JACKPOT!!” Since he’s the only agent in the picture, his payday just doubled. Now, do you really believe he’s going to give you any extra information? Fact is, he’s legally obligated to the owner not to share anything extra that might undercut the deal. He needs to get you to closing. So, he earns double-time and you end up under-represented. In these scenarios properties usually sell for too much money because the buyers did not have a trusted advisor working in their favor.
Ø So, I strongly suggest: Never ever use the Seller’s Agent to write up your offer. Even though he’s a nice guy.
8. Know how a Realtor finds a good Realtor.In a nutshell, the best agents stay on the cutting edge of the market and are attuned to its nuances and subtle changes. They approach their clients needs with the same attentiveness they would give their own families. It takes one to know one. Here are five key things I would look for in a Realtor: 1. I would only consider real estate agents who are Realtors®. Did you know that not every licensed agent is a Realtor®? Only members of the National Association of Realtors® are held to a strict Code of Ethics. We must continually attend classes to stay current, and are expected to maintain a higher level of industry knowledge. 2. I would only consider professional Realtors®. Those who have been working full time in the business for at least five years, who have proven market experience. n Did you know that 58% of real estate agents change careers within one year? n Another 23% drop out before reaching five years in the business n Only 19% of agents who passed their exams 5 years ago remain in the business n Of those, 23% keep another job There are many personal reasons why, but the most critical is money. It’s expensive to stay in this business, only the very best agents can actually earn a living from it. I’d want a Realtor who has relied upon happy clients for his career to thrive, making it possible to succeed when most can’t. 3. I would only work with a Realtor® who has earned their GRI designation. GRI stands for Graduate, REALTOR® Institute. It is one of the most comprehensive designations a Realtor can earn, typically taking a year and a half to complete. The GRI is comprised of 15 courses, each designed to better our knowledge in key areas. Realtors must pass 15 tests, proving they have advanced knowledge in areas like Fair Housing, Real Estate Law, Property Tax, Water Rights, Buyer/Seller Agency, and Contract Law. Only 19% of Realtors have earned a GRI designation, according to the National Association of Realtors.
4. I would prefer a Realtor® who knows their way around technology. Open houses and free magazines are fine, but a little old school. There is a whole generation (or two) out there who are more familiar with pounding the keyboard than pounding the pavement. My Realtor would have to know his way around the internet, push customized MLS searches straight to my email or handheld, and not be afraid to TXT IF A GR8 1 JUST LSTD! Also, I’d want the ability to look at homes online and weed some out before we start driving all around town.
5. I would only work with a Realtor® willing to sell me a home in my price range, not push beyond my budget. Think about it: A Buyers Agent typically makes 3% commission, based on the sales price. On a $160,000 home this is $4,800. (Not bad for a month’s -or more- work.) An agent who pushes his client into a $200,000 home makes an extra $1,200. Aside from the ethical issues, is it really worth it to him to scalp an extra $1,200 bucks to put you in over your head? If so, maybe he’s not busy enough – and maybe there’s a reason for that.
9. Know the value of a good professional.Finding a good Buyers Agent could be one of the most important decisions you make. As you prepare to invest the largest sum of money most of us spend in our lifetimes, would you do it without professional guidance? If you had a $100,000 tax issue you’d want a CPA’s advice, right? If you had a $100,000 legal problem you’d want a lawyer to help you deal with it, wouldn’t you? Consider for a moment how much you’re about to spend on real estate. It makes sense to have a seasoned professional to stand by your side. Oh, and by the way: You’d pay out of your pocket for a CPA or attorney – a Buyers Agent gets paid from the closing proceeds, not your pocket.
Of course, I think I’m a great agent. And, my advice is: Don’t take my word for it. You can read what others have said about their experiences with my approach here.
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