Buyers • For Buyers • Home Ownership • September 14, 2022

Making a Down Payment on a Home

by Angie Clauser

Imagine the process of financing a home purchase as a relay race. From start to finish, the baton must be passed several times between interconnected transactions. The down payment plays an important role in the relay race and will help you cross the finish line, but how much money do you put down? And when do you make the down payment? Understanding its characteristics will help you see where it fits in the home buying process.

What is a down payment?

The down payment is a large payment made upfront to help fund a home purchase. Unlike the financing obtained through a mortgage loan, the down payment comes out of the buyer’s pocket, not from a lender.

For example, let’s say the house you want to buy is priced at $500,000. If you put $25,000 down, or five percent of the purchase price, that would leave $475,000 you’d need to pay for with a mortgage. If you put down $100,000, or 20 percent, that would leave a $400,000 mortgage principal. In general, a higher down payment equates to a lower interest rate since that financial structure is viewed as less risky by lenders. It also means your monthly payments will be lower since your loan balance is smaller.

However, making a large down payment isn’t feasible for everyone. In fact, according to the National Association of REALTORS® Profile of Home Buyers and Sellers¹, the typical down payment was seven percent for first-time home buyers and 17 percent for repeat buyers in 2021. If you’re not able to put down 20 percent of the home’s purchase price, your lender will typically require that you obtain Private Mortgage Insurance (PMI), which protects them against the possibility of a mortgage default. The benefit of PMI is that it creates a pathway to homeownership by allowing you to move in and start building equity right away.

Different loan products have different down payment requirements. Conventional loans have a minimum down payment requirement of three percent, while government-backed loan products like VA loans or USDA loans may allow you to purchase a home with no money down if you qualify.

Down Payment: Home Monthly Payment Calculator

As you prepare to buy a house, it’s helpful to see what you can afford. Your down payment will have a direct impact on your loan terms and your monthly mortgage payment. Use our Home Monthly Payment Calculator to experiment with different down payments, principal amounts, interest rates, taxes, and more for any listing price.

A man and a woman shake hands with their real estate agent at their kitchen table

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How to Save for a Down Payment

Though your lender will need to verify that you have the funds available to make your down payment early on in the mortgage approval process, the down payment is officially due at closing. Saving up for such a payment may seem like a daunting task, but with the right planning, you’ll make steady progress. Having a strategy in place for compiling your down payment is a telltale sign that you’re ready to buy a home. Here are some methods of generating savings to consider:

Consider downsizing to reduce your living expenses and increase your savings over time.
Reduce your debt before applying for a mortgage to give yourself a better shot at favorable mortgage terms—i.e., a lower down payment requirement and reduced interest rates.
Explore down payment assistant programs to see if you qualify.
Ask family members for support.

If you’re in the process of selling your current home while looking for a new one, know that you can use the proceeds of the home sale to help finance your new home purchase.

For more information on financing a home purchase, helpful tips on the buying process from start to finish, and more, visit our Home Buying Guide.

1. National Association of REALTORS® (2021) Profile of Home Buyers and Sellers

Featured Image Source: Getty Images – Image Credit: ridvan_celik

Loveland Real Estate • September 8, 2022

Adorable Loveland Ranch Home

by Angie Clauser

Welcome to this adorable ranch home in Loveland! 328 Brittle Bush Drive includes 3 bedrooms, 2 bathrooms, and a 3-car garage. Sip your morning coffee in the eat-in kitchen or enjoy your evenings entertaining on the expansive back deck! Plus, privacy is plentiful with a fully fenced backyard. This lovely open-concept home also boasts a full unfinished basement, a laundry room, vaulted ceilings, a fireplace, and a walk-in closet. Call (970) 590-9860 to schedule a private tour or click here for more information.

Home Ownership • Market Update • September 6, 2022

Understanding the Value of Your Home: Market Value vs. Assessed Value and More

by Angie Clauser

The math of a home sale is relatively straightforward. Sellers list their home at a certain price, a buyer makes an offer, and eventually the two parties reach a final, agreed-upon price. However, between these two points in the selling process, there are several other figures that go into to setting a home’s value that you should be aware of. Your real estate agent will be your best resource in interpreting the different values associated with your home and what they mean as you prepare to sell.

Understanding the Value of Your Home

Listed Price (Asking Price)

Also known as an asking price, the listing price of a home is the price at which a seller lists their property when it goes on the market. The listing price is a gross price, meaning the costs associated with selling the home are not included. A real estate agent’s Comparative Market Analysis (CMA) will accurately set your home’s listing price, accounting for the various factors that influence home prices including location, condition, seasonality, local market conditions, and more.

The listing price is a starting point for negotiations with buyers. You may receive an offer that matches your asking price, but it’s common for buyers to make offers at other price points. You can either accept, reject, or make a counteroffer in response until you and the buyer reach an agreement.

Whether you’re selling in a buyer’s market or a seller’s market may determine you and your agent’s approach to the listing price of your home. There may be certain pricing tactics you can employ to either drive buyer attention or increase competition, but if your home’s listing price strays too far from its market value (see below), it could stay on the market for longer than you expected.

Market Value

As a seller, you’re interested in what buyers are willing to pay for your home. By taking into account a home’s condition, size, curb appeal, and features, as well as local market conditions and what comparable homes are selling for, a home’s market value reflects the price buyers will pay for a property.

Man sitting at his computer at home talks to his real estate agent on the phone

Image Source: Getty Images – Image Credit: damircudic

Appraised Value

A home’s appraised value is determined by a professional appraiser to ensure that the lender is loaning the correct amount of money for the home. Appraisers assess the home’s layout and features, square footage, gross living area (GLA), overall condition inside and out, home updates and remodels, and more. If the appraised value comes in too low or too high, the buyer and seller must renegotiate for the deal to go through. In competitive markets, buyers may include an appraisal gap guarantee in their offer, which states that the buyer will cover the difference between the price of the home and the appraised value.

Sale Price (Purchase Price)

Also known as the purchase price, your home’s sale price is what it ultimately ends up selling for. Once you and the buyer have reached an agreement on the terms of the transaction, the buyer will have the home inspected and final negotiations may occur based on the findings of the inspection. Familiarize yourself with the Common Real Estate Contingencies buyers may include in their offer and what they mean when selling your home.

Net Proceeds

So, how much do you actually make on the sale of your home? After subtracting the total costs of selling from your home’s sale price, you’ll arrive at your net proceeds. This is the amount you walk away with from the transaction.

Assessed Value

Your agent’s CMA is a reliable method of determining your home’s value for its eventual sale, but its assessed value is used for taxation purposes. Employed by local municipal or county entities, an assessor will conduct a review of your property to determine its assessed value. The assessor’s findings are passed to local tax officials, who use that number to calculate the home’s property taxes.

For Buyers • For Sellers • Home Ownership • September 1, 2022

Making a Contingent Offer: Common Real Estate Contingencies

by Angie Clauser

Imagine a home-buying scenario where you make an offer, the seller immediately accepts, and the two of you move through closing without any hiccups until you have keys in hand. It’s possible, but a more likely home buying experience is marked by negotiation, counteroffers, and a back-and-forth dialogue between both parties to reach a deal. And in some cases, the deal can fall through.

Contingencies protect buyers and sellers against these natural characteristics of the home buying process and any problems that may arise before a home sale is finalized. They help to shape a buyer’s offer and can be used strategically to make it more appealing. Whether you’re a first-time home buyer or you’ve bought before, you should be aware of common real estate contingencies and the role they play in making an offer on a home.

Making a Contingent Offer on a Home

After you and the seller agree on the price of a home, both parties have certain duties to finalize the transaction. Buyers are responsible for securing financing, having the home inspected, and getting the property appraised. Sellers are responsible for prioritizing the offer on the table and opening their doors to the home inspector when the time comes. The agreed-upon contingencies included in the contract protect the buyer and seller against any issues that may arise during this time.

Contingencies present a spectrum of options to home buyers, allowing them to walk away from a real estate transaction with their earnest money intact or renegotiate the contract. While their inclusion offers protection and negotiating leverage, sometimes their exclusion can be just as effective.

In a seller’s market, competition amongst buyers is high. Escalation clauses, bidding wars, and all-cash offers become commonplace as potential home buyers compete for a limited number of listings. To sweeten their offers in such market conditions, buyers will typically waive their contingencies. This presents added risk due to a lack of protection, but with so much competition around them, buyers are left with no choice but to maximize their offer’s appeal.

Man and a woman shaking hands with their real estate agent in the kitchen of their new home as they sign paperwork

Image Source: Getty Images – Image Credit: andresr

Common Real Estate Contingencies

Home Inspection Contingency

After you’ve made an offer, you’ll have a home inspector thoroughly examine the home before the deal is final. If they discover issues with the property, this contingency allows you and your agent to present the seller with a new offer that accounts for the home’s lessened condition, or to cancel the contract entirely.

Financing Contingency

Also known as a “mortgage contingency,” a financing contingency gives the buyer a specified period of time to secure adequate financing to purchase the home. Even if you are pre-approved for your mortgage, you may not be able to obtain the right loan for the home. If you are unable to finance the purchase, this contingency allows you to back out of the contract and recover your earnest money, and the seller can re-list the home.

Appraisal Contingency

An appraisal contingency states that the home must appraise for, at minimum, the sales price. It allows you to walk away from the deal if the property’s appraised value is lower than the sales price, and typically guarantees that your earnest money will be returned.

Home Sale Contingency

If you’re buying a new home while selling your current one, you may want to include a home sale contingency in your offer. This contingency specifies the date by which you’ll need to sell your current home in order to move forward with your offer. If you don’t sell your home by the specified date, the contract is terminated. Home sale contingencies are financially appealing in that they allow buyers to use the proceeds from their home sale to fund their new home purchase. However, these contingencies force sellers to wait until the buyer’s current home sells, which means they likely won’t accept such offers in competitive markets.

Title Contingency

Before the sale of a home goes final, a search will be performed to ensure that any liens or judgements made against the property have been resolved. A title contingency allows you to raise any issues you may have with the title status of the property and stipulates that the seller must clear these issues up before the transfer of title can be complete. If an unpaid lien or unpaid taxes turn up in the home’s title search, this contingency also allows you to back out of the deal and look for another home.

Fun Facts • Home Ownership • New Construction • August 29, 2022

Like 1993

by Angie Clauser

Here’s a trivia question…

The number of new, single-family homes completed in 2022 will most closely resemble which prior year?

If you guessed 1993, you are correct.

Yes, the number of homes built and completed this year is no more than the number from 30 years ago.

In 2022, there will be just over 1 million single family homes constructed in the U.S. which is the same as 1993.

This is much more than the bottom of construction in 2011 which saw just under 500,000 new homes built.

But it is also much less than the top of 2006 which had almost 1.7 million.

Limited new home construction today is preventing anything close to a glut of inventory on the market which, in turn, insulates us from any sort of major price correction.

Buyers • Fun Facts • Home Ownership • August 23, 2022

What Is a Homeowners Association and How Much Are HOA Fees?

by Angie Clauser

Becoming a homeowner comes with many responsibilities, but if the home you’re purchasing requires you to be part of a Homeowners Association (HOA), you’ll have to follow additional guidelines and pay additional fees. As you’re looking for homes, talk to your agent about whether purchasing a home that’s part of an HOA is right for you.

What is a Homeowners Association (HOA)?

A Homeowners Association is an organization that governs a community of homes. Homeowners within the governed community must follow certain guidelines for property upkeep and maintenance and will face restrictions on their ability to make additions and/or changes to the property. These rules exist to maintain a standard level of quality amongst the community to maximize property value.

Different HOAs may have different stipulations based on the type of housing they govern. For example, an HOA may oversee a community of detached single-family homes, but they are commonly found in communities of condo or townhome housing styles where there is a shared, communal living style. Each HOA has a Board of Directors in charge of enforcing rules, collecting fees, and managing the funds, and certain associations may hire a third-party management company to help the Board of Directors carry out their operations. The members of an HOA are the residents who live in that community. Here are some examples of typical HOA property restrictions:

Exterior paint color choices must be submitted for approval
Grass must be mowed regularly
Flower beds must be kept weed-free
Noise regulations and/or noise curfew
Pet restrictions (type of animal and/or number of pets per household)

Homeowners Association (HOA) Pros and Cons

Living in an HOA community means your property will maintain its curb appeal and you can live with the knowledge that systems are in place to protect property values. However, the benefits come with additional restrictions on your freedoms as a homeowner while increasing your monthly payments.

Overhead view of a miniature model house sitting on tax paperwork next to a calculator

Image Source: Getty Images – Image Credit: mphillips007

How much are HOA fees?

If you buy in a development governed by a Homeowners Association, you will be required to pay HOA fees on top of your monthly mortgage payment. Typically paid monthly, HOA fees go toward the neighborhood’s shared spaces, property maintenance, and amenities. Homeowners Association fees vary greatly depending on the particulars of that community’s agreement. These fees often cover landscaping costs, parking, community security, garbage pickup, maintenance and repair, insurance, and other amenities, such as a shared pool or gym. If the home is your primary residence, your HOA fees are not tax-deductible.

HOA fees are an additional expense you’ll have to budget for when buying a home. To get an idea of what you can afford, use our free Home Monthly Payment Calculator by clicking the button below. With current rates based on national averages and customizable mortgage terms, you can experiment with different values to get an estimate of your monthly payment for any listing price, accounting for any HOA fees you may incur.

For Buyers • For Sellers • Fun Facts • August 19, 2022

Moving Checklist: A Step-by-Step Guide to the Moving Process

by Angie Clauser

Once you and your agent work through the process of selling your home, there comes a point when it’s time to switch gears and get ready to move. It can be difficult to juggle the various steps of the moving process, especially if you’re Buying and Selling a Home at the Same Time. Using a moving checklist will help you stay organized and on schedule throughout your moving timeline.

Moving Checklist: A Step-by-Step Guide to the Moving Process

We’ve included a comprehensive checklist below of all the steps you’ll need to complete to ensure a smooth, successful move. This list is also available as an interactive web page and downloadable PDF here: Moving Checklist

Twelve Weeks Before:

Get estimates from professional movers or truck rental companies if needed.
Once you’ve selected a mover, discuss insurance, packing, loading and delivery, and the claims procedure.

Six to Eight Weeks Before:

Use up things that may be difficult to move, such as frozen food.
Sort through your possessions. Decide what you want to keep, what you want to sell, and what you wish to donate to charity.
Record serial numbers on electronic equipment, take photos (or video) of all your belongings and create an inventory list.
If you are moving yourself, use your inventory list to determine how many boxes you will need. Stock up on the items you’ll need from our “Moving Essentials” list.
Obtain a change of address packet from the post office and send it to creditors, magazine subscription offices, and catalog vendors.
Discuss tax-deductible moving expenses with your accountant and begin keeping accurate records.
If you’re moving to a new community, contact the Chamber of Commerce and school district and request information about services.
Make reservations with airlines, hotels, and car rental agencies, if needed.
Begin packing nonessential items.

Two to Four Weeks Before:

Arrange for storage, if needed.
If you have items you don’t want to pack and move, hold a yard sale.
Update the address listed on your car registration, license, and insurance.
Transfer your bank accounts and safe-deposit box items to new branch locations if needed. Cancel or redirect any direct deposit or automatic payments from your accounts.
Make special arrangements to move your pets and consult your veterinarian about ways to make travel comfortable for them.
Have your car checked and serviced if you’ll need to drive it a long distance.
Change your utilities, including phone, power, and water, from your old address to your new address.

Week of Moving Day:

Defrost your refrigerator and freezer.
Have movers pack your belongings.
Label each box with the contents and the room where you want it to be delivered.
If you’re using a moving company, arrange to pay for their services in full, or the remainder of what you owe, upon delivery.
Set aside legal documents and valuables that you do not want packed.
Pack clothing and toiletries, along with extra clothes in case the moving company is delayed.
Give your travel itinerary to a close friend or relative so they can reach you as needed.
Pack a first-day box with items that you’ll want accessible before other boxes are unpacked. See our list of suggested items on the right and add any others you’ll want to include.

Moving Day:

Old Home

Pick up the truck as early as possible if you are moving yourself.
Make a list of every item and box loaded on the truck.
Let the mover know how to reach you.
Double-check your closets, cupboards, attic, basement, yard, and garage for any left-behind items.

New Home

Be on hand at the new home to answer questions and give instructions to the mover.
Check off boxes and items as they come off the truck.
Install new locks.
Confirm that the utilities have been turned on and are ready for use.
Unpack your first-day box.
Unpack your children’s toys and find a safe place for them to play.
Examine your goods for damage.

Our Moving Checklist page has all the information above, plus helpful lists for Moving Essentials and which items to pack in your First-Day Box available as a downloadable PDF.

Home Ownership • Home Value • Market Update • August 15, 2022

Understanding the Value of Your Home: Market Value vs. Assessed Value and More

by Angie Clauser

Understanding the Value of Your Home

Listed Price (Asking Price)

Market Value

Image Source: Getty Images – Image Credit: damircudic

Appraised Value

Sale Price (Purchase Price)

Net Proceeds

Assessed Value

Buyers • Fun Facts • Market Update • August 12, 2022

What Gives?

by Angie Clauser

“I thought the market was cooling off, so why are prices still going up?”

This is a frequent question we hear from our clients.

They are understandably confused by the fact that average prices have continued to rise at a rapid pace even though sales activity is slower than what it was 6 months ago.

Bottom line, they want to know why prices are up along the Front Range anywhere from 12% to 17% compared to last year.

Firstly, we don’t expect this pace of price appreciation to continue. What we foresee is price growth going back to the long term average of 5% to 6% per year.

The reason why we still see double-digit growth comes down to two words. Supply and Demand.

Supply, while higher than a year ago, is still relatively low.

Also, demand, while lower than a year ago, is still relatively high.

The market is still healthy, just not as frantic as it was.

Properties are still selling, but bidding wars and multiple offers have mostly gone away.

Sellers remain in a strong position, but they face more competition than before.

Buyers • Economy • Fort Collins Real Estate • Home Ownership • Market Update • August 8, 2022

Q2 2022 Colorado Real Estate Market Update

by Angie Clauser

The following analysis of select counties of the Colorado real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Colorado continues to add jobs, but the pace of growth has slowed, albeit modestly. At the time of writing this report, the state’s employment had increased by 124,600 jobs over the past 12 months, which represents an annual growth rate of 4.6%. The state unemployment rate in May was 3.5%. Regionally, unemployment rates ranged from a low of 2.4% in Boulder to a high of 3.4% in the Grand Junction and Greeley metropolitan areas.

Colorado Home Sales

❱ In the second quarter, 12,839 homes sold, a drop of 8% compared to a year ago but 57% higher than in the first quarter of this year.

❱ Year over year, sales rose in only three counties covered by this report and fell in the rest of the region. That said, there was a palpable increase in sales across the board compared to the first quarter of 2022.

❱ The significant jump in sales from the first quarter can likely be attributed to the fact that inventory levels spiked, rising more than 190% from the first quarter.

❱ Pending sales (an indicator of future closings) rose 39% from the first quarter, signifying that the third quarter may show further growth in sales activity.

Colorado Home Prices

❱ The average home sale price ($700,369) was 14.1% higher than the same period in 2021. Prices were also 9.8% higher than in the first quarter of this year.

❱ Price growth remains strong even in the face of significantly higher inventory levels and mortgage rates, which is an impressive achievement.

❱ Year over year, prices rose by double digits across all markets except El Paso and Arapahoe counties. Prices rose in all counties other than Gilpin (-10.3%) and Clear Creek (-1%) from the first quarter.

❱ With the increase in mortgage rates and the number of homes for sale, I have started to watch list prices more closely. Compared to the first quarter, median list prices are lower in 9 of the 12 counties included in this report. Although it’s too early to say whether this is a trend we should be worried about, I will be watching how prices move during the summer, as it may be an indicator that the market is starting to soften.

A map showing the real estate home prices percentage changes for various counties in Colorado. Different colors correspond to different tiers of percentage change. El Paso and Arapahoe Counties are the only counties with a percentage change in the 7% to 10.9% range, Boulder and Gilpin counties are in the 11% to 14.9% change range, Larimer, Weld, Adams, Park, Jefferson, and Douglas are in the 15% to 18.9% change range, Denver County is in the 19% to 22.9% change range, and Clear Creek County is the sole county in the 23% + change range.

A bar graph showing the annual change in home sale prices for various counties in Colorado from Q2 2021 to Q2 2022. Clear Creek County tops the list at 23.7%, followed by Denver at 22.3%, Larimer at 18.6%, Douglas at 16.4%, Park at 16.2%, Weld at 15.5%, Adams at 15.2%, Jefferson at 15.1%, Gilpin at 14.2%, Boulder at 11.3%, Arapahoe at 9.9%, and finally El Paso at 7.9%.

Mortgage Rates

Although mortgage rates did drop in June, the quarterly trend was still moving higher. Inflation—the bane of bonds and, therefore, mortgage rates—has yet to slow, which is putting upward pressure on financing costs.

That said, there are some signs that inflation is starting to soften and if this starts to show in upcoming Consumer Price Index numbers then rates will likely find a ceiling. I am hopeful this will be the case at some point in the third quarter, which is reflected in my forecast.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q2 2023. He forecasts mortgage rates continuing to climb to 5.9% in Q4 2022, then tapering off to 5.58% in Q1 2023 and 5.53% in Q2 2023.

Colorado Days on Market

❱ The average time it took to sell a home in the markets contained in this report fell eight days compared to the same period in 2021.

❱ The length of time it took to sell a home dropped in six counties, remained static in three, and rose in the other three compared to the same quarter a year ago.

❱ It took an average of only 10 days to sell a home in the region, which is down 15 days compared to the first quarter of the year.

❱ Compared to the first quarter of 2022, average market time fell across the board, with significant drops in Gilpin (-41 days), Park (-25 days), and Clear Creek (-23 days) counties.

A bar graph showing the average days on market for homes in various counties in Colorado for Q2 2022. Arapahoe, Adams, and Jefferson Counties have the lowest DOM at 7, followed by Denver, Douglas, and Clear Creek at 8, El Paso at 9, Larimer at 10, Weld and Boulder at 11, Gilpin at 12, and Park at 17.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The Colorado economy remains robust and continues to grow. As it stands today, I anticipate income growth here will continue to outpace the nation. The 221,000 current job openings in the state are evidence of significant employer demand, which will lead to higher wages. Housing demand is still remarkably strong, even in light of the rapid increase in the number of homes for sale and rising financing costs.

A speedometer graph indicating a medium seller's market in Colorado for Q2 2022.

As mentioned earlier, I will be watching movement in list prices through the summer as they are a leading indicator in respect to the health of the market. Although we saw some softening in the pace of regional list price growth during second quarter and median list prices pulling back in some markets, it is too early to state that this is a pattern. As such, I am leaving the needle in the same position as the first quarter. The growing number of homes for sale and lower list prices in some markets should favor buyers, but this is offset for the time being by solid demand.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.