After Touring The Parade of Homes, We Want To Build!

Dave,

My husband and I are in a predicament—we have been thinking of moving for a few years. We've been poking around on Zillow to see what’s available and if anything sparks our interest. We weren't having any luck, but then we attended the Parade of Homes this fall. We fell in love with one of the homes on tour. The only problem is it was out of our price range. Our Realtor has shown us a few houses since then, but we can’t stop thinking about how perfect that home is for us! We need your help making a game plan. What would be better in our current market?

Option One: Stay in our current home, and strive to save a large enough down payment so we can afford to build that same house?

Option Two: Sell our home, use the equity to purchase a house in the next price range up, live in it a few years to build more equity, and then make the jump to build our dream home?

We need your help! Thank you in advance!

Laura and Adam, Grand Junction

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Laura and Adam,

Oh my, you have what one of my friends calls the “want its” and once you get a case of the “want its” it is very hard to rid of it.  The “want its” show up when you are most unsuspecting and innocently looking at something that you may or may not really need.  While you are looking, something inside taps you on the shoulder and plants the seed of “I want that” and that is when the real trouble begins.  We have all had this disease so there is no shame in acknowledging you have it, its what you do to get rid of it that separates the men from the boys!  All kidding aside, you really do have a problem and it will take self-control and discipline to put it in the rearview mirror.   

I can tell from your question you guys are not the type to make a rash decision as both of your options are very reasonable and show financial discipline and the development of a realistic plan for the future.  There are a lot of things to consider, but option one sure sounds like it might be the best play especially when you consider that there are costs in both buying and selling that you can only incur once if you don’t do option two.  Each time you sell it will cost you on average of 6-7% and each time you buy it will cost you 1-2% and this does not include any soft costs associated with both.  Considering these costs, if you are selling $250,000 and purchasing $400,000 you will spend at least $25,000 to buy and sell.  If you don’t buy and sell in between the “dream house” then you will automatically be that much closer to your goal.  Clearly you will eventually have to sell this home and purchase the “dream home” but it illustrates that doing it twice will likely just add time to achieving the desired dream home! 

 I would also take into consideration that option one is the safer play against any economic upheaval that potentially exists during the next year or two while we grind through what is sure to be a messy presidential election cycle with plenty of potential clouds on the horizon.  I personally believe our area will remain strong over the next several years, however choice two would serve as a bit of a hedge against any potential unforeseen downturns.   

Option two might also be the right choice, especially if you are outgrowing your existing home, have had a shift in needs that your existing home does not fulfill or are just plain sick of where you live!  I am always a proponent of your home being ones “happy place” and if you are just not happy where you currently live, then option two would certainly be a more appealing choice, as I have often said “it’s not always about the money.”  My vote, on face value of your question, would be to strongly consider choice one and work hard to put the “want its” on the back burner and work hard to keep it at bay for as long as possible.  I honestly believe you will make it work regardless of your choice, as both are very reasonable and the outcome of most every decision is determined by what you make of it!  Good luck!

Dave Kimbrough

The Kimbrough Team

How do we build a home today that's easy to sell in 10yrs?

Dave,

We have purchased a lot and are beginning the process of designing our home. We are planning on being there for a minimum of 10 years, but want our design to not only fit our lifestyle and needs, but also be a design that will readily sell when that time comes. We have seen so many homes that probably fit the owner’s needs, but were built so specifically that they are hard to sell to another owner. In order to create the best design possible, what trends are you seeing in the housing markets, i.e., smaller vs larger, price ange, 3 car garages, solar systems, energy efficiency, xeriscape, ranch vs two story, RV parking, etc.. Your input is appreciated. 

Jim and Jerry, Grand Junction

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Jim and Jerry,

What an exciting time, having a new home designed and built can be a wonderful experience and a very exciting time. I will also add that it is a labor of love that can be stressful and overwhelming, but the reward at the end will ultimately be worth the effort! This is a great question, because I too have seen many homes that were designed so specifically for the owner that it makes them very difficult to sell when the time arrives for you to move on. Building your new home with the forethought of implementing features that other home buyers will find attractive is a great idea and should save you some of the heartache of selling in the future. That being said, also understand that what buyers desire now, can certainly change. Many of the things I will recommend will be what I believe to be timeless features that buyers will still want 10 years from now.

There is no doubt that buyers are trending towards smaller homes, the days of the 5000 square foot home are not over, but certainly buyers today are willing to sacrifice some square foot space to keep the purchase price down. It has been said many times before, but it is true, some homes that are 2000 square feet live like they are 2400 square feet and some live like 1700. It all comes down to a livable floor plan that is space conscious and efficient. Open floor plans generally live much larger than more traditional / compartmentalized floor plans. As far as price is concerned, you should really stay towards the lower to middle end of your neighborhood price ranges. Homes near the middle to lower end of the neighborhood price points generally lose less when the market shifts down and gain more when the market moves up, being the highest priced home in the neighborhood or area is not always the best play for long term investment and year over year appreciation. I hope that makes sense. Definitely go with a 3 car garage, as most buyers need, or want, as much garage space as possible. As a society we all have way more “stuff” than we need and instead of recycling we tend to store, thus the huge boom in rental storage units over the past 20 years. A 3 car garage, I believe is a timeless, feature that will benefit you when you decide to sell. RV parking can also be a big selling feature, as we live in Western Colorado and many people have ATV’s, boats, campers, rafts, sport vehicles etc.. and love having a place to park them on their property. Buyers here value their personal time and spending time at play and do not like having to store these items off property..

Energy efficiency is no longer a feature that is “coming” it is a feature that is here and here to stay. Building your home in an energy efficient manor is very important and will become increasingly important as building codes and buyers expectations change as time move forward. Energy Star Ratings will become more and more important and 10 years from now I believe buyers will really see energy efficiency as a big “value add” vs. homes that are not as energy efficient. Going green is here to stay and while it is not a “must” now, it may very well be by the time you go to sell. Low maintenance is good, but complete xerisacpe can narrow your buyer pool extensively. I maintain the recommendation to still have an area of grass that will allow kids, grand children, or pets to have an outside area to play or “do their business”. (pets, hopefully not the kids, but to each their own!) Professional landscaping can make a big difference in a homes value, so do not skimp or go “cheap”.

Lastly, go ranch style if you can. Going with a ranch style home will keep your buyer pool wide and deep and not cut out those buyers who do not want to deal with stairs. Ranchers almost always command more money and sell more readily than two story homes. Stairs can be a killer for some buyers and you want your buyer pool to be as big as possible. I hope this helps a little with your design, but it would appear that you are going about the design process the right way. Also, make sure to discuss these things with your builder or designer as they will have very valuable input on what sells and what sits!

Dave Kimbrough

The Kimbrough Team

We're having trouble navigating a home loan online, any advice?

Dave,

We are starting the process for looking for a new home.   We are currently renting, but have decided that the interest rates and home prices are attractive enough to lure us into home ownership.  We filled out an application from a lender online and found out our credit score is only 674, we thought it would be much higher as we are not aware of any missed payments etc.. in the past.  We thought it would be easier to get a loan than it appears it is going to be.  We both have good jobs and have held them for several years and do not understand why our credit score would not be higher.  Can you fill us in on why our credit score might be low and what we can do to get it higher so we can qualify to get a new home?   Looks like, from checking on line, we need a credit score around 700 to get qualified for a new loan, is this a typical qualification standard?  Thanks for your help and advice.

Troy and Jennifer, Orchard Mesa

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Troy and Jennifer,

Sounds like you are headed in the right direction, with one small detour, I would recommend you  stop filling out forms online and go to a reputable local lender and sit down with a loan officer who can help you evaluate your financial capabilities and help you put together a strategy for getting your credit score in better standing and get you into a good loan, while rates are still attractive.  It sounds to me like a 674 credit score is “pretty good” and should not preclude you from buying, so I posed your question to one of our trusted resources, James Pulispher, Regional VP at Fidelity Mortgage and he agrees.

“There are two basic loan types.  FHA and Conventional.  The Conventional type of financing is much more credit sensitive than the FHA financing.  It may be that an FHA loan would be the best option in this scenario.   A conventional loan would likely still allow financing, depending upon what was on the credit, but might simply charge a higher rate of interest in order to provide the financing.  As a general rule you must have a 620 or better to obtain financing, which this particular buyer certainly does have.”

James also points out, “Many internet lenders have over‑layed the credit standards that exist, allowing them to only deal with the top tier customers. This customer would certainly have viable financing options when dealing with a local lender, and should not be discouraged about buying.”  The internet can be a good thing, but does not replace your local expert’s advice.  By establishing a local lender, that you can trust and can count on, you will put in place an important piece to your long and short term financial needs.

According to James, your credit scores looks at many things.  “One item that can influence credit scores is the utilization of credit.  35% of the credit score takes into account what percentage of available credit is owed on revolving accounts. (ie. credit cards)   The lower percentage of available credit that is owed, the better the score will be.  This customer may have paid all bills on time, but may owe close to the limit.  This could lower the credit score.  That doesn't necessarily create negative credit, but does lower the score.”  As you can see, your credit score can be impacted by many things, but also having a “go-to” person to discuss these issues with can literally be a life saver. 

To get your score up, continue to pay your bills on time and try reducing some of your debt burden.  By reducing your debt burden, I mean pay down some of your revolving accounts that can lower your debt to income ratio which will in turn raise your score.  Remember, one or two missed or late payments can cause your credit score to drop up to 10% and it can take a year or longer to get it back up. 

This Ask Dave column should be entitled, Ask James, but it is all good and relevant information for any home buyer or consumer who really does not understand the world of credit scores.  We throw the term “credit score” around loosely and many times do not fully understand what it is or what impact it really can have on our financial picture and purchasing ability!  Hope this helps and happy house hunting! : )

Dave Kimbrough

The Kimbrough Team

Is it a good idea to buy a rental for college students or a nightmare waiting to happen?

Dear Dave,

My wife and I very recently sent our son off to college on the front range. We are considering investing in a house near the university he is attending. We would like to know your opinion on investing in a property near a university or college. Is it a good idea to buy a house that could be used as a rental for college students or is it a nightmare waiting to happen?

Any feedback you have would be appreciated!

Thanks -

Joe and Darbi - Grand Junction, CO

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I think purchasing a property is a great idea!  I would suggest you check with your financial advisor or accountant, but I would bet the investment would pay off over the course of your son’s college career.  I will add one qualifier, it will work out better if your son is also responsible and will responsibly help you maintain the property while living there.   Let's look at a quick scenario to demonstrate how you might benefit from purchasing, rather than pouring out rent over the next 4-5 years.

Let's say you purchase a 3 bedroom condo for $300,000 and put 5% down, which is $15,000. You then own a 3 bedroom condo with a monthly payment estimated at $1700 which should include taxes and insurance.  You only need one bedroom and surely your son has a couple of friends that he would like to have living with him.  Let’s assume they would be willing to pay $700 per month, which in turn makes your monthly out of pocket shelter expenses $200, which is $400-$500 per month less than having him rent.  Five years from now, assuming that your second son takes a bit longer to graduate than 4 years, and let's also assume the market has improved 5% per year for your condo, it would then be valued at $383,000.  Let's also assume that you have paid the principal down to $260,000, which leaves you with over $100,000 in equity when you go to sell.  I know there are expenses and this is not direct profit, but at the very least you should receive some return, rather than footing the bill with nothing but a diploma to show for it.  The numbers in this scenario may not be exact, but it does illustrate the fiscal advantages of owning vs. renting for your college student.

There also is a loan specifically designed for this situation and it is referred to as the “Kiddie Condo Loan”.  The requirements are designed specifically for your scenario and require that the child must live in the home and be on the loan.  The financial qualifications for the loan are done off your information, but it allows your son to begin building a credit portfolio for after he graduates.  There are several great things about this loan.  You can qualify with only 3.5% down, the loan is assumable and with today’s low-interest rates, assumable loans may be very advantageous in the future.  If your son decides to stay in his college town after school, he can assume the loan from you and take over the payments or you could sell it and have them assume your interest rate.  As you can see, there is a good case to be made for a college purchase, in town or out of town, for kids who are attending college. 

Lastly, one of the great things about University towns, their real estate generally will not fluctuate up or down as drastically as other areas, because they have built-in buyers and sellers that cycle through which generally helps ensure good demand and smooth out any other market influences.  The worst-case scenario would be that you have a rental in a college town that will be pretty easy to rent year after year.  I say, “do it and you are likely to be glad in the long run”.  Hope this helps.

Dave Kimbrough

The Kimbrough Team

Can We Take Our Fridge When We Sell Our Home?

Dave,

We've had an unexpected job change come up and have to sell our house - sadly we just did a big remodel to our kitchen and it is wonderful.  We were given some money, from my parents, to buy a top of the line refrigerator - one that I had painstakingly researched and I absolutely love! 

I want to take the refrigerator with us because we used my parents gift money to buy it, but my husband doesn't think we should.  If the refrigerator is taken out when we move, not part of the house sale, is that going to delay being able to sell our house? We're really in a dilemma as we ready for this move.

Thanks in advance-
Jennifer - Grand Junction - Redlands area

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Jennifer,

Sorry about the unexpected job change, there is some of that going around right now.  Don’t sweat this one, there are several options.   In some real estate markets it is customary to leave all the appliances, however it is not customary in our market to leave your refrigerator or your washer and dryer. It most certainly should not cost you a sale or make it harder to sell your home if you plan on taking it with you.  Make sure to have your agent note that the kitchen fridge does not stay and WHY.  Everyone, or at least almost everyone, is human and the majority of the time appreciate sentimental reasons behind why some things are done the way they are.  If you have your agent disclose that you are taking the fridge with you and it was a gift from your parents, then you are unlikely to face much of a head wind from any reasonable buyer.

Another option, one that would eliminate any confusion, would be to purchase a replacement fridge and leave it with the home after sale.  This is an option, but not one that I would recommend.   Make no mistake about it, if it is new and as nice as you say, buyers are going to want it.  The question is how understanding will they be about it and like I said, most will totally get it and there will be no issue.  By removing it prior to sale and replacing with a less expensive model, you remove the issue all together.  This is overkill, IMHO, but an option to consider. 

My final verdict, leave it there, explain why you are keeping it and if the buyer balks about it, let them move on to something else.  If your fridge is the deal breaker, then they probably need to find another house to buy that they love enough to purchase their own fridge!!  Don’t worry…..everything will be cool! : )

Dave Kimbrough

The Kimbrough Team

Can We Still Decorate For Halloween When Our Home is For Sale?

Dear Dave,

My family just loves Halloween. We usually like to go all out with decorating, but this year we have our house on the market to sell. It has been for sale for about 6 weeks and we haven’t had any offers. What do you think about decorating a house for a ‘holiday’ when it is for sale? I know that every Realtor probably has a different opinion on this, but I would really like to know yours.

Thank you,

Carrie and Tom - Fruita, CO

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Carrie & Tom,

I am a firm believer in enjoying this time of year!  I personally think it would be a crime not to decorate and enjoy the holidays.  In my opinion a home never feels more like a home than it does during the Thanksgiving and Christmas season and I see no reason not to extend that to include Halloween.  No pun intended, however I don’t believe you will scare anyone away by decorating!  I do encourage you to decorate tastefully and try to err on the side of too little rather than too much.  With Halloween, I would make a concerted effort to not decorate with things that are too gruesome or scary and make an effort to decorate with all ages in mind.  Believe me, if your kids love the way you decorate the likelihood is the families that come to look at your home during the holidays will love it also. 

Remember that buying a home is still very much a “feel” thing for most buyers and the more senses you get involved and the more “like a home” you make your home feel the more likely you will be to sell.  I can tell you that more often than not, when a buyer gets a feel about a home and they can picture themselves or their family living there, your chances of them making an offer go up significantly.  Also, don’t be afraid to bake some cookies, pies, cake or at the least light a candle that plays up the holiday season.  We have purchased cinnamon pine cones in the past and for less than 10 bucks it will fill your home with a wonderful aroma.  This is the greatest time of year to have fun and get immersed in the season, enjoy it because it will be gone too soon.  Remember time is the one thing we can’t get back, so enjoy it, have fun and make this a season to remember.

The key take away here is tasteful and not overdone, yet have fun and enjoy the season.  The spirit of the holidays is contagious and my bet is someone will catch the spirit at your house this season.  Don’t be the least bit shocked if you sell between now and the end of the year!

Dave Kimbrough

The Kimbrough Team

We're Getting Lots of Showings & No Good Offers...

Dear Dave,

I had 24 showings been on market 59 days one low ball offer week after listed we did not accept, now no other offers.  I dropped the price of the house 8 thousand off the list price a month ago and still no offers.  Our house is in move-in condition and the neighborhood is very nice. After a price drop only two showings please advise since we still have no offers.

Mary B. No area provided

***We also received a similar question from Robert***

Dave,

I have a home that has gotten over 50 showings with no offers. Our home shows like a model and consistently get compliments about how beautiful and well keep it is. On the advice of our agent, I have reduced our price over $120,000 during our listing period with the same results….  No offers. Having spent my entire career as a senior global marketing executive and with an Ivy League MBA.   Analysis dictates that the marketing is attracting the wrong customer which would account for no buyers. I would be interested in your take.

Robert M., No area provided

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Mary and Robert,

Since your questions are quite similar, I am going to try and a new approach and answer both at the same time!  You both have VERY similar scenario’s and I would suggest that both of you have had enough showings that you should have had offers by now.  Also of note is that between the two of you you have had nearly 75 showings and only one offer….. I might suggest that you might start to consider things are not as perfect/pristine as you may believe.  I will also note that both agents are providing ample traffic and must be doing a good job of marketing your properties.

Mary, I am not sure how low your “low ball” offer was, but there is the old adage that often proves true…. “first offer, best offer”.  What that means is that the first offer you receive is often times the best offer you will get.  I have found this to be true more often, than not.   If we put that lost offer in the rearview mirror, we must focus on the present and what lies ahead!  Robert, I would suggest that you should also focus on what is in front of you and not spend much time concentrating on the past.

From what you have both have described your traffic is fantastic, statistically, you should receive an offer within 13-15 showings and Robert I would suggest that despite the $120k in price reductions your value is still too high for what buyers are finding.  With so many showings there is something else going on rather than price.  Buyers are finding out about your homes either online or through their agent's efforts.  Buyers are liking what they see enough to schedule a showing (which generally means that the pictures and price appear to be acceptable), but end up not writing an offer.  This generally (not always) means that there is something else going on.  It might be the condition, floor plan, odors, neighbors, colors, setting, high traffic road, a barking dog next door or any number of other issues that would cause buyers to not choose your home.  Ultimately, all things being equal, there are three things you can control, marketing, condition, and price.  If the marketing is good (Robert I know you are questioning this) then you will get showings and 50 is a lot!   If that many are coming to look you can assume there is something else coming into play if they are choosing other properties….. If you have a condition issue or non-desirable feature, those are typically only cured by either price changes or just waiting for the perfect buyer fit.

 Lastly, it is not out of the question to say that the marketing is attracting the wrong buyers, but to attract 50 wrong buyers and no right ones would be statistically very unlikely unless your home is so specific in features and price that it only will be attractive to a VERY narrow pool of buyers. If this is the case a marketing adjustment needs to be done to ensure the approach is more targeted.  It's hard to get buyers excited about an amazing riding arena and barn if none of them ride horses! 

I am putting out good vibes for both of you and am hopeful that your journey will come to an end soon but try to remain patient.  Remember it only takes one showing to completely change your outlook!  Thanks again for writing in.

Dave Kimbrough

The Kimbrough Team

What's Best Sewer or Septic?

Dear Dave,

We live in an older neighborhood and our house is connected to a septic system. The system is about 30 years old and we suspect it may be nearing the end of its lifespan. The public sewer line has been brought into our neighborhood, but the cost to hook up to it is about $10,000. 

We need some advice on the route we should go - septic or public sewer system?

Thanks for answering questions each week - we look forward to hearing how you answer ours.

Thanks in advance,

Mick and Jamie – Grand Junction, CO

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Mick and Jamie,

This one is easy!  Keep your septic system running as long as you can, because when it fails you will HAVE to hook up to the sewer system.  Once sewer has been run to your neighborhood you are obligated to hook up if/when your septic fails.  That means, keep your septic running as long as you can to avoid the sewer installation and plant assessment fees, but be prepared for expenses either way.

Here are some common signs of septic system failure:

1.      Slow drains or “stuff” backing up into your home.  If you have slow draining you should call and have your septic tank pumped out.  Your tank may be overloaded with solids and just needs to be pumped out to restore proper flow and allow it to properly drain into the leech field.

2.      Unpleasant odors inside or outside your home.  You will know the smell when you smell it.  It most likely won’t be a, “honey do you smell that?” smell, it will be a “Honey is that you?” smell.  All kidding aside, it will be a noticeable sewage odor.  Make sure to have this looked into before your next neighborhood party!

3.      Soggy areas or puddles in your lawn, when it has not been raining.  This is likely telling you that your drain field is going bad and not properly draining.   If you notice this, it needs to be addressed as soon as possible.

If you have slow drains, gurgling sounds, waste backup in the home or foul smells in your home, it very well could be a clogged main line or issue with your tank.  If you have not already done so, I would have Goodwin’s Septic come out and pump your septic tank and have it inspected to see if you have any issues that can easily be corrected.  It is my understanding, keep in mind that I am no septic expert, that if your tank and lines check out and you have puddles, standing liquids or drain field issues, you are likely to need a new field.  This means you would have to abandon the existing field and install a new one.  If your field or tank has failed and you have sewer in your neighborhood, you will have to “hook up” to the sewer system and abandon your septic. You realistically will not have a choice.

Keep in mind, the nice thing about Sewer is, you flush it and forget it… for the most part. The bad part is the ongoing costs associated with monthly sewer bills.  Bottom line, If sewer has come to your neighborhood, it is just a matter of time till you become a part of it. 

Dave Kimbrough

The Kimbrough Team