What is an appraisal and why do I have to get one to buy a house?

What is an appraisal, and why do I have to get one to buy a house?

In Colorado real estate, it’s usually like this…

What is an appraisal?  The buyer usually has to borrow money to buy a house, so the financial institution (lender) that is making the loan submits a request to a third party, called an appraisal management company. They then randomly selects a Colorado licensed appraiser to review similar houses that have sold in the past 6 months.  This person then puts together a report (appraisal) with their comparison findings, and submits it to the lender.

Why do I need an appraisal?  You need an appraisal because you are borrowing money, and your lender wants to be sure the house is worth the money they're lending you to buy it.  Then, if you stop making your house payments, the lender will be able to re-sell the house to get their money back.

Who orders the appraisal?  The financial institution lending the money to the buyer.

Who pays for it?  The buyer typically pays for the appraisal (which is around $350-$450 for single-family residential), because it’s for the buyers’ benefit.  If the seller contractually agrees to pay all the buyers’ closing costs (including appraisal), the buyer still has to pay for it up front, and then will be reimbursed at the closing.

How and when do I pay for it?  Your loan officer will usually accept credit card over the phone, or you can pay by check. It is ordered as soon as possible, but usually following inspection resolution so that the buyer doesn't spend money on an appraisal, only to have the contract fall apart due to inspection issues.

What if the house doesn’t appraise?  Then the seller does not have to sell, the buyer does not have to buy, and lender will not loan money above the appraised value.  For this reason, the buyer and/or seller, if they choose to continue forward, will have to come up with the difference in cash. 

 If it doesn’t appraise, do I get my money back?  No.

How is a VA appraisal different?  VA appraisals tend to be a bit more rigorous, with more emphasis on the property condition as it relates to safety.  They may make requirements of repairs to the property (by whom is negotiable), which will have to be completed prior to closing and are subject to a $75 re-inspection fee.  A VA appraisal also runs with the property for 6 months, even if the original buyer backs out.  This can be problematic to the seller if the appraisal is less than what they are asking for the home, and a new buyer wants to obtain a VA loan within that time frame.  

Is an appraisal the same thing as an inspection?  No.  You (or your agent) hire and/or control the inspection process.  During inspection you have the opportunity to thoroughly examine major components of the house (i.e. furnace, roof, etc.) for defects or safety issues.  An appraisal is ordered by the lender to ascertain value.

*This is why we highly recommend obtaining a real estate professional (or two, like usJ) to represent you.  They will be familiar with the market, and will do detailed studies to ensure the value of the home you’re buying or selling is where it should be.

For more information, please contact Tammy or Gayle of

719.576.3600 office/ gcaldwell@erashields.com or tammy@erashields.com

www.MotherDaughterRealEstate.com

The best way to quickly shop and compare mortgages

What is the best way to QUICKLY shop & compare mortgages?

APR = Annual Percentage Rate

There are many different types of mortgages (FHA, conventional, fixed rate, adjustable, 30 year term, 15 year term, etc.) and there are many types of mortgage providers (mortgage brokers, direct lenders, credit unions, etc.), and all of these need to be considered before making a final decision, but you need to know to quickly shop and compare the costs of a mortgage loan.  Most folks simply base their comparison on interest rates.  However, the interest rate is only part of the picture, because there are other costs associated with obtaining a mortgage loan (i.e. discount points, funding fees, loan origination fees, etc.) and those can vary widely from company to company.  Because of that, the best thing to ask is the APR, short for annual percentage rate.  This rate will include all the costs associated with borrowing money in addition to the interest rate charged.  Here's a link to additional information on the Truth in Lending Act, including APR :

http://www.in.gov/dfi/2582.htm

If you're getting ready to purchase a home, and you're not already working with a real estate broker, give Tammy & Gayle a call at 719-576-3600 or visit our website, www.MotherDaughterRealEstate.com !
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Rebuilding guidelines in Colorado Springs

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The Housing & Building Association of Colorado Springs (CSHBA) is working closely with the Regional Building Department, El Paso County and City of Colorado Springs to help rebuild our community. We’re honored to be part of the tremendous outpouring of support for the individuals and families who have lost their home or have been displaced as a result of the recent fires.

For information about rebuilding on your same property, click here for a resource page from Regional Building Department.

In response to the catastrophic fire in Colorado Springs, Pikes Peak Regional Building Department will use the following scenarios to assist those who lost or suffered damage to their home. Any one of the following 4 scenarios may be used when applicable. Upon completion of the scope of work defined for a permit associated with scenario 1; 2 or 3, a Certificate of Occupancy will be issued. No Certificate of Occupancy will be issued for a permit using scenario 4. Please contact Mindy Stuemke @ 327-2903 or Bob Croft@ 327-2914 to discuss if these scenarios will not work for your particular situation.

1. Use of existing foundation, same house:

If Regional Building has the original plans, the only document required will be a letter from a licensed engineer stating that existing foundation is acceptable for rebuild. RBD will issue, at a minimum fee, a demolition permit for removal of fire debris. This permit is required to monitor removal activity and be sure fall protection is installed around the open foundation as required by code(2011 PPRBC). The single family dwelling shell can be constructed according to the plans on file with the issuance of a new remodel permit (434). The permit cost will be based on the cost of square footage with attachments for Electrical/Mechanical and Plumbing trades at a minimum fee. The interior finish portion of the house may not be required to meet all current structural or design criteria of the 2009 IRC, but will be required to meet all life/ safety requirements and other design provisions that benefit the owner such as, but not limited to, State Electrical Code, smoke and CO detectors, energy conservation, etc.

2. Non-use of existing foundation, same house:

If Regional Building has the original plans, the documentation required will be a letter from a licensed engineer stating that foundation is not safe for rebuild and submittal of a new foundation plan for review/approval. RBD will issue a wrecking permit at a minimum fee for total removal of foundation and all fire debris. This permit is required to monitor removal activity and to be sure the foundation excavation is backfilled or protected according to code (2011 PPRBC). With this option, a new single family dwelling permit (101) will be issued based on the cost of square footage and no other trades will need to attach, this will be a universal permit. The construction of the foundation must comply with all applicable provisions of the 2009 IRC. Inspections may be made by the engineer of record. The remaining portion of the structure located above the foundation may be constructed as outlined in # 1 above.

3. Building new home (different from original) at existing location:

Process will be the same as any new single family dwelling plan/ permit submittal currently in place. http://www.pprbd.org/plancheck/PLCK_RESGuide_2012.pdf One set of plans, including engineered foundation, site plan, all construction docs and duct design components to comply with 2009 IRC.

4. Repair of existing structure due to fire damage:

Process will be the same as any remodel for an existing residential structure.

Should I buy a house now?

This is a great post:

Why Buy Now … Buying Power!

For home buyers with a long-term housing plan, today's mortgage rates are an incredible value as compared to even February of last year.  Last February, the 30-year fixed rate mortgage averaged 5.05 percent nationwide and today you are around 4.00 percent. If you are one of the many that have waited, you will have saved 13% on your mortgage payment. Take a look at the math :

February 2011 : $539.88 principal + interest for every $100,000 borrowed

February 2012 : $477.42 principal + interest for every $100,000 borrowed

That's $62.06 monthly savings for every $100,000 borrowed.

Same Mortgage Payment ~ 77% More Home

 When you buy a home, you think in terms of "monthly budget" and that's why mortgage rates are critical to home affordability. Your purchasing power is a direct reflection of the mortgage rates of the day. As mortgage rates rise, purchasing power falls. As rates dip, purchasing power rises.  This is why your mortgage dollar goes so much farther today as compared to 20 years ago -- mortgage rates are scraping rock-bottom in 2012 at levels that were previously unthinkable to economists. 

Let's say you have a monthly budget of $1,700 for your mortgage.

In 1991, a $1,700 mortgage payment gets you a loan size of $200,000

In 2011, a $1,700 mortgage payment gets you a loan size of $353,000

In other words, in 2012, for the same monthly payment, you can borrow 77% more from the bank than you could in 1991. Talk about a great deal!   

While property values rose, the affordability index dropped. With rates low and property values stabilizing, this becomes as close to the “perfect time” to buy as we can accurately estimate. No one knows when the bottom or top of any market comes until after it is long gone. Whether we are moving up, down, or laterally the forecasts say that now is the time.

Jim Harmelink

ERA Mortgage
NMLS# 283201
Office: (719)535-7405
Toll Free:(866)820-5526
Fax: (719)535-7393
Mobile: (719)651-0291http://jimharmelink.eramortgage.com/

If you like numbers and statistics you're going to LOVE the 2011 year-to-date Colorado Springs real estate market analysis and preview to 2012.  Happy reading!

Colorado Springs real estate statistics!

Call us if you have any questions. 
Tammy and/or Gayle

Should I clean my own carpet with one of those professional carpet cleaning machines?



Here's a pic of the professional carpet cleaning machine I use

 Have you ever considered buying your very own commercial grade carpet cleaning machine?  Well I did it, and here's my story:

I used to rent one from Home Depot every few months or so (just like the one pictured above).  Then I got tired of schlepping that thing back and forth (it's heavy) so I asked if I could buy it.  They, of course, obliged to the tune of around $400.  Which, I believe, is about market rate for one of these carpet cleaning units.  I saw one at Costco, similar unit, different brand, for about that.  New is probably better.  I bought a used one for some reason.  Was it a good investment?  If you consider spending @ $100 a pop to have the professionals do it, perhaps it pays for itself after 4 or 5 uses.  But remember the opportunity cost and sore muscles (if you're out of shape like me). 

If you decide to spring for one (or rent one), here's a couple things I've learned over the years:

• The handle folds down & makes it slightly more compact & easier to carry.  It's still heavy though.
• Use hot water with little to no "shampoo".  I will either directly spot-treat or place a 1/4 cup of Folex in with the water if necessary.   Folex is the best because it doesn't foam up or leave residue. I used a foaming shampoo once, and it reminded me of that episode of the Brady Bunch when the washing machine overflowed with suds.
• Use your bathtub to fill the blue water bucket.  I used to do it at the sink, which made a mess & took forever.  I even went so far as to boil water on the stove & then put it in.  Loser.  I know.  Beware: I think hot cleans best, but it can loosen the glue. 
• Dump the dirty water in the toilet.  It will be filthy, disgusting and likely have pet hair and small rocks, which the toilet can handle.  I used to poor it in the kitchen sink & the disposal almost blew up trying to grind those tiny rocks. 
• When cleaning, pull the machine backwards and go slowly, slinging that cord over your shoulder. I was told when I rented it to be sure, whatever I did, DON'T run over that cord! I've never done it.  Not sure what really happens, but just in case. 
• You'll get used to the loud, obnoxious noise, but when it changes to a different kind of annoying buzzing sound, it's out of water.  Watch the little clear tube in back as well, because it will show the level of water.
• Try to do it on a day when you can have the windows open & the ceiling fans on.  It get super humid.
• If you use the hand tool, be sure to connect it properly.  I had Home Depot order me a new one, got home and realized they had the water hose opposite the suction hose end and I had to rework it.
• When done, take the blue bucket off, and if possible get it lower than the unit itself.  Then pull the clear tube on the back down, into the bucket, and the remaining water will come out. 
• It's not a bad idea to run a bucket of clear, clean water through using the previous step.
• Afterward, I also hold the hand tool hose up to an outdoor water spigot to rinse it through.

Did I do the right thing buying this machine?  Should I have kept renting or just hired someone to do it?  I'm not sure.  I like to think I'm saving a bundle, and I like to do it when/where I want to.  I guess I like to have the control too.  This last go-around, I actually used the spray hose on a few dirty walls & wiped 'em down while I was at it!  Cleaned my car's carpet & upholstery too.  Now that I know the ropes, I think it was worth it.
http://www.motherdaughterrealestate.com/

How to know if a property has a well in Colorado

Try checking this website:  Colorado Division of Water Resources Search Page

Here's what the main search page looks like.  I had the most luck using the legal description on the property I was researching.  Good luck!
Of course we sell properties with wells, so give us a shout!

Beware of Foreclosure Rescue Scams!

Beware of Foreclosure Rescue Scams!

PikesPeakParent.com : Plant flower bulbs right to avoid spring no-shows

PikesPeakParent.com : Plant flower bulbs right to avoid spring no-shows

Colorado is a "table funding" state for real estate transactions

In Colorado, we are what's called a "table funding" state.  That means when your real estate transaction is closed (usually by a title company),  all money is due and payable (in "good funds" of course; which includes cash, certified check or wire transfer) and title to the property is exchanged.  In a typical situation, that means when the buyer brings money to the closing table (whether via a mortgage lender or cash) that money is then distributed to pay the liens against the property (i.e. the mortgage), the real estate brokers and/or attorneys, the title company, insurance company, and if there's money left over, the seller. Thus, the term "table funding".  Ocassionally, the buyer will even walk away with money if they've obtained a 100% mortgage loan, which is the refund of their earnest money. 
Upon the conclusion of the signing of the seemingly endless documents and distribution of the money, the transaction is officially closed, or sold.