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Real Estate 101 – Kearney Realty Co.
303-440-6464 info@KearneyRealty.com
The Tax Bill and Its Effect on Real Estate

The Tax Bill and Its Effect on Real Estate

The recently passed federal tax bill will definitely have an impact on real estate.  In general markets with high taxes and high values will be most affected.  Despite the recent increase in local property taxes, Boulder County is considered a low property tax area compared to other parts of the country.  However, we are a high value market.  Here is a summary of the main points of the tax bill that affect real estate. Also, if your selling your property or house, we buy houses at a good price. Mortgage Interest Cap – This is in regards to how much of the interest paid for mortgages can be used as a deduction.  For those whose mortgages balances are less than $750,000 this will not affect anything.  Previously the cap was $1 million and it has now been reduced to $750,000.  Not many people have loans in excess of $750,000, but in our area where the luxury home market is very robust, we may see fewer buyers able to make those purchases. The interest on the first $750,000 is still deductible.  This may dissuade some luxury home purchasers to buy a less expensive home, thereby reducing the demand for the very high end. Local and State Tax Deduction – The Boulder County Treasurer was inundated before the new year with property owners pre-paying their property tax bill in advance.  This was in response to the section of the tax bill which caps the deduction for state and local taxes at $10,000. Previously, homeowners were able to deduct from their federal tax return the amounts paid for state income tax, various ownership...
The Real Estate Cycle – Where Are We Now?

The Real Estate Cycle – Where Are We Now?

The Real Estate Cycle Approximately 2500 years ago Heraclitus of Ephesus said “The only thing that is constant is change”.  In the moment we sometimes forget that forces larger than we can see are slowly moving culture, markets and people.  Everything we see is changing, however the rate of change makes a difference. We notice more readily the melting of an ice cream cone than the erosion of a mountain.  It’s normal to only take note of what we can readily see.  However, there is wisdom in taking a longer view. Real estate is cyclical.  There are many factors involved, but the peaks and valleys of the real estate demand and value have been shown to have a relatively consistent cycle of approximately 18 years.  Economist Homer Hoyt made a detailed study of the Chicago real estate market and the broader United States real estate market and found that it has run its course in a steady 18 year rhythm since 1800.  There have been exceptions that have disrupted the normal cycle such as The Great Depression, World War II and the post war boom but on average, the business cycle and the real estate cycle have been very consistent including the 18 year cycle than ended in 2008.   The infographic above shows the four phases of the real estate cycle.  Here is more information on each of the stages of the cycle.  Most studies present Recovery as the first phase of the cycle, but since the last recession was so memorable I think it makes a good starting point. Recession  Think back to what was in the news...
Senior Property Tax Exemption

Senior Property Tax Exemption

With property values increasing as steadily and as rapidly as they are in Boulder County, it should come at no surprise that property taxes are following suit. This became very clear this past May when assessment notices made their way around town informing Boulder County residents that the assessed value of their property had significantly increased by on average 26%. Although it is exciting to watch the value of your assets increase it does mean that property taxes will most likely increase for you as well. When discussing property taxes I believe it is helpful for anyone to have a basic understanding or concept of how property taxes are actually determined. When boiled down to the basics it is actually quite easy to understand. Three major components go into your property taxes: Rate of Assessment Assessed Value Mill Levy (Tax Rate) The Rate of Assessment for residential properties in Colorado serves as the base for property taxes as it determines what percentage of your homes actual value can or will be taxed.  This can be adjusted on the state level and just recently got lowered for the first time in 14 years from 7.96% to 7.2%.  The rate of assessment is multiplied by the assessed value to your taxable value. The Assessed Value is the value assigned to your home by the county assessor.  This assessment is adjusted every two years based upon comparable sales in your neighborhood.  The assessed value is what arrived in your mailbox in May.  Finally, the Mill Levy (also known as the Tax Rate) is the percentage of the Assessed Value that is actually...
Home Search Zillow Sued for Inaccurate Zestimate’s

Home Search Zillow Sued for Inaccurate Zestimate’s

This past May, Zillow, the online real estate search company was sued by a Chicago based home building company who claimed that Zillow’s online Automated Value Model (AVM) is deceiving home buyers with prices below the true value of properties leading to frustrated sellers. Furthermore the suit claims that Zillow’s “Zestimates” are in violation of the legal description of an appraisal, which under Illinois law must be administered by a licensed appraiser. Zillow defends themselves by stating that their Zestimates claim only to be approximations not true appraisals; to which the suit responds stating that whether or not they are technically appraisals homeowners are viewing them as such leading to confusion and irritation. It will be interesting to see over the coming months how this lawsuit plays out. It’s clear that Zillow’s Zestimate and other AVM’s which are becoming common across the internet are being used by consumers to determine the approximate value of their home.  But in my experience, many times this approximation isn’t close to the true market value. So just how accurate are Zestimates. In a Nationwide study conducted by Zillow it was found that their Zestimates fall within 5% of the sales price of homes 53.9% of the time, within 10% of the sales price 75.6% of the time and finally within 20% of the sales price 89.7% of the time. Back in 2007 when Zillow was just getting its footing I conducted my own research local to Boulder on the subject and found that on a whole Zillow’s algorithm was 99% accurate.  However, when I took a closer look I found that there was...
The Steps of A Home Search

The Steps of A Home Search

If you have determined that you are ready to buy a house (click here for more information about determining if you are ready) the next question to ask is how do I do it? What is the smartest way to go about buying a home? What are the first steps in a home search? This article will show how to begin the process of buying a home as well as point out some common pitfalls that can be avoided. Step 1 – Finding a Really Good Realtor It’s easy enough to start browsing houses on the internet or going to the random open house, but at some point you will want to get more serious about looking at homes.  The first step towards getting more serious about looking for a home is finding a good Realtor who has been through the process time and time again.  Most people end up working with a Realtor, so why not engage one early on in the process?  Realtor’s have tools that will save you time and put you on track to finding the right home more quickly. If you are finding air quality experts for your home or business here is the solution. A good Realtor is much more than a person who shows you the houses that you have found online, they serve as an information source, an advocate and a guide through the process.  Make sure you are working with a Realtor who is more interested in helping you find a great house for the long term rather than a quick sale for them.  It takes patience and persistence to make sure you end up in...
Am I Ready to Buy a House?

Am I Ready to Buy a House?

Am I ready to buy a house? It starts as a subtle suggestion in the back of your mind. You might hear yourself thinking; “this is ridiculous, rents are so high and I’m throwing my money away” or “now that I’ve landed that job I’m ready to settle down” or “we’ve been saving for years and now is the time to buy before prices go up any more”, or “all of my friends are buying places and they seem to be doing great”.  Whatever dialog is whispering in your ear, there comes a time when it may make sense for you to buy a home of your own.  But are you truly ready?  This article will help first time home buyers to analyze that question and help get you ready to make the purchase. Is it smart to buy a house? (when I say house I mean any residential real estate) If done correctly, owning a home is for many people best financial decision they ever make.  According to the 2014 Survey of Consumer Financing by the Federal Reserve the median net worth of a homeowner was $194,500 compared to $5,400 for renters. During the time frame of 2008 – 2012 many homeowners were adversely affected by the housing crisis and economic downturn that resulted in a record number of foreclosures and short sales nationally. For those who bought just before the crisis or those who needed to sell when prices dropped in many areas (click here to see why Boulder County was named the most stable market in the country) owning a home may not seem like a wealth enhancing...
Colorado’s Property Tax Rates Near The Lowest

Colorado’s Property Tax Rates Near The Lowest

Do you know what PITI is? If you have a loan on your home you probably know that these are the four elements of a mortgage payment. P stands for principal; the first I stands for Interest; T stands for taxes and I stands for insurance.  Together they make up the amount you pay for your home on a monthly basis.  If your PITI payment is comfortable for you, you will have extra funds available to pay for all of your living expenses, be able to save some money on a monthly basis and have some left over for some fun.  But many times as we consider how much of a house we can afford we key in on the price of a home  and the interest rate (these go into determining the ‘P” and first ‘I’) without much considering the ‘T’ and the ‘I’. Before I get started talking about Florida Property Management (fpm) taxes I want to make it clear that this is not a comprehensive article on taxation.  There are many elements that go into the discussion of total taxation that include income tax, various sales taxes, car registration fees, use fees, transfer taxes, etc., this article just focuses on one element and is therefore not a comprehensive picture. It doesn’t fairly compare apples to apples across states. However, I think it’s an interesting and relevant topic because it comes up often in my discussions when I am showing property. Corelogic recently did a study ranking the median property tax rate across the country.  The highest property tax percentage is in Illinois where taxes are 2.67%...
Seven Key Strategies for Winning Multiple Offers

Seven Key Strategies for Winning Multiple Offers

During 2015 43% of all homes sold in the City of Boulder sold for more than asking price (see more context in my year end report) . Presumably most of these homes had multiple buyers making competing offers.  So what does it take to be the winner of a multiple bid situation?  Here are seven strategies for winning multiple offers.  I liken these ideas to a set of arrows in a quiver. Price – The most effective way to win the hearts and minds of a seller is to give them the most money.  In theory it’s easy give them more than anyone else.  In practice, given limited information, it’s very difficult to know what others who are exactly in your position will do.  On average in 2015, those homes that sold for a price over asking price sold for 4% above. The range is from just a few hundred dollars over to 20% over. Now that’s using a sharp and effective arrow! Escalation Clause – This could be a subheading under price but I think it’s worth giving it top billing.  An escalation clause is a paragraph inserted in the contract which states; that the buyers agrees that if their offer isn’t high enough their offer will be automatically increased to beat any competing offers by $X,000 up to a cap price. Some sellers and their agents announce that they will not accept escalation clauses because they view them as a hedge (we are willing to go higher but only if we need to).  For a buyer an escalation clause is a good way to state your intentions...
Baby Boomers, Millennials and Real Estate

Baby Boomers, Millennials and Real Estate

In a recent article in Forbes Magazine by Mary Meehan titled “The Baby Boomer Housing Bust“, the author makes the case that in the coming years the Baby Boomers may have a hard time selling their homes to the Millenials. She states that many Baby Boomers (people born between 1946 and 1964) will need to sell their large suburban homes to finance their retirement and that the younger buyers may not be interested in buying those homes. It’s an interesting article, especially since in the Boulder area we are seeing a strong sellers market with strong demand for any property listed. But since real estate markets change and many people are talking about how the changing demographics in America will affect housing, I thought I would explore the connection between Baby Boomers, Millenials and real estate.  Here are the topics I’d like to touch on: Baby Boomers need to sell homes to fund retirement. Younger buyers, including Millennials have different attitudes regarding home ownership. There will be an unmatched demand for the supply of homes on the market. According to a National Association of Realtors (NAR) 2014 Generational Trends Survey, Millennials made the most real estate purchases in 2013. Here is the breakdown: Millennials (1980 – 1995)           31% of purchases Gen X (1965 – 1979)                     30% of purchases Young Boomers (1955 – 1964)   16% of purchases Older Boomers (1946 – 1954)     14% of purchases Silent Generation (1925 – 1945)  9% of purchases For reference, here are the latest population percentages in the United States and Boulder County: Under 18     25.7% (22.9%);  18-24     9.6% (13.4%); 25-44     ...
How Do You Know If You Are Ready To Buy A Home

How Do You Know If You Are Ready To Buy A Home

Here are some of the reasons why people buy their first home. Tired of paying rent / rents are rising. Home prices are rising and if they don’t buy now they might be priced out of the market. Just got married. Just got a great new job. All my friends are buying a place and it seems like a good idea. Loans are hassle, try cash advance at merchantcashadvances.co All of these reasons are reasonable, but none of them hit on the key factors that a first time home buyer should consider when they are thinking about buying a home. They can push you in the right direction but they don’t ensure an intelligent purchase. Buying a home is one of the best ideas you can make. It is a great long term investment, your payments are tax advantaged, with each payment you are gaining equity and you get to live in a place you can make your own. It’s a win, win, win! However, the keys to making it a good investment have much to do with your stability and your budget. I mentioned in the previous paragraph that owning real estate was a great long term investment. Unless the market is appreciating very quickly you will be doing very well to break even if you need to sell within two years. Real estate is cyclical so not everyone gets lucky and makes the purchase right before prices take off. In many markets prices are just now getting back up to 2007 levels after a big decline. If you bought in 2006 and needed to sell in 2010...