For the last few months we all have been waiting with batted breathe to see how the interest rates increase will impact the real estate market. It has been a bit bumpy since the start of the Fed raising rates but overall we still saw a small increase in prices. However, this last rate hike coupled with a end of summer and kids going back to school seemed to have slowed the market down. Last week we saw 38.5% of homes on the market making a price reduction. We even saw a jump in how much seller’s were reducing their price to 6.6% (it was 1.3% the week before). I am a firm believer there is really no “bad” market, just different opportunities. Does that get anyone else excited? No? Just me?

As we see this shift in the market, who may benefit?

Buyers that have lost out previously but still want to buy. The last few years have been so brutally hard for buyers as they competed for homes against many other buyers, including investors. With the rise in interest rates, many investors have had to sit on the sidelines, eliminating then from competition. Buyers are able to get rate buy downs, inspection items and/or concessions from sellers currently.

Cash buyers: Hey! Who cares about interest rates when you have cash. Go negotiate a deal!

First time home buyers: This is a segment of buyers that really had a hard time over the last few years and now is a great opportunity to buy your first home. The benefits to home ownership are plentiful and there is far less competition now that even 3 months ago.

House Hackers: Rent out a room or rooms in your new home to offset your expenses. or buy a duplex/triplex/quadplex and live in one while renting out the other side(s) and utilizing an interest for a primary home.

Interest rates may be higher but a slower market offers opportunity to buyers. More inspection items are being completed by sellers, sellers offering to buy down buyers loans and concessions. These are all items that we have not seen a lot of in the last decade as buyers fought for a home and it is exciting to see more opportunities for buyer’s to purchase a home.

Reach out to Liz to start your home search. Liz is  broker and owner of Liz Daigle Realty.

I have had a number of real estate agents reach out to me from different cities asking about a blog post I wrote a bit ago. Although we have seen a competitive market for years, they are not starting to see contracts written with escalation clauses and appraisal gap guarantees. It appears homebuyers are starting to compete for homes nationallyand they are starting to see multiple offers for the first time. I wrote about the gold standard of multiple offers in 2018,�here�and, although, today this is typical practice for homebuyer’s offers in Denver it is very helpful to both agents and buyers to understand this practice.

Let’s look at what wins a multiple offer situation again:

Escalation Clause: This clause is when a buyer writes an offer to pay more than the highest offer by a certain amount.

Example language:��Buyer to pay $2,000 above the highest offer up to $500,000. Seller must supply a copy of the highest bona fide offer.�

While the purchase price gets pushes higher with multiple offers and escalation clauses the�concern becomes�appraisal and appraised value. A buyer can only get a loan for what the home is appraised for. This concerns leads to the next clause that we have seen in contracts,�the appraisal gap guarantee clause.

Appraisal Gap Guarantee�Clause:�This clause states that if the home were to appraise lower than the stated purchase price, the buyer would bring money above appraised value OR make up the entire difference between the appraised value and purchase price.

Example language:��In the event the appraised value comes in below Purchase Price, then Buyer agrees to pay�up to $6,000.00* over appraised value not to exceed purchase price. Any such cash differential�shall be applied to Buyers` Cash at Closing amount in Section 4.4. Section 6.2.1 shall apply in the event the appraised value comes in below the stated listing price at the time the offer was�submitted.�

*can be any dollar amount above appraisal.

One of the agents that called asked a great question about this clause. “Isn’t it implied when a buyer is bringing more down that they will restructure their loan to accommodate a lower appraisal and bring money to cover that that gap?”

Short answer: NO. In a more balanced market, when an appraisal comes in lower, both parties usually agree to the appraised value. So, as a listing agent, I want the appraisal gap spelled out in the contract. If the appraisal comes in low, how much will the buyer bring above the appraised price?

Health and Safety Inspection: I have seen this written a number of different ways but in essence�the buyer is saying they will only object to items related to health and safety. This clause is the hardest to enforce because everyone’s definition of health and safety is a little different. However, buyers should not go into the transaction thinking they will get cosmetic updates completed the seller at inspection objection.

The gold standard in a multiple offer situation:

An offer with an escalation clause,�appraisal gap guarantees and an inspection for only health and safety (or taking the home as is).

Contracts written with this language are not new to our market, however, there are a few changes that I have seen. Mainly, the dollar amount is increasing. Buyers are no longer offering 5k above the appraised value, now its upwards of 15-20% of the list price. Appraisal objections are being waive completely as buyers are willing to make up the difference between the agreed upon purchase price and the appraised value. Inspection objections are being waived and buyers are agreeing to take the home “as is”.

This is a very tight market, making it incredibly competitive. It is imperative that both buyers AND sellers have an agent on their side that know how to navigate this market.� Be sure to reach out to Liz for more information.

Liz is �broker and owner of�Liz Daigle Realty.

 

The Details:

2 bedrooms
1 bathroom
Gorgeous Fir hardwood floors and plenty of charm!
1,000 sq. ft finished and an unfinished basement.
8,000 sq. ft yard.
A 10 minute walk to Downtown Littleton… Bacon, Fierce45, coffeeshops, The Viewhouse, and more!

The Price:�$439,000

The Showings:�Lasted Friday – Sunday. There were a total of 28 showings.

The Offers:�6 multiple offers ranging from $448k-476k.

The Decision: The top two offers (around 475k) looked very similar. Both had a quick close, great lender and an inspection for health and safety. However, buyer A was putting 10% and had a 25k appraisal gap and buyer B was putting 55% down and had a 15k appraisal gap. An appraisal gap is when buyers bring money above the appraised value should the appraisal come in lower than the price they are offering. With prices skyrocketing so quickly, this is a much needed detail in a contract.

The Verdict: The sellers liked Buyer B’s down payment. The sellers had previously had the appraisal waived for their initial purchase and refinance and were hopeful this would happen with Buyer B, removing the appraisal contingency completely (this means the lender did not require an appraisal since the loan was small due to a large down payment). There is no guarantee that this would happen, however, it will definitely not happen if a buyer has a smaller down payment with mortgage insurance.�We ended up going back to Buyer B to see if they would increase their appraisal gap to 25k (in case there was an appraisal done). They agreed and we went under contract at 476k (37k over asking) with a 25-day closing.

The Process: The appraisal DID end up getting waived and the only contingency was the inspection which was for “health and safety”. The buyers did send an inspection objection asking for items that were not “health and safety” and they ended up withdrawing the inspection objection and continuing with the transaction.

As this case study shows, sellers can continue to expect a good number of buyers through their home over the weekend and buyers will have to compete for a home. To be competitive many buyers have a significant down payment and most contingencies are being waived.

Reach out to Liz for help with any real estate needs.

Liz is �broker and owner of�Liz Daigle Realty.

What a year.�

Every single woman that I have talked to recently expresses burnout. We have somehow managed the impossible for a year now. Social isolation. Raising babies. Homeschooling. All while working full time (or not). If there has ever been a year to honor and celebrate the strength, tenacity and residence of women, this would be it.

2.5 million women have left the workforce since the start of COVID. Now more than ever, woman have to be creative with how to make money as they juggle even more. Now more than ever, I think real estate is a great avenue for women to build wealth. Yesterday was International Women’s Day�and this year’s theme is Choose to Challenge. What if we chose to challenge the status quo and what it looks like to build wealth for our family?

As women, we know what it takes to be resourceful and creative: traits that are needed in the Denver Real estate market. How can you make money using real estate?

House-hacking. Can you rent a room, basement, etc of your home?

Buying a Rental. Sure, house values are rising but so are rents as people continue to move here. You can still make money with a rental in this market.

Selling your home. Most likely, your home is your biggest asset but that isn’t realized until you sell. I hate having a ton of equity in my home and every few years get the itch to sell. Now, this isn’t for everyone because a primary residence can be an emotional investment. However, your home is worth a lot right now but that money is unrealized until you sell. We bought a home for 400k two and a half year ago and are now selling it for 475k. If you had put 20% down ($80,000), you would be almost doubling your investment when you sell and collect about $130,000 at closing (after fees, etc). You could easily reinvest that money in another primary residence or put 10% down on a large home and then use the rest to buy a rental that cash flows.

Leverage. Another way to take advantage of all the equity in your home without selling is a HELOC (home equity line of credit) and using that money to purchase a rental. Commit to using the cash flow from the rental to paying off the HELOC. In a few short years, you will have two homes worth more money AND one that cashflows and brings in extra money for your family each month.

Imagine a life of financial independence where what happens in the external world won’t impact you so greatly because you have made strategic decisions to build wealth. Real estate has blessed me with the opportunity to build wealth on a very flexible timetable. �I urge you to consider how to set this up early in life, your future self will thank you.

And, just a reminder ladies, we’ve got this!

Reach out to Liz for more information on how to build wealth through real estate. Liz is �broker and owner of�Liz Daigle Realty.

There is no way to have survived the housing crash of 2008 and not be a little skittish about the real estate market right now. We are seeing some of the lowest numbers of inventory in year and some of the highest numbers in�appreciation as buyers compete for homes. That coupled with the fact this has been our story for quite some time now – can seem scary (even if you are able to cash in on the appreciation currently.

Boots on the ground, the energy is unnerving as buyers face a scarce number of homes to look at often times not being able to even get a showing. However, times like these, I look at the facts…

• Interest rates continue to reach record breaking low levels.
• This is a case of extreme supply and demand. We have a lot of buyers and only about a month worth of inventory. A balanced real estate market would require at lease 6 months of inventory.

With the low level of inventory, I, personally, think we have another several years of this. If you are a homeowner, you will continue to see some incredible appreciation. Buyers, you will continue to compete for homes. Considering this may be our new normal for a bit, this is what I have chosen to do:

Rentals. We currently have two rentals that we plan to hold on to and do conscious upgrades that will ultimately increase rental prices and the value of the home.

Primary Residence.This summer we bought a home that needed substantial renovations and took that project on and added equity through upgrades.

Selling our Old Primary Residence. We had always considered turning this home into a rental, however, it had a quirky layout. it was a 2 bedroom 1 bathroom built in 1917. It oozed charm but the layout was hard and because of this we chose to sell. A small, quirky home is easier to sell in an extreme sellers market.

Going forward.I am not done and am always open to buying more houses. I am always looking for a rental in a good school district in the suburbs. Only recently have I considered WHERE some people will decide to go as metro Denver continues to get more expensive and crowded.

Taking into consideration of what is going on right now in the real estate market and looking forward, I would advise unloading homes that may be harder to sell if the market were to change. Don’t be afraid to buy a home, however, be prepared for a fight. Consider creating your ideal home by adding upgrades to help increase equity. Buckle up and get ready to make money when you choose to sell a home.�

Liz is �broker and owner of�Liz Daigle Realty.