Real-Estate-AppraisalWhen you buy a house, your lender will require an appraisal on the property before they will complete your loan. Why is an appraisal necessary? Because the bank wants to know that they are not loaning more than the property is worth.

What’s an Appraisal?
Appraisals are completed a week to ten days before the closing. Even though lenders require appraisals, you get to pay for them. The cost is $400 to $500.

Appraisals are conducted by – believe it not – appraisers! These are professionals who specialize in determining the “actual value” of properties. The actual value is based on past sales, features, condition, location, and other factors. Appraisers attempt to remove biases and simply look at facts and numbers.

Appraisers vs Real Estate Agents
Instead of “actual value,” real estate agents determine the “market value” of properties. Market value is the price that buyers will pay for a house in the current market. Market value is based on supply and demand, marketing plans, buyer emotion, and market trends. If a market is active and buyers are frenzied, they will often pay higher prices than past sales appear to support.

What to Look For in an Appraisal
From a buyer perspective, your objective is for the appraised price to be at least as high as the purchase price; anything higher is a bonus. You don’t want it to come back lower than the purchase price. The reason is that lenders loan you money based off the appraised value.

For example, if you are buying a $200,000 house with an FHA loan (borrow 96.5%), and the appraisal comes back at $195,000, then the bank will only loan you $188,175 not $193,000.

If the appraisal comes back too low, you have a couple of options. First, make up the difference out of your own pocket. In the previous example, that means you come up with $11,825 down payment (5.9%) rather than $7,000 (3.5%). Another option is to have the seller lower the purchase price to match the appraised value. Your third option is to terminate the contract and walk away.

Think of your appraisal as a reality-check on the price you agreed to pay the seller. It’s nice when a third party agrees that your new home is a good value – or warns you that the house is over-priced.


Homeowner’s Insurance: How Much Coverage Do You Need?

insurance-agentWhen you buy a new home, you are required by the lender to have homeowner’s insurance (aka “hazard insurance”). The question is, how much coverage do you need?

Daryl Alexander, an agent in Fort Collins with State Farm, recommends that you “make sure your home is insured for at least 100% of its estimated REPLACEMENT cost. “

What does Daryl mean by “replacement” cost?

Market value is the amount a buyer would pay for a home. Replacement cost is the rebuilding cost necessary to repair or replace the entire home.

Over the years, the cost of materials and labor increase, sometimes faster than the market value of a property. If you have a fire, water leak or hail claim, and you’ve owned your house for many years, the cost to repair your house could be really high.

Cost of Premium
It sounds like replacement cost is the way to go, right? Then why would anyone get market value insurance?

The premium for market value insurance is lower than replacement insurance, which is why many homeowners buy it.

That’s being penny-wise and pound-foolish, as the expression goes. For the minimal increase in cost, replacement insurance gives you the coverage you’ll need in case of a disaster. Remember, you are buying peace-of-mind that your family and possessions are protected.

Review Your Policy Occasionally
As the years go by, it’s a good idea to get together with your insurance agent to ensure you still have the right coverage for your home. This is particularly true if you have remodeled bathrooms and kitchens, finished basements, or added on rooms or living spaces.

The worst time to find out you DON’T have enough insurance is when a disaster occurs. Avoid the heartache and trauma of insufficient coverage; find a trustworthy, reputable insurance agent, listen to his/her advice, and buy the coverage he/she recommends.

If you would like a referral to some trustworthy insurance agents, please contact Gary Clark.

Renewing Leases with your Residents

CB026637One of the easiest ways to maximize profit on your rental property is to avoid resident turnover. Therefore when a lease is near expiration, you want to renew the lease with the resident. This means you need to have a Lease Renewal Process in place.

Lease Renewal
Start your Lease Renewal about two months prior to the lease expiration. If you DO NOT want to retain the residents, send them a Notice to Vacate letter, which informs the resident you will not be renewing their lease. If you want to retain the residents, send them a Lease Renewal Packet, which requires them to inform you of their intentions:
1. Stay in their home
2. Vacate their home

Lease Renewal Packet
The Lease Renewal Packet contains three important tools.
1. Renewal Letter– this lets the resident know you like having them as tenants and hope they choose to stay.
2. Lease Renewal Agreement — this is a legal document that extends the lease; it allows you to increase the rent and define the term of the lease.
3. Notice of Intent to Vacate — this is a legal document where the resident informs you that they intend to vacate the property when the current lease expires.

If Residents Renew the Lease
You are set for another year! By retaining the residents, you avoided the hassle and expense of turnover, and you’ll be more profitable.

If Residents Vacate the Property
If you had a bad tenant, the good news is you get the chance to find a better one. If you lost a good tenant, ask why they are leaving; maybe there is a way to improve the resident experience for the next tenant. Either way, you have two months to prepare for the turnover of the property.

Bohemian Nights at New West Fest

New West FestNew West Fest is one of Fort Collins’ signature events. It’s usually held during the third weekend of August. Founded in 1989, the New West Fest is a three-day smorgasbord of music, booths, food, and events put on the Fort Collins Downtown Business Association.

This crazy mix of high-brow art, low-brow crap, and everything in between was the brainchild of then-DBA director Maggie Kunze and her friend Jackie O’Hara. These two ladies stumbled on a successful, enduring formula; the New West Fest’s layout, atmosphere, and mix of vendors have remained the same since 1989.

The biggest change in the New West Fest occurred in 2005. The DBA partnered with the Bohemian Foundation to enhance the music component of the festival. The Bohemian Foundation, managed by local billionaire Pat Stryker, cranked up the music MANY, MANY levels by paying national acts to perform for FREE. That’s right…FREE. They also provide top-quality stages, sound, and lighting equipment so the experience is second to none. In addition, they simulcast the Saturday performance on large screens in Library Park because the Mountain Avenue stage is too packed with people. Past performers include Gypsy Kings, Allison Kraus, Los Lobos, Ben Harper, and Leon Russell.

Today the festival is known as the Bohemian Nights at New West Fest. The festival is huge, covering Library Park, Remington Street, Mountain Avenue, Old Town Plaza, Walnut Avenue, and Linden Street. There is a kids’ area with carnival rides, face painting and fun. There are food venders, craft booths, product vendors, and political causes. There’s a beer garden with local micro brews. And there’s the music everywhere you go on several stages.

So go check out the Bohemian Nights at New West Fest in August. Eat turkey leg, listen to some music, and get in some first-class people watching.

For information on the Bohemian Nights at New West Fest:

Tips on enjoying the festival:
• Ride a bike – it’s super-crowded with people
• Put on sunscreen
• Wear comfortable shoes – you’ll walk a LOT

Prepare Your Mind as Well as Your House

mindset-300x300As you prepare your home to sell, you should make a difficult but necessary change in mindset.  You have to stop thinking of your home as your home. Instead, think of your home as just a house. Even better, simply think of your home as property that needs to be sold.

Easy to say; hard to do. It’s difficult because you put your heart, creativity and individual imprint on your home. It’s a reflection of who you are.  Maybe you raised your kids there. Perhaps it’s your dream home. Whatever your home is to you, “divorcing” yourself from your feelings about it is tough to do.

Nevertheless, the mindset change is essential because it will help you cope with the challenges, stresses, and frustrations of selling your home.

There are three hurdles you typically need to cross. Thinking of your home as simply a house or property will make it easier to get over these hurdles.

Inspections. After inspectors comb through your house, buyers create a list of objections (problems) that they want you to resolve (fix). Common objection items are plumbing and electrical issues, deferred maintenance issues, and radon mitigation. The list of objections often irritates sellers, who are offended by the notion that something’s wrong with their home. Then, sellers must negotiate what to fix or not to fix, which is stressful. Finally, the expense and hassle of fixing objection items strains pocketbooks and nerves.

Financing. Getting a home loan is a challenge for most buyers. The time frame to process a loan is about 45 to 60 days. The information required is voluminous and the level of detail seems intrusive and silly. No matter what buyers do, the closing can go down to the wire, causing heartburn and sleepless nights for buyers and sellers.

Appraisals. Banks loan against the appraised value of property, so they hire appraisers to set a price for your house. If the appraisal is the same as or more than the negotiated price of your contract, then everything is fine. If the appraisal is lower, then you have a problem; to keep the contract in force, you can either drop the price, or the buyer can come up with a bigger down payment. Otherwise the buyer can terminate the contract.

As you can see, distancing yourself emotionally from your home can be helpful throughout the selling process. Changing your mindset will help maintain a healthy mental, emotional, and physical state so you can deal with the twists and turns of your transaction.

The MS Society

MS Society LogoWhen you sell or buy a property with me, I make a donation to the MS Society after your property closes. It’s one way I contribute to this worthwhile organization and fight Multiple Sclerosis.

The national MS Society conducts important research to find a cure for Multiple Sclerosis. Over the years the MS Society’s made significant advancements in detecting the cause of Multiple Sclerosis and developing treatments.

The local MS Society chapter provides services directly to people in our community. I’ve seen firsthand the great work they do, the need, and I’ve come to trust the people running the chapter.

The MS Society is important to me because my wife, Bettie, lives with Multiple Sclerosis. I would love to see a cure for her sake and everyone else impacted by Multiple Sclerosis.

To learn more about Multiple Sclerosis or the MS Society, please visit

What Sells (or Doesn’t Sell) Your House?

Location-Price-Condition GraphicHouses sell or don’t sell due to three factors: location, price, and condition. These factors relate to each other, so if your house sells it is because you got them right. If your house is not selling, then you’ve got one or two of them wrong.

When you get the factors wrong, you have a VALUE problem. Value is not about what you PAY; it’s about what you GET for your money. The more you get, the more you are willing to pay. The less you get, the less you expect to pay. So price, therefore, is a reflection of value.

Now that we have defined value, let’s take a closer look at the three factors.

Location is the easiest factor because “is what it is.” In other words, you cannot change where your house is located or the attributes of that location – be they good or bad.

If the location of your house offers a fantastic view, sits on a lake or river, or is close to Old Town, it’s desirable and thus valuable. If the location of your house is next to a busy road or smelly feedlot, that’s less desirable and reduces value.

Bottom line: a great location increases your asking price; a poor location reduces your asking price. And there’s nothing you can do about it.

Price is a factor over which you have minimal control. Sure, you can ASK whatever price you want, but you have no control over what buyers will PAY; that’s determined by the current market.

Buyers compare your house to others on the market and determine its VALUE. If the value is high, buyers will pay the PRICE you are asking. If other properties offer better value, buyers won’t pay your price. That’s why it’s so important to preview (personally visit) other properties on the market when setting prices.

Another important pricing factor is supply. How many similar houses are on the market? If there’s a lack of properties like yours, you can charge a premium price. If there’s a glut of houses like yours, it will be difficult to justify a high price.

The condition of your house is a factor over which you have complete control. You can clean and de-clutter your house. You can repair broken things. You can replace worn out carpet, repaint walls, trim bushes and trees, and mow the yard. How much work and money you want to spend fixing up your house is entirely up to you, but be aware that condition directly affects the price you ask.

An agent once told me that selling houses is a price war and a beauty contest. If your house has a great location and is in great condition, then you can ask a premium price. If your house has a bad location and is in poor condition, then you must ask a bargain price. When two houses are the same price, wouldn’t you buy one in that’s cleaner, that shows better, with fewer repairs and less deferred maintenance? Sure you would, because it has more value.