Your Home Is Worth More Than You Think!
When it comes to real estate, things actually aren't so bad here in Denver. Our guide to the myths and realities of the local market will show you why. Plus: How to refinance your mortgage, remodel on a budget, and rehab your IRA with real estate investments.
Myth Now's the time to score a good deal on local foreclosed properties.
Reality While there may be opportunities, many bank-owned homes have serious drawbacks—and can be difficult to land anyway. The wave of bank-owned homes coming to market, which is now ebbing, gave prospective buyers the impression that they could snap up a first-rate pad on the cheap. There may be scattered examples of this, but it's not often the case. "Foreclosures are often not priced all that much better than other listings, are often in extremely poor condition, and may require you to wait months for the bank to approve or respond to an offer," says Lane Hornung, a Boulder-based broker associate for COhomefinder.com. Foreclosed homes, too, frequently are not in the tony ZIP codes in which many buyers would like to put down roots.
Michael Canon, a broker associate with Your Castle Real Estate, says that when there are deals on well-maintained foreclosure properties, buyers must be prepared and act fast to land them. "The competition is fierce," he says. "[Bank-owned] properties often sell in less than five days on the market, for about a three percent premium over list price."
Myth National real estate trends and stories accurately reflect what's happening in Denver.
Reality Real estate is more local than ever. We've all been overwhelmed by the almost daily dose of bad news from the national housing scene. But national trends seldom are relevant to any local housing market. Denver has been getting mostly good news lately: Foreclosures are down, home values are declining slower here than in other parts of the country—and are actually rising in some neighborhoods—and the metro area appears to be in for a milder recession than most other urban centers. Even so, Denver real estate is so hyper-local that buyers and sellers in Wash Park or Highland often tell entirely different stories than their counterparts in Belcaro or Uptown. "Denver houses and neighborhoods are heterogeneous," says Your Castle Real Estate's Michael Canon. "Even neighborhoods that have the same house built at the same time by the same builder can have substantially different values."
Myth Sellers should list their house at their preferred price, even if it seems high.
Reality High list prices often result in stale listings—a nightmare for sellers. Real estate agents agree that few things undercut a home's true value quicker than appearing to be undesirable, and few things make this more apparent than a house that has been on the market too long. "There's a real downside to 'just testing' the market," says Lane Hornung, a broker with COhomefinder.com. "Price-reduction notices are not as effective as new listings." Your Castle Real Estate's Michael Canon says the current situation has created a condition called "downward price stickiness," in which buyers offer what they think the house will soon be worth while sellers hold out for what the house used to be worth. Unable to find buyers, nondistressed sellers often withdraw their house from the market, but then the property carries the scarlet letter of having gone stale or, eventually, having to be relisted. Sellers who obsess too much over getting lowballed now should think about the big picture. A family that's trading up because it's growing might get five percent less for its current house, but chances are it'll be able to buy a bigger one for a similar discount. That house, in turn, will provide even greater gains once the market turns around.
Myth Real estate is a commodity—a house is a house is a house.
Reality Individual Denver neighborhoods and their homes cannot be compared or equalized so easily. "Every market is different, every neighborhood is different, and in many neighborhoods the sub-markets are different," says Michael Canon, a broker with Your Castle Real Estate. "When deciding what a house is worth, you have to account for factors such as house sizes, schools, crime rates, nearby parks, and proximity to bank-owned properties." That is why all the online research in the world can't tell you a house's full story until you've actually seen it. "Websites like Zillow look at every 1,000-square-foot, three-bedroom house as if each one is the same, but that isn't the case at all," says Paul Tamburello, an associate broker with Distinctive Properties. "Zillow can't smell a house, or see what kind of view it has, or what it's next to." In addition, data from these sites often are drawn from public records, so the numbers can sometimes be months out of date—an eternity in such a volatile market.
Despite the preponderance of local and national data and resources, real estate still is a visceral experience for buyers and sellers. People zero in on homes based on research, but they decide whether to make an offer because of how a home made them feel. This is why, when buying or selling a home, no volume of numbers can take the place of good old-fashioned legwork.
Myth You can get a steal by anticipating the market's low point.
Reality It's impossible to precisely identify a micro-market's nadir. The burst housing bubble has created an enticing but precarious opportunity to time the market just so and wring maximum returns. But while it's possible for risk-tolerant investors—using data such as days-on-market, price changes, inventory levels, and foreclosure intensity—to "narrow down" a market's lowest point, Your Castle Real Estate's Michael Canon says "exogenous factors" make it impossible to exactly peg the bottom.
The overzealous impulse came into play before the Democratic National Convention last August, when some rental-property owners held off on writing leases because they thought they could make a killing on the influx of visitors. "They were passing up 12-month leases because they thought they could get rich off the DNC, but come September they couldn't find any renters," says Brad K. Evans of Denver CORE (Colorado Real Estate). The bottom line, COhomefinder's Lane Hornung says, is that "if you wait for the market to hit bottom, you'll miss it."