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Two Important Impacts of Home Equity

Two Important Impacts of Home Equity | MyKCM

Equity continues to rise, helping American homeowners secure a much more stable financial future. According to the most recent data from CoreLogic, the average homeowner gained $9,800 in equity over the past year. In addition, experts project 2020 home prices to continue rising. With prices going up, equity gains will also keep accelerating. Black Knight just reported:

“The annual percent change in the overall median existing single-family-home price has skyrocketed in the past several months, with recent numbers at three to five times higher than rates seen in the past several years.”

Jeff Tucker, Senior Economist at Zillow, just qualified recent price increases as “jaw-dropping” and “within a hair’s breadth of double-digit year-over-year appreciation.”

Knowing equity will help enable many homeowners to better survive the economic distress caused by the ongoing pandemic, it’s important to break down two key homeowner benefits of increasing equity.

1. Equity Increases a Homeowner’s Options to Buy a New Home

Aside from the financial damage of the last seven months, there has also been a tremendous emotional toll on many people. Shelter-in-place mandates, quarantine requirements, and virtual schooling have all made us re-evaluate the must-have requirements a home should deliver. Having equity in your current house gives you a better opportunity to move-up or build your perfect home from scratch.

Mark Fleming, Chief Economist at First American, recently explained:

“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity.”

If you need to make a move, the equity in your current home can help make that possible – right now.

2. Equity Enables Homeowners to Help Future Generations

An increase in home equity grows overall wealth, which can transfer to future generations. The Federal Reserve, in an addendum to their recent Survey of Consumer Finances, explains:

“There are numerous ways families can transmit wealth and resources across generations. Families can directly transfer their wealth to the next generation in the form of a bequest. They can also provide the next generation with inter vivos transfers (gifts), for example, providing down payment support to enable a home purchase or a substantial wedding gift.”

The Federal Reserve also explains another way wealth (including the additional net worth generated by an increase in home equity) can benefit future generations:

“In addition to direct transfers or gifts, families can make investments in their children that indirectly increase their wealth. For example, families can invest in their children’s educational success by paying for college or private schools, which can in turn increase their children’s ability to accumulate wealth.”

Bottom Line

Equity can help a homeowner grow their confidence in a more stable financial future. It provides near-term move-up options and creates a positive impact for future generations. In many cases, the largest single investment a person has is their home. As that investment appreciates in value, financial options increase too.

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Is it Time to Move into a Single-Story Home?

Is it Time to Move into a Single-Story Home?

Is it Time to Move into a Single-Story Home? | MyKCM

Once the kids have left the nest, you may be wondering what to do with all of the extra space in your home. Chances are, you don’t need four bedrooms anymore, and it may be a great time to sell your house and downsize, maybe even into a single-story home. You’ve likely gained significant equity if you’ve lived in your home for a while, so making a move while demand for your current house is high could be your best step forward toward the retirement goals you set out to achieve several years ago.

The dilemma, though, is where to go next. A big concern for many homeowners who are ready to sell is finding a home to move into, given today’s lack of houses available for sale. There is, however, some good news: the number of single-family 1-story homes being built today is on the rise, improving your odds of finding the right home for your changing needs. In a recent article, The National Association of Home Builders (NAHB) explains:

“Nationwide, the share of new homes with two or more stories fell from 53% in 2018 to 52% in 2019, while the share of new homes with one story grew from 47% to 48%.”

Here’s a map showing the breakdown of newly constructed homes being built by region, and the percentage of 1-story and 2-story homes in that mix:Is it Time to Move into a Single-Story Home? | MyKCM

What are the benefits of buying a one-story home?

Still not sure about buying a single-story home? An article from Home Talk covers several advantages of switching from two floors to one:

1. Energy Efficient

“It is easier to heat and cool a single-story house [than] it would be to regulate the temperatures of a multi-story house.”

Most single-story homes only need one heating or cooling unit, and they typically stay cooler than a two-story home, both of which can lead to significant savings.

2. Easier to Maintain

“Doing a general cleaning in a single story requires less effort and you will be able to see all areas that need cleaning and the areas are easily accessible.”

Cleaning and maintenance of a single-story home can take less time and effort, and better upkeep helps improve the overall value of the home.

3. Accessible for Everyone

“A single-story house can be accessed by anyone, whether they are young children or the senior citizens.”

If you’re looking for a house that provides a safe and easily accessible environment at any age, a single-story home may be optimal.

4. Good Resell Potential

“When buying a single-story house, you should consider the resale value should you think of reselling it in case of a circumstance that can happen. Look at the growth rate of that area. Due to the high demand of these types of houses it is [easy] to resell them and depending on the growth rate of an area, it increases in value significantly.”

Single-story homes have a lot of benefits and are often in higher demand. This bodes well for future resale opportunities.

Bottom Line

There are many benefits to downsizing into a one-story home. Doing so while demand for your current house is high might make it easier than ever to make a move. Let’s connect if you’re ready to purchase the single-story home you need while homes are so affordable today.

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How Do Realtors Get Paid?

how do realtors get paid

A real estate agent can streamline the complex process of selling or buying a new home. In return for their guidance and expertise, your agent will typically collect a commission based on a set percentage of a property’s selling price. Read on for an in-depth look into how your agent will be compensated for his or her services.

Digging Deeper into Commissions

Most real estate agents earn a living through commissions, which are essentially payments made directly to brokers for all the necessary services rendered in the purchase or sale of a real estate property.

A commission is typically a percentage of the home’s selling price, although it can sometimes be a flat fee. While agents rely on commissions for income, they usually only get a slice of the pie. To understand how agents are paid, it helps to know about the relationship between agents and brokers.

Agents and Brokers

Professional agents are licensed salespeople who work under the umbrella of a designated real estate broker. It’s important to note that an how realtors get paidagent is not able to work independently and is prohibited from being paid any commission directly by a consumer.

On the other hand, a broker is able to work independently and/or hire real estate agents. In most cases, real estate commissions are paid directly to the broker, who then splits the commission with the agent or agents involved in the transaction.

The broker’s compensation will almost always be specified in the listing agreement, and the rate of the broker’s commission is usually negotiable. Commissions are funded by sale proceeds, and it’s usually the seller who pays them, unless the seller and buyer negotiate a split.

Most sellers factor agent/broker commissions into a home’s asking price, so it could be argued that the buyer pays at least some portion of the commission in either case due to the inevitable increase in the overall asking price.

How Commissions Get Divided

Real estate commissions are often divided among several different people. In a standard real estate transaction, the commission might be shared between up to four professionals, including:

  • Buyer’s agent
  • Buyer’s agent’s broker
  • Listing agent
  • Listing broker

For instance, let’s consider an example of an agent who has taken a listing on a $400,000 property at a 6% commission rate. If the home sells for the asking price, the listing broker and the buyer’s agent’s broker would get 50% of the commission ($400,000 sales price x 0.06 commission ÷ 2 = $12,000 each). The brokers would then split the commissions with the agents.

It’s common for commissions to be divided so 40% goes to the broker and 60% goes to the agent; however, the split could also be split at whatever ratio the broker and agent have agreed upon. In a 60/40 split, each agent in the above example would receive $7,200 ($12,000 X 0.6), and each broker would receive $4,800 ($12,000 X 0.4). The final breakdown would be:

  • Buyer’s agent—$7,200
  • Buyer’s agent’s broker—$4,800
  • Listing agent—$7,200
  • Listing broker—$4,800

Commissions are sometimes divided among fewer people. For instance, when brokers list a property and also identify a buyer, they may keep the full 6% commission. Or, if a listing agent sells a home acting as both the buyer’s agent and listing agent, he or she would only need to split the commission with the sponsoring broker.

Of course, as with almost every other financial transaction, all parties must contend with taxes and business expenses. This includes everything from federal, state and self-employment taxes to the many costs of doing business, including dues and fees, insurance and advertising. All of this can turn what appears to be a substantial commission into a much more modest profit.

Things to Consider

Commissions are typically only paid when a transaction settles. There are certain instances, however, when a seller might be liable for the broker’s commission even when a real estate transaction is not closed. For example, if the broker already has an offer from a willing and able buyer, he or she may still be entitled to claim a commission if the seller:

  • Chances his or her mind and refuses to sell
  • Has a title with uncorrected defects
  • Agrees with the buyer to cancel the transaction
  • Commits any sort of fraud in relation to the transaction
  • Insists on terms that weren’t included in the listing agreement
  • Can’t deliver possession of the home to the buyer within a reasonable timeframe
  • Has a spouse who refuses to sign the deed after already signing the listing agreement

The Bottom Line

In rare instances, real estate agents are employed by their brokers and paid an annual salary. Most commonly, however, agents earn income through commissions paid to brokers when real estate transactions are settled.

Thinking of buying or selling a home? The Wheaton Team can help. With 60-plus years of combined experience, our team specializes in residential real estate throughout Colorado Springs and all of El Paso County. Let us guide you through each step of the selling, buying and financing process, so you can turn your vision into reality.

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5 Tips on Finding the Right Home Inspector

finding the right home inspector

A home inspection is a critical part of buying a home. Without an inspection, you could easily pay too much for a property in need of unseen repairs. The structure may also pose dangerous health risks, safety hazards or building code violations, which could jeopardize your family’s health and dent your bank account. But how do you find a reputable professional to inspect a home? Here are some tips to help you choose a knowledgeable, honest home inspector.

  1. Get a reference from your agent. If you have an experienced real estate agent, he or she should be able to recommend a reputable home inspector. A good agent should be very familiar with at least one or two home inspectors who will go through a home with a fine-tooth comb. Trustworthy agents won’t worry about whether choosing a “tough inspector” will comprise a sale; they will put their client’s best interests first and ensure that every detail of a home is revealed according to local and federal guidelines.
  2. Ask if you can tag along. It’s always a good idea to attend your home inspection. A good inspector will be happy to talk you through any issues as they are investigated. If the inspector won’t let you come along, look for someone else. Also, since time is of the essence when it comes to home inspections, be sure the inspector agrees to provide the report within an acceptable timeframe (24 hours is common).
  3. Find a company that is insured and bonded. Whether you go with a single inspector or a big company, make sure whoever examines the home is both insured and bonded. It may sound unlikely, but an uninsured home inspector could try to hold you or the homeowner liable if they happen to be injured during the inspection.
  4. Verify that the company only does inspections. Some home inspection companies also provide home repairs and renovations. This gives them an incentive to flag problems in a home. Avoid conflicts of interest by choosing a home inspection company that’s focused entirely on inspections. If you are interested in the cost of renovations or repairs, bring in an independent contractor after the inspection is completed.
  5. Ask what the inspection will include. It’s important to ask what the inspection will include and how long it will take. A good home inspection should involve a thorough look at every critical component of the home, including:
  • Electrical systemfind the right home inspector
  • Plumbing system
  • Structural condition
  • Heating and air conditioning
  • Attic and roof
  • Foundation and basement
  • Pests (including bugs and wildlife)
  • Evidence of grading issues and water penetration
  • Appliances and other various general components
  • Environmental issues such as radon, mold, lead paint and asbestos

Knowing what an inspector will look for allows you to shop around. Certain inspectors may only address the structure and nothing more, while others will take a more comprehensive approach. Make sure you know exactly what you will be getting before you agree to an inspection.

Things to Consider

When choosing a home inspector, it’s important to know what to expect. The typical home inspection will be a “visual only” appointment. The inspector will spend a few hours scanning the property for visual signs that something is amiss. That said, they aren’t going to tear off pieces of drywall to inspect for mold or dismantle a water pump to check for defects.

Depending on the home’s location and age, you may have reason to worry about radon, termites or mold, but inspecting for these issues will usually cost you more. Be sure to ask if the inspection will include a search for these problems; if not, ask whether the inspector will include these items and how much extra they will charge.

Most home inspections should take around two to three hours to complete. If you are buying a larger home, an older home or a fixer-upper, the inspection could take even longer. Never hire someone who says they can complete the inspection within only an hour or two. Even an experienced inspector won’t be able to do a thorough job in such a brief time span.

If you’re interested in buying a home, The Wheaton Team can help. For nearly 20 years, we’ve specialized in residential real estate in all of Colorado Springs and El Paso County. With more than six decades of combined experience, our award-winning real estate professionals can guide you through the complicated buying process so they can find the home of their dreams. To speak with one of our agents, contact us today!

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Are Interest Rates Going Down?

are interest rates going down

Mortgage rates play a huge role in determining the cost of a home loan. Recently, rates have been trending downward, creating great opportunities for affordable home loans. Here’s what you should know about current mortgage rates, along with some insight into what drives interest rates higher and lower over time.

How Low Are Current Rates?

A year ago, the benchmark rate of a 30-year fixed-rate mortgage loan was about 4.05%. Since that time, it has been trending downward in a big way. As we head into the third and fourth quarters of the year, rates are hovering at or below 3.5%. This makes now a great time to buy as long as you understand how interest rates affect the overall cost of your mortgage loan.

Why Do Interest Rates Matter?

When you buy a home, the listing price, down payment and closing costs are only a small part of the cost equation. One of the smallest (but most significant) numbers home buyers need to understand is the mortgage interest rate. The interest rate significantly affects monthly mortgage payments and determines the total amount you pay for your home.

In essence, the interest rate on your loan determines how much you are paying every year to your lender for just having the mortgage loan. Basically, lower interest rates mean a lower overall cost for your real estate investment.

For instance, consider a $300,000, 30-year fixed-rate loan with an interest rate of 4.5%. Over the term of the loan, you can expect to pay an extra $247,220 in interest on top of the initial $300,000). You can also expect monthly mortgage payments of about $1,520.

interest rates going downNow, if you were able to get a loan at 3.5 percent, you’d only pay $184,968 in interest, and your monthly mortgage payments would be about $1,347. Although it may not seem significant at first glance, that 1% difference in interest could cost (or save) you around $170 a month and more than $60,000 over the life of your mortgage loan.

In addition to saving you money on a loan, lower interest rates allow you to look at homes that might normally be outside your price range. This is why it’s so important to pay close attention to fluctuating interest rates and strike when an ideal opportunity arises.

How Are Mortgage Rates Determined?

Contrary to common belief, mortgage rates are not actually based on the 10-year Treasury note; they are based on the bond market, meaning mortgage-backed securities or mortgage bonds. Mortgage-backed securities are essentially mortgage loans that are packaged into bundles or groups of securities and then sold in the bond market. The price of these bundled debt securities is driven by global and national news events, which also impacts individual mortgage rates.

While that may sound complicated, it simply means that there are a lot of factors that influence the benchmark rate of 30-year fixed-rate mortgage loans. That said, just because national mortgage rates are low doesn’t mean you can expect to acquire a loan at an affordable rate. There are a lot of other things that work to determine the rate on each borrower’s loan. Individual lenders adjust mortgage rates based on how risky they judge a loan to be. The riskier the mortgage loan, the higher the overall interest rate.

When judging risk, lenders will consider how likely you are to fall behind on payments, and how much money they stand to lose if the loan goes bad. The major factors are loan-to-value ratio and credit score. Lenders may also charge higher interest rates for adjustable-rate mortgages, cash-out refinances and loans on condominiums, manufactured homes, investment properties and second homes because they are viewed as riskier.

Working with an Expert

When it comes to getting the best deal on a home, it’s important to take advantage of low interest rates. It’s also important to have an expert in your corner to help you make important decisions and navigate the complex home buying process.

With 60-plus years of combined real estate experience, The Wheaton Team specializes in residential real estate throughout Colorado Springs and all of El Paso County. Our considerate team of seasoned professionals can guide you through each step of the buying and financing process, so you can find the home you’ve always dreamed of. To learn more, contact us today!

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Home Loan or a Mortgage?

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Does A Pergola Add Value to Your Home?

does a pergola add value to your home

Influenced by Pinterest and HGTV programming, more and more homebuyers are interested in pergolas which increase the comfort and enjoyment of outdoor living space. But do these features actually add value to a home? Here’s what homeowners should know.

Does a Pergola Increase Property Value?

Anytime you elevate your home in the eyes of buyers, you are essentially increasing property value. If a feature makes your property more enticing compared to similar inventory, it will allow you to command a higher asking price. 

Since outdoor living has become especially popular, the value of homes with pergolas has been on the rise. A safe gauge for a backyard improvement or deck is about 50% to 80% for your ROI. That said, to the right buyer, an alluring pergola could earn an even better return while providing the X-factor that attracts future buyers to your house.

Because they are open and airy, pergolas can help define your outdoor space without making it feel smaller or confined. Typically, the ground under the pergola is topped with some sort of flooring, whether it’s concrete pavers, brick flooring or even a deck, which combine with the pergola’s pillars and beams to further define your outdoor living space.

Pergolas are generally good investments because they effectively provide more “living space” outdoors. It’s similar to adding a gazebo or patio to serve as an exterior living room. While it won’t give you as much ROI as other hardscape additions, such as a patio or outdoor kitchen, a pergola can add value to your property. 

Getting the Most Out of Your Pergola

pergola add value to homeWhen it comes to maximizing ROI for your pergola, there are a few things to consider. While installing a pergola is one of the less expensive hardscape additions, the biggest factor affecting the overall cost is overall size and the kind of material used.

According to HomeAdvisor, the national median cost of a pergola is around $3,500. That said, you can expect to pay about $5,000 for a teal or ipe pergola, $3,000 for a cedar pergola and between $1,000 and $5,000 for an aluminum or fiberglass kit. If you’re an experienced DIYer, you can also opt to install a pergola yourself using a 10-by-10 kit that costs around $2,000.

Although wood is the most popular and beautiful option, it also requires more maintenance. You may have to repaint it, reseal it or repair hardware; and this could result in ongoing costs. With vinyl pergolas, on the other hand, you won’t have to worry about deterioration or maintenance. 

Vinyl pergolas won’t peel, chip, splinter, rot, warp, fade or become discolored when exposed to UV rays. Unlike wood pergolas, they can’t be infested by termites or other wood-boring insects. They also don’t require frequent maintenance or annual staining. 

The Bottom Line

When it comes to any home renovation, it’s important to consider all angles of the investment. If you’re looking to enhance your home’s outdoor space, there are a lot of good reasons to purchase a beautiful and durable pergola for your patio. In addition to boosting property value, these functional additions make your home more enjoyable while you’re still living in it. 

Bear in mind that how you choose to pay for your pergola will also affect your ROI. For instance, if you choose to finance the pergola with a loan, you will incur interest charges that may offset any potential increase in property value. So, it’s important to weigh the costs and benefits before purchasing a pergola for your home. 

It’s also important to remember that while a pergola could help you increase the asking price on a home; the increase isn’t going to be especially substantial. In some cases, it could increase the value of your home by a few thousand dollars. This depends on whether the pergola is part of a more extensive renovation that either extends your outdoor living space or defines it in a way that makes it more beautiful and more accessible.

If you’re planning to sell your home, The Wheaton Team can help. We specialized in residential real estate in Colorado Springs, Monument and the entire El Paso County. Let us help streamline the complex selling process and help you sell your home for a price that meets your expectations. To get started, contact us today!

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9 Tips for First-Time Home Buyers in Colorado Springs

first time home buyers in colorado springs

Colorado Springs is a great place for buying a new home. Unfortunately, purchasing a home for the very first time can be a stressful experience. Here are some tips for streamlining the process so you can find the home you’ve always dreamed of. 

 

  1. Hire a good agent. There is a lot to learn about the home-buying process and plenty of complex paperwork to go through. An experienced real estate agent can help make the process a lot easier and a lot more affordable. 

 

Since you will be working closely with your agent, it’s important to find someone you get along with well. The agent should also be highly skilled, motivated and extremely knowledgeable about Colorado Springs and the surrounding area. This will help you target the right home in the right neighborhood. It will also help keep costs down, especially if the agent is very familiar with the local market and available home inventory. 

 

  1. Know what you can afford. Before you begin looking for your dream home, you need to have a clear idea of your price range. Use a home affordability calculator to help you determine how much you can safely afford to spend without taking on too much unwieldy debt.

 

  1. Get pre-approved. Sellers typically will not accept an offer unless you have a lender’s letter stating you can acquire the financing required to close the deal. Having a pre-approval letter makes you look more serious to sellers, giving you an advantage over buyers who have yet to take this key step.

 

  1. Look into local financing programs. Even if you have your finances in order, you may still have trouble coming up with a down payment. Fortunately, there are a number of first-time homebuyer programs available locally and statewide. 

 

Before you start browsing for homes, check to see if you might qualify for a first-time buyer program available through El Paso County. You should also look into one of the following programs available to qualified first-time buyers looking to purchase a home in Colorado Springs and other Colorado communities. 

 

 

  1. Budget for closing costs. In addition to securing money for a down payment, you will need to budget for closing costs. This will generally run between 2% and 5% of your loan amount. 

 

  1. Pick the right neighborhood. Even if a home is perfect, the actual neighborhood could be a bad fit. So be sure to:

 

  • Research local schools, even if you do not have kids, since schools affect home value.first time home buyers
  • Look at local crime and safety statistics.
  • Map the nearest pharmacy, hospital, grocery store and other amenities.
  • Explore the neighborhood at different times on various days to check out noise, traffic and activity levels.

 

A good local agent can help give you invaluable input about specific neighborhoods, but only if they specialize in Colorado Springs real estate. 

 

  1. Stick to your original budget. Since it’s easy to fall in love with an overpriced home, it’s best to only look at properties that cost less than the amount you were approved for. Although you may be able to afford your preapproval amount, it won’t account for other monthly expenses that come with homeownership. Shop with a firm budget in mind to avoid getting in over your head. 

 

  1. Don’t just buy a home for today. It’s easy to focus on properties that meet your existing needs. If you plan to start a new family or expand your existing one, however, it may be better to buy a larger home you can grow into. Always consider your future wants and needs when deciding between available properties.

 

  1. Act fast. Colorado Springs real estate moves quickly in many areas because of limited inventory. It’s best to check out any newly listed homes that interest you as fast as possible. If a property is listed on a Monday, don’t wait until Friday to look at it. If you hesitate, you risk losing out to a more ambitious buyer.

 

If you’re thinking of buying your first home, contact The Wheaton Team. Over the past decade, we’ve established a well-earned reputation for specializing in residential real estate throughout Colorado Springs and all of El Paso County. Let us help you find the home of your dreams.

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Buying or Selling During A Pandemic

While it may only be temporary, the COVID-19 pandemic is touching everyone’s life in one way or another. If you are in the market to buy or sell your home, this can be a frightening time. With calls for social distancing and many businesses temporarily closing their doors, there is a great deal of uncertainty when it comes to real estate. If you are trying to buy or sell right now, here are some tips to help you make it through!

 

 

GO DIGITAL

Instead of opting for an open house, see if you can do a guided tour via Facetime or video marketing.

SANITIZE

If you are still allowing tours of your home or attempting to tour homes, make sure you are taking all sanitary precautions. Offer hand soap for your home tour and ensure you are sanitizing all surfaces a potential buyer may come into contact with, such as door knobs and counter tops. If you are touring a home, make sure you maintain social distancing practices with the agent and avoid touching anything you do not need to.

DOWNSIZE

Instead of having an open house, consider having only scheduled showings for your home or only participating in scheduled viewings if you are looking to buy.

STAY CALM, STAY SAFE

While there are still many options to buy and sell right now, stay calm and trust your agent. This is their specialty and they know the best course of action during this time. If they can offer digital options, they will let you know.

If The Wheaton Team can answer any questions please call our office, we’re here to help in anyway.  719-536-4581