Pay Cash for Denver Home?

The stories are true about Denver! Many buyers are paying cash for homes here in Denver. And not just the low end rentals but some very nice homes in the one million dollar range. I get the question “where are they getting their money?” Imagine owning a $2,000,000 home and having bought it in 1995. It is mostly paid off and you paid 600k for it? Well there is a lot of equity there and folks will use it to buy their principle residence and maybe a rental or two. Plus the capital gains treatment of selling a principle residence allows for some substantial gains, tax free. But before you decide to make such a move to be close to the grand kids or mom & dad, read on…

The National Association of REALTORS® reports in its 2016 Profile of Home Buyers and Sellers that 12% of all buyers paid cash for their home.Denver Home Buyer

Before paying cash for a home, a buyer should decide if they might put a loan on the home in the near future. It may affect the ability to deduct the interest on a mortgage placed on the home at a later date.

Homeowners can currently deduct the interest on up to $1 million of acquisition debt which are the borrowed funds used to buy, build or improve a home. Paying cash for a home establishes acquisition debt at zero. The only deductible interest to the owner would be home equity debt which is limited to $100,000 over acquisition debt.

Paying cash certainly seems like a simple decision but it may limit a homeowner’s ability to deduct interest on a future mortgage. You can get more information about this from IRS Publication 936 or from your tax professional.

Should you want to visit about investing in a home in Denver as a principle residence, or as a rental, we should talk.

When you want to move to a sunnier climate, we should visit about selling that Denver residence. Let’s plan a visit. Go to

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Not Available for All Buyers in Denver

For years lenders in Denver have done a “loss leader” advert and were chastised in the Dodd Frank act for predatory lending. In this new atmosphere you need to be aware that they might advertise a rate that you can only get if you close in 10 days or any other reason. But now they have your loan application. Just so you know it is very difficult to get an appraisal that quickly. So my advice to you is to work with a lender you or your Realtor know.

Lenders regularly publish mortgage rates but they may not be available for all buyers. Denver

Imagine that the mortgage payment based on an advertised rate influenced a buyer to make an offer on a home. After negotiating a binding contract, this buyer makes a loan application and finds out that for any number of possible reasons, that rate isn’t available.

Even if the person does financially qualify for a loan at a higher interest rate, it will not be the payment that the buyer expected when the contract was negotiated.

Lenders evaluate several factors such as the borrower’s credit score, debt-to-income and loan-to-value ratios. These variables are used to assess the risk associated with the repayment of the loan.

While mortgage money is a commodity, it isn’t priced the same way items are that involve cash for goods. The lender puts up the money today based on a promise from the borrower to repay over a long term, possibly up to thirty years.

The simple solution to avoid surprises such as the one described here is to get pre-approved at the beginning of the home search process. Since pre-qualification does not mean the same thing to all lenders, call if you’d like a recommendation of a trusted mortgage professional.

If you want to talk with some trust worthy lenders go to http//

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Six Reasons to Consider Rental Homes

Always a good investment, Denver’s rental market has paid for many a child’s college education. When buying a Denver area rental for the child early in their life the equity position by their 18th birthday can be substantial, allowing Mom or Dad to utilize that or the monthly income to subsidize the tuition payments. But here are some other reasons to consider buying a rental property in Denver…

Single-family homes offer an investor the ability to borrow large loan-to-value amounts at fixed interest rates for long terms on appreciating assets, tax advantages and reasonable control. Some of these characteristics are not available through other investments.Denver

75-80% loan-to-value mortgages are available on most residential properties up to four units. Comparatively, the stock market allows you to borrow up to 50% on a stock but if the price goes down, they will require additional cash to keep the ratio at or below 50%. If it isn’t available, your stock can be sold to satisfy the loan.

Real estate investors call getting a long-term mortgage putting an investment to bed. The fixed-rate and the 20-30 year terms are exceptions to loans for most other investments, if they’re available at all.

Real estate tends to go up in value over time. There can be a lot of variables that affect the price like supply and demand, condition and available mortgage money, in addition to the general economy.

Rental real estate has several different tax advantages. The profits are taxed at lower, long-term capital gains rates for investors who have owned the property for more than 12 months. While the property is being rented, investors are given a non-cash deduction based on cost recovery of the improvements. Tax deferred exchanges can also be available if specific conditions are met which allow an investor to postpone paying the tax on the gain.

It isn’t necessary to have a partner with mostly rental homes if the investor can qualify for the mortgage. This allows investor control to make all the decisions that an owner is entitled such as setting the rent, making improvements and determining when to sell.***

Rental real estate can earn a much higher rate of return than other available investments while providing income during the holding period. It certainly is worth investigating the possibility with a real estate professional who understands and works with rental properties.

***Often an IRA can be set up to buy real estate and a number of “Uncle IRAs” can join together, create a partnership or other agreement and buy much larger properties. You need the advice of 2 people here: a good Realtor and a good Accredited IRA custodian. I know both here in the Denver area.Call me.

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OK Denver…What Would You Give?

It was not in Denver, but I got to watch Yogi Berra, Mickey Mantle and Roger Marris play in Yankee Stadium in the 1960’s with my dad. He let me eat everything I wanted and when Marris hit his 60th that day, I think I was in the toilet hurling, but will never give up that memory! And that is why folks buy homes in Denver…to build memories with their family. So, as you consider that move to, or around Denver, what would you give up? I think I agree with…

Yogi Berra who said he’d give his right arm to be ambidextrous. While most first-time home buyers are not going to that extreme, it is interesting to see what sacrifices are being made according to the National Association of REALTORS® 2016 Profile of Home Buyers and Sellers.Denver Home Buyer

  • 43% – cut spending on luxury or non-essential items
  • 34% – cut spending on entertainment
  • 27% – cut spending on clothes
  • 14% – canceled vacation plans
    9% – earned extra income through a second job
  • 7% – sold or decided not to purchase a vehicle
  • 44% – did not need to make any sacrifices

Forty-percent of first-time buyers experienced some difficulty during the mortgage application and approval process. Single, male buyers expressed a higher incidence of difficulty than single females and married or unmarried couples.

Pre-approval from a qualified mortgage lender before the home search process begins is still considered the best advice for all buyers who will purchase with a mortgage. Your real estate professional can make recommendations for a loan officer that could help you avoid unnecessary aggravations.

An experienced DENVER loan officer can save you so much in the process, just by helping you increase your credit score 20 points it could shave a 1/4 percent off your note rate when buying that Denver Home. They can also help you see where the down payment might come from. Make sure you get “pre-approved! Call one of these Denver lenders before you start to search for a home. In addition to the right real estate Broker, the right lender are the keys to a good Denver Home buying experience.

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Denver Loans from Relatives for real estate

I do quite a bit of estate work here in Denver, and because of my title experience as a landman I often find the loans, deeds and other documents are un-intentionally fowled up by well meaning relatives. Also, we can often pass interests at the wrong time to our loved ones creating further taxable issues See my previous post about the basis of the “Inherited Real Estate“. But more often we find mom & dad “loaning” the kids some money to buy the house, collecting interest, and the kids NOT being able to deduct that interest. Read on…

Occasionally, when dealing with close relatives who might also become heirs, signing a note and handling the paperwork properly may seem like a needless effort but it could mean the difference in being able to take a legitimate interest deduction.Denver Real estate

Home mortgage interest is deductible only if the loan is a secured debt which involves the buyer signing an instrument like a mortgage or deed of trust that makes the ownership of the home security for the debt. That instrument must then be recorded or otherwise perfected according to state or local law and the home, in case of default, must be able to satisfy the debt.

In a family situation, a parent, grandparent or other relative may decide to loan a buyer the money to purchase a home because they have it available and it isn’t earning much in certificates of deposit. They offer to loan it for a rate equal to what a conventional lender is charging but without the fees.

While it may appear to be a win-win situation, there could be problems if things are not done correctly. Even if the borrower makes the payments, they are not entitled to an interest deduction unless three criteria are met: 1) sign a debt instrument specifying the terms 2) securing and record the debt properly and 3) the home is sufficient collateral for the loan.

It would be prudent to consult with an attorney before you sign the final settlement papers to be comfortable that both buyer and the lender-relative are complying with IRS regulations. For more information, see IRS Publication 936 – Home Mortgage Interest.

There are all kinds of attorneys with all kinds of specialties. If you need one that is 100% focused on real estate here in Denver to help you preparing loan documents or even mineral severance deeds, let me know so I can introduce you.

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Proof of Purchase – Your Highlands Ranch Home Burns

Back in the day when I was the Highlands Ranch area coordinator for neighborhood watch with Douglas County Sheriff (I think I stopped when Highlands Ranch got to 10,000 homes), this was one of the biggest issues for people recovering their goods after a loss in Denver. You know the land won’t be lost, and maybe the foundation will be useable, but in Denver, like Colorado Springs, the personal property, the art work, the silver from Granny, the trains in the basement or even the guns in the safe can all go up in smoke. You need to be ready and it is pretty simple, but read this first:

People who experience a personal property loss are usually asked by their insurance company for proof of purchase which can come in the form of a receipt or current inventory of their personal belongings.Highlands Ranch

Even the most organized people might find it challenging to find receipts for all the valuables in their home. If the inventory isn’t up-to-date, a homeowner might forget to add some items to the claim and may not recognize the omission for long after the claim is settled.

The inventory can serve as a guide to make sure a homeowner gets compensated for all the loss.

Photographs and videos can be adequate proof that the items belonged to the insured. A series of pictures of the different rooms, closets, cabinets and drawers are helpful. When video is used, consider commenting as it is shot and be sure to go slow enough and close enough to things becoming recorded.

For your convenience, download a Home Inventory, complete it, and save a copy off premise. Good places for your inventory could be a safety deposit box or digitally, in the cloud if you have server-based storage available like Dropbox.

Take out your camera phone and walk the house and note the special things on the video.Then save it to a safe place, and delete it from the phone…don’t give the bad guys a shopping list! If you want a printed blank inventory, just reach out to and I will get one to you. If you want to be part of Neighborhood Watch or want to start one, call your local law enforcement agency and ask for the community relations officer.

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Denver Boomers Are Staying In-Place

Thirty one, almost 32 years being a residential real estate broker in south Denver allows me to look back and note interesting trends. And this is one that is fairly consistent. What is different is the number of silver haired residents we now have in Denver…it seemed to be different in the 1980’s. The common complaint we hear today is there isn’t anything I can buy to replace my home. When we built our home we actually planned for an elevator, eventually. So my counsel to folks is often, “re-model if you love your home”.

There is one new trend I am seeing and that is folks chasing the grandchildren. What I mean is grand parents want to be near the children and so they move to where they live. And then the kids move again, so they do too. It is a curious trend that has developed because of our mobile society. We hope our children will come “home” after their adventure. And while multiple moves are good for me (I can refer you to Realtors across the country) I pray the families are re-inforced for the effort it takes to leave Denver.

There seems to have been an accepted progression for homeowners going from starter home, to gradually moving into one’s dream home, then, downsizing after becoming an empty nester and finally, into a retirement home. However, Marianne Cusato’s 2016 Aging-in-Place Report indicates that many older Americans don’t plan on following that pattern.Denver - Pete Doty

61% of homeowners above the age of 55 intend on staying in their homes indefinitely. 2/3 of them believe that the home’s layout will serve their needs without having to make aging-related improvements.

Some of the reasons being cited for staying in place are:

  • 66% say their home is conveniently located
  • 38% say they live close to their family
  • 68% say they feel independent in their home
  • 54% say they are familiar with their neighborhood
  • 66% say the feel safe in their home

Typical renovations that might be considered for their current home are things like grab bars in the tub or shower, shower seats, taller toilets, handheld showerheads and additional handrails on stairways.

It seems that the report’s conclusion is that regardless of a homeowner’s age, they want to thrive in their home. The same emotional reasons that causes a person to want to buy a home are the things that cause them to hold onto them if is practical.

One of the services I offer is a list of contractors who can help you get your home up to speed for your life style or ready for sale. If you are considering a move, we should talk.

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Attracting Buyers to a Denver Home

It seems that in Denver Home sales incentives, including those with builders, have shrunk to almost none. However, over 16% of the listings in the MLS have expired and could take advantage of this. Yet experience tells me that even offering a carpet allowance will cost the Seller 3 times the actual costs because of the buyer’s inate ability to “HORIBLIZE” any repair situation. So having a property properly priced and in great condition will not only expedite the sale but also maximize your investment.

There is a common body of knowledge among real estate professionals that indicates that the longer a home is on the market, the lower the price will be. Many sellers discount this belief in the beginning because they feel confident their home will sell quickly.Denver home incentives - article.png

Lowering the price is the most obvious thing that can be done to encourage buyers but it might be good to look at what builders do. Builders offer a variety of incentives such as upgrades, seller-paid closing costs, interest rate buy downs, washers, dryers, refrigerators or big screen TVs.

Interestingly, much of the resale market doesn’t employ these techniques. According to the latest NAR Home Buyers and Sellers Profile, 64% of sellers did not offer any incentives at all.

21% of sellers offer a home warranty. 16% of sellers offered assistance with closing costs and 6% offered credit toward remodeling or repairs.

The attached chart indicates that while 80% of sellers were not willing to offer incentives in the beginning of their marketing period, as weeks passes and their home hasn’t sold, closer to half did add incentives.

The ideal outcome is to maximize proceeds in the shortest time possible with the fewest unexpected issues. This involves having a firm understanding of current, local market conditions and crafting a marketing plan that will insure results.

There is so much at stake, the value of a trusted real estate professional is essential.

As a potential seller of a Denver Home, take a look at for tips and some videos.

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Denver real estate a HOT market?

From the first publication: In the last 7 days about 1350 homes have come on the market.
1560 have gone under contract. Yes property sales in Denver are going to be crazy again this year.

Updated 1/12/2017: In the last 7 days about 819 homes have come on the market.
1083 have gone under contract. Yes property sales in Denver are going to be crazy again this year.

And what about those folks who say it is too late? The trends say: More houses are selling, days on the market are the same, Fewer new listings, and median prices are up 10% over last year throughout Denver. The three that are most important to me are the Year To Date SOLD, Denver Real Estatethe Active Listing count, and the days on the market. They all would combine to push prices higher in Denver.

The question always seems to be “How Much Longer will this last for Denver?” To me with my limited scope it appears that another 2 years is likely. That would be a 20% increase in the value of a home you bought today if the above trends hold true. We simply need to see more houses on the market and fewer buyers…which brings us to the why?

Colorado is a net 75,000 people growth per year state (about 15% for mj). Denver and the front range get most of them. That requires about 20,000 living units and that is the simplest explanation I know. When the market tanked the builders quit building, but we did not stop having babies. And those kids are now buying houses too. Why so many people moving here? Unemployment is low so it is easier to find good work. And how about those mountains west of Denver? You know why you live here.



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Rent or Buy – You Pay for the Denver House You Occupy

So often I find folks throughout Denver who are simply afraid of a long term commitment like buying a home. They feel they cannot afford it, that their credit is bad, or that homes are too expensive. At least in Denver, if you can afford the rent you can afford to buy a house. Feel free to reach out, in confidence: 

The ironic thing about people who think they can’t afford to buy a home for themselves, end up buying the home for their landlord. There are several facts that support this notion.Denver Home is Leveraged Investment

Mortgages, whether held by an owner-occupant or an investor, are usually amortized so that each payment reduces the principal amount owed so that the loan will be repaid totally over the term. A tenant is inadvertently retiring the landlord’s mortgage with his monthly rent.

In most cases, the mortgage payment including taxes and insurance will be lower than the rent tenants are paying. Some experts are saying that we may never again experience the incredibly low mortgage interest rates currently available.

Renting precludes a person from enjoying the advantage a home has as a leveraged investment. When the borrowed funds cost less than the investment is returning, the rate of return on the down payment grows much faster. As you can see from the chart, a 2% appreciation on a home could result in big returns on the down payment. In most cases, there are very few or no alternative investments that offer homeowners similar returns.

Even if a buyer agrees with all of these things but doesn’t have the down payment or cannot qualify for a loan, they still need to investigate further. To find out exactly what types of loans are available and the specific down payment required which can be a whole lot less than 20%, they need to consult with an experienced, trusted loan professional (an Internet lender or a “BIG” bank may not be the best choice.) Call for a recommendation. 303-880-5585.

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