Real Estate Term of the Day: Conditional Offer

CONDITIONAL OFFER (aka: Contingency Offer) – purchase contract tendered to the seller that stipulates one or more requirement to be satisfied before the purchaser is obligated to buy (Barron’s Dictionary of Real Estate Terms)

The most common form of contingency offer is referred to an offer that features an additional provision stipulating that the buyer is not able to purchase the property without selling their existing home.  The additional provision will sometimes give a length of time that the buyer has to get their home sold and if they don’t, the offer will be terminate.  While the additional provision will sometimes state that the buyer’s home is under contract and will outline the general info of the offer on their home, such as the close date, inspection date and appraisal date.

Real Estate Term of the Day: Conditions

CONDITIONS (aka: Contingency Clause) – provision(s) in a contract that some or all terms of the contract will be altered or cease to exist upon a certain event (Barron’s Dictionary of Real Estate Terms)

Common conditions that can be negotiated between the buyer and seller in a Colorado Contact to Buy and Sell Real Estate (residential) are:

• Title review
• Off-Record Title review
• Association Documents review
• Loan Conditions
• Appraisal
• Survey
• Inspection
• Property Insurance
• Due Diligence Documents review

Real Estate Term of the Day: Concessions

CONCESSIONS (aka: Seller Concessions) – reduction in price (could be credit for closing costs), or other benefit provided to a buyer as an inducement to buy (Barron’s Dictionary of Real Estate Terms)

Requests for seller concessions in the form of closing costs are a common negotiating point between buyers and sellers in our current market.  If a buyer is financing a home, there are limits as to how much concessions can be given to the buyer from the seller.  For an FHA loan the current limit is 6% of the sales price, while most conventional loans have a limit of 3%.

Buyer closing costs are commonly used to pay for:

• Fees associated with the loan (origination, lender title insurance, flood certification, appraisal & credit reports)
• Mortgage insurance
• Property surveys
• Hazard insurance escrow
• Tax escrow
• Recording fees
• Title company fees
• HOA working capital amount
• HOA prepaid dues

If you have any mortgage questions feel free to call Tonnie Gillen (303-996-8821 direct or via email tgillen@pinnacle-mortgage.com) with Pinnacle Mortgage Group.  Tonnie is a local lender that I have worked with over the past several years and highly recommend.  She has a proven track record with me of great service and highly competitive rates.

Real Estate Term of the Day: Comparative Market Analysis & Comparable Sales

COMPARATIVE MARKET ANALYSIS (aka: Competitive Market Analysis or CMA) – an estimate of the value of property using only a few indicators taken from sales of comparable properties, such as price per square foot.  These value estimates are not appraisals and do not meet the standards of appraisal as defined by USPAP – the Uniform Standards of Professional Appraisal Practice (Barron’s Dictionary of Real Estate Terms)

COMPARABLE SALES (aka: Comparables or Comps) – properties that are similar to the one being sold or appraised (Barron’s Dictionary of Real Estate Terms)

A CMA can be a very helpful, cost effective tool for a seller trying to set a list price and can prevent a seller from selling too low.  A CMA is also helpful to a buyer trying to understand the true value of a home and  can prevent the buyer from overpaying for a property.  The analysis may also be used as an informational tool for homeowners trying to refinance their mortgage or dispute property taxes.

Here are some important items found in a CMA:

• Home Profile
• Deed Profile
• Metro Denver Real Estate Market Overview
• Neighborhood Market Overview (includes a $/sqft and absorption rate analysis)
• Market Summary of Homes in your Neighborhood
• Sold Price Analysis of Homes in your Neighborhood
• Detailed CMA for the Home with Detailed Adjustments for Improvements/Upgrades
• Comparable Sold Home Profiles
• Estimated Sales Price Range

For a Free Home Evaluation visit: www.MetroDenverHomeValue.com

I recently attended a Metro Denver 2012 Economic Forecast presentation titled “Remodeling the Economy” put on by Patricia Silverstein.  Patricia serves as the consulting chief economist for the Metro Denver Economic Development Corp. and the Denver Metro Chamber of Commerce.  In these roles, she compiles, interprets, and forecasts economic and demographic data for the Denver metropolitan area and performs in-depth research on issues and proposed developments impacting the region (according to Development Research Partner‘s website).

Below are some interesting tidbits I collected regarding the Metro Denver Economy (defined as a 7 county region including: Adams. Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson) in 2012:

• 2012 will be very similar to 2011 with a continued trend of slow growth
• The Consumer Confidence Index shows that the consumer confidence in the mountain region is down, but remains aligned with the national index
• Forecasting a 1.4% growth in population (currently at 2.8 million)
• The unemployment rate has increased since 2002, but continues to mirrors the movement of the national rate
• The number of existing homes sold in 2011 was 39,387.  She is forecasting a 3% increase in sales for 2012.  This would put the number of sales closer to the 40,500 mark, which is a sustainable number for Metro Denver.  She warns that total sales above 47,000 may not be sustainable for Metro Denver.  FYI, years 2002 to 2008 saw total sales above 47,000.  Years 2004 to 2006 had total sales above 50,000.
• There is slight concern with the median home prices of Metro Denver compared to the U.S.  In 2011, Metro Denver’s median home price was $230,000 compared to $165,000 in the U.S.  This could be a concerning factor for companies looking to relocate here.
• Foreclosed homes in Metro Denver was 16,755 in 2011.  She is predicting that number to decrease by 11% in 2012.  FYI, years 2007 through 2010 had foreclosures above 23,000.
• Colorado has the 8th lowest mortgage delinquency rate in the U.S.
• Residential building permits (single family, two family and multi-family) have significantly slowed since 2009, with 2011 having around 5,900 housing starts.  She is expecting that number to increase slightly, but not by much.  FYI, the 30 year average for housing starts per year is around 17,000.
• The vacancy rate for 2011 was at 5.1% which has decreased .8% from 2010.
• The most exciting forecast she gave was a 3% appreciation in home prices for 2012!

See also: BUYER’S MARKET, Denver Real Estate Market, The #1 Question I Was Asked Over the Holidays… and the most recent Monthly Economic Summary (December 2011)

Now is the time to take advantage of this opportunistic real estate market in Metro Denver, contact me today to discuss how your opportunities!

Real Estate Term of the Day: Co-Mortgagor

CO-MORTGAGOR (aka: co-borrower or co-signer) – one who signs a mortgage contract with another party or parties and is thereby jointly obligated to repay the loan.  Generally a co-mortgagor provides some assistance in meeting the requirements of the loan and receives a share of ownership in the encumbered property (Barron’s Dictionary of Real Estate Terms)

Below are a few examples of common co-mortgagors:

• Spouse
• Parent(s)
• Sibling
• Relative
• Friend
• Business Partner

Real Estate Term of the Day: Community Association

COMMUNITY ASSOCIATION – general name for any organization of property owners to oversee some common interest.  In a condominium or planned unit development (aka PUD), the association has the responsibility of managing the common elements (see COMMON AREAS) in the project.  A homeowner’s association may be established in a subdivision to enforce deed covenants (Barron’s Dictionary of Real Estate Terms)

Below are a few benefits of living in a community association:

• Protect property values by ensuring that properties are well maintained and taken care of properly.  Almost all community associations throughout Metro Denver have specific rules (covenants) that each member is obligated to abide by.  These rules help protect the aesthetics of the neighborhood, thus establishing desirability to the community for potential buyers
• Offer common elements/common areas that other neighborhoods don’t have
• Maintain the common elements/common areas of the community (such as the community pool, clubhouse, fitness centers, tennis courts, parks, etc)
• Many community associations organize community events such as yearly picnics and holiday parties that help to establish a sense of community in the neighborhood
• Established rules and regulations that deter nuisance activity and promote conformity

In Metro Denver there are several neighborhoods that are located within a community association.  If you need help identifying a neighborhood with a community association please contact me.

Real Estate Term of the Day: Common Areas

COMMON AREAS – areas of a property [or community] that are used by all owners (Barron’s Dictionary of Real Estate Terms)

Below are a few examples of common areas that can be found in neighborhoods around Metro Denver:

• community pool
• clubhouse
• fitness center
• tennis courts
• park within community
• covered pavilions/picnic and grill areas
• lake access
• parking garage

See also: AMENITIES

Real Estate Term of the Day: Commitment Letter

COMMITMENT LETTER – an official notification to a borrower from a lender indicating that the borrower’s loan application has been approved and stating the terms of the prospective loan (Barron’s Dictionary of Real Estate Terms)

This letter is typically given to the borrower before the loan conditions deadline has passed.  It is very important to ask your lender for a commitment letter for your records.

See also: Mortgages 101 & Mortgage Information

Real Estate Term of the Day: Commission

COMMISSION – an amount earned by a real estate broker for services performed (Barron’s Dictionary of Real Estate Terms)

The commission amount is agreed upon between the client (either the seller or buyer) and their agent.  The rate is typically based on a percentage of the final sales price of the home.

If you would like more information about commission rates please contact me.