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Home Buying

It’s wind & hail season in Colorado,are you ‘covered’?

Almost 2 years ago now we were hit by a bad wind & hail storm, here in Englewood, where I live.  After the storm passed we inspected our roof and realized we were going to have to have it replaced.  The good news for us?  Our homeowner’s insurance covered the replacement cost of our roof.  The bad new for our next door neighbor?  His insurance only covered the actual cash value.  Our neighbor ended up having to come up with almost 50% of his cost to replace his roof, boy was he mad!

This article was generously provided by Taylor Bigandt of American Family Insurance. Taylor is a local Insurance Producer in the Englewood area. The agency that Taylor works for has two locations, one in Lakewood and the other in Englewood. Taylor is the Sales Lead Manager at the Englewood office. You can reach Taylor by phone or email at 303-462-2100 or tbigandt@amfam.com.

Summer is fast approaching, and you know what that means? Afternoon thunderstorms. These storms place Colorado in the middle of “Hail Alley”. Hail season starts in mid-April and goes through mid-August. The damage can be catastrophic and may leave you wondering what to do next. If you have the correct coverage on your Homeowners Insurance when that next storm hits, you will not have to worry about what to do next. Many people are not educated by their agents on the coverage that will help them save money when a hailstorm or windstorm destroys their roof. When your roof is destroyed by wind or hail, there will be two different coverages that you can be covered under. The first coverage that I personally recommend having on your Homeowners Insurance is Roof Replacement Cost Coverage. The definition of replacement cost is “the current cost of replacing an existing asset or property with the same quality of construction”. The second coverage is Actual Cash Value. The definition of actual cash value is “the current cost of replacing an asset less the depreciated value”.

Roof Replacement Cost Coverage means that your insurance company will cover your roof at a replacement cost value, less your deductible, without taking into consideration the depreciated value. This means that if your roof costs $20,000 to replace with a $1,000 deductible, the insurance company will pay $19,000. If your policy does not include Roof Replacement Cost Coverage then your roof will be covered at Actual Cash Value. Actual cash value means that your insurer will pay to replace your roof, less the deductible and depreciation for the age of the roof. For example, your roof costs $20,000 to replace and it is 10 years old with a depreciating value of $500 per year along with a $1,000 deductible. The insurance company will then pay out $14,000 ($20,000-$1000=$19,000-$5,000(depreciation) =$14,000) leaving you to pay $6,000 to get your roof replaced.

When shopping for a policy it is important to understand what your wind and hail deductible will be. Some insurance companies are starting to go to a percentage deductible. Having a percentage deductible will help you save at the time of purchase on your homeowners insurance but most people don’t understand the consequences financially by selecting this deductible. A percentage wind/hail deductible will be based on your dwelling coverage. If you own a home that costs $400,000 to replace and you have a 1% deductible for wind and hail then your deductible will be $4,000. If you do not have $4,000 to spend then the policy you purchased will be of no use and your roof will not be replaced.

At American Family Insurance where I am currently employed we still offer a $1,000 wind/hail deductible. In addition, we offer Roof Replacement Cost Coverage on roofs up to 15 years old. This is longer than the industry average which is about 10 years. Our homeowner’s product will be able to properly protect your home during hail season in Colorado.

Again, if you have any questions or would like to inquire about a quote from American Family Insurance please give Taylor a call at 303-462-2100 or email Taylor at tbigandt@amfam.com

Property Taxes – What you need to know

If you live in Colorado and haven’t already received your tax bill in the mail you should see it shortly.  Here are some things you should know about property taxes and how they are paid.

  1. In Colorado property taxes are paid “in arrears” meaning the property taxes due in 2017 are for 2016.
  2. If you recently purchased a home, the sellers gave you a credit at closing for the taxes for the portion of 2016 that they owned the home. You, as the new owner are then responsible for paying the tax bill when it comes due. Contact me if you have a question about this.
  3. If you have a mortgage on your home it is highly likely that you don’t need to do anything with this bill except file it away. Typically homeowners, with a mortgage, pay a portion of the taxes and insurance each month right along with the mortgage payment.  The mortgage company puts that money into an escrow account and then pays your tax bill and your insurance bill when it is due. 
  4. Did you know? Senior Tax Exemptions are available. If you’re over 65, have lived in your home for 10 years or more as your principle residence you may be eligible for a 50% reduction in your payment.  The state picks up the other half.  Look at the information included with your tax bill for more information about submitting an application for the exemption.  This is also available to a surviving spouse.  Some links:
    Arapahoe County Senior Tax Exemption.
    Jefferson County Senior Tax Exemption
    Douglas County Senior Tax Exemption
    Adams County Senior Tax Exemption
    Broomfield County Senior Tax Exemption
    Denver County Senior Tax Exemption
  5. If you have any questions about the value of your taxes you should direct them to your county assessor’s office. Look at your tax notice for contact information.

New Construction – The ‘real’ sales price

Buying New Construction – Final Sales Price

You see the signs everywhere “NEW HOMES STARTING IN THE LOW $XXX’s”.  In the Denver Metro area any sign that says “starting in the low $300’s” will likely get a lot of attention.  It’s tough to find a nice house, let alone a brand new house, under $350,000 anywhere along the front range of Colorado.  The price listed on the signs are the ‘base price’ of the home.  Unlike purchasing an existing home the ‘base price’ on the marketing materials is merely a starting point.  Before you start packing up your belongings to move, you’ll want to ask the sales person specific questions about any additional costs.

Below is a list of items to take into account when calculating the actual sales price of a new home.

  1. Interior Upgrades – Ask for a list of the interior and exterior features, included in the base price, before you start touring the model homes. Most model homes you tour have the premium upgrades.  When estimating your final sales price I recommend you use a value equal to 10% to 12% of the base price.  ($300,000 home, $30,000 – $36,000 in upgrades)
  2. Lot Premiums – Lot premiums are fees that are added to the cost of the land (lot) for special features such as size, views and location (adjacent to open space, cul-de-sac, corner lots, etc.) Every community will be different.
  3. Landscaping – Very often, with new construction, the builder will include minimal landscaping with the building of the home, usually just the front yard. Typically the homeowner must complete the remaining landscaping within a predetermined time frame.  It is important to understand this cost and the specified completion timeline.

Example of features included in the base price of a new home.

Example: I toured a model home with a base price $311,000. You can view a list of the floor plan and included features here.

The cost of the interior upgrades I wanted was about $30,000 (pretty close to 10%). (granite counter-tops, wood flooring throughout the main level, tile floors in the bathrooms, a gas range in the kitchen, an additional bedroom & bathroom and a covered patio).  It can add up very quickly. Every lot had a lot premium associated with it.  Lot Premiums ranged from $4000 to $10,000 depending on the lot and location.  The total of my additional costs was $34,000 or 11 %.

Base Price $311,000
Interior Upgrades $30,000
Lot Premium $4,000
Total Purchase Price $345,000

Please Note:  If you are just starting out on the home buying process and aren’t even sure if new construction is what you want to buy, please download my Home Buyer Questionnaire, to get you started.

Buying New Construction in Denver Metro Area

Buying  a New Home in Colorado

This past weekend I stopped in to see some model homes in a new home development.  While talking with the saleswoman I realized that many home buyers  might not know what questions to ask to be sure new construction is right for them.  Buying a new construction home can have different challenges compared to purchasing an existing home.

Please Note:  If you are just starting out on the home buying process, and aren’t even sure if new construction is what you want to buy, download my Home Buyer Questionnaire to get started.

Here are a few things to consider asking about when speaking with a salesperson at a new development.

Sales Price – Unlike purchasing an existing home, the base price provided for each ‘model’ is a starting point.  There are additional costs to be considered which will vary depending on the builder and the buyer’s choices.  These costs may include: lot premiums, interior upgrades, landscaping, exterior finishes and more. For a longer discussion on base price and sales price click here.

Build Schedule and Lot Releases – Large developments will typically be built in phases. If there is a high demand for homes the builder may choose to release lots in groups as construction progresses. You may need to wait to purchase a home on the lot you prefer.

Property Taxes – Property taxes in Colorado vary widely throughout the Metro Denver Area.  For new construction you can’t just rely on county records for property tax values.  Vacant land is taxed differently than a lot with a completed home.  Be sure you get a good estimate on what the property tax rate will be on your finished home from the salesperson.

Financing & Contracts – Builders may encourage you to use their finance partners through incentives which not necessarily a bad thing,  saving money is always good. Be cautious when using your own lender and be sure you are clearly communicating the important dates & deadlines or you could be in breach of your purchase contract.  Builders DO NOT use the same contracts as those used when purchasing a pre-existing home.

Home Owner’s Association (HOA) vs Metro District – Most, not all, new developments will have either a Home Owner’s Association or a Metro District. These are governing entities that will provide guidelines for the community in which you will be living.  There may or may not be a fee associated with belonging to the HOA or Metro District and the cost and amenities may vary widely between builders and communities.

Feel free to reach out to me for more information on purchasing a new or existing home.  I am happy to help in whatever way I can.

 If you are just starting out on the home buying process and aren’t even sure if new construction is what you want to buy, download my Home Buyer Questionnaire, to get started.

How much does it really cost to buy a home?

One of the first, and most important, jobs I have as a real estate broker is to educate my clients about the home buying and selling processes.  One of the biggest misconceptions, that I have encountered, is that the only money a client needs to save up to buy a home is the down payment.  Unfortunately, there are many other costs, payments and fees associated with buying a home.

Below are some of the most common:

Purchase Costs -these include your down payment, lender fees and transaction costs.

  • Down Payment (3% – 20% (or more) of purchase price depending on the loan product that you choose.
  • Loan Closing Costs (total cost can be from 2% – 5% of the purchase price) Your lender can give you a more accurate estimate of these costs. Below is a list of fees often associated with getting a mortgage.
    • Origination Charges- fees charged by a lender on entering into a loan agreement to cover the cost of process a loan. (may include origination , processing and underwriting fees)
    • Appraisal ($225 – $450) required to determine the fair market value of the home. A property appraisal is generally required by a lender before loan approval.
    • Credit Report ($15 – $30) Lenders will obtain a copy to review your borrowing history and ultimately determine if they should risk lending you money.
    • Flood Determination/Life of Loan Coverage ($15 – $25) Determines whether or not your property is located in a federally designated flood zone. If the property is found to be located within a flood zone, you will need to buy flood insurance.
    • Courier Fee ($30) covers the cost of transporting documents to complete the loan transaction as quickly as possible to avoid paying additional interest on your mortgage loan.
    • Title Insurance (Lender’s Policy) (Varies – generally between $175 – $875) Insurance policy that protects the lender from unrecorded liens on the property.
  • Closing Fee ($150 – $400) paid to the title company for conducting the closing on the purchase of the property.
  • Miscellaneous fees you may also encounter: Tax Service Fee, Document Preparation Fee, Closing Protection Letter, Deed Recording Charge, HOA Fees (transfer fee, ect.)

Prepaid Charges – some of these may be able to be ‘rolled’ into your loan but it important you understand every fee you are required to pay.

  • 1 Year Hazard Insurance Premium (Homeowner’s Insurance)
  • 3 Month Hazard Insurance Premium in Escrow
  • 3 Month’s Property Taxes in Escrow
  • Prepaid Mortgage Insurance (Depending on Loan)
  • Prepaid HOA dues

Miscellaneous Additional Costs- these costs are typically ‘out-of-pocket’ and paid during the home buying transaction.

  • Inspections $300 – $1000 depending on the inspections needed (Home, sewer, survey, radon, pest, etc.)
  • Survey or Improvement Location Certificate – $200+
  • Home Warranty $350+
  • Moving Costs – truck rental, moving company costs, packing costs, etc.
  • Legal fees
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