Life at Altitude with Danielle Connor

May 2022

I’ve been thinking over and over lately , “What part can I play in helping our community amid the ongoing housing crisis in Summit County? ”   It feels like my responsibility as someone with influence in our real estate market to come up with creative solutions that will contribute to “keeping Summit County local”. Our locals are the thread that holds us together, and we have to continue to evolve together.  After a brainstorm with Anne and knowledgeable local lender, Rob Kingsbury of KeyBank, the following emerged. Read on . . .

What’s our big idea?
Out of our brainstorming came an idea- home prices are rising, and with 30-40% appreciation last year, buying hasn’t gotten easier- and neither has renting. That doesn’t change the fact that Summit County locals want to stay, so why not stay together?  While one person might have $350,000 buying power alone, two people could have $700,000. That could be a two bedroom condo in Summit, or a house in Kremmling, Leadville, Alma or Fairplay. Rather those two people paying rent to someone else, wouldn’t it make sense to pay that money toward a mortgage where they could gain equity? (Then, could you imagine the buying power of three people?)

Our thinking is this- within a community so tight knit, there have to be individuals that have business or personal relationships with someone else that also wants to stay in the county. If this sounds like you, let us help you be in control of your own future here, rather than holding out hope that you will be able to rent season after season. Let us share info with you about Summit County’s housing programs already in place, and how to prepare to buy a home.

How can our team help unrelated parties purchase together?
Before I was in real estate, the idea of buying with someone I worked with or was friends with would definitely have sounded intimidating, though I see now how beneficial it can be! Our team has guided numerous sets of unrelated parties through the purchase of second homes and investments. We want to show you how to do that, too! When two (or more) parties take title in these scenarios, they do so as “Tenants in Common”. There can be any number of tenants in common, and interests do not have to be equal, but must add to 100%. This interest can be transferred in the future by sale, gift, will, or inheritance. At the same time, each co-owner also has the right to mortgage, sell, or otherwise transfer their own interest in the property without the consent of the other owners. Taking title in this way is what would grant unrelated parties protection in their purchase, and I really think this opens doors for our community. Read more about Tenants in Common and Joint Tenancy from Land Title Guarantee Company HERE.

If/when there comes a time when someone wants to move on, there are options for doing so. The party that wants to leave could decide to rent out their room and still be responsible for mortgage payments, all parties could decide to sell and split the proceeds, or the party leaving can be bought out by other parties. All parties can benefit when it’s time to part ways.

What if I need down payment assistance?
Summit County has a number of resources for first time homebuyers, the first being Down Payment Assistance programs. One important distinction about down payment assistance, Rob with KeyBank noted, is that it actually comes in the form of a second loan with its own interest rate (2-3% for Summit options). It is a really common misconception that the assistance just comes in the form of a check- oftentimes, these are not grants and funds are required to be paid back.
The Summit Combined Housing Authority (SCHA) currently has (2) assistance programs- the Housing Development Grant Program and the Summit Revolving Loan Fund Loan Program. Each program has income requirements, meaning that borrowers must fall within certain income thresholds, as well as meeting certain property requirements and primary mortgage requirements. Through each of these options, homebuyers can obtain up to $25,000 of assistance. Those falling within the 80-100% AMI range can also ask SCHA about additional programs they might have available that aren’t listed on the website.

The Colorado Housing and Finance Authority (CHFA) also offers down payment assistance (and some coverage of closing costs) in an amount up to 3% of purchase price with no payback required for borrowers that are using one of their first mortgage loans. They also offer an option to receive assistance as a second mortgage loan in an amount up to 4% of the purchase price.

How do I prepare to buy a house?
First time homebuyers can register for the SCHA and CHFA required class HERE. This is mandatory if you’d like to receive assistance- take this (months) before you’re planning to buy. Other than taking the class, lenders will recommend checking out the following to prepare:
1. What does your debt-to-income (DTI) ratio look like? Compare your pre-tax income with any minimum required monthly debts like rent,  student loans, car payments, credit cards, and auto loans- anything regular, required, and recurring. Do not include utilities, health insurance, entertainment, food, clothing, and transportation costs.
2. What is your credit score? Do you need to work on building your credit? To obtain a conventional loan, you will need to have a score of 620 or higher. If you need to build credit, consider some of these options: request higher credit limits on existing credit cards, pay your debts on time, dispute any errors in your credit report, get a department store credit card if you don’t qualify for one from a bank, look into a secured credit card, and look up how to pay your balances strategically. Don’t close any credit cards until after you purchase your home!
3. Pay your taxes and make sure you can access your returns! Have those W2’s on hand, and it’s a good idea to have two years’ tax returns on hand.
4. Rob says- reach out to local lenders early, and choose the one you feel most comfortable with. Using a local lender will give you a huge leg up, because they know our market inside and out. If two offers on a home are comparable, seller’s agents will advise their clients to choose the offer with a local lender. Also, lenders will help you with all of the items mentioned above. They can guide you through figuring out your DTI, building your credit, and will advise you as to what documents they need to get moving!
5. Get pre-qualified. I can’t stress enough how important this is- having a pre-qualification letter from your lender will show sellers that a lender is vouching for your ability to make a purchase. 

If you are looking to buy with someone else, work together to get this all done and hold one another accountable to accomplishing your home-buying goal, and reach out to our team if you have questions along the way. We’d love to partner with you in your journey!

As a real estate investor, protecting your assets should be a top priority. Setting up LLCs correctly and choosing anonymity for those LLCs can be very helpful. Since you don’t know when things might go awry, you’ve got to be prepared!

If you or your property are the source of a lawsuit or have done anything to bring liability to you, and all of your assets are held in your name, you become a “deep-pocket defendant”. Anything held in your name and easily discoverable is fair game when a plaintiff attorney is deciding what to ask from you.

Limited Liability Corporations, or LLC’s, offer “Inside Protection”. This means that if something happens at a property held inside the LLC, you as an individual and your assets are protected. The LLC will be held responsible in a court of law, and the LLC only owns what is shown within the LLC. The corporate veil will generally protect owners of the LLC from being liable for that LLC’s judgements or debts.

Despite the protections an LLC affords, it is not uncommon for a plaintiff’s attorney to try to tie an owner’s assets up in a judgment or lawsuit if they can identify them. If an attorney can discover that you are the owner of multiple LLCs it can lead them to look a little further and discover multiple properties that you own. Therefore, creating anonymity for your LLCs can become very important in trying to limit the impact of a lawsuit. 

The cornerstone to an anonymity compliant asset protection structure is making sure an asset search doesn’t turn up your name in relation to any of your LLC’s or your properties. This means setting up your first LLC correctly from the get go is important, and having a buffer entity is a must. Many people will refer to this as a parent structure where you create one LLC that is the owner of multiple other LLCs. By having that parent LLC be the owner of the subsequent LLCs, it removes your name from the paperwork. In Colorado, you may have to use registered agent services to truly accomplish removing your name from those LLC.

It becomes important to register that parent LLC in states where you can be the owner without having to put your name on the LLC. Some of the most popular are Wyoming, Nevada, New Mexico and Delaware. 

Another consideration when choosing the state for your parent LLC is “Outside Protection”. States like Nevada, Wyoming, and Texas prevent a creditor from holding your business responsible for your personal liabilities through Charging Order Protections (COP). Many people refer to this as reverse piercing of the corporate veil. Essentially, charging order protection prevents a creditor from seizing your business assets to satisfy a personal debt.

Taking this route is how you get multilayered protection, in such a way that linking you to any of your investments is much more difficult. The goal with creating a structure such as the one described above is to encourage the plaintiff to take the maximum insurance payout and make any other option too difficult and time consuming to be worth pursuing.

-Danielle Connor

 

Life at Altitude with Danielle Connor

April 2022

Before I became a licensed broker, I watched all of the popular real estate shows on TV and felt like I’d already become an expert on buying, inspecting, and flipping houses. . .so, if I fell in love with a property tomorrow, I’d know exactly what to do. Boy, was I wrong! You definitely can’t (shouldn’t?) become a real estate expert from the couch, especially not when it comes to home inspections. Read on to learn more about inspections in Colorado and where they fit in the home buying process.

In Colorado, homes are sold in “As Is” condition, “Where Is”, and “With all faults”
What does that mean for homebuyers and sellers? When a seller puts their home on the market and goes under contract, the seller is required to disclose all known adverse material facts in writing. The real estate brokers in a transaction are also required to share any adverse material they have actual knowledge of . Material facts are anything known about the physical condition of the property (past or present) and environmental hazards affecting the property and  could negatively affect a home’s value. Adverse material facts are not facts that would psychologically stigmatize a house, like if someone passed away inside. That doesn’t have to be disclosed. Examples could be a leaky roof, repairs done due to fire damage, a flood, structural issues, mold, etc. The best rule of thumb is that if you have to ask if you should disclose it, then you should disclose it! Think of adverse material facts as anything and everything that someone might want to know about your home. For sellers, it is always better to over disclose.  Sellers can and do get sued for not disclosing enough. 

It is up to the buyer to do their due diligence!
When the home hits the market, it is being conveyed as is, in its current condition, and the seller is making no representations or warranties regarding the property or matters affecting the property. Because sellers make no guarantees about the home they are selling, it is up to the buyer to dive deep into the known (and unknown) about the property. This is where home inspections come in, and it is highly recommended to have professional assistance. I always suggest to my clients to choose trusted, local home inspectors. Sharing anything with them from the Seller’s Property Disclosure that the seller knows has affected/is affecting the property or anything that the buyer physically observes that might be a concern allows the home inspector to dig even deeper. Ask the inspector what they suggest to look at additionally, and pay for the extra services if they make sense. In Colorado, common add-ons we see are radon testing, sewer scopes, well testing if applicable, and roof inspections because of how harsh the elements can be here at a high and dry elevation with snow coming down ¾ of the year. 

How do I choose a home inspector?
First and foremost, buyers- ask your agent who they recommend! My local knowledge of the areas I serve includes an extensive list of vendors and contractors that I am more than happy to share with my clients. When interviewing:

• Ask for a report from a recent inspection that the inspector has done and review for thoroughness.  The important area to look at is the inspector’s notes and photos.
• Ask about what the inspection will cover – will the inspector be going into crawl spaces, the attic and the roof? Will the chimney be inspected? Do they recommend add-on services?
• Find out what the inspection does not cover – many do not cover mold, asbestos, lead, wells or septic systems so you may need to find additional service providers.
• Ask about a radon inspection.  Radon is a common issue up here so decide whether an inspection is important to you.  You can find out more about radon by visiting www.EPA.gov/Radon
• Experience is valuable!  Ask about the inspector’s background. 
• An inspector should give you a firm price for the inspection.  Prices tend to vary, as does quality.  Be suspicious of an overly inexpensive inspection bid.
• Find out if they have any bonus extras such as home warranties, floorplans, or 3D tours.

Where does the inspection fit in the buying process?
Here in Colorado, inspections are typically completed within the first 10 days of going under contract (not before going under like in some other states). There are a few ways it can be written in (or out):

1. There is an Inspection Objection, Inspection Resolution, and Inspection Termination deadline. Buyer retains the right to inspect and submit an Inspection Objection, which is a document outlining a list of health/safety/functionality items to ask for the Seller address. The items are typically either asked to be fixed, or the buyer asks for a credit at closing to address it themselves. The Seller can agree to all, some, or none of the items. Both parties either have to come to a resolution on all/some of the items, move forward without anything  being addressed, or terminate. If the parties can not come to a signed resolution, the contract will automatically terminate.

2. The Inspection Objection and Resolution deadlines are omitted from the offer, and only the Termination deadline stays. The buyer still retains the right to inspect, though they cannot ask for anything from the seller. After the inspection, the buyer decides whether to move forward or terminate.

3. The Inspection Objection, Termination, and Resolution deadlines are omitted from the offer. Buyer could still technically inspect, though they are waiving their inspection period and the right to terminate (or not) based on inspection, so any inspection is essentially of no value for moving forward or not.

 

Which option is best? I hear about people waiving their right to inspect all the time!
I always recommend Option 1 when possible. Keep the right to inspect and to negotiate with the seller if anything big comes up. Don’t waive your right to inspect if you don’t need to! Since there are many second home owners and investors here in the mountains, we encounter many sellers who haven’t been to the property in months (or even years). They may not have seen issues with the roof or that the floor is sloping inward. They may not know the radiant in-floor heat has been leaking glycol for a long time and is now failing. Major issues = $$$$, and many buyers don’t have an unlimited budget, especially after most homes are selling above list price. This avenue holds space for negotiation and the most opportunity for a win-win scenario. You can come to a resolution with the Seller, or terminate and keep your earnest money.

With the competitive nature of the current market, Option 2 would be the next best bet. Retain the right to inspect, and decide if after the inspection you are willing to take on any inspection findings yourself, or if you would like to terminate. Depending on the age and condition of the home, or if you are putting an offer on a new(er) condo where major systems are HOA responsibility, this could be totally fine. The inspection could reveal some cosmetic damage and minor issues, or it could open a can of worms. You will still have the option to either move forward or hand back that can of worms and retain your earnest money! If you go with this option, you need to be prepared to cover the cost of any repairs if you still want to move forward after the inspection as you will have waived your right to negotiate for any repairs or credits.

Option 3 means your offer is not contingent upon inspection at all- that no matter the condition of the house, you are purchasing it completely as is. If you do decide to terminate based on a material fact that was not known and not disclosed, you could terminate, and would not get your earnest money back. We generally do not recommend this option. Not taking your opportunity to learn more about a home through a home inspection could be very risky for your and our job as your agent is to share all the pros and cons, help you weigh the options and make the best choice for your situation.

What you decide is up to you- and I am here to help! Email me or give me a call if you have questions after reading this about home inspections or the homebuying process. I’d love to be your local mountain real estate expert!