Boulder Home Values Are Going Up - Someone Tell the Appraisers!

What do you do when the appraisal comes in lower than the contracted sales price? This is a question that is coming up more often as prices rise in the Boulder area.

During a recent transaction, a week before closing, the appraisal came in $10,000 lower than the contracted sales price. It also revealed that the home was about 200 square feet smaller than we thought (assessor records mistakenly included the detached garage in the home's square footage).

What to do?

The Colorado contract allows for buyers to cancel at this point and get their earnest money returned. But most buyers don't want to. Typically, this becomes another "opportunity" for the buyer and seller to negotiate on the purchase price.

It's fairly common to "split the difference," but my client felt she had already given plenty of discounts. Through initial price negotiations and inspection repair issues, she had already agreed to lower the price by $13,000. We had lots of logical arguments for why the home was worth more than the appraiser thought it was, but in the end it came down to how badly the buyer wanted it. We settled with my client giving another $2,000 discount and the buyer purchasing the home for $8,000 above appraised value. Thankfully, he had a large down payment, so the lender did not baulk.

The problem with appraisals is that they only look at where the market has been and not where it is going. They are based on comparable sales in the previous six months. But home values are rising in Boulder County. With more home buyers than last year and fewer homes for sale, the good old law of supply and demand dictates that prices will inevitably rise.

In my example, the home was in Lafayette, which had seen a 10% increase in average home sale prices in the second quarter of 2012 versus the same period of 2011. When you think about it, if buyers only ever paid appraised value, which is based on the past, then home values would never be able to rise.

In the end, my client sold her home for much more than she had expected to when she first decided to sell nine months prior; the buyer got a home he loved and that he could afford; and area appraisers now have a good comparable sale to use on future appraisals.

If you are thinking about buying or selling a home, be sure you have a Realtor who understands where the market is going and who can help you negotiate over the many hurdles along the way. Feel free to contact me anytime through my website: www.moniquecole.com.

Beware of Wood Roofs in Boulder! They will need to be replaced soon.

Back in 1994, January 1, 2014, must have sounded like the distant future of science fiction, but now it’s not so far away.  It is the deadline for homeowners in the city of Boulder with wood roofs to have them replaced, a date set in 1994 when the ban went into effect.

All wood roofs will need to be replaced by January 1, 2014.

Homebuyers take note: If the home you’ve fallen in love with has a shake roof, this will be a significant cost in the thousands of dollars to you in the future.  

The actual wording of the building code is a model of confusing bureaucratic jargon:

“No person owning a building with wood roof covering materials shall fail to remove or cause to be removed from the building all wood roof covering materials before January 1, 2014, and to replace the removed roofing with approved roof covering materials which conform to the International Building Code as adopted, and no person shall thereafter take possession or ownership of a building with wood roof covering materials.”

And, in case you’re wondering if your wood composite roof needs to be replaced, the answer is yes, if it’s more than half wood, or in the words of the code: “’Wood’" for the purposes of this definition, means any natural or composite material containing at least fifty percent wood by volume.”

My guess is that 2013 will be a busy year for local roofing companies, and you want to time a re-roof for the dry season. If you need replace your roof, you might as well do it now. Email me at monique@moniquecole.com for my recommended roofing contractors.