Can't Sell? Try Exchanging.

Having been in real estate in Durango for so many years, I have witnessed the ups and downs of numerous markets. Back in the 80’s I became familiar with the concept of real estate exchanging. In its simplest form person A has a home worth $300,000 and they want to down size to a condo worth $250,000. Person B has just that type of condo and guess what? Their family is expanding and needs a home worth $300,000. Both parties like each other's property so they exchange their properties, one for the other, and person B gives to person A $50,000 to make up for the difference in values. This straight across, one for one exchange, doesn't happen very often. Instead what we see is person A wants out of their property very badly and really likes person B's property. Person B however has no interest in person A's property. Consequently, we need to add what we often call the third leg to the transaction and that would be a taker for person A's property. You can see how this could get interesting pretty quickly with it not being uncommon to have 3, 4 or even 5 legs to a transaction.

Brokers who do exchanges often get together in groups and present various properties that their sellers have indicated they would be willing to take other property for in exchange for theirs. These meetings are open forums where each presenter gets about five minutes to explain what his client has and what his client would like as well as what his client might be able to add to a transaction in terms of additional properties. I attended just such a meeting yesterday and came away with a proposal for one of my clients. Lots of times, at meetings like this, it isn't just real estate that is offered. When a broker says that their client can add something to the transaction, that “something”could be a boat, a motorhome, an interest in a houseboat, etc. These things are often added in order to balance the equities between the parties. Let's go back to our first example where the one party needed to pay the other party $50,000. It wouldn't be unusual to see an offer made where the one-party would offer you $25,000 in cash and his free and clear ski boat. As you can see these affairs can be very fun and interesting but most importantly they are focused on problem-solving.

There are two ideal candidates in exchanging: the first is what we call a “don't wanter” that is to say, the seller absolutely doesn't want their property anymore. It could be someone who's had a terrible experience in property management; it could be caused by a divorce; it could be someone who has a property that is difficult to sell or so high-priced that it might be better if they had two or three smaller properties which individually would be easier to sell. The second ideal candidate is somebody that owns free and clear property. That makes it very easy for them to go into a transaction because they have a 100% equity position in relation to the value of their property. Bad candidates would be people who are upside down... that is they have no equity in their property... unless they are able to add other properties that have equity.

There are certain tax benefits to doing an exchange but those would only pertain to investment properties. That is, your personal residence is not eligible for a 1031 tax-deferred exchange. That's not to say you couldn't exchange it, it simply means that that you don't have the benefit of the of the 1031 terms. A personal residence, as long as you've lived there for two years, has the $250,000 or $500,000 tax-free gain benefit anyway. I've written some additional information regarding 1031 exchanges that can be found on my main website www.buydurango.com here is a link to that specific page: Durango Real Estate Exchanges .

As you can imagine, these transactions can be complex and you certainly need an experienced real estate broker to guide you through the process. A very good knowledge of the inventory of properties available in the Durango real estate market is certainly important. How to structure an exchange to minimize the tax consequences is important as well. And lastly a broker that can be creative and think out of the box is the kind of broker that you need in order to put together a 3, 4, or even a five legged exchange. If this sounds interesting to you please give us a call, Team Lorenz is here to help.

Buyer Agency... Having Someone Represent You.

Navigating your way through Durango real estate can certainly be a daunting task. If you are a prospective buyer from out of the area, it's hard for you to know the benefits of the various subdivisions and building projects that we have around the County. Nearly all subdivisions will have rules and regulations, called CC&R's, that define what you may or may not be able to do in that development. Let's say that you wanted to have horses and you are told that horses are allowed in a particular subdivision. It would not be unusual to see that there might be a limit as to the number of horses that you could have. In the Shenandoah subdivision, for instance, you have to have 5 acres in order to be allowed 2 horses. No horses are allowed if you have less than 5 acres. A Buyer Specialist will be able to find out this information for you.

Many buyers have campers, motor homes or RVs that they would like to park on their property. That is the type of thing that could easily be covered in the CC&R’s. You need to be certain that you get all of those rules and regulations ahead of time. An experienced real estate broker is very vital in helping you work your way through those sorts of issues when buying Durango real estate. Our Team is set up quite a bit differently than anybody else here in town. Lisa and Nicole are Buyer Specialists whose only job is to work with buyers. They may each see 100 properties or more a month so they truly know the market extremely well. I often kid them and say: “I have a buyer who wants pink carpet in the hallway...” and I'll get a response that says they know three homes just like that. Knowing the product that is available and then matching it to your specific needs is very important.

Another important advantage of having a Buyer Specialist work for you is that you can have an advocate on your side. A Buyer Specialist does not represent the seller; they represent you, the buyer.

Having a Buyer Specialist on your side is definitely to your advantage. ”Does it cost me anything to have a Buyer Specialist on my side?” is a question I often hear. In Colorado, the seller is allowed to pay the buyer brokerage commission and in probably 99% of the transactions that is exactly what happens.

If you're at that spot where you're ready to look for real estate in the Durango area please give us a call and we will have one of our Buyer Specialists take care of you. Please Click Here to learn a little bit more about our team.

When Is the Best Time to Buy?

That is a great question but it's also the one I have an answer for. Having been in the real estate business for 33 years... and over 25 of them in Durango in particular... I know the market here extremely well. Once you hit Labor Day, the first week of September, sellers get very nervous and you see even more price reductions. In addition, buyers are often able to negotiate much harder with the seller because they know that seller really wants to be out of that house before the snow flies. Generally speaking, the inventory is down a bit because of the summer sales, but this year we have seen more properties come on the market and because of the slowness of the market the inventory has not been reduced.

That combination of high inventory and motivated sellers really will help buyers. This is not the time to be sitting on the fence trying to make up your mind, but rather, it's a time to go out and select your new home.

So many people always say that they want to buy at the bottom of the market, but the problem is the only way to know you're at the bottom is when it's on the way back up... which means you missed the bottom. New home sales across the nation have increased for the last four months in a row. Inventories in the big cities like Phoenix and Los Angeles which are our feeder markets, are being eaten up by buyers. Those are all signs that we have hit the bottom and are going the other direction. I don't think any sane person out there feels interest rates can stay this low when the federal government is running a deficit like it is right now. Interest rates will have to go up and they will be forced up by the huge deficit spending. Nobody is talking about a balanced budget in Washington so that will continue to drive rates up and keep them up. It's back to that same concept: The time to buy is now, it will only get more expensive in the future.

Buying real estate in Durango has long-term been a very good investment. I don't see any reason why that will not continue. People live in Durango because they want to live in Durango, not because they got transferred here because of their job. It's not like a job transferred or Detroit (now I can say this because I was raised there) where you might even consider quitting your job just so you didn't have to take the transfer. People want to live here because of all of our outdoor activities, the great feel of the town, the natural beauty of the mountains around us in because the people are so friendly. We offer a diverse cross-section of real estate, with everything from modular homes on acreage to 8000 ft.² mansions in the mountains. And there are lots of homes in between of course. It is our job as Team Lorenz to help you find just exactly the right property so that you'll be able to have that Durango Colorado real estate experience. Please give us a call and I'll set you up with one of my two buyer agents who for the third year in a row have successfully taken more buyers to the closing table than any other agent, mega agent, or team in the entire County. They know the inventory and they'll find you your home.