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Is a Home Addition Worth the Investment?

If your family is growing, or if you simply want to add more space for a library, den, or rec room, you might find yourself considering a home addition. Before diving right in, though, it’s important to think of the cost, changes to your property tax rates, and the potential return on your investment.

How Much will a Home Addition Cost?

First things first, it’s important to think about the overall costs associated with a home addition. In the United States, the average cost of adding a room to an existing home is just over $40,000. If you’re adding to a luxury home and incorporating the same high-end materials, this cost can soar even higher. In fact, you may pay up to $300 or $400 per square foot. Factors that may influence the cost include whether you’re building out (adding a room to the ground floor) or building up (adding a second-story room), the size of the room, and the cost of the materials involved.

home addition 300x199 Is a Home Addition Worth the Investment?Will Building an Addition Raise My Property Taxes?

In just about every major metro area across the country – and some non-metro areas, as well – an addition will most likely trigger a tax reassessment. Renovations can significantly increase the overall value of a home, and because you pay your taxes based on your home’s assessed value, it’s likely that your taxes will go up. Aside from simply adding a room to your home, finishing your basement or attic to add living space can also increase your tax rate. You’ll be required to get permits to complete major renovations, so prepare yourself for a new assessment once those renovations have been completed.

Will I Recoup What I Spend?

Finally, homeowners often want to know whether they’ll be able to recoup their costs on a new home addition should they choose to sell their homes in the future. There are many factors that go into determining this. In most markets, including Denver, the average return on investment for an addition is anywhere from 80% to 100%. This means you won’t likely get all of the money you spend returned to you should you sell.

Should I Build an Addition?

Because you’re not likely to actually make money on your addition, most real estate agents agree that you should always add to your home because it benefits you, and not because you want to increase its value at the time of sale. If you need more living space, or if adding another room would make you more comfortable, then you should proceed if you have the funds to do so comfortably. Otherwise, if you simply want to increase your home’s overall value, an addition may not be the best way to do it. Renovations of the kitchen and bath, especially if they’re outdated, may be the best course of action in this case.

A home addition is a wonderful way to add some extra living space, but you should only consider it if you’ll be staying in your house for several years and the addition would make your home more comfortable. While you may receive your investment back at the time of sale, this isn’t always the case.

2016 Tax Breaks for Homeowners in the Denver Area

The end of the year is drawing near, and homeowners across the state are getting their paperwork in order for tax season. If you own a luxury home in Colorado, there are several tax breaks for homeowners that you might want to consider.

#1 – Interest on Your Mortgage Payments

By far, the largest tax break for homeowners in Colorado has to do with the interest you pay on your mortgage throughout the year. Most of your payment goes toward interest, and this is doubly true if you have a 30-year loan. In fact, you can deduct interest on multiple properties as long as you spend at least 14 days a year (or more than 10% of the number of days you rent it) actually living inside the home. That’s quite a bit of money, and quite a bit of savings.

HVAC tax credits 300x200 2016 Tax Breaks for Homeowners in the Denver Area

Tax breaks for homeowners in Colorado can save money on purchases, sales, and improvements.

#2 – Home Improvement Loan Interest

If you took out a home improvement loan, there are even more tax breaks for homeowners. In fact, you can deduct the interest associated with that loan with no dollar limit. As long as the money was used to modify your home for accessibility, improve its longevity, or increase its value, it qualifies. Small repairs you make don’t qualify right now, but that doesn’t mean you shouldn’t save receipts. Colorado homes are gaining value all the time, and if your home appreciates above the tax-free amount, these records may help lower your tax liability in the future.

#3 – Tax Breaks for Homeowners Who Sell Their Homes

In the state of Colorado, sales of homes valued at $250,000 or less for single persons or $500,000 or less for married persons are tax free. In order to qualify for this benefit, you must have owned the home for two years and lived there for two out of the five years before the sale. In certain circumstances that may force you to sell a home, such as a significant financial hardship, the IRS may prorate tax-free proceeds to help reduce some of your liability.

#4 – Property Tax Breaks

Most of your monthly mortgage payments are actually put into an escrow account that is used to pay your property taxes each year. You should receive a statement from your lender each year letting you know how much your property taxes are, and as long as you own your home, this is an annual deduction. If this is the first year you’ve lived in your home, then you will split the tax payments with the seller, each paying taxes for the period you owned the home.

#5 – Loan Points

In Colorado, you can pay points to get a loan with a lower interest rate. The homebuyer pays the points, and each point is equal to 1% of the total value of the loan. This amount is usually paid at closing, before the buyer takes possession of the home. If you’re careful to make sure that the points you purchase meet federal IRS requirements, the points are fully deductible in the year you close.

As you can see, there are tax breaks for homeowners in Colorado that can help ease some of the financial burden associated with buying a home of any size. Whether you have one or more mortgages, an open home improvement loan, or even a significant property tax burden, there are deductions and breaks available.

Does the Real Estate Market Truly Value Energy Efficient Homes?

With the Energy Star certification being provided to residential homes in an effort to encourage more people to build or buy homes that conserve energy, many people are going out of their way to upgrade, retrofit, and even remodel homes in such a way that they are as efficient as possible. If you’re going to be selling your home, is it worth your time? Does the real estate market really value energy efficient homes?

Consumer Demand for Energy Efficient Homes

When it comes to selling your home, there’s one thing that a real estate agent will reinforce more than any other – consumer demand. It is up to you as the seller to show potential buyers that your home suits their unique needs. That’s why cleaning, painting, and even staging is so very important. It helps you make certain that the people who are seeing your home also see its true potential. These days, energy efficiency is a huge demand, and not only because of money. Even the most expensive luxury homes on today’s market are designed or retrofitted to meet that demand. People want to be friendly to their environment, even when money is not a factor.

energy efficient homes 300x237 Does the Real Estate Market Truly Value Energy Efficient Homes?Willingness to Buy

In years past, there were some studies showing that people of all income levels – middle, middle-upper, and upper-class households – would skimp a bit on energy efficiency during tough economic times when it came to buying homes. They wanted to get the most home for their dollar, and energy efficiency wasn’t a primary concern. However, an economics professor at UCLA alongside a visiting scholar from Maastricht University in the Netherlands may have proven otherwise back in 2012. They looked at over 1.6 million homes purchased in California between 2007 and 2012, and their results were quite fascinating. On average, Energy Star (or similar) certification adds an average of 9% to a home’s overall value.

It’s Also About the Area

The same study looked at a few other factors in locations where willingness to buy energy efficient homes was higher. For example, they found that people in counties and specific cities with a high number of registered hybrid vehicles were far more likely to purchase an energy efficient home out of sentiment alone. They bought the homes because they wanted to be environmentally friendly, not just because they wanted to save money on utility costs. People in these areas were also more likely to pay a premium for their energy efficient homes. Surprisingly, there was no correlation discovered between utility rates and the buyers’ willingness to pay more for “greener” homes.

What Does This Mean for You?

In the Denver area, people are undoubtedly interested in the environment. The cost of living in the area is average, which includes utility rates and gasoline costs. This means that people don’t feel forced to buy highly efficient homes to save money, nor do they feel inclined to purchase hybrid vehicles to save on fuel costs. However, the people of Denver are conscious of the environment, and they are typically willing to pay slightly more for homes that are energy efficient.

Should buyers spend money to improve their energy efficient homes before putting them on the market? This is a great question for your real estate agent, who can help you discover precisely which improvements will net you the best chance to sell, and the best return on your investment, too.

Lot Prices Hit Record Highs as Mortgage Rates Enjoy Near-Record Lows

Incredibly low mortgage rates have been all over the news lately. People are hurrying to buy their first homes, refinance their higher-interest mortgages, and even take out second mortgages thanks to new lower rates. However, even as these rates have fallen, the overall prices and values for lots has risen. Here’s what you should know about lot values and the reasons why they’re becoming so expensive.

lot prices 300x151 Lot Prices Hit Record Highs as Mortgage Rates Enjoy Near Record LowsWhat Is a Single Family Lot?

When you see a lot advertised as a “single family lot”, this simply means it’s designed for building a single-family home instead of an office building, an apartment building, or even a duplex. Lots are just that – pieces of land that have not been modified for homebuilding in any way. If you choose to build a home, you’ll need to think about average lot prices. These prices are also figured into the overall value of a home when it is put on the market for sale.

How Much Do They Cost?

Each census, the census bureau performs what is known as a Survey of Construction, or SOC, which provides information about how many people are building new homes and the amount they’re paying for their lots. The National Association of Home Builders, or NAHB, analyzed data provided by the census bureau in 2015, which shows that average lot prices have climbed above $45,000 – the highest amount on record.

Why the Increases?

Many people are baffled by the record highs. After all, lots across the country are getting smaller, and new home production is well below what is considered the “normal” level, so they believe that lot prices should theoretically drop. Why is the opposite happening? It all has to do with the number of lots available for purchase. The NAHB reported back in May that there is a significant shortage. What’s more, regulatory costs are also on the rise, and these play a role in determining lot value, too.

Should You Still Buy a Lot?

Although there’s no denying that you’ll pay more for a lot now than you would have a few years ago, it’s still a great investment as long as you’re going to build a house on that lot. Home values are still appreciating nicely, and since the overall value of the lot is factored into the property value as a whole, there’s no reason to avoid buying such property – it is still a wise investment.

Should You Wait It Out?

If you’re waiting patiently for lot values to drop so you can get the building ball rolling, consider the fact that new home construction is still falling and regulatory costs are still rising. This means you might be waiting a while. According to analysts, paying more for a lot now won’t really hurt you in the long run, even if prices happen to fall drastically in the next few months. Once again, it’s not the lot that makes the difference – it’s the home built on that lot.

Mortgage rates are falling across the country, but lot prices are on the rise for a number of different reasons. In fact, they hit a record high in 2015 and there seems to be no sign that they’ll fall again any time soon. Fortunately, this shouldn’t make or break your decision to build a new home.

What Is the Right Credit Score for Buying Your Dream Home?

Although many of the people who own luxury homes in the Denver area have immaculate credit scores, the truth is that much more goes into acquiring a large mortgage than your FICO numbers. What is the right credit score for buying your dream home, and what else will lenders check?

What Is an “Excellent” Credit Score?

As people across the country are already discovering, it seems that lenders are tightening the requirements for obtaining a mortgage with every passing year. If you want to obtain a mortgage for buying your dream home, you’ll need to have above average credit, which is typically anything over a 700 FICO score. However, if you’re interested in obtaining a large mortgage, you’ll need a score in the “excellent” category, which most lenders consider to be 750 to 850. However, it is important to remember that even a credit score above 800 doesn’t guarantee that you’ll get the mortgage for your dream home. There are other factors to consider, too.

credit score 300x199 What Is the Right Credit Score for Buying Your Dream Home?

What Else Do Lenders Consider?

The more money you ask to borrow from a lender, the more closely that lender will look at your overall credit report to assess its risk. If you consider all of the factors included on your credit report, your payment history makes up about 35% of a lender’s consideration, while the amounts you currently owe come in second at about 30%. Other factors come into play, too, including the length of your overall credit history at 15%, the variety of the credit that has been extended to you, and any new credit you have obtained, both of which account for about 10% of a lender’s consideration. All of these things matter when it comes to buying your dream home.

Do You Qualify for Your Dream Home?

Different lenders use different algorithms to determine whether you are eligible for a large mortgage. You’ll need to have a substantial down payment of anywhere from 15% to 25% of the home’s value to get the best interest rates, an outstanding FICO score, and a credit history that is free of delinquent accounts and legal judgements. Lenders like to see a few accounts that have been open and in good standing with no late payments for at least two years, as well. What’s more, if you have a variety of credit cards, lenders want to see about 25% to 35% utilization of all of the credit that is available to you. This shows that you are responsible with the credit that has been extended to you.

Putting Things into Motion

If you’re ready to begin the process of buying your dream home, the best favor you can do for yourself involves checking your credit with all three bureaus and contacting them about any discrepancies you might find. Once you’ve done this, you can start working with a real estate agent to help you find your perfect home. Your agent may be able to direct you to a lender to find a product that works for you and your unique financial needs, and if not, it is always a good idea to start with your own personal bank where you have checking and savings accounts.

You’ll need more than an above average credit score when it comes to buying your dream home, so be sure to pull your credit reports and take a look around before you start the process. It could end up saving you time and money in the long run.

Home Prices in Denver are On the Rise

There are many changes taking place in the real estate industry as of late. The Federal Reserve has increased its interest rates, which is leading many people to believe that banks and other lenders will soon follow suit. In February, home prices in Denver increased by 9.7%, following along with the cross-country trend.

Year-Over-Year Price Increase Comparison

According to the Standard & Poor’s/Case-Schiller home price index, the increase in year over year home prices in Denver ranked third in the country in February. The country’s two highest increases were in Portland, Oregon at 11.9% and Seattle, Washington at 11%. Experts believe that these price increases are being fueled by impressive job gains thanks to new technology companies making themselves at home in these cities. Because of this, the demand for homes is climbing, and prices are also climbing to follow suit.

Number of Homes on the Market

At the national level, prices are still rising although sales have managed to level themselves out in recent months. Last month, the number of homes available on the market nationwide was 1.5% lower than in March 2015, which means that buyers are acting more quickly. In fact, according to the National Association of Realtors, homes spent only 47 days on the market in March, an indicator of just how quickly they are selling. This means that it is indeed a seller’s market – at least temporarily – despite the uncertainty of mortgage rates around the country.

finishedbasement 300x201 Home Prices in Denver are On the RiseWhat Does This Mean for the Luxury Home Market?

Luxury home prices in Denver are not rising at quite the same rate. In fact, according to Svenja Gudell, who is the chief economist at Zillow, buyers who are interested in luxury homes “will find somewhat softening prices, a larger selection of homes to choose from and more limited competition”. This means that the luxury home market is not expected to change much, even when home prices across the country are rising rather rapidly.

Entry-Level and Mid-Market Homes

Gudell claims that the biggest changes are occurring in the entry-level and mid-level home markets, where the competition is fierce, prices are climbing rapidly, and the inventory is becoming more limited by the day. In fact, she went so far as to say that many buyers would have their patience tested in coming months. Although this may be a bit unnerving, it also goes to show that investing in Denver area real estate may be a good idea at this point. With prices rising rapidly and such high demand, home appreciation is expected to occur much quicker than normal.

A Perpetual Problem?

Some experts believe that the lack of homes on the market may turn out to be a perpetual problem. There are many reasons for this, but if homeowners do not see many available properties from which they can choose, they are less likely to list their own homes on the market – even if they have every intention to sell. What’s more, many homeowners simply do not have enough equity to afford a down payment on a new purchase, which is even truer these days with rising home prices in Denver.

Although home prices in Denver are climbing rapidly, this has had little to no effect on the luxury home market as of yet. Whether the prices and availability of luxury homes will be impacted by this trend remains to be seen.

The Top Luxury Features in High-End Denver Homes

The most expensive homes in the Denver area offer up incredible beauty, innovative technology, and unique spaces. Although no two executive homes in the area are exactly the same, there are some luxury features in high-end Denver homes that popular among homeowners and buyers alike.

Spa Bathrooms

Spa bathrooms are one of the most important luxury features in high-end Denver homes for a couple of different reasons. Everyone enjoys the feeling of being pampered in a beautiful and relaxing atmosphere, and having it available to at home makes it more accessible and more convenient. Some of the most popular elements in spa bathrooms include towel warmers, fireplaces, dimmable lighting, and electronic faucets.

luxury features in high end Denver homes 300x150 The Top Luxury Features in High End Denver HomesCustom Wine Cellars

Wine lovers around the world love having their own wine cellars. Not only does this give them the perfect opportunity to store all of their favorite bottles in just the right environment, but it also gives them plenty of room to do so. Wine cellars are another of the most popular luxury features in high-end Denver homes, and some even have wine bars built right in.

Home Automation Systems

Imagine being able to turn off lights, close blinds, or even adjust your thermostat from the opposite side of the globe! That’s exactly what a home automation system does, and it’s one of the most coveted luxury features in high-end Denver homes. These systems offer incredible security for expensive properties, and they can be customized to automate everything from your blinds to your heated doghouse.

Gourmet Kitchens

These days, everyone loves to cook their own meals at home. In fact, even when hiring a personal chef, a gourmet kitchen is a must-have. They come with professional-grade appliances, lots of comfortable workspace, and even some other unique and innovative technologies such as warming drawers and “smart” refrigerators that let you know when you’re out of an ingredient.

Outdoor Kitchens

Outdoor kitchens are one of the most in-demand luxury features in high-end Denver homes these days. Denver offers a lot of aesthetic beauty, and many of the executive neighborhoods have spectacular views. Outdoor kitchens provide the perfect location to host a get-together of any sort. Consider adding a refrigerator, stove, and climate-friendly seating to complete the setup.

Home Theaters/Rec Rooms

Denver luxury home buyers are all about dedicated rooms for recreation, and that’s why home theaters and rec rooms are so popular in executive homes. Projection screens with the latest technology and heated recliners can go a long way toward providing a true movie theater experience. As far as a rec room goes, these often offer up pool tables, foosball, darts, and other pub games along with a fully-stocked wet bar and lots of comfortable seating.

Whether you are interested in buying a home, selling a home, or simply renovating your home to improve its value, it is important to consider the most popular luxury features in high-end Denver homes. These can not only boost the value of a property, but also provide unsurpassed comfort and beauty.

Today’s Hottest Trends in Flooring

Whether you’ve just purchased a luxury home in Denver or you want to make some improvements on a home you want to sell, the right flooring is essential. Carpeting, hardwood, and even tile are all incredibly popular, but there are some specific types that may help improve the value of your home. Here are some of today’s hottest trends in flooring.


In today’s market, homebuyers want their carpeting to be not only plush and soft, but also environmentally friendly. Many of the world’s top carpet manufacturers have dedicated years of research to creating this very product. These companies may recycle nylon into ultra-soft carpets, or they may simply melt down the polyester used in other materials to create recycled carpet fibers. Although you may not expect much from recycled carpeting, the truth is that these fibers are incredibly soft and plush. What’s more, they come in a variety of pile heights and colors to suit your individual needs, and that’s why eco-friendly carpeting is one of today’s hottest trends in flooring.

Wood Flooring

Open concept homes are by far some of the most popular on the market. The living room, kitchen, and dining area are often open and in full view, and this means that many homeowners utilize hardwood flooring throughout. These days, homebuyers prefer darker stains, larger planks, and more exotic species like hickory, cherry, or walnut. Something else to consider is the finish on the hardwood floor. Today’s trends in flooring are shabby-chic in nature, which means that while a homebuyer is more than willing to pay for a brand new hardwood floor, most want it to have a lived-in look.

trends in flooring 300x200 Todays Hottest Trends in FlooringTile

There is a lot of variation in regional and even individual preference when it comes to tile, but there is one thing for certain – the tile is getting larger. Traditionally, ceramic tiles come in a 12-inch by 12-inch square, but more and more manufacturers are creating larger tiles to satisfy the demands of consumers. To keep up with trends in flooring, many ceramic tile manufacturers are utilizing the same technologies used to create digital prints on vinyl or laminate countertops to build texture in flooring tiles. The possibilities are truly endless in this regard.

Luxury Vinyl

Finally, if you want to provide an elegant look and feel to a specific area of a home (such as a child’s bathroom) with a material that is incredibly durable and easy to clean, luxury vinyl is a great choice. It is inexpensive when compared to other materials, and because it is durable, it stands up to wear and tear rather well. Thanks to new and improved technologies, your luxury vinyl can look any way you want. Essentially, manufacturers can take photos of wood, marble, or any other surface and print it to the surface of the vinyl.

Some of today’s hottest trends in flooring are timeless classics, and others may only be fads for a short period of time. Nonetheless, if you want to sell your luxury home quickly, or if you aren’t sure what you’re looking for when it comes to buying a home, these trends can help you make a more informed decision.

The Difference Between a Custom Luxury Home and a Semi-Custom Home

Today’s real estate market can be incredibly confusing, and this is especially true for people who have not purchased or sold a home in quite some time. In fact, many of the luxury home buyers in the Denver area spend quite a bit of time viewing their options. Understanding the differences between a custom luxury home and a semi-custom home can save you some time in your search for the perfect property.

The Burden of Home “Shopping”

All too often, potential luxury home buyers spend a lot of time looking at the properties available in the Denver area. They may like the way one home is designed, but feel that the room size is too small. When it comes to the next home, the same potential buyers might really love the style and layout, but dislike some of the features. If this seems to be the case, it might be helpful to learn the difference between a custom luxury home and a semi-custom home.

custom luxury home 300x200 The Difference Between a Custom Luxury Home and a Semi Custom HomeWhat Is a Custom Luxury Home?

A custom luxury home is one that was built with a client’s very specific wants and needs in mind. These homes are built by very specialized groups of contractors who understand a variety of innovative projects and have the know-how to meet the demands of high-profile clients. Everything – including the floor plan, the color of the paint on the walls, the technology built right into the walls, and the finish on the faucet in the bathroom – is completely personalized to meet the needs of the client.

Custom luxury homes do appear on the Denver market from time to time, and the amount of customization often has a direct impact on the potential buyers. In some cases, these homes depreciate more quickly than others, and this is particularly if the home has unique design quirks. If you enjoy originality and innovation, then a custom luxury home might be right for you. Otherwise, you might want to narrow your search to semi-custom homes.

What Are Semi-Custom Homes?

Semi-custom homes are more popular among buyers because they are built with preexisting and predetermined floor plans. Although the owner may choose to add a room, connect a garage, or even add a full basement, the overall design of the house is more traditional than that of a custom luxury home. A semi-custom home does not depreciate as quickly because it is more traditional and therefore more desirable to the general public. Most of the buyers interested in luxury homes prefer the semi-custom variety because it offers up more potential for personalization.

In short, a semi-custom home usually offers a more traditional floor plan and layout, and it gives buyers more opportunity to add their own “touch”. Conversely, a completely custom luxury home was built based on the client’s unique personality, wants, and needs, and offers up more originality than its semi-custom counterparts. Keep these things in mind when you are in the market for a new home in the Denver area.

Why Denver Real Estate Is a Better Investment than Gold

These days, the number of people investing in real estate in order to diversify their financial portfolios is on the rise. In fact, people buy homes all over the country in order to enjoy the massive returns on their investments years down the line. In Denver, real estate is as good as gold, and a few recent numbers show that it’s probably even better.

What the Numbers Say

An independent broker by the name of Gary Bauer tracked the prices of Denver-area homes over a 25-year span. To do it, he took statistics directly from the Denver Metro Association of Realtors. The findings were nothing short of spectacular. At the end of 1990, the average price of all of the homes sold in the Denver area was $94,134. However, by the end of 2015, that number had soared to $363,143 – an increase of 285.8%.

denver real estate good as gold 300x199 Why Denver Real Estate Is a Better Investment than GoldComparing Denver Homeownership to Gold

According to a recent publication from Denver Real Estate Watch, the increase in home value in the Denver area surpasses increases in the value of gold during the same time frame. During the same period, from 1990 to 2015, the price of gold climbed from $383.51 per ounce up to $1060 per ounce, an increase of 176.4%. Some have argued that all gold is the same, ounce per ounce, but the housing market changes as more and more luxury homes enter the market. However, according to the Case-Schiller index, a popular index used to compare home sales, the prices of Denver homes rose some 261.9% during that same 25-year period. In fact, Denver homes even outpaced inflation during that time.

Supply vs. Demand

One of the trends that is certainly driving up the value of homes in the Denver area is lack of inventory. From 1990 to 2015, the inventory of unsold homes dropped by two-thirds. In 1990, there were 11,389 unsold homes available on the market. In 2015, there were only 4384, representing a 63% drop in overall inventory. According to experts, this is not likely to change in the foreseeable future. Denver’s population grew some 87% in that 25-year span, and since Denver is still a very popular destination city with plenty of opportunities for jobs in a variety of industries, the number of homes available on the market is slated to remain a challenge for consumers and real estate agents alike.

Investing in Denver Real Estate

Although there is no denying that people who bought their Denver homes a quarter century ago will likely see the best returns on their investments, the average prices of homes in Denver continue to climb. This means that even though luxury properties in the area are more expensive than they were only a year ago, that trend will continue well into the foreseeable future.

Anyone who purchased a home in Denver prior to 1990 has enjoyed a phenomenal gain on their original investments – even better than gold, according to industry experts. Whether this trend continues in the future remains to be seen, but for the time being, experts claim that Denver homes are still solid investments for everyone looking to diversify.