Jim Smith, Broker

It’s Still a Seller’s Market in Metro Denver – If Homes Are Priced Right

Here’s this week’s report on the real estate market in the Denver Metro Area. Unlike others, I define the metro area geographically, not by county — as an 18-mile radius of Downtown Denver (see map), which includes Lone Tree but not Parker or Castle Pines to the South and Superior and Louisville but not the City of Boulder to the North. To the west it goes to El Rancho, but not Evergreen, and to the east it goes to DIA but not Watkins.

In that area, there are currently 4,210 active listings with a median Days on MLS (DOM) of 28. Only 830 of them are 7 days or less, which is the median DOM of the listings that closed in the last 7 days. Two-thirds of the active listings have been active over 14 days, and over 11% of the listings have been active over 120 days! In short, we have a HUGE surplus of over-priced active listings. (If you want to make a lowball offer, ask me or your agent to show you only listings that have been active over a month!)

Of the nearly 4,000 listings currently under contract within 18 miles of downtown Denver, the median days before going under contract was 9. Of the listings that closed in last 7 days, the median days on the MLS was 7. What does that say about the 80% of currently active listings that have been on the MLS over 7 days. Not good!

There has been a big shift in Median Days on MLS this spring. Until last August, the median DOM had been under 10 throughout the pandemic, but between August 2022 and Feb. 2023, it ranged from 10 to 32 median days on the MLS. But, surprise! Starting in March of this year, the median DOM is again under 10. Happy days are here again — IF the home is priced right!

Real Estate Industry Is Abuzz With How Brokers Could Utilize ChatGPT

I’ve been reading lots of real estate newsletters and blog posts about how to put AI to work, specifically by using ChatGPT. I have also played with that app, asking it to generate articles and answer questions on a variety of real estate-related topics. Like others who have reviewed ChatGPT, I am super impressed — and also a little concerned. Why? This column, written entirely by me, a former professional journalist, has set Golden Real Estate and myself apart from my colleagues and has brought my brokerage and me 90% or more of our business because of the credibility it has succeeded in building for us.

It’s a sad truism about America that the vast majority of citizens, unless they are in a writing profession, can’t or are reluctant to compose a readable, grammatically correct and compelling paragraph about anything. Thanks to ChatGPT, don’t be surprised if you start receiving newsletters, blog posts and other well written materials demonstrating greatly improved skills by your local agents!

One blog post I read about ChatGPT suggested that I ask it to rewrite a property description to be more compelling, and so I entered the description of a particular listing and within a few seconds got the rewrite. Look for the separate blog post comparing what I wrote with ChatGPT’s rewrite of it. In that blog post, I did not change a single word, although I did eliminate a few paragraph breaks. The quality of the writing is superb, and the content was completely faithful to what I had written. It is significantly more wordy, with 317 vs. 218 words, making it more conversational.

I also asked ChatGPT to write some articles on different real estate topics to see how wise and accurate they might be, and I was surprised to see how well it did.

One of the topics I gave to ChatGPT was based on a May 8th article on Inman News with the headline, “Why buyer love letters deserve a second chance.” Look for the separate blog post of what ChatGPT wrote for me on this topic, followed by my reaction to it.

I Asked ChatGPT to Improve Upon My Description of This Listing:

Here’s what ChatGPT produced in about 10 seconds:

The property at 1004 4th Street sounds truly remarkable. With its unique features and convenient location, it offers an exceptional living experience in the heart of Golden. Here’s a summary of the key highlights:

This one-of-a-kind home boasts stunning views of North and South Table Mountain, visible through the floor-to-ceiling windows on the main level. Being within walking distance to downtown Golden allows easy access to its renowned shops and restaurants, adding to the convenience and charm of the location. The house itself is a spacious 4-bedroom, 4-bathroom residence situated on a corner lot. The wide-open floor plan on the main level creates a welcoming space, ideal for entertaining or simply enjoying the breathtaking views while staying cozy near the gas fireplace.

The kitchen is a chef’s delight, featuring state-of-the-art appliances including a 6-burner stove with an additional griddle and double oven. The oversized refrigerator and walk-in pantry provide ample storage space for culinary enthusiasts. The primary suite offers a spa-like retreat with a walk-in steam shower featuring three shower heads, two sinks with quartz counters, a soaking tub, and an extra-large walk-in closet. On the upper level, you’ll find two bedrooms, a tiled 3/4 bath, and a versatile bonus area with desks, bookshelves, and fantastic views. Additionally, there’s a rooftop office/reading room that opens up to a private roof-top deck, offering a tranquil space to work or relax.

The lower level presents the opportunity for a mother-in-law living space, featuring an extra-large bedroom with a walk-in closet, a spacious living area with a wet bar, and its own private patio. Included with the property is a one-year builder warranty, providing peace of mind to the new homeowner. For a detailed visual experience of the home, you can take a narrated video tour at www.NorthGoldenHome.com.

With its exceptional design, breathtaking views, and convenient location near downtown Golden, this property offers a truly unique and desirable living environment.

Here’s What ChatGPT Wrote for me About “Love Letters” Submitted With Real Estate Offers.

The practice of including “love letters” or personal letters with home offers has been a common practice in real estate transactions. These letters are intended to convey the emotional connection and personal story of the buyer to the seller, potentially appealing to their sentiments and influencing their decision.

However, it’s important to note that the acceptability and effectiveness of love letters can vary based on local regulations, cultural norms, and individual seller preferences. Additionally, there are legal considerations surrounding fair housing laws, which aim to prevent discrimination in the housing market.

In some regions, love letters are discouraged or even prohibited to avoid potential bias or discrimination in the selection process. These laws are in place to ensure fair treatment and equal opportunities for all potential buyers. If love letters are permitted in your area, here are some factors to consider:

Pros:

1. Emotional Appeal: A heartfelt letter can establish a personal connection and create empathy between the buyer and seller. It may help the seller relate to the buyer’s story and motivate them to choose an offer.

2. Differentiation: In competitive markets, where multiple offers are common, a well-crafted love letter can make your offer stand out from the rest. It allows you to differentiate yourself by showing your genuine interest in the property and willingness to create a home.

Cons:

1. Fair Housing Concerns: Love letters have the potential to inadvertently disclose personal information that could trigger bias or discrimination. Sellers may unintentionally make decisions based on protected characteristics such as race, religion, or family status, which is a violation of fair housing laws.

2. Unintended Pressure: Sellers might feel pressured or uncomfortable when evaluating offers accompanied by emotional letters. They may prefer to base their decision solely on objective factors such as price, terms, and reliability of the buyer.

Given the complexity of this topic and the varying legal and cultural considerations, it is advisable to consult with a local real estate professional or attorney who can provide guidance specific to your location. They will be familiar with the local regulations and can help you navigate the decision of whether or not to include a love letter with your offer.

—End of article written by ChatGPT

If I had written on this topic, I would have provided more guidance on avoiding fair housing violations, which is what triggered Oregon’s 2022 law banning love letters. That law was found unconstitutional on May 6th. I would have advised to exclude any photograph of the buyers. Let’s say the picture was of a white couple, and their offer was accepted over an offer from at least one gay or mixed race couple. That losing buyer might well win a lawsuit claiming that the seller and listing agent committed a fair housing violation, if they were to discover the winning love letter.

Fair housing laws, both at the federal level and the stricter Colorado state level, include so many “protected classes,” that a seller is not allowed to consider even the familial status (married, single, with or without children), disability, or sexual orientation, including transgender status, along with the more familiar race, creed, national origin, etc. As you can imagine, it would be hard to compose a “love letter” that didn’t reveal at least one of those descriptors.

Warning: Being ‘Anti-Woke’ Could Be a Realtor Code of Ethics Violation

Dictionary.com defines “wokeism” as “the promotion of liberal progressive ideology and policy as an expression of sensitivity to systemic injustices and prejudices.” The political right in America has made “wokeism” one of its favorite punching bags.

June is being celebrated as “Pride Month,” and Realtors with conservative leanings might want to keep in mind that any expression of anti-gay or anti-trans opinions could be taken as a violation of Article 10 of the Realtor Code of Ethics, which states that NAR members shall not discriminate “on the basis of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity.” Since ethics complaints are initiated not by NAR, but by individual members against each other or by the general public, this matter should not be taken lightly.

Opportunities abound to show one’s “anti-wokeism” through, for example, social media likes and posts. Take, for example, right-wing attacks and boycotts against Disney World, Target and Bud Light because of their alignment with LGBTQ issues or celebration of Pride Month.

Realtors who agree with such anti-LGBTQ sentiment would be wise to keep their feelings to themselves. That advice would apply as well to any expression of prejudice against other protected classes enumerated from Article 10 above.

Don’t Let Capital Gains Tax Deter You From Cashing Out on an Investment Property

According to the Census Bureau, our country has nearly 116M housing units for a population of 330M men, women, and children. Sixty percent of the housing units are single-family detached homes.

The National Association of Home Builders states that roughly 7M of the housing units (about 6%) are second homes or vacation homes not available to rent.

The Census Bureau calculates there are 20M rental properties in the U.S., owned by 14.3M individual investors. According to www.AirDNA.co, there are 1.1M short-term rentals.

So, there are over 28M properties out of 116M that are either vacation homes, second homes or investment properties of some type.

The Colorado Association of Realtors reports that the number of second home sales has jumped 44% since the beginning of Covid in March 2020. So, whether you own a vacation home, second home, rental home, or short-term rental condo, you own real estate subject to capital gains tax when you sell.

Many sellers of investment properties take advantage of the Sec. 1031 tax deferred exchange option, which allows the property owner to put your full proceeds, pre-tax, to work.

Doing a 1031 exchange of real estate requires what’s called a “qualified intermediary” (or QI) and not the title company conducting the closing to hold your proceeds until you reinvest them, and the IRS allows 45 days to identify and 180 days to close on the replacement property. Sellers cannot “touch” the proceeds from the sale of your relinquished property. The QI must work with the title company to facilitate transfer of the proceeds to the new closing. If a qualifying replacement property cannot be closed within 180 days, that opportunity is lost and the gain will be taxable.

Unless the investment property is inherited at your death, there will be a capital gains tax liability. For some, the gain has been so significant that perhaps it’s time to pay the tax and laugh all the way to the bank with the remainder. Note: You cannot use the 1031 tax deferral strategy to sell or purchase a primary residence.

There are capital gains tax calculators online. Here’s one: https://smartasset.com/investing/capital-gains-tax-calculator

Here’s the IRS’s Fact Sheet for 1031 Exchanges: www.irs.gov/pub/irs-news/fs-08-18.pdf

To determine your tax exposure, start with the original purchase price. What did you pay for the property when you bought it? Second, add up all the money you put into capital improvements of the property. Then subtract depreciation which you took on your tax returns. The IRS considers investment real estate’s “useful life” to be 27.5 years. The cost basis of the property is the amount you paid, plus the cost of selling it – commissions, settlement fees, and closing costs, minus the depreciation taken.

An agent in our office calculated the following numbers for a deal he is doing and roughly calculated the net gain. His seller’s unit was purchased in 2016 for $275,000, netted the owner $10,000 per year in passive income, enjoying a 61% profit in just six years, after tax. The lucky owner paid the tax man and was left with roughly $377,000 in cash after everything was deducted. Discuss your particular situation with your CPA if you have one, and, if not, I can recommend a local firm. These figures are round numbers and for the purposes of this article.

I believe in paying taxes. It is pothole season and street crews are at work. Fireman are on call and the police are vigilant. Our national defense is strong, and we live in the most prosperous nation in the world where wealth can be created simply from smart investing. Be proud, as I am, to pay your taxes, for you made a lot of money in a beautiful place called Colorado.

Austin Pottorff, who deals more than I do with investors, helped with the research for this article. He has two development sites listed at this time. See them at www.GoldenDevelopmentSite.info and at www.LakewoodDevelopmentSite.info.

If Energy Efficiency in Your New Home Matters to You, Call Us.

One of the two value statements on our yard signs (see logo above) is “Promoting and Modeling Environmental Responsibility.”

If you’re a buyer wanting to assess the energy efficiency of the homes you are looking at, you owe it to yourself to hire one of our agents to represent you and show you homes, because we know this topic better than most real estate agents.

In addition to pointing out how sustainable the houses we show you are, our inspectors “speak green” too, and, as a summer special, we are giving buyers who hire us a Free Energy Audit as a closing gift. Call me at 303-525-1851 or email Jim@GoldenRealEstate.com.

Meet Our Broker Associates and Me at the Farmers Market in Golden June 17th

Every summer, Golden Real Estate gets a “showcase” booth at one of the farmers markets held in downtown Golden, and Saturday, June 17th, is our date this year.

Bring your questions about real estate, or simply come to say “hello.” We’ll have our laptops online so we can even help you look at homes and set up an MLS email alert matching your search criteria.

You’ll get to enter a drawing for a $100 gift certificate to a Golden restaurant. And bring your reusable bags — Golden’s is one of Denver’s top-rated farmers markets!

We’ll be there from 8 a.m. to 1 p.m. The market is in the parking lot next to the Public Library on 10th Street in downtown Golden.

We Welcome Broker Associate Kathy Jonke to the Golden Real Estate Team

Kathy, who lives in downtown Golden, joined our brokerage this week. We’re no longer an all-male brokerage!

She was born and raised in Wheat Ridge. With her degree in Geology and Earth Sciences from the University of Colorado at Boulder and her career with the U.S. Forest Service in geophysics, she relocated often, which gave her the opportunity to renovate houses and historic commercial buildings, and also to design and build new homes. Her passion for real estate led Kathy to become a real estate broker, and she loves helping people navigate the buying and selling process in the local Golden market.

Kathy settled in Golden five years ago and had a home built in the 9th Street historic district. She is active in the community, where she volunteers with her friend Judy Denison (who I featured recently) at the International Rescue Committee. She also serves on the City of Golden’s Historic Preservation Board.

Welcome aboard, Kathy! We’re excited to have you on our team!

New 3-BR Home Near Downtown Golden Just Listed by David Dlugasch

This home at 1004 4th Street is truly one-of-a-kind. There are magnificent views of North and South Table Mountain from the floor-to-ceiling windows on the main level. It was just listed for $1,995,000. You are within walking distance to downtown Golden with its famous shops and restaurants. This is a 4-BR, 4-bath home on a corner lot. The wide-open main level floor plan is great for entertaining, or just appreciating the fabulous views and staying cozy near the gas fireplace. The state-of-the-art kitchen is a chef’s delight. It has a 6-burner stove with an additional griddle and double oven. The refrigerator is oversized, and there is a walk-in pantry. The primary suite has a spa-like feel with a walk-in steam shower with 3 shower heads. There are 2 sinks with quartz counter, a soaking tub an extra-large walk-in closet. The upper level has two bedrooms, and a tiled 3/4 bath. Outside the bedrooms, there is a wide-open bonus area with desks, bookshelves and fantastic views. Above the 2nd floor a rooftop office/reading room that opens to a private roof-top deck. The lower level could be used as a mother-in-law living space with its extra-large bedroom with a walk-in closet, large living area with a wet bar, and its own private patio. Included is a one-year builder warranty. Take the narrated video tour and find more details and still photos at www.NorthGoldenHome.com, then come to David Dlugasch’s open house this Saturday, June 17th, 11 am to 2 pm. Or call him at 303-908-4835 to set a private showing.