Jim Smith, Broker

NAR’s ‘Clear Cooperation’ Policy Has Failed to Reduce the Number of Pocket Listings

In November 2019 the National Association of Realtors (NAR) created its Clear Cooperation Policy (CCP) designed to end the practice of “pocket listings.” A pocket listing is one which an agent keeps in his or her “pocket,” hoping to sell it himself instead of giving other agents the opportunity to sell it. The incentive is financial. Roughly half the listing commission goes to the agent who sells a listing. If an agent sells the listing himself, he/she gets to keep the entire commission.

The term “clear cooperation” is a reference to the purpose of the MLS, which is “cooperation and compensation.” Every MLS member agrees to cooperate with other MLS members, allowing them to sell their listing. And every listing specifies the compensation which the buyer’s agent will receive — typically 2.5 to 2.8 percent in our market.

You can read the three previous articles I’ve written about this policy at www.JimSmithColumns.com. Those articles (in Nov. 2019, Feb. 2021, and Aug. 2021) document the creation of the CCP and its subsequent implementation by REcolorado, our MLS. The deadline set by NAR to do so was May 1, 2020.

My August 12, 2021, column described how our MLS is fining agents $1,500 for a first offense when they fail to put a listing on the MLS within one business day of promoting it outside their own office in any way — online, in print or via a sign in the ground.

One would think that with such a big penalty the number of homes selling with zero days on the MLS would have declined, but in fact they have increased. I didn’t realize that until I read a Nov. 3rd article from Inman.com which quoted a study by Broker Resource Network (BRN). The study pulled data from 24 multiple listing services comparing the number of homes sold with zero days on MLS during the 12 months before and after the May 1, 2020, implementation date.

“In every market reviewed across the United States, brokerages recognized double and triple digit increases in Zero Days On Market listings across firms of all sizes and business models,” the report said. These were figures for big brokerages, not the full MLS.

So I checked REcolorado statistics to see what our full-MLS statistics are for homes sold with zero days on the MLS. I found that there were 2,225 such closings reported in the 12 months before May 1, 2020, and 2,769 reported in the 12 months after May 1, 2020 — a 24.4% increase.

To discover the longer trendline, I looked at several half-year periods going back to 2018. In the last 180 days (as of this past Sunday), there were 1,677 closings of resale residential listings recorded on REcolorado with zero days on MLS before going under contract.

During the same 180 days of 2020, there were 1,295 such closings, making this year a 29.5% increase over last year. The number in 2019 was even lower — 1,077. In 2018 it was not much different — 1,104.

What could account for this counter-intuitive increase?

One explanation might be the explosion of the seller’s market during the pandemic, which really took off simultaneously with the implementation of the Clear Cooperation Policy (and the pandemic surge).

One way to assess the seller’s market is to measure how many homes went under contract after 4 days on the MLS during those 12 months before and after May 1, 2020, and the median ratio of sold price to listing price for those listings.

During the 12 months before the implementation of the CCP, there were 4,563 closings of listings which went under contract in 4 days, and the median ratio of sold price to listing price was 1.0019. During the 8 months after May 1, 2020, there were 4,896 such closings, and the median ratio was 1.01299. Another 2,840 such closings took place during the remaining 4 months of the 12-month period after May 1, 2020, and the median ratio for them was 1.05157. Clearly, the seller’s market was accelerating. It makes sense that more sellers might receive offers they “can’t refuse,” and that listing agents might encourage them to accept those offers.

There was an important loophole created when the CCP was implemented by REcolorado and perhaps by those 24 other MLSs. That loophole is called the “office exclusive,” which allows any brokerage to promote an off-MLS listing within the brokerage, so long as there is no advertising of any kind on social media or in print and no sign in the yard — the definition of a pocket listing.

This policy greatly favored large brokerages which could have hundreds of agents in a dozen or more offices, to promote new listings internally with the additional incentive of keeping the full commission of each transaction within the brokerage.

If this loophole were to be closed, there would probably be far fewer closings with zero days in the MLS — and sellers might get more money for their homes by having them exposed to more competing buyers.

As I mentioned above, a listing agent profits from keeping a listing off the MLS, because it increases the chances of selling the listing himself and thereby greatly increasing his/her commission. Of the 100 homes on REcolorado which sold for $1.25 million or more in the last 180 days with zero days on the MLS, 25% of them were double ended (see list below), and only 9 of those 25 listings reduced the commission paid by the seller because of their listing agent’s windfall. (The agents at Golden Real Estate always discount our commission when we double-end a transaction.)

**D0uble-Ended Sales On REcolorado Over $1.25 Million – Last 180 Days, Showing Whether Seller Got a Discounted Commission**

By contrast, of the 100 highest priced homes ($1,575,000 and over) which sold after 4 days on the market, only 2% were double-ended. Whether or not you call it “greed,” the agents who kept their homes off the MLS greatly profited from it — and the sellers paid the price by not exposing their homes to all potential buyers.

Another recent article from Inman reminds us that Fair Housing was one of the reasons the Clear Cooperation Policy was introduced. A blog post on REcolorado also makes this point. The reasoning is that if a home is sold privately without being exposed to all buyers on an MLS, then it is more likely to be sold within the same demographic. Thus, pocket listings are inherently discriminatory against minority groups, whether they be racial or, for example, LGBTQ.

I’m sure that these articles and the studies behind them, including my own analysis of REcolorado statistics herein, will lead to some discussion locally and nationally about how to tweak the Clear Cooperation Policy so it is more effective and less counter-productive, which it clearly has proven to be. I do not believe, however, that the Clear Cooperation Policy will be scrapped, because its stated intention is clearly good public policy.

Sellers: Insist that your home is put on the MLS so that all interested buyers have the opportunity to see it and participate in a bidding war that nets you more money.

What Are the Steps You Can Take Toward Making Your Home Net Zero Energy?

I don’t know anyone who doesn’t like the idea of saving money, which will happen when you convert your home to “net zero energy.” So, what are the steps you can take to get there?

“Net zero energy” means that your home generates more energy than it consumes. With “net metering,” your electric meter runs backwards when your solar panels generate more electricity than you’re using (on a sunny day), then runs forward at night, resulting in zero (or less) net consumption of electric power.

Solar power gets more affordable every year. When I purchased my first 10-kW solar photovoltaic system 15 years ago, the cost was over $60,000, but Xcel Energy gave a rebate of $4.50 per watt, so I got a check for $45,000 from the utility, reducing my net cost to $15,000. Nowadays that same system would cost as little as $15,000 with no Xcel rebate but a 26% federal tax credit.

While you can generate your own electricity, you cannot generate your own natural gas, so terminating natural gas service is key to achieving net zero energy. This involves some major system changes if you are currently heating your home and your water using natural gas, cooking with gas (including with a gas grill) and have a gas fireplace.

There are electric alternatives to all of these uses of natural gas, and you’ll appreciate that eliminating natural gas also eliminates the possibility of a gas explosion and of carbon monoxide poisoning (unless you have a gas powered car).

Heating your home with electricity used to mean installing baseboard resistance heating units in each room, but that is so 20th century. Nowadays electric space heating is done far more efficiently (and evenly) using heat pumps.

Gas forced air furnaces and water heaters are considered to have a 15-year life expectancy, so when yours fail, think of that as an opportunity to adopt heat pump technology for both functions. And a heat pump eliminates the need for a separate A/C unit, since it heats and cools.

Gas furnaces and water heaters generate heat by burning gas. A heat pump moves heat, similar to what A/C does. (How heat pumps work) It cools your home by moving the heat out of your house. If you put your hand over the external compressor unit while it’s cooling your home, you will feel the heat that was moved from inside your home. In heating mode, the process is reversed, and the heat pump moves heat from outdoors into your house. It may surprise you to know that when it’s freezing outside there is actually heat that can be moved from outside to the interior of your house, but it’s true. (Heat pumps work in extremely cold climates) Our office has been heated solely by heat pump since November 2017, and ever since there has never been a day when the system failed to keep our office at 70°F or warmer.

A simple one-unit 12,000-BTU, 29.3-SEER ductless mini-split system from Fujitsu can be found online for $1,961. That’s a small unit, suitable for one room or a garage (a great application!). For our office, we bought a Mitsubishi system in which a single compressor drives three separate wall units, each with its own thermostat.

A heat pump water heater (which I installed at our home) has the compressor built into the unit, above the tank. You can feel cool air emitting from it when it is heating water. I suggest putting it in a wine cellar where it’ll keep the room cool without buying a separate A/C unit.

For cooking, you’ll be amazed and delighted by the induction cooktops that are now widely available. I saw them used on a cruise ship for both cooking and warming surfaces, and the chefs loved them. (Modern cruise ships have eliminated natural gas because of the fire hazard.)

An all-electric home will, of course, demand more electricity, but Xcel Energy now allows you to install enough solar panels to generate double your electrical usage over the prior 12 months. That is more than enough to cover your new electric space heating, water heating and cooking needs, with capacity left over to charge an EV, too.

An important first step in pursuing net zero energy for your home is to reduce your need for energy, and the easiest and cheapest way to do that is to improve your home’s insulation. I had Dennis Brachfield of About Saving Heat blow cellulose insulation into the exterior walls (not just the attic) of a 1940s bungalow I owned, and I was astonished at how much more comfortable the house became. Even if your exterior walls have batt insulation in them, there is still space in the walls to blow in cellulose. (How to insulate an old house)

I learned something interesting from that experience. We all know that walls can radiate heat, such as a brick wall in bright sunlight. Well, walls can also radiate coldness, or suck heat. The air temperature in my bungalow before and after blowing in insulation was the same, but I felt warmer and burned less gas.

You can go beyond improving the insulation of your exterior walls and attic. There are numerous places that allow cold into your home, especially around your windows. Whether or not you install triple-pane Alpen windows, as we did at our office, caulking around the window frames and elsewhere can reduce the energy needed to heat your home.

A blower door test done by a contractor will identify the air leaks in your home. Insulating your attic with blown-in cellulose and your crawlspace with plastic sheeting will also reduce your home’s energy needs whether from gas heating or your new heat pump. (Insulating crawl spaces)

Of course, many homes, especially in older neighborhoods, can’t benefit from solar power because of shading from trees or insufficient south-facing roof area, but you can purchase community solar. (This is also a good solution for condos which have no roof at all.)

The way community solar works is that you invest in solar panels that are part of a solar farm in some distant pasture. The electricity generated by your panels in that remote location is credited to the electric meter for your home or condo. One advantage of community solar is that when you move, you only need to change which meter gets credited with your solar production.

Other ways of reducing energy use include replacing CFL or incandescent light bulbs with affordable LED bulbs and “daylighting” your home or office. (Batteries + Bulbs sell 8-packs of 60W LED replacement bulbs for $6.49, tax included, after $15 instant rebate.) We have “sun tunnels” in our home and office to bring daylight into interior spaces. In fact, on a sunny day we don’t need to turn on any lights in our office. It’s great— and saves energy. We had Design Skylights of Evergreen install Velux sun tunnels at both home and office.

Would you like one of us to visit your home for a private consultation about the sustainability possibilities in your home? Email me at Jim@GoldenRealEstate.com.

As Real Estate ‘Disruptors’ Abound, Let’s Hear It for the Traditional Brokerage

Disruption is happening in every industry, spurred on primarily by internet-based technology. Amazon is disrupting brick and mortar retail. Uber and Lyft have disrupted the taxi industry. Tesla disrupted the auto industry’s dealer model. Travel agents have suffered from online ticket sales by airlines, cruise lines and related businesses.

Now companies like Zillow, Open Door, and OfferPad are disrupting the real estate industry with their “iBuyer” model.

But those and other disruptors have not killed off the older business models. They are grabbing market share, but of an increasing market. You can expect to see brick and mortar retail stores, taxi companies, travel agents and, yes, traditional real estate brokerages such as Golden Real Estate thriving for years to come.

We ourselves have not suffered from these disruptors. Indeed, while 2020 and 2021 have seen huge growth by these new real estate enterprises, they have also brought record growth for our brokerage and other traditional brokerages, and it is easy to see why.

Buying and selling a primary residence is typically the biggest financial transaction we all deal with. Yes, buyers increasingly utilize the internet to search for homes, but they end up calling us to see them. Sellers also use the internet to monitor the market — many taking advantage of the MLS alerts that we set up for them — but they want someone they know and trust to bring their real estate savvy to bear in listing and marketing their home when it’s time to sell.

The “full-service” real estate agent is being redefined, and I like to think that my broker associates and I epitomize that evolution. Some of the services we provide can not be obtained from those other companies.

Full service goes beyond providing our free moving truck, moving boxes and packing material, which we’ve been doing since 2004. Here are some other services you can expect from us.

We have an in-house handyman who can help with preparing a home for market, such as repairing drywall damage, washing windows, and doing light plumbing and light electrical tasks such as installing a new toilet, faucet or light fixture. He’s also there to address many of the issues which arise from the buyer’s inspection. And he’s also there if needed to drive our truck for moving, or even for a dump run or for taking a load of possessions to Goodwill or Arc.

We also have a certified home stager who provides our sellers with a free consultation to help their home show its best.

You’re familiar by now with how we create narrated video tours of each listing, including drone videos, but we also serve out-of-state buyers by shooting videos of other agents’ listings that interest them. Last June I did that for a Minnesota couple who felt they had “seen” an Arvada home well enough through my narrated video tour of it to go under contract, not visiting the home in person until they came for the inspection.

Speaking of inspection, experienced agents like us from a traditional brokerage can be counted on to recommend a good inspector who has a track record with them. Other specialists we know and trust — giving our clients the comfort to employ them — include estate sales companies, structural engineers, electricians, plumbers, HVAC companies, and more. The real benefit from these trusted vendors is that they will make sure you’re satisfied with their work, because they want to be referred to future clients.

“Full service” also implies availability and responsiveness. My broker associates and I are available 7 days a week, and we answer our cell phones on evenings and weekends. Although I have associates who can be my “boots on the ground” when I go on vacation, I take my cell phone (and laptop) with me, and I answer it when it rings.

Often we provide service for which we don’t expect or receive any compensation. For example, this past Sunday I got an inquiry from a man who had inherited his mother’s house and wanted an appraisal for tax purposes. I explained that only licensed appraisers can do appraisals but offered to do a free market analysis, which he happily accepted. He may call me about listing it later on, but that’s not the point. I’m happy to be of service.

I follow a policy that I came to embody many years ago: Concentrate on giving and the getting will take care of itself.

Regulation of Community Association Managers Recommended by Dept. of Regulatory Agencies

If the General Assembly follows the recommendation of DORA’s “sunrise” report, we may see the return of regulation of HOA management companies and of the community association managers (CAMs) they employ.

DORA’s recommendation, released earlier this month, stated that regulation of CAMs “is necessary to protect consumers” and recommended the creation of a new regulatory program.

CAMs were regulated starting in 2015, but the bill to retain that regulation (which DORA recommended) was killed by the General Assembly in 2017 resulting in the phase out of CAM regulation in June 2019. With the General Assembly now controlled by Democrats, this new recommendation may result in legislation restoring regulation of CAMs that will be signed into law by Gov. Polis.

You can find the full text of DORA’s sunrise report here.

Arvada City Council Buys Into a Developer’s False Narrative That New Homes Must Have Natural Gas

It’s sad to see elected officials not taking the time to learn about new technology, especially technology that contributes to abating the effects of climate change.

Such is the story unfolding in the city of Arvada, where the city council — historically super friendly to developers — has bought into a false narrative by a developer/builder team that all-electric homes are not affordable or desired by today’s home buyers.

This is happening despite the fact that Arvada is itself home to a well known model of affordable all-electric homes in the Geos Community located west of Indiana Street and south of 72nd Avenue.

The Geos Community was partially built out several years ago without any natural gas lines. Home heating is by geothermal and air source heat pumps. Cooking is on induction cooktops. Heat pump water heaters provide the domestic hot water. Solar panels on each home provide all the electricity needed for these and other needs, making all 26 current homes “net zero energy.”

Before the Geos Community could be fully built out, its original developer was forced into selling due to a divorce settlement. Otherwise the remaining 250 homes — a mix of townhomes and single family homes — would have been built to the same net zero standard. The new developer had promised to do so, as described in a Nov. 17, 2020, post on MileHighCRE.com, but it reneged on that promise and is in the process of installing natural gas lines to the new homes, greatly annoying and angering the owners of the original 26 homes.

The fossil fuel industry duped all of us by promoting methane as a “natural and safe” gas for use in homes. This gas is highly heat-trapping (80-100 times more so than carbon dioxide), prone to explosion and causes many health issues (see Electric4Health.org). During the last decade Colorado added an average of 20,500 residential gas customers each year. BigPivots.com reports that our state now has 1.8 million residential gas customers. That trend needs to be reversed. There’s no need to keep building home reliant on natural gas.

Geos homeowners appealed to Arvada’s city council to deny the developer a permit for the gas lines, but the city declined to do so. The neighbors, however, are not giving up and have 267 signatures (including my own) on a petition to reverse that decision. The City of Arvada has advised the current Geos residents that this issue is closed.

Arvada should be proud that it is the home of the country’s first “geosolar” community which has, among other honors, been featured several times in the Metro Denver Green Homes Tour. I myself have produced narrated video tours of three Geos homes for that tour, which you can view here, here, and here.

As part of its COP 26 coverage this week in Glasgow, CNN will air a segment on Geos as a home building model to be emulated, essential for addressing climate change.

A Professional Inspection Is Money Well Spent

You can’t tell a book by its cover, and you can’t tell a home’s condition by how well it looks when you fall in love with it and go under contract.

That’s why you should never waive your right to inspect the home and submit an “Inspection Objection.” With all the bidding wars going on, it’s increasingly common for buyers to waive both inspection and appraisal in order to get the home they are bidding on.

There are three inspection deadlines. You might feel the need when competing with other buyers to waive inspection objection and inspection resolution, but you should never waive inspection termination. That way, you still have the right to hire a professional inspector, and you may just find enough hidden defects to exercise your right to terminate the contract.

That’s what happened with a buyer I was working with. The house showed all the signs of being well built and well maintained, but the inspection revealed several shocking structural flaws, electrical issues and plumbing problems. We clearly had to terminate — unless the seller was willing to amend the contract to allow for inspection objection and inspection resolution, which she did. (Lesson: The threat to terminate alway contains within it the possibility of restoring the right to submit an inspection objection which you may have given up to win the bidding war.)

We then submitted an extensive list of repairs, which the seller rejected completely. This was unusual, however, since the seller and her agent were now aware of serious problems, structural and otherwise, which they were required by law to disclose to the next buyer.

Pressure is Building for Potential Home Buyers: Why Now May Be the Best Time to Buy

Roughly 6.5 million homebuyers have taken advantage of ridiculously low interest rates since the beginning of 2021. Low interest rates have allowed them to become first-time homebuyers, to move up to their dream home or to downsize.

Many would-be home purchasers have watched this ‘boom’ from the sidelines and decided that now may not be the best time to buy. Bidding wars and the need to make split second buying decisions over the last few months have reduced their appetite for home buying. It might be time to reconsider that decision.

I asked Jaxzann Riggs about the wisdom of “waiting” to make a move, and the following is based on our conversation.

Rental rates fell in 2020, but nothing could be further from the truth in 2021. While accounts vary, some leasing agents (according to ApartmentList.com) report that rental rates could increase as much as 32.4% in the next 12 months and stats indicate that they are up a shocking 16.5% in the first eight months of 2021.

As rental prices spike, potential homeowners should do a little mortgage math.

A potential homeowner who is paying $2,600 per month for rent, would be able to own a home valued at around $475,000. With a 3% down payment of around $14,279, this renter could turn into a homeowner, allowing them to enjoy the associated tax benefits and the opportunity for appreciation on their new property

Housing inventory is increasing and with the threat posed by rising rental rates, and rising interest rates, there is no better time than today to explore home buying options.

During the Covid-19 pandemic, the Federal Reserve supported lending to households, consumers, and small businesses to stimulate the economy. The Federal Reserve recently signaled that it plans to begin reducing the support it has been providing to the U.S. economy. Long term fixed mortgage rates are driven by the overall economy and inflation, but they are directly influenced by Fed policy.

Once the Federal Reserve starts to slow the pace of bond purchases, mortgage rates will move up. Fed officials indicated that they would begin “tapering” the asset-buying activities that it began last year as early as November. After the announcement, mortgage rates did in fact, show a rising trend. For someone with a $500,000 home loan, a 4-basis point jump will cost them $115 more per month and $41,400.44 more over the life of the loan on a 30-year, fixed-rate mortgage.

Mortgage rates are hovering near 3% and demand remains strong but higher rates are clearly on the horizon. Remember our potential renter? As rates rise, a monthly rent of $2,600 would instead result in a $410,000 house (vs. $475,000), if interest rates move from 3% to 4.5%

Even more incentive to potential homeowners is housing inventory. The inventory of active listings on the market rose by a record monthly amount (according to Denver Metro Association of Realtors). Some potential homebuyers that I am working with report they are waiting for prices to cool off to make offers, but even if that does occur, they are unlikely to see lower monthly house payments because any potential savings in purchase price will be lost to rising interest rates.

Future home buyers are not the only ones affected by higher interest rates. For homeowners who have been procrastinating with their refinance application, now is the time to call a lender. Jaxzann Riggs and I are standing by to make the process as simple as possible.”

If you have lending questions, you can reach Jaxzann, who is the owner of The Mortgage Network, at (303) 990-2992.

We Are Now Witnessing the Transition from a Sellers Market to a Balanced Market

The often heard complaint from homebuyers and their agents during the pandemic was the lack of active listings, which was not due to a lack of new listings but rather the result of those new listings going under contract so quickly that at any given time there were few to choose from.

It became a crazy sellers market which is only now abating except for “special” homes that are priced appropriately.

Looking only at closed listings, you might conclude that we are still in a sellers market. One measure I have used in the past is the median ratio of listing price to closing price, which remains above 100% within the Denver metro area. In September, for closings within 15 miles of downtown Denver, the median was 0.9% above listing price — declining, but still impressive.

However, if you look below the surface — that is, at the homes that haven’t sold, you see a rising inventory of homes that have been active on the MLS for an increasing length of time.

For example, as I write this column on Monday morning for this Thursday’s newspapers, there are 2,542 active listings of single family homes, condos and townhomes within 18 miles of downtown Denver, 760 of which (or 30%) were only listed on REcolorado in the last 7 days.

Despite so many new listings, the median active listing has been on the MLS for 19 days, and 1,024 of them (or 49.9%) have been active 30 days or longer. Another 552 of them (or 21.7%) have been active for 60 days or longer.

Meanwhile, there are 4,949 pending listings within that same 18-mile radius. Of them, only 804 or 16.2% were active more than 30 days before going under contract, and only 319 (or 6.4%) took over 60 days to go under contract. 221 of those currently pending listings went under contract with zero days on the MLS. Another 2,528 of them (over 50%) went under contract in 1 to 7 days.

Meanwhile, if you look at the 3,509 listings in the same 18-mile radius that closed in the last 30 days, only 401 of them (or 11.4%) took over 30 days to go under contract, and only 318 (or 3.4%) took over 60 days to go under contract.

This is what it looks like as we transition from a seller’s market to a balanced market. To reiterate, nearly 22% of active listings within 18 miles of downtown Denver have been on the market over 60 days, but only 3.4% of recently closed listings were active that long before going on the market.

My bottom-line observation is: Buyers who gave up after losing multiple bidding wars will find greater success if they re-enter the market now. As I’ve suggested in the past, you can avoid a bidding war simply by asking your agent to send only listings that have been active on the MLS for at least 10 days. You’re less likely to have competing buyers for them.

The new listings, however, will still get multiple offers if they are unique or special in one way or another.

For example, we recently listed a home in Golden’s coveted 12th Street Historic District. There was a bidding war on it, and it went under contract for more than $100,000 over the listing price. But if you look at all the active listings in Golden proper as I write this, there is only one new listing. The other active listings have been on the MLS between 11 and 102 days, and all but two of them have posted price reductions.

It should begin to sink in among sellers and their listing agents that they need to be less aggressive in pricing their homes when they put them on the market.

Don’t assume that buyers will flock to your listing regardless of price and compete with each other for it. Price it right, and it will sell. Overprice it, and it won’t.

Court Rules That Sending an Email Can Bind You, Even Without Signing It

The real estate industry runs on electronic signatures nowadays. In our market most contracts are created and signed on CTM eContracts. Buyers and sellers can click on “Select Font Signature” and see their name appear in a script font. Then they click “Save” and click “Accept” to show that they accept that the font signature is theirs. That document is considered signed.

In the beginning, I was leery of this technology, insisting that our clients use a stylus or finger to personally sign their name on a touch screen device such as a smartphone. Ultimately I relented, realizing that the closing based on those electronically signed documents does involve a “wet signature” witnessed by a Notary.

Electronic signatures became legal as a result of UETA, the Uniform Electronic Transactions Act, which became law in 1999. It was followed in 2000 by the E-Sign Act, which legalized electronic signatures for interstate and international transactions. The following is from www.BakerMckenzie.com:

UETA provides a framework for states to enact state law concerning the enforceability of e-signatures and the validity of electronic records. Forty-seven states and the District of Columbia, Puerto Rico and the US Virgin Islands have adopted some form of UETA. The only states that have not adopted UETA are New York, Illinois and Washington, but each of these states has enacted legislation similar to UETA to govern how electronic transactions are handled….

UETA and the E-Sign Act provide that: (a) a record or signature may not be denied legal effect or enforceability solely because it is in electronic form; (b) a contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation; (c) if a law requires a record to be in writing, an electronic record satisfies the law; and (d) if a law requires a signature, an electronic signature satisfies the law.

It followed, as a result of this law, that electronic messages (emails) between two parties can constitute a contract if both parties have signed their emails by typing their names. The more detailed the emails (covering terms as well as price) the more likely that a court would deem them enforceable contracts.

A Sept. 28 article on Forbes.com by Joshua Stein carried the headline, Yes, Sending an Email Can Create a Binding Contract. It reported on an appellate court decision in New York State that went further to declare that typing your name on such emails was not necessary, that merely clicking “send” from your email account made any signature “an unnecessary formality.” Here are some key paragraphs from that Forbes article:

This case means that pressing “send” on an email is now potentially equivalent to signing a piece of paper containing whatever statements appeared in the email. An actual typed signature is not necessary….

The moral of the story: before sending an email that could be interpreted as committing to some agreement, consider whether that’s what you really want. If not, make it clear in writing that your email isn’t intended to create any form of binding agreement.

Many standard email disclaimers say exactly that, automatically, on every message that goes out. Careful email senders should not rely on those disclaimers to protect them. If an email sounds like a serious and meaningful agreement to material terms, the courts just might decide that’s what it is, and enforce it accordingly.

Although that was the decision of a New York State appellate court, we should probably consider that Colorado courts or the United States Supreme Court might issue a similar opinion. So, how does this affect buyers and sellers of real estate?

If you’re represented by a real estate agent, you’re not sending emails directly to the other party in a transaction, but if you are unrepresented and you exchange emails with a prospective buyer or investor, you could easily find yourself negotiating and agreeing to terms and price before undertaking the creation of a contract with various other important terms and deadlines. Be careful!

At the very least, when discussing price and terms with a prospective buyer or seller, always add that “this is not a contract, which still needs to be created separately and signed by both parties.”

What Are the Most Common Foundation Problems You Might Encounter in a Home?

Understanding the most common foundation problems and knowing the underlying cause of each will help you make an informed buying decision. Below are the most prevalent foundation problems according to professionals I’ve spoken with.

Every home foundation cracks at some point. Most homes have hairline cracks that formed during the natural settling process of the concrete after the foundation was poured. These appear as very thin fissures running vertically up and down the foundation walls. Generally speaking, these gaps are harmless, although most homeowners choose to seal them to keep water and moisture from seeping in.

Horizontal or stair-step cracks on the basement walls of a home are far more problematic. If you discover these during a walk-through of a property, you should know that you might need to pay for stabilization and repair in the future.

Horizontal cracks on the foundation walls develop when the pressure from the soil outside becomes too intense for the concrete to resist. This is a common occurrence in our area because the soil often contains clay and bentonite, both of which are more absorbent than other types of soil, and expand when they get wet.

We can expect up to 60 inches of snow each year, and when this snow melts, the soil around your home gets saturated. The highly absorbent clay can expand, at which point it puts intense stress on your foundation walls, sometimes causing them to crack.

Stair-step cracks occur most often because of the differential settling which occurs when different parts of the earth beneath a home get wet and dry out at different rates. This is typical in an area like ours, where the soil can expand rapidly even from being introduced to minimal amounts of runoff.

Eventually, an unsupported section of a foundation cracks away from the rest of the home and leaves a step-shaped crack, which usually indicates structural damage.

Concrete is relatively rigid, but an eight-foot wall can flex slightly before cracking under the pressure from the soil outside. If there are signs that they’re bowing inward, the wall is at risk of cracking and losing its structural integrity. Just because a foundation may be slightly out of plumb, however, does not necessarily mean it needs repair.

Although it stands to reason that a bowing wall is easier and more affordable to correct than one that has flexed to the point of cracking, the repair process is roughly the same and just as expensive.

Water intrusion is a pervasive issue. Water can enter the basement through cracks in the concrete or directly through the pores of undamaged concrete. (Because concrete is porous, it’s a common practice during construction to seal the outside of the foundation with a black coating which you may have observed.)

While you’re inspecting a home, pay attention to visible water in the basement, musty odors, visible mold growth, noticeably damp air, and efflorescence on the walls. Efflorescence is a white, powdery substance that gets left behind by intruding water.

When basement walls have been finished, it’s not possible to observe any cracks within a foundation wall. However, there are usually other indicators that may be visible, such as upstairs windows with cracked glass or that are difficult to open and close, interior doors that rub on the frame or will not close, irregular cracking within the walls or ceilings and/or under windows or around door framing, sloped floors, etc.. These are a few conditions that could indicate a foundation issue.

Homes with cinder block, brick or rock foundations are far more susceptible to water damage and/or movement from expansive soils as they are unreinforced.

Also worth inspecting is proper drainage, downspout extensions and inadequately designed or improperly installed gutter systems, vegetation (trees, shrubs, grass, etc.), sprinkler systems and planters, etc. All of the aforementioned could cause cracks in a foundation.

No one should buy a home without hiring a professional inspector, even if you have waived some of your rights to demand repairs. A professional inspector is typically not a structural engineer, but he/she will recognize indicators that you should hire a structural engineer to make a separate assessment of the foundation.

When you’re purchasing a home, you should be confident that it’s structurally sound and won’t end up costing you thousands of dollars in repairs.

Ava Tamber of Regional Foundation Repair and Jim Camp of Metropolitan Home Inspections assisted me in composing this article.