Real Estate – Page 18 – Jim Smith's Blog

Realtor Magazine: Builders Need to Respond to the Home Electrification Trend

It isn’t in the print edition of Realtor Magazine, but a June 8 article on its website is titled, “The Future Is Now: Home Electrification.”

Regular readers of this column know that home electrification has been “now” for many years here at Golden Real Estate. At the Net Zero Store in our former building at 17695 S. Golden Road, Helio Home Inc. is busier than ever responding to people who want to replace their gas forced air furnaces with heat pump units and their gas water heaters with heat pump water heaters. (You can reach the Helio Home sales team at 720-460-1260.)

The primary focus of the Realtor Magazine article is on the need for home builders to include a larger electrical service as fossil fuels are phased out. Number one, it said, was to accommodate an electric car, since the major car manufacturers are committed to going all-electric or mostly so by 2030.

The article promotes the idea of installing solar photovoltaic (PV) systems to generate electricity for your home and car. With such a system, the author of the article correctly points out that the electrical grid can function as your home battery (thanks to net metering), but seems not to understand how it really works. He states that the utility will buy your excess solar generation but you might have to buy electricity for your car on a cloudy day. In fact, net metering allows you to send surplus electricity to the grid when you don’t need it, but you get it back at full value when needed. Everyone with a solar PV system should take advantage of the “roll-over” option allowing you to be credited for that surplus production long-term rather than get a check each January for the previous year’s over-production.

When the utility pays you for your surplus production, it does so at its cost of generating electricity — a couple cents per kilowatt-hour. But if you use your surplus electricity, you save the full retail rate (over 10¢ per kilowatt-hour) versus purchasing those kilowatt-hours from the utility.

Not understanding that process, the author promotes the idea of a home battery system, but, as I wrote before, that only needs to be considered if you have medical equipment which must run during a blackout.

The author promotes the installation of a 240V car charging station, suggesting that this could require a larger electrical panel in older homes. I disagree. The Level 2 charging station only draws the same electricity as your electric clothes dryer. If your panel can’t accommodate a dedicated circuit for the car, you could use the same one as the clothes dryer and not use both appliances at the same time. (I recognize that this is not what the code dictates, but it’s still safe if you have a 40-amp breaker on that circuit, because if you do run the dryer and the car charger at the same time, it would trip the breaker.)

Also, every EV comes with a 120V cord to plug your car into a standard household outlet. Although that only gets you 4 miles of range per hour, that’s still over 50 miles of range overnight, which may suffice, especially if you have other charging options during the day. Downtown Golden, for example, has ten free Level 2 charging stations in its garages and elsewhere.

Of course, there’s more to home electrification than car charging. The article points out that there are now electric outdoor tools—lawn mowers, leaf blowers, snow blowers, chain saws and more—that you can buy online or at Lowes. Ego Power is the biggest brand in this field, and their various tools all use the same interchangeable batteries.

Not mentioned in the article are the biggest consumers of fossil fuels—your gas furnace and water heater. As I said, you can speak to Helio Home about converting gas units to electric heat pump units.

For cooking, I have written in the past about induction electric ranges, and I’m really fond of our electric grill shown here. Lift it off its stand and you can use the grill on your countertop. You can’t do that with a gas grill! And it plugs into a standard 120V patio outlet. We bought ours at Home Depot for $100. Food grilled on it tastes just as good as when cooked on a gas grill.

Can the electrical grid handle the increased use of electricity over fossil fuels, given, for example, that by 2030 over 50% of car sales in America will be all-electric? You may have read warnings that widespread adoption of EVs will overwhelm our electrical transmission systems, but I disagree. Solar panels are being installed just as quickly and perhaps more so, and that electricity is consumed within your neighborhood if not by yourself, reducing the needed distribution from the utility. And, as I said, even with Level 2 charging, an EV only draws the same amount of electricity as a clothes dryer.

Home builders can and should adapt to this trend, and are in fact required to do so in some jurisdictions. Every new home should be solar-ready if not solar-powered, by building chases into the home which could accommodate the electrical lines serving roof-mounted solar panels. Also, garages should be wired with a 240V outlet on their front walls in addition to the usual 120V outlets on three walls.

I was encouraged to see that a new 300-unit apartment complex about to break ground in Lakewood between Colfax and 15th Place and between Owens and Pierson Streets is, according to the plans I saw, going to have over 40 EV parking spaces in its garage.

One of the more interesting flaws in the Realtor Magazine article was the suggestion that home garages should be insulated or even heated to avoid shortening the life of an electric vehicle’s battery. This is a misinterpretation of the fact that EVs lose range in the winter. It’s not that the battery loses power in cold weather, but rather that heating the car’s cabin uses battery power which thereby reduces the car’s range, as does the heating of the battery itself to its optimum operating temperature.

With the Rise in Mortgage Interest Rates, ARMs Are Making a Comeback and Can Save You Money

As mortgage interest rates rise, many potential homebuyers have asked me about the wisdom of using an adjustable-rate mortgage loan (often referred to as an ARM) to finance their home purchase.

Adjustable-rate mortgages, also known as “variable-rate mortgages” are mortgages that offer a low introductory interest rate for a specific period of time. The borrowers’ interest rate and correspondingly their monthly principal and interest payment will be “locked in” for the first five, seven, or ten years. For example, a 10/6 ARM means that you will pay a fixed interest rate for 10 years, then the rate will adjust every 6 months. A 7/1 ARM, on the other hand, means that your rate will be fixed for 7 years and then the rate will adjust every year.

Because the lender is not “locking in” the interest rate for a 30-year period, the borrower is sharing in the risk associated with rising rates. In exchange for the ability to increase the borrowers’ rate based upon future market conditions, lenders offer lower rates for ARMs than they do for 30-year fixed rate loans. The lowest ARM rates are offered on shorter terms, as an example, a 5-year ARM will have a lower rate than a 10-year ARM. The difference in today’s pricing for a 5-year ARM versus a 30-year fixed rate is approximately .75%, with a 5-year ARM being offered at 4.25% and a 30-year fixed rate loan being offered at 5.00%

Borrowers considering an ARM should know which index will be used to calculate their new interest rate, as well as the “margin” that will be added to the indexed rate to determine the “fully indexed interest rate” at the time of adjustment. While this might seem extraordinarily risky, all loans offered thru FNMA and FHMLC (and most jumbo lenders as well) “cap” the increases that can occur at each adjustment period as well as the maximum amount that the rate may increase over the life of the loan. Unlike the ARMs of previous years, borrowers are not allowed to make partial interest payments, so there is no risk of the loan amount increasing as the rate increases.

The most obvious benefit to choosing an ARM is lower monthly payments. While homebuyers will have to qualify for the loan based on the future higher payment price, they can take advantage of the lower payments by investing the savings somewhere with higher gains, making home improvements, or adding more to the principal balance to pay off the loan more quickly.

ARMs are typically best suited for borrowers who do not anticipate that they will still own the home at the time of the initial adjustment or those who anticipate increases in income that will keep pace with interest rate increases. If a borrower’s circumstances change, there is always the option to refinance into a fixed rate loan. Unlike ARMs of the past, there are no longer prepayment penalties to dissuade the borrower from refinancing once the initial fixed interest rate ends. If you decide to refinance from an ARM to a fixed-rate mortgage, the refinancing process is straightforward and is similar to when you purchased your home. When you refinance, you take out another loan that is used to pay off your original note, then your new payments are based upon the new loan.

As the housing market continues to change, Jaxzann Riggs, owner of The Mortgage Network, is available to answer questions and help you decide which loan options are best suited for your current needs.

You can reach out to Jaxzann with any questions at 303-990-2992. Mention that I suggested you contact her.

Zillow Has Published a Primer on Home Solar — Here Are My Reflections on It

On April 27, Zillow published an article, “6 Questions to Ask as You Consider Home Solar.” I thought it was pretty comprehensive, but it was written for a national audience, and some of the questions are readily answered for us here in Colorado.

The article begins by asserting that, according to Zillow’s research, homes which highlight eco-friendly features like solar sell up to 10 days quicker and for 1.4% more than homes that don’t. That statistic, however, fails to distinguish between homes which have fully-owned solar installations, and homes that have leased systems or “power purchase agreements.” Those alternative arrangements basically create a situation in which the homeowner purchases electricity from two companies instead of one — still a good deal, since the solar power typically costs less than the power purchased from the utility.

Zillow’s question #1 is whether your home is suitable for solar. We all know, of course, that a south-facing roof without shading is best, but there are other considerations, such as the condition of your roof. If your roof needs replacing before you put solar panels on it, you may want to include Roper Roofing & Solar in Golden among the solar companies you interview. It’s the only solar company I know which is also a roofing company.

One question posed by Zillow is whether your HOA (if you have one) will allow solar. Fortunately, Colorado passed a law over a decade ago (C.R.S. 38-30-168) which requires HOAs to allow solar and other sustainable improvements. HOAs can regulate appearance but not prohibit solar. For example, it could require that solar panels be flush with your roof rather than angled out from it.

The article points out that if your home is not suitable for solar, you should look into community solar, for which it provides a link. Community solar is also a good alternative for renters and condo owners.

The second question is how to find a reputable installer. Personally, I prefer to hire a small (and local) family-owned company over a national business with a local sales team. I recommend Golden Solar, which has installed five systems for me over the past two decades, and Buglet Solar Electric. The owners of those two companies, Don Parker and Whitney Painter, can answer question #3, which is what incentives and rebates are available on the federal, state, local and utility level. The current federal incentive is a 26% tax credit, which drops to 22% next year and expires the following year unless Congress extends it.

Question #4 is whether there’s net metering, which allows you to “bank” your daytime production for nighttime use and carry forward your surplus solar production to future months and years. In Colorado, the answer is a resounding yes.

Question #5 is about battery storage. Net metering, in my opinion, makes home battery backup/storage unnecessary unless you are worried about power outages. (If you have life-sustaining equipment that requires uninterrupted electricity, battery storage might be appropriate.)

Where battery storage is essential, of course, is in off-grid applications, such as in a mountain cabin without accessible electricity from a utility. I have listed such homes with impressive battery systems.

The last question which Zillow poses is whether a solar installation is worth it, admitting that this is a very personal decision.

A solar installation nowadays costs between $10,000 and $20,000 for the typical home, and you can ask the companies you interview what the return on investment will be. I have never worried about ROI, because installing solar, to me, is simply the right thing to do, satisfied as I am that it does pay for itself, whether in five years or ten.

One piece of advice not in the Zillow article is to factor in the increased electricity you will need when you buy an electric vehicle — which you will at some point, since most manufacturers plan to phase out gas-powered vehicles. Xcel Energy lets you to carry forward surplus generation from year to year, and allows you to install solar panels equivalent to double your last 12 months’ usage. (Do NOT elect to receive a yearly check from Xcel Energy for your excess solar production, because they pay you a small fraction of that electricity’s retail value — carry it forward for future use at its full retail value.)

Statistics, Oddly, Seem Not to Support the Idea That the Real Estate Market Is Slowing Down

We all know that the real estate market has slowed down since the dramatic April increase in mortgage rates — right?

Seeking to document and measure that slowdown, I checked the statistics available to me as a member of REcolorado, Denver’s MLS. Below is a chart of the statistics I gathered for the period Jan. 2021 to present. Analyzing that chart, you can see that while there are fewer active listings this May than a year ago, there are roughly the same number of sold listings — and they went under contract just as quickly, with a median days on the MLS (DOM) of just 4. And, more significantly, the median sold price this May was nearly $100,000 higher than May 2021, with a slightly higher ratio of sold price to listing price. April’s statistics year-over-year were even more impressive.

The smaller chart is a 7-day residential “Market Watch” widget that I copied and pasted from the MLS on Tuesday morning. Although I don’t know how to replicate what that chart would have looked like a year ago, it’s safe to say that it’s much different — and does not paint the same picture as the larger chart above. It definitely shows a vibrant market with lots of new, pending and closed listings, but the number of price reductions must be significantly higher than they were a year ago — and 10 times the number of price increases.

So, what does all this data mean for the average homeowner thinking of listing his or her home for sale?

The number of price decreases suggests to me that too many sellers are starting out with a listing price that might have worked in the past, but that is too aggressive for the current market. While the median days-on-MLS is still only 4, you can be sure that those listings lowered their prices a week or more into their time on the MLS. At the same time, that low days-on-MLS number tells you that the sellers who price their home correctly outnumber those who do not. Good for them. That’s the group you want to be in!

Another obvious conclusion is that while the dramatic increase in mortgage interest rates has impacted many buyers, there are enough buyers who are paying cash or are not deterred by the higher rates, which are still historically low. (When I bought my first home in 1983, I benefited from a subsidized interest rate of “only” 13%!)

Bottom line: Sellers should price their homes less aggressively. Buyers should focus on homes with a DOM over 10 days. That’s where the best deals can be found.

National and State Realtor Associations Make the Environment and Sustainability a Priority Issue

Many people, I’ve found, assume that Realtors, especially the top producers, must be conservatives who resist social policies, tax increases and liberal agenda items in general. That could include denial of human-caused climate change and opposition to any mandates that interfere with “individual freedom” such as mask or vaccine mandates.

Well, I’m pleased to report that, at the association level, we’re a pretty liberal bunch. Yes, I know a few Realtors who are hard-core Trumpers and live by the words of Tucker Carlson, but they’re in the minority.

Those Realtors would not have been pleased when the president of the National Association of Realtors apologized for NAR’s support of racist policies earlier in its 110-year history in his speech to the annual convention. Compare that to conservatives across the country wanting to ban books and classroom discussion about “critical race theory,” intended to rally the conversative base to vote out liberals on local school boards and elsewhere.

Then I read on pages 16-18 of the May issue of Colorado Realtor Magazine about NAR’s commitment to “ESG+R,” which stands for Environmental, Social, Governance + Resilience.

As the article explains, ESG “is a set of standards for a company or practitioner’s operations that investors (or consumers) use to screen potential investments. Environmental criteria measure how that company or practitioner perform as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance refers to policies around leadership, executive pay, audits, internal controls, and shareholder rights. In short, ESG evaluates if a company, organization, or practitioner is operating sustainably. Globally, sustainability is rated as an important purchase criterion for 60% of consumers.”

The Realtor associations go beyond ESG to add R for Resilience, which is an aspect of sustainability.

Knowing Golden Real Estate’s (and my personal) commitment to such issues, you can understand how pleased I was to read of NAR’s commitment to the same values.

The fact that the Colorado Association of Realtors (CAR) featured this NAR initiative in their monthly magazine suggests that Colorado Realtors are, through their association, fully on board with this issue.

What follows are some excerpts from the article which spoke to me:

“Sustainability is the evolution of long-term value creation for people, planet, and the economy. If sustainability is the journey, then ESG is how we measure progress,” said Ryan Frazier, CEO of Frazier Global, a Colorado-based management consulting and environmental, social, governance (ESG) advisory business.

“We must integrate a culture of sustainability throughout our association and industry. By building a resilient real estate market today, we can create healthy, vibrant, and diverse communities for generations to come,” said 2022 NAR President Leslie Rouda Smith.

“Leading by example, NAR is driving the real estate industry toward a more efficient and sustainable future,” said NAR CEO Bob Goldberg. “As part of this responsibility, we are strengthening the association’s support of sustainability efforts and increasing engagement on policies and programs that prioritize viability, resiliency, and adaptability. We are working to generate meaningful, lasting change that will benefit both current and future generations.”

Millennials now make up 43% of homebuyers, the most of any generation, according to a 2021 report from the National Association of Realtors—and that number is only predicted to rise. And this generation has a reputation for being values-driven in their approach to their money and their careers. These choices drive where they choose to work, play, and buy a home. About one-third of millennials often or exclusively use investments that take ESG factors into account, compared with 19% of Gen Z, 16% of Gen X and 2% of baby boomers, according to a Harris Poll on behalf of CNBC, which surveyed 1,000 U.S. adults ages 30 to 40 on a variety of topics. The escalating importance of ESG doesn’t just impact homebuyer sentiment. It will also matter to brokerage firms looking to hire the best and brightest agents. Companies that promote strong ESG values tend to attract and retain the best talent.

The Purple Report on ESG and Real Estate [by NAR] had 703 respondents. 51% live in Colorado and own a home or want to own a home in Colorado and 49% live outside the state but expressed an interest in buying a home in the state.

KEY FINDINGS:

When asked, are you more likely or less likely to work with a Realtor who has a proficient level of knowledge and training on sustainability and sustainable housing practices when it comes to buying, selling, or investing in a home? 70% of respondents were somewhat or much more likely.

When asked, do you agree or disagree with the viewpoint that as the number of severe weather conditions, droughts, wildfires increase due in part to climate change, and with the potential risk to homes and commercial properties, Realtors need to be helping provide solutions that address climate change risks? 67% of respondents said they agree. The number jumped to 80% among those ages 18-24, and to 79% of those earning $150,000 a year or more.

As the National Association of Realtors Code of Ethics preamble tells us, “Under all is the land.” Our planet is the one resource we all depend on, as will our heirs. The best time to care for it — and for them — is now.

Reflections 7 Weeks After Selling Our Home and Moving into a 55+ Rental Community

In my March 10 column (read it at www.JimSmithColumns.com), I announced that Rita and I had decided to sell our Golden home and become renters for the first time in 50 or so years for both of us. A year ago, I could not have predicted such a decision so early in our youthful 70s. I thought you’d like to know how that has worked out for us, in case I got you thinking about a similar move yourself.

Our reasoning was simple. We felt that our home, which we could (and did) sell for 2½ times what we paid for it ten years ago, was unlikely to keep appreciating, and the money we would pocket from selling could more than support us for the rest of our lives. Since I’ll continue making a good income as a Realtor for several more years, we could pay all our living expenses without touching the principal, which we have since invested half in equity stocks and half in a Transamerica annuity with downside protection. (Ask me if you’d like references to our two advisors.)

Zillow and other valuation models show our former home continuing to appreciate, which is good news for our buyer, but it’s hard to predict how much longer that will be true. I feel we may be at or near the peak of the market. The experience with other listings in the past month suggests that, yes, the market is softening, triggered primarily by the rapid rise in mortgage rates.

So, are Rita and I happy in our new 2-bedroom/2-bath rental? The answer is a qualified “yes.” It definitely was an exercise in “letting go” to move from a 2,639-sq.-ft. home with its 3-car garage and its 2,281-sq.-ft. basement full of “stuff” into our 1,096-sq.-ft. apartment. I made countless trips to Goodwill, plus targeted donations elsewhere. We gave three unused bicycles plus accessories to the Golden Optimists’ Bicycle Recycle program, gave our gas generator to a Habitat for Humanity group, gave our air compressor to our handyman who uses it to blow out sprinkler systems, and, most helpful of all, included virtually all our furniture in the sale of our home.

It was, in short, quite a process of letting go, not just of miscellaneous possessions accumulated over the years, but also of family heirlooms which had been passed down over the years from our two families.

We had boxes and boxes of artifacts and papers in our basement which we spent many hours culling, recycling most of it. (I didn’t quite finish and have a few boxes in storage that I will get to “sometime.”)

Yes, we rented storage space — both a long-term unit at Public Storage and two small cages in our apartment building a short distance from our apartment for short-term storage — stuff that might otherwise go in a pantry or closet if we had a larger unit.

Long before we had decided to sell and downsize, Rita and I had purchased a week-long cruise of the Mediterranean, which began three weeks after our move into the apartment. We had barely settled in by that time, and the cruise allowed us to experience living in 200 square feet for long enough to make our 1,096-sq.-ft. apartment feel rather spacious when we returned.

As I write this, another 16 days have passed, and we are finally settled in and enjoying our new digs. We spend a lot of time on our south-facing balcony with its view of Green Mountain and the foothills. We watch less TV, having “cut the cord” and subscribed to YouTube TV. We watch much less news and more Netflix movies and programs.

We are also beginning to take advantage of the many programs at Avenida Lakewood, although the press of business is keeping me from taking the yoga and fitness classes which are offered. Shown here is a picture of the sign in our elevator listing the various facilities in the building, to give you an idea of what’s offered. A recent census reported by our community manager said that 70% of the 266 residents in Avenida’s 207 occupied apartments have participated in 9 or more activities, and that 57% of February’s programs were created and led by a resident. There were 314 programs on the March calendar. Talk about “active living”!

Continental breakfast is served daily except Sunday on the main floor and is one of many opportunities to meet fellow residents. Being on the 4th floor, we also meet people in the elevator, and everyone is super friendly. Residents don’t pass each other, indoors or on the sidewalk, without saying “hello.” This is a contrast from our single-family subdivision, where there were few opportunities to meet our neighbors. I already know more neighbors in this building than I knew in that subdivision.

Rita has made use of the full-service salon, where I have already had a haircut. Rita joined a card game and a Mahjong group, meeting additional neighbors that way. I attended the men’s group where we discussed possible events. I will be driving up Mt. Evans with some of the men after that road opens.

At this time, 95% of the apartments at Avenida Lakewood have been leased. (It was only opened in the summer of 2019.) Soon they will start creating a waiting list. Call me if you’d like to know more or be introduced to the sales staff. Don’t call me if you smoke, however. It’s not permitted anywhere in the building or on the grounds — even within your apartment or on your balcony.

In conclusion, Rita and I feel that we made the right decision. Thanks to the nest egg we created by selling our home, plus Medicare and our long-term care policies, we feel that our future is secure and we can even splurge on more vacations.

I don’t know how many communities there are like Avenida, which charges rent with no “buy-in” that would tie up capital that could otherwise be producing income. Jenn Gomer of CarePatrol told us about Avenida and we didn’t look further. I recommend calling her at 720-788-2364 if you want to know other options.

For Rita and me, we like the flexibility of our one-year lease which gives us the freedom to stay or move a year from now.

Here’s Some Advice to Sellers in a Slowing Real Estate Market

We all realize by now that the real estate market is slowing due to a reduced buyer pool, caused in part by the increase in mortgage interest rates.

Here’s some advice to sellers who don’t want their home to sit unsold on the market.

1) Reconsider buying your replacement home first, expecting to sell your home immediately. That strategy was based on the difficulty in finding a replacement home. Now you can sell first, have a 45- to 60-day close and reasonably expect to find your replacement home before you have to surrender your current one.

2) Don’t price your home based entirely on recent comparable sales, but price it slightly lower. Buyers know the market is softening and will be looking for a good deal.

3) With an increased inventory of listings, it’s more important than ever to stage your home and improve its curb appeal as well as its interior appeal.

4) Listen to the market. If you get few showings and no offers in the first week, don’t wait to lower the price.

5) Magazine-quality pix and video are more important now to make your home stand out. Hire an agent who will order professional HDR still photos, shoot a narrated video tour and drone video, and market your home the way Golden Real Estate does.

When interviewing a listing agent, ask him or her to bring their Matrix productivity print-out instead of trusting their verbal description of their level of success with prior listings.

The Sharing of Listing Commissions With Buyers’ Agents Is Being Challenged

The way real estate agents are compensated differs from that of any other industry, thanks to the creation of the Multi-List System or MLS, the essence of which is “cooperation and compensation.” Imagine going back to the days before the MLS when a real estate broker could only sell his own listings. The only way to have brokers show you listings of other brokerages is if each brokerage agrees to cooperate with sales agents from other brokerages by sharing their listing commission if they produce a buyer.

Litigation against the National Association of Realtors by the Department of Justice and other plaintiffs threatens to outlaw that system, which would have huge negative consequences not only for the industry but for buyers and sellers.

I like to contrast how we are compensated with how car salesmen are compensated. Imagine if you were in the market for a car and went to a Ford dealership and spoke with a sales person who listened to your desired features and told you that a Chevrolet or Toyota would suit you best. On his computer, he finds a dealer who has that model or models. He takes you to the other dealer’s lot, find the vehicle, get the key out of a window lockbox and take you for a test-drive. He or she could then write a purchase contract for that vehicle and earn the same commission from that dealership as from his own.

But it doesn’t work that way. The sales person at each dealership can only sell that dealership’s cars.

As an aside, there are auto brokers who are hired by car buyers. These brokers can find a dealer with the car you’re looking for and get compensated by the car dealer and not by the buyer. I used an auto broker myself in 2012 to buy a Chevy Volt, which was a brand new model and hard to find at any Chevy dealer. He found one that was en route to an Aurora dealership, which paid him a commission after I took delivery. But auto brokers are an exception. The car sales persons working at the typical car dealership cannot broker your purchase from another dealer the way I can broker your purchase of a real estate listing from any real estate brokerage.

This system of enabling any real estate broker to sell any other broker’s listing and earn a “co-op” commission is at the heart of our industry’s success, but some parties are trying to convince the Department of Justice and the federal judiciary that buyers, not sellers, should compensate their brokers.

But here’s a point that is being missed in this debate — the seller is NOT paying the buyer’s agent. Yes, it’s the seller’s money that goes to the buyer’s agent, but the listing agent is the one who is paying the buyer’s agent out of the commission which the seller has agreed to pay him or her. It says right in the listing agreement (Sec. 7.1.1) that the listing brokerage “agrees to contribute from the Sale Commission to outside brokerage firm’s commission as follows: __% of the gross sales price….”

Of course, at the closing table the seller’s settlement statement shows both commissions (to listing broker and selling broker) debited to the seller, but the total equals that specified in the listing agreement.

If the courts agree with the plaintiffs and with the Department of Justice in this matter, it would be a sad and unnecessary disruption of a process which has benefited both buyers and sellers and contributed to our healthy real estate market.

The outlawing of co-op commissions would be so disruptive that, yes, the industry could adapt but it’s hard to imagine that it would be as easy to buy and sell real estate.

Don’t Fall for This FSBO Scam Regarding Vacant Land

There have been reports of scammers pretending to own vacant land that has no mortgage on it. They advertise it “for sale by owner,” seeking a quick close at an attractive cash price. They claim to be out-of-state and do a mail-out closing providing forged IDs to an out-of-state notary. They communicate only by text or email.

A licensed broker could be fooled into listing such a property with the fraudster, giving it an additional air of legitimacy.

Both brokers and prospective buyers can protect themselves by checking public records for the name and address of the property’s legal owner and reaching out to them. Some of us (including me) have an app to find the real seller’s phone number.

When Can Buyers and Sellers Talk Directly With Each Other?

There’s a well-established protocol that buyers and sellers are to communicate with each other solely through their agents and not directly during the course of a transaction to buy and sell a home. Here are two things you may not know.

Sellers can talk with buyers and/or their agents at open houses as long as they only discuss features of the house and not price or terms. They can also give their cell number to inspectors to answer questions that may arise during the home inspection.

At closing, buyers and sellers are advised to exchange contact info so they can be in direct communication later on for any reason. During a pre-closing final walk-through, I like to make the seller available to provide an orientation to the buyer to explain how things work.