Real Estate – Page 42 – Jim Smith's Blog

Is a Recession Coming? And, If So, How Would It Impact Real Estate Market?

We Realtors have noticed a general slowing of the real estate market over these summer months, so I’m a little surprised that the statistics don’t reflect any significant slowing. The chart below is an example.

Even while the economy as a whole has shown signs of an impending recession through traditional leading indicators, and while showings are down and we’ve seen more price reductions recently, homes continue to sell, and sold prices are not yet going down significantly.

Median sold prices progressed through the $300,000s starting in May 2015, passing $400,000 in April 2018, fell back into the 300s from September 2018 through February 2019, then peaked at $421,000 this past May. They have stayed around that range since June, falling only to $418,000 in August.

Meanwhile, real estate trade publications and websites have featured numerous articles warning of an impending recession, which is causing buyers to hold off on making offers. Last Thursday, NAR’s chief economist, Lawrence Yun, was quoted as saying, “Super-low mortgage rates have not yet consistently pulled buyers back into the market. Economic uncertainty is no doubt holding back some potential demand, but what is desperately needed is more supply of moderately priced homes.” Yun predicted the low rates to continue through the end of the year, but also predicted that the sale of existing homes will not increase. He predicts home prices will rise by 3% in 2020.

Also last week, realtor.com released a survey of 755 home buyers, 51% of whom said they expect a recession this year or next year, and 56% of whom said that if a recession does occur they would delay their home search until the economy improves.

Three days earlier, realtor.com quoted its senior economist, George Ratiu, as saying, “This is going to be a much shorter recession than the last one. I don’t think the next recession will be a repeat of 2008…. The housing market is in a better position.” The biggest wildcard is probably the President’s back-and-forth on a trade war with China and the rest of the world, and no economist (or presidential advisor) can predict that.

Realtor.com went on to say, “Aspiring buyers hoping that home prices will crash, like they did during the Great Recession, are likely in for a rude awakening. There simply aren’t enough homes being built to satisfy the hordes of buyers. There isn’t likely to be a drop-off in demand anytime soon.”

We agree. Call us!

All-Electric Homes Are Practical Now, and Can Help Mitigate Climate Change

The typical American home is powered electrically but heated by natural gas, propane or other fossil fuels. You and I can generate our own electricity with solar panels, but there’s no way for us to generate natural gas or other fossil fuel energy, so the transition to a “net zero energy” lifestyle necessitates turning away from fossil fuels and going all-electric.

Fortunately, technology has advanced — just in the last decade — to the point where going all-electric is totally practical, affordable, and a way you and I can mitigate climate change

At Golden Real Estate, our office was heated with natural gas until November 2017, when we installed a heat pump “mini-split” system and had our natural gas meter removed. With 20 kilowatts of solar photovoltaic panels, we were able to eliminate our natural gas bill but not increase our electric bill. We continue to pay just $11 per month to be connected to the electric grid (which functions as our “battery” thanks to net metering), but we are generating all the electricity needed to power, heat and cool our office building. We even have enough electricity from the solar panels to power our four electric cars without buying any net electricity from Xcel Energy. We hope other businesses will follow our lead.

Making the switch to all-electric at home is still in our future, because — like you, I suspect — we prefer gas cooking, gas grilling, and having a gas fireplace.

If, however, we can get beyond those preferences, it is possible now to heat our home and domestic hot water using heat pump appliances, and to cook our food with electric or induction cooktops and ovens. Electric grilling is also available, although not as attractive from a taste standpoint to most of us.

All-electric homes was the subject of a talk by architect Peter Ewers at last week’s meeting of the Colorado Renewable Energy Society’s Jeffco chapter. You can view an archived video of Peter’s talk at www.cres-energy.org/video.

Once we have removed gas service from our homes (and gas cars from our garages), we will have also eliminated the risks of explosion and carbon monoxide poisoning, too. Wouldn’t that be great?

New Report Reveals the True Cost of Selling Your Home to an ‘iBuyer’

Perhaps you’ve heard about the new concept in home selling called iBuyers. Open Door, Zillow Offers and OfferPad are offering this way of selling your home. Basically, these firms use their own cash to buy your home and then re-sell it for a profit.

If you’re a seller who needs to sell quickly and you’re not worried about getting top dollar (or paying less in fees), the iBuyer model is an option that may not otherwise be available to you. You avoid the uncertainty of not knowing how long your home will sit on the market — or whether it will sell at all.

A company called Collateral Analytics has published a study of 4,000 iBuyer transactions in Phoenix which outlines the costs to sellers and the earnings vs. risks for these iBuyer companies. The report’s title is “iBuyers: A new choice for home sellers, but at what cost?” It was released two weeks ago. To read the full report, click on this link.

The last paragraph in the report is a good summary of their findings: “These preliminary empirical results suggest that sellers are paying not just the difference in fees of 2% to 5% more than with traditional agencies, and a generous repair allowance, but another 3% to 5% or more to compensate the iBuyer for liquidity risks and carrying costs. In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendor. For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile, but what percentage of the market will want this service remains to be seen.”

In May I got a call from a couple which was under contract with OpenDoor for $548,500, but with a 7% “service charge” and $38,563 for “repairs found in assessment.” This way of doing business annoyed them enough that they terminated with OpenDoor and listed with me at $498,000, selling for $507,000, which netted them more.

Above is one of 3 charts in the report. The analysis is from Phoenix, where OpenDoor began buying homes in 2016, because they didn’t come to Denver until 2018.

I’ve written in the past about companies which will buy your home “as is” for cash without putting it on the MLS. Then they flip the property to a new buyer for a profit — profit that you gave up by doing business with them. The same is also true with iBuyers.

Bottom line: Unless money is no object for you, you’ll do better listing your home with a full-service traditional brokerage like Golden Real Estate. Call any of us at the phone numbers below!

Just Listed: Rare Patio Home Near the Arvada Center

This 2-bedroom patio home at 8242 W. 67th Drive is in the Meadow Ridge patio home community just a few blocks west and one block south of the Arvada Center for the Arts & Humanities. It was just listed for $595,000. There are only 41 patio homes in the community, which was built by Designer Homes LLC, which has a 99 score from BuildZoom. And this is a fabulous home with high-end finishes. Every light fixture, for example, is a work of art, not the typical tract home builder light fixture. Be sure to look for them! Even the garage is beautifully painted and super clean! If you’re like me, you’ll also appreciate the full unfinished basement. Overall, I was super impressed, and I know you will be, too! True patio homes like this with zero outside maintenance are hard to find these days. View my narrated video tour at www.ArvadaHome.info, then come to the open house on Saturday, August 24th, 11am to 2pm or call Jim Smith at 303-525-1851 for a private showing.

South Lakewood Condo Just Listed by Andrew Lesko

Rarely do these condos come on the market! This 2-bedroom 1-1/4-bath, 1,015- sq.-ft. condo at 10930 W. Florida Ave #618 is located in West Lochwood. It was just listed for $228,000. The Lochwood Landings condo community is surrounded by 5 lakes, including Kendrick Lake Park & Cottonwood Park and numerous nearby hiking and biking trails. Walk to King Soopers, Starbucks, and many shops and restaurants. This condo is move-in ready, featuring fresh paint and newly installed carpet & flooring throughout. This is a desirable, second level, end unit with a southeast facing, covered balcony. It includes one reserved parking space and ample visitor parking. The most recent sales in the complex have been at or above $250K, making this an exceptional opportunity for a first-time buyer. You can view a narrated video walk-through at www.LakewoodCondo.info. For a private showing, call your agent or Andrew Lesko at 720-710-1000. Open Sunday, August 25th, 11-3.

What Requires a Permit, & Does Unpermitted Work Affect Your Ability to Sell?

My July 25th column described how a seller got into a legal dispute from not having disclosed an unpermitted basement finish done decades earlier. That story raised a question common among homeowners — what work requires a permit, and does failure to obtain a permit make it harder to sell a home?

Incorporated cities like Denver, Arvada, Lakewood and Golden issue the permits within their jurisdiction, but residents of unincorporated areas must get permits from their county’s planning and zoning office.

Each jurisdiction has slightly different requirements. For example, Golden lets you install a backyard fence up to 7’ without a permit (unless on a corner lot or in an historic district), but Jeffco requires a permit for any fence over 42 inches tall. Denver is more generous, exempting “posthole-dug fences” up to 8 feet high.

When it comes to structures, whether habitable or not, the requirements are fairly consistent. There is an International Residential Code (IRC) which is updated regularly, and most jurisdictions adopt the updated code with only minor adjustments.

I found only one jurisdiction, Golden, which provides a simple one-page PDF listing what does and does not require a permit. Click here for a link to that PDF. If you are in another city or unincorporated area, you can still expect that document to reflect what your jurisdiction might require of you.

Basically, any modifications to the walls, windows, roof, plumbing or electrical system of a home requires a permit, and it’s a good idea to obtain one, even though you can sell a home which had unpermitted work done, so long as you disclose that fact to your buyer.

Call or visit your jurisdiction’s planning department to find out what permits are and are not required for your home. You’ll find that most jurisdictions don’t require a permit for replacing cabinets, countertops, light fixtures, ceiling fans or plumbing fixtures in existing locations, or for roof or siding repairs/replacement (10% or less).

Denver exempts oil derricks, which I found to be a strange inclusion in its list of exemptions.

As mentioned in my earlier column, the standard Seller’s Property Disclosure form provided in the course of a real estate transaction asks the seller to disclose any work done without the required permit in the previous 12 months. If so, the seller should check “Yes” and use the space provided on the form to describe what was done.

If, however, the seller had work done more than 12 months prior to completing that disclosure form, I recommend that he or she use the comments column to describe the work done without a permit and when it was done.

Typically, this disclosure form is provided to the buyer prior to hiring a professional inspector to conduct a thorough inspection of all the home’s components. That way, the disclosure can be given to the inspector, which would cause him or her to pay special attention to the area of unpermitted work to determine if the work was done “to code” and without defects that the buyer might then ask the seller to fix.

By disclosing all unpermitted work in that document, the seller can forestall any claim after closing such as I described in my July 25th column. Listing agents should ask that question about older unpermitted work and handle it in this manner. I certainly will from now on!

If you’re in an HOA, you probably will need to get approval for repainting the outside of your house, concrete repairs, landscaping changes or even the location and color of exterior radon mitigation equipment — things that don’t typically require a city or county permit.

The reasons that permits are required make sense. Consider, for example, replacing a water heater or furnace. If they are gas appliances, today’s code requires that outside combustion air be provided so that the appliances don’t deplete the oxygen in your home, and gas-fired devices emit deadly carbon monoxide, so it’s important that they be installed correctly. It is only by getting a permit that you ensure the work is inspected by the city or county, which is a good thing, especially when it comes to health and safety.

In those cases, you’re probably hiring a contractor to do the work, and the contractor should be licensed with the city or county where the work is being done and should obtain the permit for you. If you are a do-it-yourselfer, you can get the permit as a homeowner, but the city or county may have you take a written test to show that you’re competent at the work being done — and it will be inspected. (I remember taking such a test when applying for an electrical permit in Denver — I failed the test…)

Permitting fees and requirements cause some homeowners to do work without getting a permit and hope they’re not caught. If the city or county catches you mid-project without a permit — something that happened to me in Denver in the 1990’s — expect them to issue a stop-work order and to double the permit fee.

At least in Golden (speaking again from experience), you can turn yourself in and get a post-facto permit without paying a penalty, but you’ll need to show that the work was done to code and have it inspected.

Property taxes are based on a market valuation of your home by the county assessor, and getting a permit for your finished basement, new deck or detached garage, etc. could result in a higher valuation and therefore higher property taxes for your home, but that’s not a good reason to avoid going through the permitting process. How much will your taxes go up? Let’s say your basement finish cost $50,000. It’s unlikely your home’s value will increase by the full amount of any renovation, but even if it did, the assessment rate is now 7.15%, which means your assessed valuation would only increase by $3,575. If your mill levy rate is, say, 100 mills, that means your annual property taxes would increase by only $357. But it won’t. And if you were to spend the same $50,000 on a kitchen or bathroom remodel, it might not increase the assessor’s valuation of your home at all, even though it was permitted, because it didn’t add any finished square footage to your home.

What the assessor values your home at is not based on what you paid for it, and neither is it based on what you spend to improve it. Your home’s valuation is based on the sale of comparable homes to determine what your home might have sold for on June 30th of the most recent even numbered year. Thus, even if you purchased your home on June 30, 2018 (the valuation date), the assessor won’t use what you paid for your home as the value of your home.

Theoretically, the county assessor’s office could monitor MLS listings and compare the description of your home with what their records show. But I have never heard of anyone’s assessor records being changed based solely on an MLS listing of their house.

If you have any questions that this column did not answer, please feel free to call me or any of our agents at the phone numbers below. I’m always happy to hear from my readers, and all of us are happy to answer your real estate questions.

Jim Smith, Broker/Owner, 303-525-1851

Broker Associates:

Carol Milan — 720-982-4941
Norm Kowitz — 303-229-3891
Andrew Lesko — 720-710-1000
David Dlugasch — 303-908-4835
Chuck Brown — 303-885-7855
Kristi Brunel — 303-525-2520
Carrie Lovingier — 303-907-1278
Jim Swanson — 303-929-2727

Amazon’s Deal With Real Estate Megafirm Realogy Could Be a Game Changer

Maybe you’ve heard about the recent deal between Amazon and Realogy in which they give buyers $1,000 to $5,000 in smart-home products if you let them assign you an agent.

Unless you’re in real estate, you probably never heard of Realogy. They’re a holding company which owns multiple real estate franchisers that you have heard of — Century 21, Coldwell Banker, Better Homes & Gardens Real Estate, Sotheby’s International Realty and ERA Real Estate.

Denver is one of 15 markets where Amazon’s “Turnkey” program is being rolled out, with the intention of making it nationwide.

Putting on my journalist hat, I pretended to be a home buyer and went to Amazon’s website for this program. I filled in my name, my non-Realtor email address, and cell number, and within a minute received a screening call from a man at Realogy affiliate OJO Labs, who asked me where I was looking (Golden & Arvada), price range ($500,000), and whether I owned and would be selling my current home. (I said yes.) Note: Since many or most buyers have homes to sell, this program is effective at generating seller leads, too.

Then he explained (because I asked) that he was sending a text message to all the participating agents in my market and the first agent who responded to the text would be my agent. I would not be able to select the agent.

Before he connected me to that agent, I asked her name and Googled it. She’s with a brokerage in Longmont, 45 miles by car from Golden. Of course, she didn’t tell me that herself, hoping I’d hire her to buy a home and probably to sell my current home. She also overstated her experience, which I was able to check online.

After saying I wouldn’t work with her, I received a call from a second agent. This one was from a Denver office of the same brokerage and knew me, so my pretense ended with her, but I was able to interview her about the program.

She confirmed that the program is run through Realogy’s relocation business called Cartus and that the participating agents are the ones who already get relocation leads. This program will be a windfall for those agents because the leads could result in both a listing and a purchase, whereas relocation leads are only for a either a listing or a purchase. It will be a windfall for Cartus, too, since, like all relocation companies, they take 30% or more of the agent’s commission. Amazon must be getting a big fee, too, which ultimately comes from the commission paid by sellers to the participating agents.

As I told Aldo Svaldi of the Denver Post when he interviewed me, this is a really smart move for Amazon and a great deal for Realogy, and I suppose companies like Golden Real Estate could lose market share, even though we do offer other advantages to using us, including free use of our own moving trucks, boxes and packing materials. And when a buyer also lists his or her home with us, we also provide free labor, saving our clients thousands of dollars.

In Real Estate, Truth Matters, Unlike in Politics and the Legal Profession

I was brought up to respect the truth by always telling the truth and expecting others to tell the truth. My father drummed this into me, as did the private schools that I attended. My boarding school, Choate, had an honor code (and still does) that required students to handwrite on every test or paper submitted, “I pledge this paper on my honor,” which we knew was shorthand for the following longer statement, “I pledge upon my honor as a gentleman that I have neither given nor received help on this paper.” (The phrasing has changed a little since the school went coed, but I’m told by the school that it’s still used and is, in fact, framed on the wall in every classroom and academic space: “On my honor, I have neither given nor received unauthorized aid.” In language classes, it’s posted in the language being taught – even in Latin!)

To this day, it upsets me when someone knowingly lies, and it pains me that some of America’s leaders, who serve as role models, have made lying in the face of clear evidence acceptable instead of condemned, as it should be.

So, I’m glad that I ended up in the real estate profession, where truth is important and is still honored. The National Association of Realtors, to which we agents are required to belong if we join any major and most minor brokerages, has a Code of Ethics to which we swear allegiance upon induction as members. In the preamble to the Code, the word “integrity” appears twice, including in this paragraph:

“The term REALTOR® has come to connote competency, fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in business relations. No inducement of profit and no instruction from clients ever can justify departure from this ideal.”

The Code of Ethics even commands Realtors to take action when they find another Realtor violating the Code. I myself have filed (and won) an ethics complaint against another Realtor who advertised that he was selling “4 homes every week,” violating the article which says members shall not misrepresent their level of success. That agent was ordered to stop making that claim in his advertising.

With the bidding wars of recent years, buyer clients have understandably wondered whether other agents were telling the truth when claiming multiple above-listing-price offers on a listing. I am pleased to tell them, and to state here, that I don’t recall ever being lied to by another Realtor, although I do worry on occasion when the agent on the other side of a transaction is a non-Realtor. Agents who are not NAR members don’t have a code of ethics to which they subscribe, which is why NAR advertising has often urged consumers to “make sure your agent is a Realtor.”

State laws regarding real estate do impose requirements of an ethical nature that aren’t imposed on other professions such as car sales. When you buy a used car (or anything else), it’s usually without any disclosure of past or current defects, but state law, like the Realtor Code of Ethics, requires that sellers of existing homes disclose all known past or current defects, and we can be disciplined even to the extent of losing our real estate license if we, as listing agents, fail to disclose a defect, past or present, of which we are aware.

Since every brokerage is also responsible for the actions of its agents (another term for the managing broker is “responsible broker”), every brokerage should instruct its broker associates to refuse to list any property where the owner is unwilling to fully disclose all problems or defects with the home. I’m happy to report that I have never had a seller who didn’t recognize and accept his or her obligation to disclose known defects.

One of the standard forms for every listing is the “Seller’s Property Disclosure” (SPD). The document itself is voluntary, but (1) I’ve never had a seller who refused to complete it, and (2) failure to complete it does not relieve the seller and his/her listing agent of their responsibility to disclose all known defects or problems.

The SPD is very thorough in the questions it asks, but one shortcoming is when it asks about unpermitted renovations. It only asks the seller to disclose renovations done without a permit in the last 12 months. This creates a loophole which can be exploited by an unscrupulous buyer after closing.

Consider the following scenario: the seller does not disclose a basement that was finished decades earlier because it was done professionally — and the SPD didn’t ask about it. A few weeks after closing there’s a plumbing leak in the renovation. The buyer hires a lawyer who takes the seller into mediation (required by the contract), where the lawyer asserts that the seller told a neighbor, “There’s a plumbing problem, but we’ll let the buyer take care of it.” The lawyer had requested separate rooms for the mediation, so there is no way to confront the buyer or lawyer on what the seller knows is a totally bogus assertion. The seller would have to reject mediation and go to trial, at great expense, to make the buyer produce the false claim from a neighbor. So the seller agrees to settle for a 5-figure amount, plus his already high legal fees.

To me, this is legal bullying, but such tactics are sadly a tool that some lawyers are willing to utilize.

Minneapolis Ends Single-Family Zoning — But Why?

I was surprised to read that Minneapolis has “become the first major U.S. city to end single-family zoning, a policy that has done as much as any to entrench segregation, high housing costs, and sprawl as the American urban paradigm over the past century.”

The premise that single-family zoning was actually intended as a tool of de jure racial segregation was news to me, but that’s what the article said.

Influencing the Minneapolis action was a 2017 book, The Color of Law, by Richard Rosenstein. The book’s subtitle is “A Forgotten History of How Our Government Segregated America.”

I’m not saying that I agree with the premise, but I find the argument both interesting and somewhat compelling.

The Dec. 7, 2018, article in Slate said, “Opening up Minneapolis’ wealthiest, most exclusive districts to triplexes, the theory goes, will create new opportunities for people to move for schools or a job, provide a way for aging residents to downsize without leaving their neighborhoods, help ease the affordability crunch citywide, and stem the displacement of lower-income residents in gentrifying areas.”

Slate describes Minneapolis as a “staunchly liberal” city, so this may be an isolated action, not likely to be replicated elsewhere, including here.

Some Favorite Home Improvements When Purchasing a New-to-Me Home

Who doesn’t want to make some improvements on a home they have just purchased? Here are some of my personal favorites.

Energy efficiency is very important to Rita and me, so the first thing we do is pay for an energy audit by someone like Andrew Sams of Alpine Building Performance to identify opportunities for making the home more air-tight. This would likely include blowing more insulation into walls or ceilings and caulking around windows. It might also include installing an energy recovery ventilator (ERV) to bring fresh air into the home. This device warms cold outside air in the winter and cools hot outside air in the summer by means of a heat exchanger.

I love bringing sunlight into a home, not with traditional skylights but with sun tunnels. Most people are familiar with the Solatube brand, but I prefer the Velux brand. I had Mark Lundquist of Design Skylights install a 22-inch Velux sun tunnel in my windowless garage and a 14-inch sun tunnel in my windowless laundry room — and four large Velux sun tunnels in the Golden Real Estate office. Ah, sunlight!

Speaking of sunlight, we replaced every light bulb is our house with LEDs which are “daylight” color (like sunlight), not cool white or warm white. CFLs and incandescent bulbs are so 2010!

Installing solar photovoltaic panels is a no-brainer for us, especially now that the cost has dropped so much. Your roof doesn’t have to face due south. Southeast and southwest are good enough. (That’s our situation.) Since you might be driving an electric car someday, install as much PV as Xcel Energy allows to cover that future load. If you have just purchased an EV, Xcel will allow you to install more panels based on anticipated future use.

Don’t you hate climbing a curb to enter your driveway? Developers install those mountable curbs the entire length of the streets in new subdivisions, not knowing exactly where each driveway will be. One of the first things I would do (and have done) is to hire a concrete company to replace the mountable curb with a smooth entrance. It cost over $2,000 for our 3-car-wide driveway, but I love it every time I enter from the street! Caution: the sidewalk will now be sloped slightly and pedestrians could more easily slip on ice, so be prepared to salt your sidewalk to eliminate icing!

When your gas forced air furnace needs replacing, consider replacing it with a heat-pump furnace or mini-splits. And when your gas water heater needs replacing, I suggest buying a heat-pump water heater. The cost is about the same, and, by converting to electricity for both, you will have eliminated the most common sources of carbon monoxide poisoning in your home.

Other improvements I’d consider include: Replacing carpeting with tile in bathrooms; and replacing regular glass with Low-E glass on south-facing windows to reduce the harmful effects of sunlight on furniture, hardwood floors and artwork.