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Last week I documented how our real estate market is showing signs of slowing. In that column I noted an increase in the number of price reductions for metro area listings and compared statistics from this summer with those from last summer, showing how the ratio of sold price to original listing price and the median days on market suggest a slowing in our real estate market.

One reader asked whether prices were also leveling off or falling, so this week I am presenting that data. As documented in the chart below, the answer is pretty obvious — prices have increased from 6.8% to 9.8% year-over-year this summer, and price per square foot has increased from 5.4% to 9.4% year-over-year. That’s comparable to or greater than the increases experienced in previous summers.

That presents an interesting dichotomy. We are not seeing as many quick sales and multiple offers, and we are seeing more price reductions than last year, yet the median sales price is increasing. It’s hard to come up with a reasonable explanation of what’s going on, but I’ll keep working on it!

I’ll be curious to see how market activity and price changes look this coming winter compared to last winter.  In the past I have pointed out (more than once!) that winter can be the best time to sell a home. That’s because there are fewer listings yet lots of buyers are still getting email alerts from the MLS whenever a new listing matches their search criteria. I myself have 60 different clients receiving email alerts based on their different search criteria. You can be sure that when these would-be buyers get an email describing a house they want to see, they will call me to see it — even on Christmas eve or in a snow storm!

That’s the nature of our changed real estate business. Buyers and not their agents are doing their searching and finding online, then asking their agents to set a showing.

Remember: Summer may be the “listing season” in real estate, but there is no one “selling season.”

 

Last week Realty Times, an online news service, had an interesting article that caught our attention. It was about a long-standing law in the District of Columbia that is designed to protect tenants from being displaced when a landlord sells their home, condo or townhouse.

Although only 5% of tenants have been able to exercise the right of first refusal granted by that D.C. law and it has just been modified to exempt some properties in some situations, it presents an interesting concept that could make sense if properly designed.

However, Golden Real Estate has a program that is even better, because we have a buyer who will purchase that home for cash, guaranteeing the tenant the right to stay up to 5 years with pre-specified and reasonable annual rent increases and the opportunity to purchase that home when able. The tenant need only be pre-qualified as a tenant (with a $75 application fee) and does not have to qualify as a buyer.  While the tenant has the right to purchase the home over the next 5 years at specified prices, he also has the right to leave after each one-year term without purchasing the house.

Under this arrangement, if a tenant learns that his house is going on the market and he’s at risk of being given 30 days’ notice to vacate, he/she can call us we’ll set that tenant up with our buyer, Home Partners of America, who will qualify the tenant immediately, then make a cash offer to buy the house, just like any buyer.  Call me at 303-525-1851 to apply.

The home itself has to qualify. It can’t be a condo, and can’t be priced over $550,000.  We function as Home Partners’ agent.

 

Selling your home is no small matter, and small mistakes can lead to big losses. So who can you trust to do right by you or to give you sound advice?  That’s what prompted me to start writing this column over a decade ago and why I archive all my columns going back several years at www.JimSmithColumns.com.

A couple weeks ago I wrote about an agent who has been very successful getting listings by claiming to have a buyer and offering to cut his commission in half if he sells it himself — but who admitted to me on the phone that he refers all buyers to an agent who’s not even in his own brokerage (earning a nice referral fee) and hasn’t “double-ended” one of his own listings since March 2017.

In another previous column, I instructed readers on how to verify agents’ claims of success by going to www.REcolorado.com (our MLS) and clicking on Find Agent > View My Listings > Properties I’ve Sold.  I created www.FindDenverRealtors.com as a short-cut to take you directly to that agent search page on REcolorado.com. If any seller had searched for the above-mentioned agent on that web page, he or she would have known in advance that that agent had not provided the buyer for any of his sales in over a year. It’s so easy for an agent to claim he or she has a buyer for your house, and then say after getting your listing, “Oh, sorry, that buyer found another house. The timing was just not right.”

So, not verifying claims about having a buyer is the one of the bigger mistakes that I see sellers making.  My suggested response to that pitch is, “Bring me your buyer and I’ll consider the offer.  If I accept that offer I’ll pay you 2.8% commission, but I won’t list with you just because you claim to have a buyer.”  Don’t be surprised, then, that the buyer “found another house.”

That brings me to the second mistake I see sellers make: accepting the first good offer you get. You should treat any unsolicited offer as the opening bid on your home. And keep in mind that anyone who offers to buy your house for cash without putting it on the market is doing so with the intent of flipping it and making a minimum 5-figure profit.  Yes, he may save you something on commission, but only by putting your home on the MLS will you expose your home to the full universe of potential buyers and thereby get the highest price.

That brings us to the third mistake — not having an agent on your side. You don’t want to be the only party to a transaction who doesn’t know what he’s doing. Sellers without an agent typically still pay 2.8% to a buyer’s agent, and for a couple percent more would likely net much more by exposing their home to other buyers and their agents.

Once you’ve decided to have an agent on your side, we encounter mistake #4: not asking the right questions when interviewing listing agents. You can find my suggested interview questions in previous columns at www.JimSmithColumns.com.

Another mistake I see again and again is overpricing the home.  In a wild and crazy seller’s market like we’ve been experiencing, it is tempting to overprice a home. But how do you know what the right price is?  I’ve written about this before, but the short answer is to price your home based on previous sales, not on future expectations. It’s difficult to underprice a home, because a lower initial price is likely to attract more buyers and create more interest.

Have you ever attended an auction? Does the auctioneer start the bidding at what he expects to sell the item for?  Of course not. He starts it low enough to get several bidders in the game, and then the price is bid up and up until only the highest bidder remains. That’s how I train our broker associates to sell homes.

It stands to reason that a higher number of motivated buyers will lead to a higher selling price. Asking buyers to submit their “highest and best” is the easy but usually not the most effective strategy for maximizing sales price. That would be like an auctioneer cutting off bidding after getting one bid from each bidder!  I advocate telling buyers’ agents exactly what the current highest price is and going back to other bidders and asking them if they want to resubmit. This takes more work and a degree of patience, but it will not only get you the highest price for your home, it’s also the fairest way to sell a home in a seller’s market, something most buyers’ agents seem to appreciate.

After all, what buyer wants to find out that it he had only offered $2,000 more he would have won the bidding on a house he wanted to buy?  At the same time, what seller wants to question whether he or she could have gotten more for their home if their agent had priced the home correctly and worked the multiple offers instead of recommending acceptance of the “highest and best” offer?

Take the time to visit my website of previous columns, and scroll down through the headlines.  When you find a headline that speaks to you click on the date to read the column on your screen or to download a printable PDF of it. You could learn something that might save you lots of money and heartache.

 

We had a great turnout of EVs and people interested in buying an EV at our event last Saturday. A special treat was the participation of four owners who brought their new Tesla Model 3s, three of which are shown in this picture. The one on the left had only 26 miles on the odometer, because the owner drove it straight from taking delivery of it that morning! During the event we received notification that lifetime free supercharging with a referral code for certain Tesla models is being discontinued after Sept. 16th — next Sunday! If you want to take advantage of that offer, you can use my own referral code, by going to this website URL: http://ts.la/james6985.

 

Although the often dreaded Homeowners Association (or “HOA”) has been around for a long time, its widespread use goes back only a few decades. Prior to, say, 1980, it was common for new subdivisions to have covenants, but no reasonable way to enforce them.  This begs the question; “why have covenants if they can’t be enforced?”  Enter the HOA, an entity designed and created to answer that question.

Many early covenants had provisions that after 30 years or so the majority of homeowners would have to petition to renew them. Some covenants had the opposite provision — i.e., they automatically renewed unless a majority of homeowners agreed to abandon them.  All covenants, whether still valid or not, are recorded and thus provided with other title docs.

Let’s say you live in a subdivision with still  enforceable covenants but no HOA.  The only way to enforce the covenants against a homeowner who is in violation of them would be for one or more homeowners to file a civil suit against the offender.  Obviously, that is not practical, which is probably why developers of new subdivisions started including an HOA in their CC&Rs — Covenants, Conditions and Restrictions.

Some older subdivisions such as 6th Avenue West have created “neighborhood associations” with voluntary dues (usually under $100 per year) which are used to create community through various activities, such as picnics and newsletters.  That sense of community can in turn contribute to social pressure for members of the community to abide by the provisions set forth in the covenants.

Lakewood Estates, a 1980s subdivision across Jewell Avenue from White Fence Farm, has taken this approach a step further. This voluntary HOA exerts pressure and has even shown a willingness to take legal action against residents who violate provisions of their older, but still existing covenants.

What neighborhood associations can’t do is to levy fines against homeowners. HOA fines can become liens against the property, too, so they always get paid, along with unpaid dues, even if only at closing upon sale.

Do you have experience in dealing with old and possibly unenforceable covenants in the Denver Metro Area? I’d love to hear about it. Contact me at 303-525-1851 or email me at Jim@GoldenRealEstate.com. I may do a follow-up article on this topic.

(Because such laws and regulations vary from state to state and even county to county, I can’t assist people outside my service area.)  

By now it should be clear to you — as it is clear to the automotive industry — that electric vehicles are neither a passing fad nor something that only the wealthy can afford.

Some manufacturers, including BMW and the Volkswagen Group (12 brands from seven European countries) have stated that they will convert their entire fleets to electric propulsion within the next 10 or so years, which makes sense since several countries have indicated they will ban the sale of cars with internal combustion engines by 2030 or 2040.

If you haven’t seriously considered owning an electric car, now is a good time to investigate what is already being offered by different manufacturers.

Drive Electric Week, presented by Plug-In America, the Sierra Club, and the Electric Auto Association, is your opportunity to meet and talk with current owners (not dealers) of electric cars, get your questions answered, and even take a ride in one or more models.

For the 5th year, the parking lot of Golden Real Estate, at 17695 S. Golden Road, is one of many venues for this event. Already 30 owners are registered to bring their EVs, and another 30 or so people have registered at www.DriveElectricWeek.info to attend on Saturday, Sept. 8th, 10 am to 3 pm.  Denver and Boulder have their events on Wednesday,  Sept. 12th. (Details are on that same website.)

 

When I was a new agent at Coldwell Banker, my trainer shared the expression “listors last.” In other words, our goal should be to succeed as a listing agent, even if we get our first paychecks by representing buyers. But how does one get listings? You can solicit your “sphere of influence” (i.e., friends and family), but that can take you only so far. You can hold open the listings of busier, established agents who either can’t or don’t want to hold their own listings open, hoping that an unrepresented buyer comes along who also needs to sell their home but hasn’t yet hired a listing agent.

Some agents specialize in cold-calling expired listings or For-Sale-By-Owner listings. If you have your home on the MLS and the listing expires, be prepared to be deluged with letters, phone calls, emails and door knocks from agents claiming they can succeed where your previous agent failed.

I got my start by “farming” a subdivision in Golden. The practice is called “farming” because you are “planting seeds” and looking to “harvest” listings as the homeowners come to know and appreciate your newsletters, calendars, garage sales and other special events or services for that subdivision.

Nowadays, I get most of my listings from people who have been reading this column for a decade or more and feel confident calling me when real estate needs arise, sensing that I understand the real estate market better than their friend or relative who got their real estate license, and better than the agent who sold them their home (if they even remember who he was).

Then there’s the approach taken by an agent I’ll call John (not his real name).  His approach is to hire Door Hangers Direct to print flyers that look hand-written saying, “Call me. I may have a buyer for your house.”

Notes from John with that message were taped to the front doors of two Golden Real Estate listings — one a year ago and another one last week. Since the notes looked hand written, my initial thought was that another Realtor had violated our Code of Ethics as well as Colorado law by soliciting one of our sellers. However, because distribution by a third party is considered “mass advertising” (even though it looks individually written), that rule does not apply, so long as the message contains a disclaimer (usually in small print) saying that it is not a solicitation if your home is currently subject to a valid listing agreement.

To see how successful this approach might be, I tracked down 10 sellers who had listed their homes with John earlier this year.  Most of them told me they had listed with him because of the note found on their front door. Seven of the 10 recommended him.  Two were annoyed that John did not in fact have a buyer for their home. Indeed, of the 24 listings sold by John in the past 6 months, neither John nor anyone else in his brokerage brought the buyer.  Industry wide, about 5% of listings are sold by the listing agent.  I had to go back to March 2017 to find one of John’s listings that he sold himself.

From my interviews I learned that John offers to cut his listing commission in half if he sells the home himself, but that’s an empty offer, given that, as one disappointed seller told me, “John only lists homes, he doesn’t sell them.” John confirmed this himself, telling me an interview that he refers buyers to agents from another brokerage, instead of handling them in-house. And he doesn’t hold open houses where he might encounter unrepresented buyers. (He was surprised that I do.)

Claiming to have a buyer has long been a technique for obtaining listings, and smart agents like John cover themselves in their notes by saying they “may” have a buyer, not that they actually have one.

How Top Producing Agents Work

Getting to know “John,” I’m reminded of the business model of famed real estate coach Tom Ferry.  John is one of Tom’s students and practices what Tom preached.

My first year in real estate, 2002, I attended one of Tom Ferry’s “Super Star Summits” in Palm Springs. Tom espoused several practices, including the following:

Delegate everything you can.  Hire vendors to print and distribute flyers and newsletters, to install and remove yard signs, to take photos and create virtual tour, to enter listings on the MLS, and to manage transactions through to closing. Don’t waste your time with open houses, and refer out (for a 25% referral fee) all buyer leads, including your sign calls.  Instead of answering your phone, change your voicemail greeting every day saying you’re with clients most of the day and will return calls between certain hours.  In other words, it’s okay to lie. 

Tom Ferry’s system works, but it’s not for me.

 

 

A recent report by ShowingTime, one of the nation’s biggest showing services, indicated that real estate showing activity in the western states has slowed by 6.9%, while increasing 0.2% nationwide.  But that’s only one study by one company.  And while ShowingTime might be a major player on the national stage, the Denver market is dominated by Centralized Showing Service (CSS). I searched their website for statistics on this subject.

According to CSS, showings of listings in Jefferson County — based on an analysis of eight diverse ZIP codes — are up by 30% this summer (June 1 through August 21) over the same period in 2017. Denver was even more active, with showings up 40% over that same period last summer.

Despite that surge in showings, REcolorado, our metro area MLS, shows that sales are not increasing, but are showing barely any let-up from the previous four years, as shown in these two charts:

The agents at Golden Real Estate have observed a slowdown in sales activity in recent weeks, and that slowdown is reflected in the fact that as of this Tuesday there were only half the number of sold listings in Jefferson County and Denver as there were in all of August 2017, suggesting the figure will be down somewhat when this month closes out next week.

I’m often asked whether we’re about to see an end to this seller’s market, and my reply is in the negative. This is due primarily to the shortage of new homes and condos being built, while the net in-migration of people moving to Colorado (primarily to our metro area) from other states remains quite high.  The housing market has no immunity against the law of supply and demand, and as long as there are more people relocating to our area than there are homes being built, we’re going to remain in a seller’s market. This more-people-than-homes scenario means many would-be buyers have been forced to rent.   Rental apartments, which have been built in great numbers throughout the metro area, are absorbing most of these would-be buyers..

Prior to, say, 2012, those apartment buildings would have been built as condominium projects, but condo construction dropped nearly to zero in recent years because of the state’s construction defects law.  In 2017, new legislation reduced the legal and insurance risks associated with building condos, so that trend toward building apartments instead of condos is gradually abating, and after the mandatory six years of “repose,” many of those apartment buildings may be converted to condos.

The MLS is limited in its ability to show how many condos have been built and sold since the change in the construction defects law, because condo sales by builders are not typically reported on the MLS, meaning they can be found only by searching public records.

Even with the coming resurgence of condo construction, the fact remains that many would-be buyers are stuck in rental apartments because of the continuing overall shortage of homes for sale.  Any increase in the number of homes on the market has been wiped out by an increase in the number of sales.  For this reason, inventory levels have remained at either one or two months since January 2014.

Conventional wisdom says that May through July is the “selling season” for homes, primarily because of families not wanting to move during the school year. However, I would suggest that real estate sales are no longer seasonal and that May through July should be thought of as the listing season instead of the selling season, if only because so many sellers believe that it’s the best time of year to list their home. Nowadays winter is the best time to list a home for sale, because there are just as many buyers but fewer listings, because other sellers are waiting for the “selling season.”

 

Dear friends,

As you may already know, Golden Real Estate is a founding member of Good Business Colorado, and we’re holding an event called the GBC Summer Happy Hour next Friday.

Come and enjoy happy hour with me and other founding members of Good Business Colorado on Friday, August 24th, 4:00 to 6:30 p.m., hosted by Illegal Pete’s at 270 S. South Broadway (northeast corner of Alameda & Broadway). Meet current members, along with other responsible business owners from around the metro area, and hear more about this exciting new business group. Chips and salsa will be provided for snacks!

You can also learn more about GBC (and why I love its mission) at www.GoodBusinessColorado.org.

Can you join me? Click here for details and to RSVP: https://actionnetwork.org/events/gbc-summer-happy-hour-2?source=email&

 

Denver appraiser Fred Rossiter had this as the topic of his most recent blog post, and he makes a compelling argument that providing a rating condition on MLS listings is not only a good idea but easy to implement in a fair and reasonably consistent manner.

As Fred states in his first paragraph, which you can read at www.FredRossiter.com, condition “is neither asked nor is there a field provided for an answer.  Condition is a glaring omission on our MLS input forms.  It’s time for a change!”  I agree.

You may think that a listing’s condition is too subjective to quantify, but he points out that Fannie Mae has created a “Property Condition Rating” system that all appraisers must follow and which could easily be adopted by REcolorado, Denver’s MLS.

Here are the 6 ratings which appraisers can assign to homes, along with guidance for selecting each rating:

C1—The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation.

C2—The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.

C3—The improvements are well-maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well-maintained.

C4—The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.

C5—The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. The functional utility and overall livability are somewhat diminished due to condition, but the dwelling remains useable and functional as a residence.

C6—The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.

For each of the above ratings, Fannie Mae provides “notes” giving additional guidance about selecting each rating level, which makes it easy even for a non-appraiser such as a listing agent to assign the right condition rating to a listing.

The only field currently in our MLS that relates to condition is the term “fix-up,” but that’s an undefined term, not required, and some sellers tell their listing agent they don’t want that term used.

I like this rating idea a lot.