Category: Uncategorized

How Listing Agents Handle Bidding Wars: The Good, the Bad and the Ugly

I have written in the past about how we handle multiple offers and bidding wars on our listings using an auction style, which we feel is best for our sellers and most fair to buyers and their agents.

Regrettably, very few listing agents handle multiple offers and bidding wars the way we do. Most are sticking with the “highest and best” approach, in which buyers submit an above-listing-price offer without knowing what other buyers are offering.

Usually agents maintain that their sellers won’t let them reveal the competing offers, but I find that hard to believe. Have they even had an honest discussion with their sellers about that? I have that discussion with every seller who hires me and invariably they agree that full transparency about offers in hand is not only going to net them the highest price for their home but is also fairest to the buyers.

I have written in the past that 4 days on the MLS before going under contract is the “sweet spot” when it comes to netting the best price for sellers, and I have supported that opinion statistically.

However, recently we have modified our policy because of more buyers submitting early offers which are too good to pass up. Do we keep our word not to sell before the 4th day, or take the offer?

Rule #1 is that the seller makes that decision, not us. If the seller wants to accept a particularly sweet offer on day one or day two, we ask for 24 hours’ lead time so that we can notify all other agents who have set showings that our timeline has changed. “We have this great offer, and the seller wants to accept it.” That gives those agents time to accelerate their timeline and compete (or not) with that particularly sweet offer.

Regardless of how an agent handles multiple offers, professional courtesy demands that they communicate with other agents and not just ignore the competing offers. Just call us and say, “My seller has decided to go with a better offer.” Give us a chance to recalibrate and resubmit. That’s best for your seller (to whom you owe “utmost good faith and fidelity”), and it’s only fair to the other bidders.

Sometime soon these bidding wars will subside, and we’ll go back to having a “balanced” market. I’d settle, frankly, for a seller’s market that is not crazy wild!

We are still seeing way too many homes that are selling with zero days on the market, often because the listing agent convinced the seller to accept a contract obtained by the listing agent, thereby allowing the listing agent to keep his or her entire commission instead of sharing it with a buyer’s agent.

The Colorado Real Estate Commission frowns upon this practice and has issued guidance that every listing agent should advise their sellers that they may be leaving money on the table (that is, getting less than they might for their home) if they don’t allow the home to be on the MLS for at least a few days so that all interested buyers have a chance to see it and make an offer.

Along that vein, the National Association of Realtors last November adopted a “Clear Cooperation Policy,” making it a violation to have “pocket listings” not on the MLS so agents can see and show it. On our MLS that carries a $1,500 fine.

Legislation Bans HOA Limits on Political Flags & Signage

Before the current session of the Colorado General Assembly ends this Saturday, it will send to the Governor a bill which bars HOAs from limiting the display of partisan flags and signs.

The bill’s prime sponsors are Rep. Lisa Cutter of Jefferson County and Sen. Robert Rodriguez of Denver, both Democrats.

The title of the bill is “Homeowners’ Association Regulation of Flags and Signs” with the subtitle “Concerning additional protections for homeowners’ freedom of expression in common interest communities.”

Sounds like a good idea, right? Who is (or dares to be) against freedom of expression? It has attracted 11 other representatives and 5 other senators as sponsors.

However, let’s consider the unintended (or perhaps intended) consequences of this law. Basically the bill only allows content-neutral regulation of signs and flags, prohibiting only commercial messages.

Considering the political divide in our country and the extremism on each side of it, do we really want to allow unfettered display in our communities of right-wing and left-wing signs and flags?

I can live with the fact that a neighbor might be a QAnon follower, but I don’t want his lawn festooned with conspiracy messages or even Trump 2024 flags and signs without any limitation on their number or duration of display.

Currently it is common for an HOA to bar flags or signs of a political nature unless they are for a particular candidate or ballot measure and to limit their display to 45 days prior to an election and a short period afterwards. The effect of HB21-1310 would be to bar HOAs from enforcing any such limitation on the display of any political message at all, even if the membership voted for such a limitation.

If this bill becomes law, look for signs cropping up in your neighborhood for “Stop the Steal” or “Black Lives Matter” or “White Power” or even hate speech that’s reduced to a slogan. Do we need that much freedom of expression right under our noses every, day year round?

This can only serve to rile up divisions among neighbors who were heretofore happily ignorant of each other’s political beliefs. I can picture neighbors removing or destroying signs and flags they disagree with. These actions will be caught on cameras leading to criminal complaints and sometimes violence.  Do we really want to go in this direction?

Homeowners and renters are entitled to the quiet enjoyment of their premises. Unleashing this “freedom of expression” through flags and signs will only work against that principle.

I hope Governor Polis vetoes this bill when it gets to his desk.

Don’t Let Service People Take Advantage of You

It makes me angry when I hear of service providers telling a homeowner they need a new furnace, water heater or other major repair when they don’t. I got a call recently from a single older woman who has owned her home for a couple decades, the type of homeowner who is often targeted by sales persons to spend money they shouldn’t on repairs and replacements.

In her case, she was told she needed both a new furnace and new water heater, but, knowing I am in real estate, she called me for advice. I listened to her describe the issues she was facing, and recommended she call vendors I trusted. The result? She needed only some minor fixes and no big expenditures.

Women often encounter this problem when it comes to auto repair as well, since they tend not to be mechanically minded or experienced. It burns me up to hear about such stories, so here’s a little advice, in case you can relate to this situation.

If you need (or think you need) a home repair, whether it’s plumbing, electrical, painting, roof replacement, or anything else, call me or your favorite real estate agent (preferably a Realtor), and ask them to recommend a vendor. We deal with such vendors so often, and they count on our referrals for future business. If we refer you to a vendor — and you tell the vendor we did — he or she is less likely to take advantage of you, even if they wanted to, because they know that would jeopardize future referrals. We don’t get a referral fee from such vendors, so you can trust our recommendations.

Use this same strategy when, for example, you need service for your car. Call a Realtor you trust to get a referral to a trusted mechanic to enjoy similar protection against being taken advantage of.

Don’t Fall for This Gift Card Scam

This Monday, people on my contact list received an email that looked as if it was from me, asking for “help.” If they responded to the email, it went to a scammer pretending to be me who said I was in a meeting but could they help me purchase some Google gift cards for me and I’d reimburse them.

This kind of scam doesn’t hurt the person who’s being impersonated, but it hurts his/her friends and contacts who fall for it. Tell your family and friends about this scam and don’t let them fall for it.

Experts Are Predicting a Surge in Foreclosures, But I See the Situation Differently

With the continued high unemployment rate and the expiration of Pandemic Unemployment Assistance (PUA), many homeowners are hurting, so it makes sense that we may have a foreclosure crisis in our future.

CoreLogic reported recently that back in June (when the Feds were still sending $600/week in PUA to Americans) the share of mortgages with payments 90 to 119 days late had already risen to 2.3%, “the highest level in 21 years.” A rate that high could result in a foreclosure crisis, the report said. Not only could millions of families potentially lose their home, but that would also create downward pressure on home prices.

But I see the situation differently, and after consulting with Jaxzann Riggs of The Mortgage Network, here’s why I don’t expect that flood of foreclosures.

First of all, foreclosure should only happen when a seller owes more on their home than it is worth. That’s because sellers lose all their accumulated equity in a foreclosure, and most people have accumulated a lot of equity thanks for the sellers’ market we have been experiencing.

Secondly, federally mandated forbearance is in effect, which is unlike the forbearance which delinquent borrowers may have enjoyed in the past. Under the current plan, lenders add extra payments at the end of the loan instead of requiring any kind of catch-up payments. This mandate could be extended, too.

The only people likely to face foreclosure will be those who recently took out 100% VA loans or 96.5% FHA loans or conventional loans with only 3% down payment, and for whom there is hardly any equity to lose in a foreclosure action.

Being on forbearance doesn’t affect one’s credit rating even though you are not making payments (again, part of the federal mandate), but once you resume payments, you need to make a minimum of three on-time payments to qualify for a Fannie Mae or Freddie Mac loan, which will restrict your ability to sell your home and purchase a replacement home. Some lenders require six months post-forbearance loan payments.

That, too, will slow down any surge in what are known as “distressed listings.”

A Reader Asks How to Handle Inspection Objections

Inspection is the first and biggest hurdle in any contract to buy and sell a home. It’s an area in which experience by your agent really counts!

Usually the buyer will only ask for serious issues to be addressed by the seller. The seller rarely agrees to all the demands, nor is that expected. A common practice is to fix the easy items but give the buyer a price reduction or credit toward closing costs in lieu of making the big dollar repairs. When the buyer wants older appliances that are still working replaced, one solution is for the seller to purchase a home warranty covering those and other appliances.

Good luck with your inspections!

Despite Global Pandemic, Our Real Estate Market Was the Hottest Ever for August

Much to the consternation of observers, the real estate market in metro Denver was hotter this August than it was in any previous August, according to the Market Trends Committee of the Denver Metro Association of Realtors (DMAR). At this rate, 2020’s statistics at year end will likely exceed 2019’s statistics.

The report covers an expanded metro area, including 11 counties instead of the 7 urban and suburban counties that you and I think of as “metro Denver.” The non-urban counties included in the report are Clear Creek, Gilpin, Elbert and Park.

Detached single-family homes sold like crazy in August—up over 6% from August 2019, despite 50% fewer active listings at month’s end. The average sold price was up 13.8% from last year, and average days on market was down 23%.

Attached homes sold on a par with last year, although their inventory was also down — 19% fewer listings at month’s end. They did sell quicker, though, with days on market down by over 27%.

Unlike DMAR, I like to define the metro Denver market as within a 25-mile radius of the state capitol, as shown here, instead of by county. Using that method, the number of detached homes sold this August was up 13.7% from August 2019, and the sold price per finished square foot (my preferred metric) was up 7.0%. Average days on market dropped by 31%, but median days on market plunged 57% from 14 days in August 2019 to 6 days this year.

Even more interesting to me is that median days on market was in double digits until March 2020 — the first month of Covid-19 lockdown — when it dropped by 40% to 6 days, and remained in the 5- to 7-day range through August. It could be said that “Stay at Home” and “Safer at Home” really meant “Buy a Home” in the real estate business!

Average sold price within that  25-mile radius rose by 13.4% to $597,290, while median sold price rose by 11.6% to $505,000. The gap between average and median is attributable to a large number of million and multi-million dollar closings. I wish others would stop focusing on average stats for that reason.

The number of active listings (what we call “inventory”) plummeted from 6,483 in August 2019 to 3,444 in August 2020, a 47% decline.

Another measure of market strength is how many listings expire without selling. That number was 777 in August 2019, but it fell by 37% to 493 this year.

The average ratio of sold price to listing price was 100% both last August and this August — suggesting that roughly half the listings sold above full price. With half the homes selling in 6 days or less, it’s to be expected that there were multiple offers and possibly a bidding war on many listings.

This week my downtown Golden fixer-upper closed at $665,000, which was $40,000 over listing price. My Lakewood listing from last week is already under contract at $55,000 over full price. Clearly, the seller’s market is still hot despite the pandemic.

If you have considered selling your home, there couldn’t be a better time than now to put your home on the market. And you couldn’t do better than call one of us listed below to talk about it. Your home would, of course, be featured in my weekly Denver Post column and on this blog.

If you let us represent you in the purchase of your replacement home, the listing commission could be as low as 3.6% and qualify you for totally free moving!

Jim Smith— 303-525-1851

Jim Swanson — 303-929-2727

Carrie Lovingier — 303-907-1278

Chuck Brown — 303-885-7855

David Dlugasch — 303-908-4835

Carol Milan — 720-982-4941

If You Don’t Put Your Home on the MLS, You May Not Get What Your Home Is Worth

A reader wrote me last week complaining that some homes in her subdivision are being sold privately for less than they should, without putting them on the MLS. It bothered her because doing so creates lower comps that could affect what she is able to get for her own home when she sells.

Just as important, there are buyers who would like to move into her neighborhood who are frustrated when a home is sold before they can submit their own offer for it. And, of course, sellers are not getting the highest possible price for their home, as I’ll explain below.

Among the culprits are fix-and-flippers and “iBuyers” such as Open Door and Zillow Offers, who convince sellers to take a cash offer, claiming to save them the cost and inconvenience of listing their home on the MLS. More about them below, as well. (See my Jan. 2, 2019 and my Aug. 22, 2019 columns about iBuyers.)

If anyone offers to buy your home for cash without listing it, there’s one thing you can be certain of: they’re going to pay you a price that leaves lots of room for profit. That is money that could be yours if only you exposed your home to the full market by putting it on the MLS.

The worst thing you can do in a “sellers market,” which is what we have now, is to sell your home off the MLS. The next worse thing you can do is, after putting your home on the MLS, to sell it to a buyer who quickly offers you full price. If someone offers you full price on day one, you can be sure that there are other buyers who’d be happy to pay even more. Four days should do it.

But there is something worse than both those scenarios, and that is to put your home on the market at a price which does not attract any offers. I tell my sellers that they can overprice their home, but they can’t underprice it, because a low price can trigger a bidding war. An experienced Realtor like myself can help you set the perfect listing price. Just remember not to accept the first offer — unless that offer comes long after you put your home on the market, because you overpriced it.

What I see all too often is sellers putting their home on the market at a wished-for price, then lowering the price reluctantly over several weeks, and ending up getting only one offer, not multiple offers, at a price that’s lower than what they might have gotten if they had priced the home right initially.

It’s tempting, I know, to accept an unsolicited offer to sell a home without paying 6% commission, but I can’t even remember the last time I charged 6% commission. Remember, 2.8% of any listing commission goes to the buyer’s agent. Typically, sellers who try to sell “by owner” end up paying that 2.8%, so they only save the difference between 2.8% and the full listing commission, which is 5.6% on average. At least that is what I charge, and I reduce it if I sell the home myself, and I reduce it further when I earn a commission on the purchase of the seller’s replacement home.

If you factor in the totally free moving which I provide (locally, of course) when you sell and buy with me, it’s hard to justify not putting your home on the MLS with Golden Real Estate, thereby exposing it to all those bidders in this still-hot seller’s market.

Our Denver MLS, REcolorado, is now enforcing a new rule called “Clear Cooperation,” which was voted into being by the National Association of Realtors last November. It requires MLS members to put their listings on the MLS within 24 hours of promoting their listings in any way.

The rule is very simple: If a listing agent promotes his or her listing in any way — with a yard sign, tweet, Facebook post, or newspaper article, etc. — the listing must be on the MLS, either as “Coming Soon” or “Active.”  If it’s “Coming Soon,” the sign must say so, and it can’t be shown, even by the listing agent himself. Once shown, it must be changed immediately to Active status, making it available for showings by all members of the MLS. Prior to Sept. 1st, REcolorado only issued warnings, but fines are now being levied for violations.

So, yes, there can be off-MLS sales, but not involving an MLS member unless there was no marketing at all, not even emails to his/her clients. With “pocket listings” now banned, the focus now turns to the iBuyers, companies like Open Door, Zillow Offers and others which directly solicit homeowners to purchase their homes, charging a 7% “service fee,” with the intention of flipping the home for a profit.

Only time will tell whether this new rule, with fines being levied, will make a big difference, but it surely will make some difference.

Any Talk About Affordable Housing Must Include Mobile Homes

Mobile or “manufactured” homes are the original and enduring form of affordable housing. You see them in rural and, as workforce housing, near resort communities, but you also see them in the Denver metro area. Five mobile home parks are within two miles of our Golden real estate office.

More than 100,000 people live in over 900 mobile home parks across Colorado. If our goal as a society is to preserve and expand affordable housing, we must protect and even expand mobile home ownership.

But there are problems.

Mobile home owners pay upwards of $100,000 for their homes (mostly pre-owned), but they have to rent lot space in a park. I was told that zoning laws in Jefferson County (and probably elsewhere) don’t allow a mobile home not in a mobile home park.

Increasingly, mobile home parks are owned by big national corporations whose only interest is maximizing profit. Because it is financially prohibitive to move a mobile home, and you can only move it to another park, the park owner has the home owner over a barrel. They can increase the rent as much and as often as they want and the owner has to pay it or be evicted. Until the passage of HB19-1309 by the Colorado General Assembly last May, which strengthened the Mobile Home Park Act, a homeowner (who the courts treat as a tenant) had 48 hours to vacate for non-payment of rent, and if they left the home in place, it became the property of the park owners. Now they have 10 days to cure a notice of rent past due and then have 30 days to vacate, but the problem persists — you either pay or you surrender ownership of your home.

Now that mobile homes can be listed in the MLS, I found 11 such homes in the metro area that are active, pending or have closed in the past 6 months. Rents range from a low of $7,500 to a high of $10,920 per year. Many of the homes couldn’t be sold for that much and are depreciating every year, unlike “regular” homes, which appreciate.

A mobile home, by the way, is not real estate and can only be on the MLS if it is on owned land or has a land lease. Mobile homes are titled with the Department of Motor Vehicles, and yet they are taxed as “real property” by the county assessor rather than via “ownership tax” from the DMV, as with automobiles. The property tax on those 11 listings ranged from $142 to $803 per year.

Although last year’s legislation created a complaint resolution process for mobile home owners, it is not utilized as much as it could be, because residents are fearful of retaliation by management. If you get on the wrong side of management, you face increased enforcement and fines which are added to rent. Don’t pay the full rent, and you’ll be evicted. And you thought HOAs were difficult! One resident of a Golden mobile home park who has been outspoken told me that the number of “rule notifications” – known among residents as “nastygrams” – has exploded as a result of speaking up.

I was educated (in less than 20 minutes!) on this topic by a segment by John Oliver on his program “Last Week Tonight.” Do watch it using the link above.

While mobile home park residents may be reluctant to speak up for themselves, they have allies among progressives within the larger community, notably the Golden United Housing Task Force. They meet monthly on the first Wednesday of the month. One of the leaders of that effort within Golden United, Kathy Smith (no relation), sent me a super-informative email with the following information, much of which is reflected in my published column.

The state government’s website is https://cdola.colorado.gov/mobile-home-park-oversight.

Also, the Colorado Sun did a series titled “Parked.”  https://coloradosun.com/tag/parked-half-the-american-dream/

Golden United and the Jefferson Unitarian Church Community Action Network (JUC CAN) are collaborators on a 2-year grant made possible by the Community First Foundation to engage and inform residents of manufactured housing communities in Jefferson County about new statewide laws that provide protections for residents of mobile home parks. The main organizations for the grant are Together Colorado, 9to5 Colorado, and the Colorado Coalition of Manufactured Home Owners (CoCoMHO). We are just getting started and will be working at some mobile home parks in the Golden area, including Mountainside Estates, Golden Terrace, and Golden Hills. We will also be working at parks in Arvada and probably Lakewood. Here are some excerpts from the grant application:

Background:

An important aspect of housing options in Jeffco is preservation of existing affordable housing. Manufactured housing is the largest unsubsidized source of affordable housing and provides homes to seniors on fixed incomes, low-income families, people with disabilities, veterans, immigrants, and others in need of low-cost housing. More than 100,000 people live in more than 900 manufactured home parks (MHPs) across Colorado,  In MHPs. Home owners own their homes but rent their lot from the park owner. Because it is often nearly impossible to move their homes, when park owners raise lot rents, residents are trapped, choosing between paying the rent or abandoning their homes. Many MHPs are owned by corporate landlords.

The Colorado Department of Regulatory Agencies (DORA) performed a Sunrise Review of Manufactured Housing Communities (October 2018). The report states:

“Clearly, harm is occurring in manufactured housing communities… The harm largely stems from the lack of enforcement of existing laws, bad actors exploiting a relatively loose regulatory structure, and the inevitable tension that arises when the house belongs to one person but the land beneath it belongs to someone else. Conditions for Colorado owners of manufactured homes could be improved by increasing community engagement within the communities, including the forming of homeowners associations and cooperatives; educating homeowners about their rights and encouraging them to challenge community owners when appropriate or file complaints with the proper authority…”

This DORA report provided the justification for recent legislation that enforces the Mobile Home Park Act (MHPA) and created the Mobile Home Park Dispute Resolution and Enforcement Program (DREP). It also provides validation for our approach of community engagement and education.

As laid out in the DORA Review, residents of many MHPs are experiencing exploitation and numerous stressors. Recent impacts from coronavirus will further hamper the ability of families and individuals to meet basic needs. Some examples of current practices that create instability and stress include: (a) increasing rent, decreasing services, issuing mandatory fees, or billing for something not previously billed in an unequal way, (b) issuing warnings/citations/fines that are not justified, (c) serving notices or threatening eviction when not justified, (d) selectively enforcing rules/requirements, (e) conducting management visits or surveillance targeted at a complainant that is unjustified, (f) adding maintenance responsibilities for trees or fences, and (g) property rights capture (i.e., loss of autonomy over home and lot space).

These practices lead to instability and stress, both economic and emotional. Many of these practices can be addressed through enforcement of the MHPA and the rules for the DREP complaint process. Further policy changes can be sought through the state legislature and local jurisdictions. Ultimately, more oversight, protections, and enforcement can lead to systemic change which will, in turn, reduce expense burdens and the number of evictions, and improve the quality of life for Jeffco MHP residents.

Recently, the Colorado Legislature has updated laws that regulate MHPs. The Mobile Home Park Act (MHPA), circa 1985, provides protections under the law for mobile home residents, but has had minimal enforcement. In 2019 the legislature passed HB19-1309, MHPA Oversight. This law grants the Colorado Division of Housing oversight over the MHPA and the authority to administer a Dispute Resolution and Enforcement Program (DREP). The DREP provides a mechanism to submit complaints without the expense of hiring a lawyer and will begin taking complaints on May 1, 2020. An anticipated benefit of the DREP is to decrease evictions and housing insecurity in MHPs.

For more information or to join Golden United in their MHP initiative, you can contact Kathy Smith at 303-278-8025.