Why Do Colorado Property Taxes Vary So Much?

A reader recently asked why property taxes vary so much, particularly since the state constitution requires that all property taxes be based on full valuation based on actual sales of comparable properties.

The biggest discrepancy arises from the taxing of non-residential property at four times the rate of residential property.

Let’s say you buy a vacant lot valued by the assessor at $200,000. Until that lot has a house on it, the assessed (i.e., taxable) valuation is 29% of $200,000, or $58,000. At 100 mills, (a typical mill levy), the annual tax on that vacant land would be $5,800.

Now let’s say you build a house on the lot, increasing the market value by an additional $200,000, for a total of $400,000. Because it’s now considered a residential parcel, the assessed valuation is only 7.2% of $400,000, or  $28,800. At 100 mills, the annual tax on that residential parcel would now be only $2,880.

The other big discrepancy is in new subdivisions where the developer creates a “metropolitan tax district” which issues bonds to pay for infrastructure work – sewers, sidewalks, streets, gutters, etc.  To pay off those bonds, a mill levy, typically about 50 mills, is assessed on all the parcels in that subdivision.  If the usual tax is 100 mills, that’s a 50% increase in property taxes compared to homes not in that tax district.

Many Buyers of New Homes Shortchange Themselves By Not Having an Agent

Real_Estate_Today_bylineYou’re probably aware that buyers typically pay nothing to be represented by a Realtor in a real estate transaction, because in virtually all transactions the listing agent splits his or her listing commission with the buyer’s agent.  It’s called a “co-op commission” because the buyer’s agent (also known as the “selling” agent) is cooperating with the listing agent in the sale of his or her listing. My own analysis reveals that 95% of residential transactions involve both a listing and selling agent.

Builders of new homes also offer a co-op commission when a buyer has an agent, yet in too many cases, buyers deal directly with the builder’s salesperson and do not take advantage of the opportunity to have an agent on their side. It’s similar to buying an automobile from a dealer — the salesperson isn’t your friend.

This is particularly unfortunate when you realize that you pay just as much for the house when the builder doesn’t have to compensate your agent. You gain nothing and lose a lot when you buy a new home without professional representation.

I did a survey of 45 builder salespersons and the Realtors who put builders’ homes on the MLS, and learned that as few as half their transactions are with buyers who have an agent representing them.

In case it’s not obvious that you’re better off having your own agent when buying a home from a builder, let me point out some ways that having an agent on your side can benefit you.

First of all, your agent can tell you whether the builder is using the buyer-friendly state purchase contract or – as is usually the case – a contract prepared by the builder’s attorney. Any contract prepared by a builder’s attorney is written to protect the builder, not you. Although a real estate agent is allowed to interpret the state contract to buyers, only a lawyer can explain or interpret a builder’s contract. Your agent can refer you to a trusted real estate attorney who will help you understand the contract before you sign it.

It’s fair to say that a builder’s sales representative will not give as much weight as your agent would to the importance of consulting a real estate attorney. That salesperson also may not stress the importance of hiring a professional home inspector to make sure the home is well built and built to code.

Just because a home is new does not guarantee that it was properly built, or even built to code.  I always recommend having a home inspector make three visits when you buy a new home — once after framing is complete but before the drywall is installed, and a second time prior to closing. You’d be surprised what these inspections can uncover. I also recommend a third visit a year later, before the builder’s warranty expires.

One thing your agent can tell you is whether the deposit money you provide at contract time is non-refundable (as is usually the case) and whether you’ll be spending thousands of dollars, not only for design-center upgrades but also for window coverings and landscaping, including a sprinkler system.

Your agent can also tell you whether the builder has created a “metropolitan tax district,” which means that you, not the builder, will be paying hundreds or thousands of dollars in extra property taxes for up to 30 years to cover the community’s infrastructure costs, including streets, sidewalks, and sewers.

If you hire an agent from Golden Real Estate, you’ll also get assistance with your moving costs, including use of our moving trucks, moving boxes, packing materials and labor. Don’t shortchange yourself by not engaging one of us in the purchase of your new home.  Call us at 303-302-3636.

 

Now for a Brief Lesson on Type Fonts and Readability…

As with most Realtors, real estate was not my first career. I started out as a newspaper reporter/editor/publisher, then transitioned to typography, using the typesetting equipment I had purchased for my newspapers.

Just as I’ve never let go of my love of journalism, I’ve never let go of my love of typography. I design and compose this full page ad myself every week, and I take pleasure in making it as well written and readable as possible. The choice of typefaces for headlines and text is a big part of that.

If I had my choice, the text typeface in my newspaper ads would not be 10 point Arial Narrow but a serif typeface like Times Roman. “Serifs” are those subtle accents at the bottoms, tops and ends of letters, but they play a huge role in readability.  Sans-serif typefaces like Arial or Helvetica don’t have those accents.  [This blog post is in Times Roman.]

Serif_vs_Sans-SerifAt right is a Times Roman letter with serifs next to an Arial letter without serifs. Can you see how much those little serifs improve readability, especially for smaller type sizes?

As a typographer, I learned that serif typefaces should be used for text, and that sans-serif typefaces should be used only for headlines, subheads, captions, and other limited-text applications.

You’ll notice that most newspapers, magazines and books — but not most websites — follow this rule, with Times Roman the most common text typeface. The Denver Post doesn’t let me use Times Roman lest my ad be mistaken for editorial content. Compare my Arial Narrow text with the same size type in that newspaper’s news stories, and you’ll probably agree that those little serifs make text more readable. Also notice that sans-serif headlines and sub-heads work really well when combined with serif body text.

Unfortunately, Microsoft, seemingly unaware of these typographic principles, has from the beginning made sans serif typefaces like Calibri the default typefaces for Outlook, also making the default size fairly small. Given that space is not a limitation in emails or websites, it’s sad that this has become the standard. Note: You can change the default font and type size for outgoing emails in Outlook and other applications.  I use 12 pt. Georgia, a particularly readable serif typeface.

Another annoyance, especially for us older Americans, is the use of thin, gray sans-serif type instead of black serif typefaces in so many websites.  Don’t webmasters value readability?

 

Central Arvada Condo Just Listed by Carrie Lovingier

6310 Oak St #107This spacious 2-bedroom, 2-bath ranch-style condo at 6310 Oak Street (Unit 107) is within central Arvada’s Grace Place subdivision, built in 1999. The master bedroom features a huge walk-in closet with built-in shelving, and the kitchen has a bar/counter overlooking the living room. Being a garden-level unit, this condo has a private patio. It has a full size washer & newer dryer, a newer range and newer hot water heater. The building has a brand new roof. The complex is adjacent to Allendale Park, close to Ralston Recreation Area & near bus & light rail. The HOA fee is only $145 per month, and there’s plenty of guest parking. You’ll be only 15 minutes from downtown Denver or downtown Golden, and 36 minutes from DIA.  Casinos are 45 minutes away, and skiing is just an hour away. View a narrated video tour at www.ArvadaCondo.info, then call listing agent Carrie Lovingier at 303-907-1278 for a private showing.

 

Real Estate Related Email Scams Are Proliferating

Judging from my own email, there has been a huge spike recently in email scams targeting real estate agents and their clients. For several months I have been getting Real_Estate_Today_bylineemails with subject lines such as “Clear to Close” or “Document Delivery Notice,” with links to “View Documents.”

Many of the emails appear to have a PDF attachment, but when you click on the attachment, then you see a link to “open” that PDF.  I worry that some of my colleagues or their clients might fall prey to this or similar scams.

DocuSign is a well-known software for signing real estate documents, and often the email asks me to click on a link to view a DocuSign contract or settlement statement for some transaction it doesn’t identify and that I wasn’t expecting. One should never click on that link. This can be tempting to an unaware agent.

I can’t tell you what exactly the scam is because I haven’t clicked on any of those links. If any of you readers have clicked on such links, I’d like you to share your experience with me.

Another popular scam involves sending an email giving buyers wiring instructions for their down payment. In many cases buyers’ money was lost forever.  These emails might appear to be from your agent or title company, but they aren’t.  Always call your agent or title company to verify any such email.

Our office has a business subscription to Microsoft Office 365, and often my agents and I receive emails aimed at compromising our Office 365 accounts. The subject line is often “Account Login Attempt,” and the text claims that someone knows my login details and has used it to access my email account. The text of the email contains my email address to make it seem authentic. It goes on to say that a lock has been placed on my email account and that I need to click on a link to restore access. Of course I ignore and delete these messages. How many of my colleagues (and readers of this column) have fallen victim to such emails?  I’d like to hear from them/you.

There’s a simple way to identify links you should not click on. Float your cursor over the link (don’t click!) to display the true link address. What you saw in the message is likely not what you would get if you click on it! Often it will be for a web address from a foreign country, whose 2-letter initials take the place of .com.

2017 Home Sales Will Hit Record Again, Despite Reported ‘Low Inventory’

One of the most persistent myths about our real estate market is that not enough people are putting their homes on the market, resulting in “record low inventory.”

Sales_vs_new_listings_-_last_10_years

How, then, since there are so few homes on the market, does one explain that the number of homes sold has set a record every year since 2013? In the chart above, 2017 is shown slightly lower than 2016, but that doesn’t include the 1,387 that closed since the end of November. Also, there are 2,400 listings that have been under contract for more than 30 days, the majority of which are bound to close before Dec. 31st. Another 3,000 listings have been under contract less than 30 days, and many of those will close by Dec. 31st, too.  So, the number of 2017 sold listings will probably end up over 65,000.

Active listings and DOM      How to explain the record number of sales when there are so few active listings? It’s really quite simple. As shown in the table at left, the median days on market (“DOM”) for new listings is less than half what it was five years ago and is showing no signs of rising, which explains why the number of active listings keep declining. What about December? The numbers aren’t in yet, but, judging from the last three years, when median days on market was 16 and 17, you could speculate that half the homes put on the market this week will also be under contract before the end of the 2017.

The statistics I’ve been quoting are for the total metro MLS (REcolorado.com), but Denver and Jefferson County are as hot or hotter.  Denver’s median days on market for November was 14, and Jeffco’s median days on market was 12.

 

One Month Left to Sell Before Possible Tax Hike

Real_Estate_Today_byline    If either version of the GOP tax bills is enacted, nearly 20% of Colorado homeowners who sell their home would be subject to capital gains tax next year who are not subject to it this year. That’s how many of us have lived in our homes more than two but less than five years.

Currently, you only need to have lived in your home for 2 of the 5 years preceding a sale to enjoy a $250,000 (single) or $500,000 (if married) exemption on capital gains. That changes to 5 of the past 8 years under both bills. For a typical $100,000 gain in value, that computes to nearly a $20,000 tax hike. (The Senate version only requires you to be under contract by Dec. 31, whereas the House version requires that you close.)

So, if you are planning to sell before you’ve lived in your current home for at least 5 years, it would be a good idea to put it on the market immediately. Fortunately, as I’ve demonstrated in previous columns, December is a pretty good month for putting a home on the market.  We know how to make it happen, so call us.

Also at risk: the deductibility of property taxes, state income tax, and the mortgage interest deduction. The estate tax, which only applies to the top 0.2%, would be cut in both versions and eliminated by 2024 if the House version prevails — a billion-dollar windfall to heirs of the top 0.1%.

If you’re thinking of buying an electric or hybrid vehicle, you should do that before year end, too, because the $2,500 to $7,500 tax credit (based on battery size) is also being eliminated. It’s not too late to take delivery of a new Tesla Model S or Model X, or Chevy Volt by year’s end and get that full tax credit plus Colorado’s $5,000 credit (which does not go away in 2018). I can secure you an additional $1,000 on either Tesla model, plus free supercharging.  Call me at 303-525-1851.