NAR’s ‘Clear Cooperation’ Policy Has Failed to Reduce the Number of Pocket Listings  

In November 2019 the National Association of Realtors (NAR) created its Clear Cooperation Policy (CCP) designed to end the practice of “pocket listings.” A pocket listing is one which an agent keeps in his or her “pocket,” hoping to sell it himself instead of giving other agents the opportunity to sell it. The incentive is financial. Roughly half the listing commission goes to the agent who sells a listing. If an agent sells the listing himself, he/she gets to keep the entire commission.

The term “clear cooperation” is a reference to the purpose of the MLS, which is “cooperation and compensation.” Every MLS member agrees to cooperate with other MLS members, allowing them to sell their listing. And every listing specifies the compensation which the buyer’s agent will receive — typically 2.5 to 2.8 percent in our market.

You can read the three previous articles I’ve written about this policy at www.JimSmithColumns.com. Those articles (in Nov. 2019, Feb. 2021, and Aug. 2021) document the creation of the CCP and its subsequent implementation by REcolorado, our MLS. The deadline set by NAR to do so was May 1, 2020.

My August 12, 2021, column described how our MLS is fining agents $1,500 for a first offense when they fail to put a listing on the MLS within one business day of promoting it outside their own office in any way — online, in print or via a sign in the ground.

One would think that with such a big penalty the number of homes selling with zero days on the MLS would have declined, but in fact they have increased. I didn’t realize that until I read a Nov. 3rd article from Inman.com which quoted a study by Broker Resource Network (BRN). The study pulled data from 24 multiple listing services comparing the number of homes sold with zero days on MLS during the 12 months before and after the May 1, 2020, implementation date.

“In every market reviewed across the United States, brokerages recognized double and triple digit increases in Zero Days On Market listings across firms of all sizes and business models,” the report said.  These were figures for big brokerages, not the full MLS.

So I checked REcolorado statistics to see what our full-MLS statistics are for homes sold with zero days on the MLS. I found that there were 2,225 such closings reported in the 12 months before May 1, 2020, and 2,769 reported in the 12 months after May 1, 2020 — a 24.4% increase.

To discover the longer trendline, I looked at several half-year periods going back to 2018. In the last 180 days (as of this past Sunday), there were 1,677 closings of resale residential listings recorded on REcolorado with zero days on MLS before going under contract.

During the same 180 days of 2020, there were 1,295 such closings, making this year a 29.5% increase over last year. The number in 2019 was even lower — 1,077.  In 2018 it was not much different — 1,104.

What could account for this counter-intuitive increase?

One explanation might be the explosion of the seller’s market during the pandemic, which really took off simultaneously with the implementation of the Clear Cooperation Policy (and the pandemic surge).

One way to assess the seller’s market is to measure how many homes went under contract after 4 days on the MLS during those 12 months before and after May 1, 2020, and the median ratio of sold price to listing price for those listings.

During the 12 months before the implementation of the CCP, there were 4,563 closings of listings which went under contract in 4 days, and the median ratio of sold price to listing price was 1.0019. During the 8 months after May 1, 2020, there were 4,896 such closings, and the median ratio was 1.01299.  Another 2,840 such closings took place during the remaining 4 months of the  12-month period after May 1, 2020, and the median ratio for them was 1.05157. Clearly, the seller’s market was accelerating. It makes sense that more sellers might receive offers they “can’t refuse,” and that listing agents might encourage them to accept those offers.

There was an important loophole created when the CCP was implemented by REcolorado and perhaps by those 24 other MLSs. That loophole is called the “office exclusive,” which allows any brokerage to promote an off-MLS listing within the brokerage, so long as there is no advertising of any kind on social media or in print and no sign in the yard — the definition of a pocket listing.

This policy greatly favored large brokerages which could have hundreds of agents in a dozen or more offices, to promote new listings internally with the additional incentive of keeping the full commission of each transaction within the brokerage.

If this loophole were to be closed, there would probably be far fewer closings with zero days in the MLS — and sellers might get more money for their homes by having them exposed to more competing buyers.

As I mentioned above, a listing agent profits from keeping a listing off the MLS, because it increases the chances of selling the listing himself and thereby greatly increasing his/her commission. Of the 100 homes on REcolorado which sold for $1.25 million or more in the last 180 days with zero days on the MLS, 25% of them were double ended (see list below), and only 9 of those 25 listings reduced the commission paid by the seller because of their listing agent’s windfall. (The agents at Golden Real Estate always discount our commission when we double-end a transaction.)

D0uble-Ended Sales On REcolorado Over $1.25 Million – Last 180 Days, Showing Whether Seller Got a Discounted Commission

By contrast, of the 100 highest priced homes ($1,575,000 and over) which sold after 4 days on the market, only 2% were double-ended. Whether or not you call it “greed,” the agents who kept their homes off the MLS greatly profited from it — and the sellers paid the price by not exposing their homes to all potential buyers.

Another recent article from Inman reminds us that Fair Housing was one of the reasons the Clear Cooperation Policy was introduced. A blog post on REcolorado also makes this point. The reasoning is that if a home is sold privately without being exposed to all buyers on an MLS, then it is more likely to be sold within the same demographic. Thus, pocket listings are inherently discriminatory against minority groups, whether they be racial or, for example, LGBTQ.

I’m sure that these articles and the studies behind them, including my own analysis of REcolorado statistics herein, will lead to some discussion locally and nationally about how to tweak the Clear Cooperation Policy so it is more effective and less counter-productive, which it clearly has proven to be. I do not believe, however, that the Clear Cooperation Policy will be scrapped, because its stated intention is clearly good public policy.

Sellers: Insist that your home is put on the MLS so that all interested buyers have the opportunity to see it and participate in a bidding war that nets you more money.

5-BR Dutch Creek Home Backs to Greenbelt  

There’s so much to love about this special home at 6586 S. Newland Way in Littleton’s Dutch Creek subdivision. It was just listed for $725,000. Its fully-owned solar PV system provides all the electricity needed to power the house. It backs to the greenbelt with stream that runs through nearby Weaver Park. In that greenbelt, just behind this home, is the subdivision’s pool, clubhouse, tennis courts and basketball half-court. A gate in the backyard provides easy access to that amenity. Upstairs are the master suite and 3 guest bedrooms (two with mountain views) and a 5th bedroom in the walk-out basement, where there is a home theater with 7-speaker surround sound. As you can see from the picture above, the 2-car garage door is extra high to allow for indoor RV parking. Please visit www.LittletonHome.online or click on the thumbnail below to take a narrated video tour, then come to our open house on Saturday, Nov. 13, 11am to 2pm. That website also has more still photos.

https://youtu.be/6tmUaRGlDEc

Green Mountain Home With Finished Basement  

This Green Mountain Village brick ranch at 1474 S. Ward Court sits on a 1/4-acre lot at the end of a quiet cul-de-sac, a half-mile downhill from Green Mountain High School. It was just listed at $550,000. Green Mountain trailheads are also nearby, as are the Alameda Parkway and Union Boulevard commercial strips. The home itself has some nice features including an enlarged walk-in pantry, an oversized patio with pergola, and two Solatubes bringing extra sunlight into the family room and kitchen. The roof and several windows were replaced following a 2017 hail storm. A large storage shed was also added by the current owners. Visit www.GreenMountainHome.info to see more pictures and take a narrated video tour (or click on the thumbnail below), then come to the open house on Saturday, Nov. 6th, 11 am to 2 pm.  Or call your agent or Jim Smith at 303-525-1851 to arrange a private showing.

https://youtu.be/_OYn4yXiHRA

What Are the Steps You Can Take Toward Making Your Home Net Zero Energy?  

I don’t know anyone who doesn’t like the idea of saving money, which will happen when you convert your home to “net zero energy.” So, what are the steps you can take to get there?

Net zero energy” means that your home generates more energy than it consumes. With “net metering,” your electric meter runs backwards when your solar panels generate more electricity than you’re using (on a sunny day), then runs forward at night, resulting in zero (or less) net consumption of electric power.

Solar power gets more affordable every year. When I purchased my first 10-kW solar photovoltaic system 15 years ago, the cost was over $60,000, but Xcel Energy gave a rebate of $4.50 per watt, so I got a check for $45,000 from the utility, reducing my net cost to $15,000. Nowadays that same system would cost as little as $15,000 with no Xcel rebate but a 26% federal tax credit.

While you can generate your own electricity, you cannot generate your own natural gas, so terminating natural gas service is key to achieving net zero energy. This involves some major system changes if you are currently heating your home and your water using natural gas, cooking with gas (including with a gas grill) and have a gas fireplace.

There are electric alternatives to all of these uses of natural gas, and you’ll appreciate that eliminating natural gas also eliminates the possibility of a gas explosion and of carbon monoxide poisoning (unless you have a gas powered car).

Heating your home with electricity used to mean installing baseboard resistance heating units in each room, but that is so 20th century. Nowadays electric space heating is done far more efficiently (and evenly) using heat pumps.

Gas forced air furnaces and water heaters are considered to have a 15-year life expectancy, so when yours fail, think of that as an opportunity to adopt heat pump technology for both functions. And a heat pump eliminates the need for a separate A/C unit, since it heats and cools.

Gas furnaces and water heaters generate heat by burning gas. A heat pump moves heat, similar to what A/C does. (How heat pumps work) It cools your home by moving the heat out of your house. If you put your hand over the external compressor unit while it’s cooling your home, you will feel the heat that was moved from inside your home. In heating mode, the process is reversed, and the heat pump moves heat from outdoors into your house. It may surprise you to know that when it’s freezing outside there is actually heat that can be moved from outside to the interior of your house, but it’s true. (Heat pumps work in extremely cold climates) Our office has been heated solely by heat pump since November 2017, and ever since there has never been a day when the system failed to keep our office at 70°F or warmer.

A simple one-unit 12,000-BTU, 29.3-SEER ductless mini-split system from Fujitsu can be found online for $1,961. That’s a small unit, suitable for one room or a garage (a great application!). For our office, we bought a Mitsubishi system in which a single compressor drives three separate wall units, each with its own thermostat.

A heat pump water heater (which I installed at our home) has the compressor built into the unit, above the tank. You can feel cool air emitting from it when it is heating water. I suggest putting it in a wine cellar where it’ll keep the room cool without buying a separate A/C unit.

For cooking, you’ll be amazed and delighted by the induction cooktops that are now widely available. I saw them used on a cruise ship for both cooking and warming surfaces, and the chefs loved them. (Modern cruise ships have eliminated natural gas because of the fire hazard.)

An all-electric home will, of course, demand more electricity, but Xcel Energy now allows you to install enough solar panels to generate double your electrical usage over the prior 12 months. That is more than enough to cover your new electric space heating, water heating and cooking needs, with capacity left over to charge an EV, too.

An important first step in pursuing net zero energy for your home is to reduce your need for energy, and the easiest and cheapest way to do that is to improve your home’s insulation. I had Dennis Brachfield of About Saving Heat blow cellulose insulation into the exterior walls (not just the attic) of a 1940s bungalow I owned, and I was astonished at how much more comfortable the house became. Even if your exterior walls have batt insulation in them, there is still space in the walls to blow in cellulose. (How to insulate an old house)

I learned something interesting from that experience. We all know that walls can radiate heat, such as a brick wall in bright sunlight. Well, walls can also radiate coldness, or suck heat. The air temperature in my bungalow before and after blowing in insulation was the same, but I felt warmer and burned less gas.

You can go beyond improving the insulation of your exterior walls and attic. There are numerous places that allow cold into your home, especially around your windows. Whether or not you install triple-pane Alpen windows, as we did at our office, caulking around the window frames and elsewhere can reduce the energy needed to heat your home.

A blower door test done by a contractor will identify the air leaks in your home. Insulating your attic with blown-in cellulose and your crawlspace with plastic sheeting will also reduce your home’s energy needs whether from gas heating or your new heat pump. (Insulating crawl spaces)

Of course, many homes, especially in older neighborhoods, can’t benefit from solar power because of shading from trees or insufficient south-facing roof area, but you can purchase community solar. (This is also a good solution for condos which have no roof at all.)

The way community solar works is that you invest in solar panels that are part of a solar farm in some distant pasture. The electricity generated by your panels in that remote location is credited to the electric meter for your home or condo. One advantage of community solar is that when you move, you only need to change which meter gets credited with your solar production.

Other ways of reducing energy use include replacing CFL or incandescent light bulbs with affordable LED bulbs and “daylighting” your home or office. (Batteries + Bulbs sell 8-packs of 60W LED replacement bulbs for $6.49, tax included, after $15 instant rebate.) We have “sun tunnels” in our home and office to bring daylight into interior spaces. In fact, on a sunny day we don’t need to turn on any lights in our office. It’s great— and saves energy. We had Design Skylights of Evergreen install Velux sun tunnels at both home and office.

Would you like one of us to visit your home for a private consultation about the sustainability possibilities in your home? Email me at Jim@GoldenRealEstate.com.

As Real Estate ‘Disruptors’ Abound, Let’s Hear It for the Traditional Brokerage  

Disruption is happening in every industry, spurred on primarily by internet-based technology. Amazon is disrupting brick and mortar retail. Uber and Lyft have disrupted the taxi industry. Tesla disrupted the auto industry’s dealer model. Travel agents have suffered from online ticket sales by airlines, cruise lines and related businesses.

Now companies like Zillow, Open Door, and OfferPad are disrupting the real estate industry with their “iBuyer” model.

But those and other disruptors have not killed off the older business models. They are grabbing market share, but of an increasing market. You can expect to see brick and mortar retail stores, taxi companies, travel agents and, yes, traditional real estate brokerages such as Golden Real Estate thriving for years to come.

We ourselves have not suffered from these disruptors. Indeed, while 2020 and 2021 have seen huge growth by these new real estate enterprises, they have also brought record growth for our brokerage and other traditional brokerages, and it is easy to see why.

Buying and selling a primary residence is typically the biggest financial transaction we all deal with. Yes, buyers increasingly utilize the internet to search for homes, but they end up calling us to see them. Sellers also use the internet to monitor the market — many taking advantage of the MLS alerts that we set up for them — but they want someone they know and trust to bring their real estate savvy to bear in listing and marketing their home when it’s time to sell.

The “full-service” real estate agent is being redefined, and I like to think that my broker associates and I epitomize that evolution. Some of the services we provide can not be obtained from those other companies.

Full service goes beyond providing our free moving truck, moving boxes and packing material, which we’ve been doing since 2004. Here are some other services you can expect from us.

We have an in-house handyman who can help with preparing a home for market, such as repairing drywall damage, washing windows, and doing light plumbing and light electrical tasks such as installing a new toilet, faucet or light fixture. He’s also there to address many of the issues which arise from the buyer’s inspection. And he’s also there if needed to drive our truck for moving, or even for a dump run or for taking a load of possessions to Goodwill or Arc.

We also have a certified home stager who provides our sellers with a free consultation to help their home show its best.

You’re familiar by now with how we create narrated video tours of each listing, including drone videos, but we also serve out-of-state buyers by shooting videos of other agents’ listings that interest them. Last June I did that for a Minnesota couple who felt they had “seen” an Arvada home well enough through my narrated video tour of it to go under contract, not visiting the home in person until they came for the inspection.

Speaking of inspection, experienced agents like us from a traditional brokerage can be counted on to recommend a good inspector who has a track record with them. Other specialists we know and trust — giving our clients the comfort to employ them — include estate sales companies, structural engineers, electricians, plumbers, HVAC companies, and more. The real benefit from these trusted vendors is that they will make sure you’re satisfied with their work, because they want to be referred to future clients.

“Full service” also implies availability and responsiveness. My broker associates and I are available 7 days a week, and we answer our cell phones on evenings and weekends. Although I have associates who can be my “boots on the ground” when I go on vacation, I take my cell phone (and laptop) with me, and I answer it when it rings.

Often we provide service for which we don’t expect or receive any compensation. For example, this past Sunday I got an inquiry from a man who had inherited his mother’s house and wanted an appraisal for tax purposes. I explained that only licensed appraisers can do appraisals but offered to do a free market analysis, which he happily accepted.  He may call me about listing it later on, but that’s not the point. I’m happy to be of service.

I follow a policy that I came to embody many years ago: Concentrate on giving and the getting will take care of itself.

As Real Estate ‘Disruptors’ Abound, Let’s Hear It for the Traditional Brokerage  

Disruption is happening in every industry, spurred on primarily by internet-based technology. Amazon is disrupting brick and mortar retail. Uber and Lyft have disrupted the taxi industry. Tesla disrupted the auto industry’s dealer model. Travel agents have suffered from online ticket sales by airlines, cruise lines and related businesses.

Now companies like Zillow, Open Door, and OfferPad are disrupting the real estate industry with their “iBuyer” model.

But those and other disruptors have not killed off the older business models. They are grabbing market share, but of an increasing market. You can expect to see brick and mortar retail stores, taxi companies, travel agents and, yes, traditional real estate brokerages such as Golden Real Estate thriving for years to come.

We ourselves have not suffered from these disruptors. Indeed, while 2020 and 2021 have seen huge growth by these new real estate enterprises, they have also brought record growth for our brokerage and other traditional brokerages, and it is easy to see why.

Buying and selling a primary residence is typically the biggest financial transaction we all deal with. Yes, buyers increasingly utilize the internet to search for homes, but they end up calling us to see them. Sellers also use the internet to monitor the market — many taking advantage of the MLS alerts that we set up for them — but they want someone they know and trust to bring their real estate savvy to bear in listing and marketing their home when it’s time to sell.

The “full-service” real estate agent is being redefined, and I like to think that my broker associates and I epitomize that evolution. Some of the services we provide can not be obtained from those other companies.

Full service goes beyond providing our free moving truck, moving boxes and packing material, which we’ve been doing since 2004. Here are some other services you can expect from us.

We have an in-house handyman who can help with preparing a home for market, such as repairing drywall damage, washing windows, and doing light plumbing and light electrical tasks such as installing a new toilet, faucet or light fixture. He’s also there to address many of the issues which arise from the buyer’s inspection. And he’s also there if needed to drive our truck for moving, or even for a dump run or for taking a load of possessions to Goodwill or Arc.

We also have a certified home stager who provides our sellers with a free consultation to help their home show its best.

You’re familiar by now with how we create narrated video tours of each listing, including drone videos, but we also serve out-of-state buyers by shooting videos of other agents’ listings that interest them. Last June I did that for a Minnesota couple who felt they had “seen” an Arvada home well enough through my narrated video tour of it to go under contract, not visiting the home in person until they came for the inspection.

Speaking of inspection, experienced agents like us from a traditional brokerage can be counted on to recommend a good inspector who has a track record with them. Other specialists we know and trust — giving our clients the comfort to employ them — include estate sales companies, structural engineers, electricians, plumbers, HVAC companies, and more. The real benefit from these trusted vendors is that they will make sure you’re satisfied with their work, because they want to be referred to future clients.

“Full service” also implies availability and responsiveness. My broker associates and I are available 7 days a week, and we answer our cell phones on evenings and weekends. Although I have associates who can be my “boots on the ground” when I go on vacation, I take my cell phone (and laptop) with me, and I answer it when it rings.

Often we provide service for which we don’t expect or receive any compensation. For example, this past Sunday I got an inquiry from a man who had inherited his mother’s house and wanted an appraisal for tax purposes. I explained that only licensed appraisers can do appraisals but offered to do a free market analysis, which he happily accepted.  He may call me about listing it later on, but that’s not the point. I’m happy to be of service.

I follow a policy that I came to embody many years ago: Concentrate on giving and the getting will take care of itself.

Regulation of Community Association Managers Recommended by Dept. of Regulatory Agencies  

If the General Assembly follows the recommendation of DORA’s “sunrise” report, we may see the return of regulation of HOA management companies and of the community association managers (CAMs) they employ.

DORA’s recommendation, released earlier this month, stated that regulation of CAMs “is necessary to protect consumers” and recommended the creation of a new regulatory program.  

CAMs were regulated starting in 2015, but the bill to retain that regulation (which DORA recommended) was killed by the General Assembly in 2017 resulting in the phase out of CAM regulation in June 2019. With the General Assembly now controlled by Democrats, this new recommendation may result in legislation restoring regulation of CAMs that will be signed into law by Gov. Polis.

You can find the full text of DORA’s sunrise report here.

Arvada City Council Buys Into a Developer’s False Narrative That New Homes Must Have Natural Gas  

It’s sad to see elected officials not taking the time to learn about new technology, especially technology that contributes to abating the effects of climate change.

Such is the story unfolding in the city of Arvada, where the city council — historically super friendly to developers — has bought into a false narrative by a developer/builder team that all-electric homes are not affordable or desired by today’s home buyers.

This is happening despite the fact that Arvada is itself home to a well known model of affordable all-electric homes in the Geos Community located west of Indiana Street and south of 72nd Avenue.

Geos Neighborhood

The Geos Community was partially built out several years ago without any natural gas lines. Home heating is by geothermal and air source heat pumps. Cooking is on induction cooktops. Heat pump water heaters provide the domestic hot water. Solar panels on each home provide all the electricity needed for these and other needs, making all 26 current homes “net zero energy.”

Before the Geos Community could be fully built out, its original developer was forced into selling due to a divorce settlement. Otherwise the remaining 250 homes — a mix of townhomes and single family homes — would have been built to the same net zero standard.  The new developer had promised to do so, as described in a Nov. 17, 2020, post on MileHighCRE.com, but it reneged on that promise and is in the process of installing natural gas lines to the new homes, greatly annoying and angering the owners of the original 26 homes.

The fossil fuel industry duped all of us by promoting methane as a “natural and safe” gas for use in homes. This gas is highly heat-trapping (80-100 times more so than carbon dioxide), prone to explosion and causes many health issues (see Electric4Health.org). During the last decade Colorado added an average of 20,500 residential  gas customers each year. BigPivots.com reports that our state now has 1.8 million residential gas customers. That trend needs to be reversed. There’s no need to keep building home reliant on natural gas.

Geos homeowners appealed to Arvada’s city council to deny the developer a permit for the gas lines, but the city declined to do so. The neighbors, however, are not giving up and have 267 signatures (including my own) on a petition to reverse that decision. The City of Arvada has advised the current Geos residents that this issue is closed.

Arvada should be proud that it is the home of the country’s first “geosolar” community which has, among other honors, been featured several times in the Metro Denver Green Homes Tour. I myself have produced narrated video tours of three Geos homes for that tour, which you can view here, here, and here.

As part of its COP 26 coverage this week in Glasgow, CNN will air a segment on Geos as a home building model to be emulated, essential for addressing climate change.

A Professional Inspection Is Money Well Spent  

You can’t tell a book by its cover, and you can’t tell a home’s condition by how well it looks when you fall in love with it and go under contract.

That’s why you should never waive your right to inspect the home and submit an “Inspection Objection.”  With all the bidding wars going on, it’s increasingly common for buyers to waive both inspection and appraisal in order to get the home they are bidding on.

There are three inspection deadlines. You might feel the need when competing with other buyers to waive inspection objection and inspection resolution, but you should never waive inspection termination. That way, you still have the right to hire a professional inspector, and you may just find enough hidden defects to exercise your right to terminate the contract.

That’s what happened with a buyer I was working with. The house showed all the signs of being well built and well maintained, but the inspection revealed several shocking structural flaws, electrical issues and plumbing problems. We clearly had to terminate — unless the seller was willing to amend the contract to allow for inspection objection and inspection resolution, which she did. (Lesson: The threat to terminate alway contains within it the possibility of restoring the right to submit an inspection objection which you may have given up to win the bidding war.)

We then submitted an extensive list of repairs, which the seller rejected completely. This was unusual, however, since the seller and her agent were now aware of serious problems, structural and otherwise, which they were required by law to disclose to the next buyer.

Event Tonight (Oct. 21) Is About Heat Pumps, “The Overlooked Climate Solution”

Michael Thomas is founder and head of research at Carbon Switch, a climate research company on a mission to decarbonize America’s homes. He will be speaking this evening at Jefferson Unitarian Church, 14350 W. 32nd Ave., Golden. All are welcome (masks required). The event begins at 7 p.m. but is being recorded if you can’t make it.

From Carbon Switch website

Michael Thomas argues that heat pumps are “the boring climate solution we need to pay more attention to” because they offer massive savings for heating and cooling and substantially reduce carbon emissions. (They were key to Golden Real Estate making its office net zero energy.) Thomas will also talk about why cold-climate states like Maine have some of the best opportunities for heat pump adoption while climates like Colorado will be harder to electrify with heat pumps.

His research has been featured on NPR, CNBC, WSJ, and dozens of other national publications. He has also written for The Atlantic, FastCompany, and Quartz. www.carbonswitch.co

The event will be recorded and be available on the CRES Youtube channel.