Buyers & Sellers Ask: Why Did the Appraisal Come in at Exactly the Contract Price?

Real_Estate_Today_bylineWhen purchasing a home with a mortgage, one of the major hurdles for buyers in getting to the closing table concerns the home appraisal. The lender hires the appraiser – at the buyer’s expense – to make sure that the home is worth what the buyer has agreed to pay for it.

More often than not, the appraisal comes in at exactly the contract price, which understandably seems a little fishy.  Typically, when the buyer asks me why, I explain that the appraiser always gets a copy of the purchase contract and therefore knows his or her target valuation. Once an appraiser can justify that target, there’s no need to identify additional value. That’s been my hypothesis anyway, but since it’s only a hypothesis, I posed the question last week to several experienced lenders with whom I have long-standing relationships.

Bernie Bernfeld of Wells Fargo (303-273-6373) responded as follows: “My short answer is that with so much scrutiny on appraisers and their valuations due to past abuses in some areas of the country, the appraiser will generally not assign more value than is necessary to support the sales value even if he knows the property may be worth more. This conservative approach satisfies the loan underwriters and those reviewing the appraisal while still supporting the buyer’s accepted offer.”

Jim Spray, a mortgage broker specializing in reverse mortgages (303-403-8168) said the following: “One should keep in mind that an appraisal is simply a valuation tool for lending purposes; it is nothing else. It may or may not reflect the actual market value,  which is what an independent party (the buyer, in this case) is willing to pay.  This may not reflect the value of an appraisal that is not associated with a purchase. In large part, an appraisal is just a tool for lenders to use to help prevent fraud and prove they are making sound lending decisions.”

Scott Lagge of Eagle Home Loans (303-944-8552) gave the longest response, making several interesting points.  He wrote: “Appraisals come in at value because appraisers don’t want to deal with appraisal objections from the real estate agents, their buyers and sellers, or the buyers’ lenders.

“When an appraisal comes in below the contract price, the first ones to cry foul are the real estate agents. They immediately question the appraiser’s ability, and put pressure on us lenders to fix it.  The agent send comps to the appraiser or lender, arguing their position, and wanting the lender to challenge the appraisal.

“So the extra work for the appraiser begins. They have to fix or defend their appraisal.

“Conversely, if the appraisal comes in high, especially if it comes in way higher than the contract price, there’s a concern on the part of the seller that they are leaving money on the table. This was more common in years past when sellers had access to the appraisal.  You can imagine being a listing agent in this situation. You’re selling a home for $400,000 and the appraisal comes in at $450,000. Bad deal for that seller — and for their listing agent!

“In either of these situations, the pressure is being put back on the appraiser to fix it.

“Let’s be clear, all lenders have a legitimate process for challenging an appraisal, and we have to prove that there is a material defect in the appraisal in order to rebut it.  We all have an internal or external appraisal management company that assures everyone is coloring inside the lines.  In other words, only valid challenges are accepted these days, but that doesn’t eliminate the pressure on us as professionals to explain why the value came in low or high to the consumer.

“So, coming in at value is the appraiser’s only sure-fire way to avoid scrutiny from clients, lenders and agents, thereby avoiding the extra work of defending and/or redoing the appraisal.

“The easier answer is that a home is worth what someone is willing to pay for it in an arm’s length transaction.  If you have a contract price of $300,000 and a buyer and seller have agreed on that price, once that transaction closes and records, it is officially worth exactly $300,000 and becomes a valid comp for future transactions.

“So why would an appraiser state anything different than the contract price, assuming he can justify it?”

[End of lenders’ responses]

I found it necessary once to challenge a low appraisal, and I was successful.  It was for a Golden area purchase, and the appraiser was from Castle Rock and clearly didn’t have geographical competence, because he checked the box indicating that the housing market was “stable” instead of “rising,” which was obvious to anyone.  I was able to point out other factual errors, and the appraisal was recast at the contract price.

Any of the above mortgage lenders would be happy to answer your questions on this topic. Call them!

Preparing Your Home for Sale – Some Practical Advice

Submitted by Suzie Wilson of HappierHome.net

Whether you’re moving because of a job, family expansion or retirement, you’ll have to roll up your sleeves and get to work if you want your property to appeal to the most buyers. Before you start packing, however, there are a few minor home improvements you should tackle, which will speed up the process and get you on the road.

Start with aesthetics

No matter how short a time you’ve lived in your home, there are likely lots of little things that you’ve learned to overlook. The vast majority of these will be minor aesthetic imperfections that are cheap and easy to rectify. ProfessionalStaging.com notes that buyers are on the lookout for issues and will notice every little crack, stain, or chipped tile. Here are a few DIY projects that will reduce the lived-in look of your home:

  • Replace moldy or damaged caulk in the bathtub and shower
  • Clean or stain grout in the kitchen and bathroom
  • Fill nail holes in the wall and gaps around the trim
  • Plant colorful flowers by the mailbox and entryway
  • Organize storage spaces (buyers love to look in closets, under the stairs, and in the garage and attic)
  • Paint rooms that don’t already have a neutral color scheme
  • Install functional smoke and carbon monoxide alarms
  • Pull weeds and add a layer of fresh mulch to flower beds
  • Repair brown spots on the lawn
  • Replace outdated bronze and brass doorknobs, handles, and drawer pulls

Manage major malfunctions

There are plenty of small things you can tackle on your own, but you’ll also need to invest time and money making sure there are no major defects that may derail your home sale at inspection time. These include:

  • Foundation problems (Homes.com estimates this can devalue your property by up to $100,000)
  • HVAC issues
  • Mold
  • Leaks in the roof/missing shingles
  • Major plumbing problems, such as a clogged mainline
  • Outdated electrical panel
  • Windows that won’t open up or lock
  • Musty/animal smell
  • Rotted wood behind walls – most likely in the kitchen or bath
  • Damp basement

Small issues won’t necessarily be deal-breaker for most of your buyers but the less work they have to do the more likely they will be to give your home a second look. Large issues such as a crumbling foundation may designate your home as a fixer-upper, which won’t attract “everyday” buyers who want to move in immediately.

What do buyers want?

Buyers in different demographics will seek out home features that appeal to their lifestyles. There are, however, a few universal want-list items you can play up in your listing to cast as wide a net as possible. According to American Home Shield, the features homebuyers want are:

  • Separate laundry room
  • Energy-efficient appliances and windows
  • Exterior lighting
  • Outdoor entertainment space
  • Ceiling fan
  • Full bathroom on the main level
  • Hardwood flooring
  • Proper insulation
  • Garage storage
  • Eat-in kitchen

When it’s time

Once you’ve completed these repairs and renovations, there are a few finishing touches that will put the icing on the cake and sweeten the deal for your buyers. First, you should declutter, so that buyers can see more of the house and less of what you own. Before you declutter, though, it’s a good idea to buy an air filter. Since digging through those items is going to stir up a lot of dust, it’s important to keep the air clean for you and home buyers.

After you declutter, deep clean the entire home and weed out any belongings or furniture that don’t look quite right. To get your home sparkling clean, spend a little money on a housekeeping service. For an average of $166 a visit in Golden, housekeepers can help you keep up with laundry, mopping, sweeping, vacuuming, and straightening. Just keep in mind that the more you request from the housekeeping service, the more you’ll ultimately pay for the privilege. 

Also, staging and investing in high-quality professional listing photos (a real estate photographer usually charges between $110 and $300 for a shoot, depending on your location) will give online searchers a reason to pay your house a visit. 

Perhaps most importantly, you’ll need to choose the best listing agent. Interview multiple individuals and ask about their recent local sales history and how many current listings they manage. A good agent will encourage you to price your home competitively and will go above and beyond simply listing on the MLS to promote the property.

Brokerages Should Allow Agents to Enter or Change Their Listings on the MLS

At Golden Real Estate, each agent (under my supervision) enters and updates their own listings on the MLS. I believe that helps to promote accuracy.

But many brokerages block their agents from accessing their own listings, sometimes resulting in incomplete or inaccurate data. One would hope that agents in those brokerages check to see how their listings were entered and tell their admins when mistakes have been made or data omitted, but there’s no way to know that.

Did you know that in addition to the “public remarks” for listings, there is a place to enter a description of every room in the house?

Very few listings — under 50% by my count — include a description of any rooms, and some listings don’t even list rooms other than bedrooms and bathrooms.

Dimensions can be entered for each room, too (rounded to the nearest foot), but I find very few listings with that information either. Our office policy is to enter room dimensions and descriptions for every room in every listing.

Brokerages which require all agent listings to be entered by their unlicensed administrative staff are less likely to have these non-mandatory fields entered. If they would make each agent responsible for such data entry and then monitor their work as we do, I believe that buyers would have much more useful and accurate information for each listing. Other non-mandatory fields in the MLS include the following:

> Is the property owner-occupied, tenant-occupied, or vacant?

¨ How close are bus stops and light rail stations?

¨ Is it in an incorporated or unincorporated area?

¨ What are the dimensions and features of the garage/carport/RV parking?

¨ What appliances are in the house?

¨ What kinds of flooring is there?

¨ Does the home have any fireplaces, and where are they?

¨ If there’s an HOA, what are the fees and what do those fees cover?

Our office policy is not only to complete every field on our company’s MLS listings, but to share our MLS data entry in draft form with the seller before making the listing live on the MLS, which also helps to assure accuracy and completeness of our listings.

The Colorado Environmental Film Festival Is Back Live Next Weekend – Don’t Miss it!

Golden Real Estate has proudly co-sponsored this unique film festival for at least a decade. For the first time since 2020, the festival is back live at the American Mountaineering Center (AMC) in downtown Golden Feb. 23-26, but most of the films can also be viewed online starting the following week.

During the pandemic, the festival (“CEFF”) was only virtual, and I loved it because I was able to see far more films than I could have seen in person.

Meanwhile, if you go online to https://ceff2023.eventive.org/films, you get to read descriptions and view trailers for all 97 films in the festival. Below is a screenshot from that website, showing just three of those films’ thumbnails.

I was particularly drawn to “The Power of Activism,” and look forward to seeing the full 53-minute Australian film about six young women activists out to save the planet. “Purple Haze” is about the purple martin, described as “America’s favorite backyard bird.”

An in-person “all access” pass costs $90 and can be purchased at the same website. The virtual pass costs $75.

As before, the films are organized into 28 “collections” such as the “Activism Collection” (my favorite), each of which can be purchased for $12 if you don’t want to buy the all-access or virtual pass. All the information is on that website. Click on the “Menu” link at the top left of the website to see the various pages with all the information you need to attend the festival.

As in past festivals, there is a free (but ticket required) “Community Opening Night” on the 23rd which includes announcement of the winning films in various categories. It starts at 6 pm in the AMC auditorium and is followed at 7:15 by the screening of seven of the award-winning films, ranging from a one-minute PSA to a couple 23-minute films. I never miss this event, which is held in the AMC’s Foss auditorium. 

Although CEFF is an international film festival, several of the “collections” feature films made by Colorado filmmakers. There are also 16 accessible collections which are either captioned, subtitled or have no dialog. One collection is of the “Top 10 Best Kids’ Short Films.”

Other collections which caught my attention include: Art in Nature; Climate Chaos; Feathered Friends & More; Innovation & Inspiration; Off the Beaten Path; People to Know; Special Places; Unique Solutions; and two Wildlife Collections.

If you are reading this column in time, there’s a free Festival Preview at the University of Denver’s Sturm Hall on Thursday, Feb. 16th, 6:30 to 8:30 pm.

The Foss auditorium is the main venue for the festival at the American Mountaineering Center, but a second screen is created in the AMC’s event center to accommodate all the screenings, which begin at 10 a.m. from Friday through Sunday. The virtual access ticket (which I’m going to get) allows you seven days to watch any or all of the films on demand.

The festival features young filmmakers from around the nation including Hawaiian youth-made films like “Sunscreen Standoff,” and local Colorado young filmmakers like Taylor Saulsbury, who gives voice to her generation’s climate anxieties, creating portraits of resistance and resilience in “Right Here. Right Now.”

Join one of the free virtual “Green Bag Lunch & Learn Series” to hear from local experts as they dig deeper into current event environmental issues, including a closer look at the impact of Climate Chaos on young people’s mental health (Wednesday, March 1st at noon).

By attending the festival in person, you also get to participate in Filmmaker Q&A Sessions after many of the films to chat live with the filmmakers in attendance or watch one of the many recorded sessions to hear the secrets and intriguing behind-the-scenes stories of the films featured in the festival.

It Pays to Be Aware of Recent FHFA Changes to Lending Rates and Rules

We are barely six weeks into 2023 and already, we are  feeling  the effects of  “pent up demand” for housing. Denver’s real estate market is rebounding and the advantages that buyers had in the last few months are declining as the “Spring Selling Season” unfolds. Consumer confidence, unemployment numbers and inflation have been in the news recently, and while those factors certainly impact the cost of residential home loans, there are other upcoming changes in the industry that aren’t as well known. I asked Jaxzann Riggs, owner of The Mortgage Network, to elaborate.

The Federal Housing Finance Agency (FHFA) has announced changes that will affect the cost of home ownership for many borrowers starting in March.

Established in 2008, FHFA was created to restore confidence in the mortgage market and to provide supervision and regulation over Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. FHFA has made it their mission to prevent a repeat of the housing collapse and promote stability so that Americans can buy homes with confidence, especially those within underserved communities.

FHFA has announced targeted changes to Fannie Mae (FNMA) and Freddie Mac (FHLMC) pricing by eliminating added interest rate adjustments called Loan Level Price Adjustments (LLPAs) for certain borrowers and affordable mortgage products. There are requirements to qualify, but one example would be first-time homebuyers who are at or below 100 percent of the area median income (AMI) in most of the United States and below 120 percent of the AMI in high-cost areas such as Denver.

Traditionally, LLPAs have been added to interest rates to account for higher risks such as lower credit scores, low down payments, and property types, such as condominiums. Eliminating these LLPAs can lower the offered interest rate by up to 1.75%, which makes a substantial difference in a monthly mortgage payment. These changes will help to make home ownership easier for underserved and first-time buyers.

To support FHFA’s priorities, lenders will offer new mortgage programs that allow individuals to make down payments of only 3% and, in an effort  to help first-time and lower-income buyers enter the housing market, a portion of the 3% down payment can actually be borrowed.

While Fannie Mae, Freddie Mac, and FHA are reducing the interest rates being offered to first-time and lower-income buyers, they are increasing the interest rates being charged to other home buyers. We have already seen a dramatic increase in the cost of loans for individuals purchasing a second home or investment property, and additional increases are expected in the next couple of months. These changes signal a significant shift in lending philosophy. At the height of the COVID crisis, the cost of mortgages for second homes and investment properties was identical to that for primary residences.

Currently the price differential between an owner-occupied home and an investment property is over a full percentage point, making real estate investing much more expensive than in recent years.

While credit scores have influenced the cost of money for over a decade, Fannie Mae and Freddie Mac will now increase interest rates for those with mid-level FICO scores. In the past, the percentage of income (debt to income ratio or DTI) that a borrower used for housing had no impact on the cost of the loan. Soon a borrower’s DTI ratio will be factored into the cost of loan — the higher the DTI, the higher the rate.

You may have questions about the changes. Do you qualify? What is the best loan option for your personal circumstances? Reach out to Jaxzann Riggs of The Mortgage Network, 303-990-2992, for answers.

Have You Wondered About 72Sold? It’s Not Licensed as a Real Estate Brokerage in Colorado

Perhaps, like me, you have wondered about 72Sold, which runs commercials every night on local TV stations, giving the impression that it is a Colorado real estate brokerage, and directing you to www.72Sold.com, which gives the same impression.

In researching this company, the first thing I did was to look on REcolorado.com, the Denver MLS, to see how many listings they have sold. The answer was none, because 72Sold is not a member of the MLS and is not even licensed in Colorado to sell real estate.

So what’s the story? First I asked Marcia Waters, director of the Colorado Division of Real Estate, who confirmed that 72Sold is not licensed in Colorado, and said the division has not received any complaints about them — which makes sense, since one can only file a complaint against a licensed brokerage.

My suspicions about 72Sold were raised further as I scanned the company’s website, which contains numerous testimonials and the following graphic, which has no identification of, or links to, the “five independent studies” cited in it:

To learn more, I posed as a potential seller and requested a valuation on 72Sold’s website, which uses such terminology as “a better way to sell your home.” That sure sounds like a brokerage, doesn’t it?

Registering my name and a home address on their website resulted in a call from a woman who said she was from 72Sold but who, under questioning, said she was actually with Your Castle Realty, a non-Realtor brokerage. So as not to blow my cover, I used the excuse that I only wanted to work with a Realtor, and she offered to have an agent from Keller Williams call me.

Susan Thayer, co-owner with her husband of Keller Williams Action Realty in Castle Rock, was the agent who called me next. I revealed to her that I was actually a Realtor myself writing this real estate column. I explained that posing as a seller on 72Sold’s website was the only way I could find out what was really behind all those TV commercials.

Susan was quite open and helpful and sent me links with background information, including an Inman News article about 72Sold’s partnership with Keller Williams and its many franchises.

Like 72Sold’s website, the Inman story conflated the roles of a lead generating company and a real estate brokerage, reporting, for example, that 72Sold had grown from 10 agents to 426 agents (as of August 2022), when in fact they only have licensed agents in Arizona, where they are a licensed brokerage.  Everywhere else, as I understand it, they have what should be called “referral partners” instead of agents.

What 72Sold does is invest 80% of its referral fee income (according to the Inman story) into more TV advertising in those markets where it has referral partners, and some of that expense is apparently shared by those referral partners, although I didn’t garner any specific numbers.

What 72Sold offers through its referral partners is a strategy of combining a 7-day coming soon period with a Friday-to-Sunday active period during which buyers’ agents may show the home for 15 minutes on Saturday, according to the Inman article. The idea is to create a buyer frenzy and “fear of loss.” With the slowing of the market, that strategy has softened. It sounds great to sellers, however, making the leads generated well worth 72Sold’s referral fee.

Click on the thumbnail below to watch a video from 72Sold’s home page. Judge for yourself whether they are posing as a brokerage in Colorado, where you just watched their TV ad.

https://customer-1v1fe9xdf1t4u6v8.cloudflarestream.com/e02e9ac5fab9ccd518603b7cc92a65c9/iframe

PS: It is a violation of the Realtor Code of Ethics for a member to misrepresent himself or his level of success, but neither Greg Hague nor his Arizona brokerage is a member of the National Association of Realtors, and therefore neither is bound to the Code of Ethics.

Understanding Indoor Air Quality and How It’s Managed in Super-Insulated Homes

As we all work to make our homes more airtight, we also have to be conscious of our families’ need for fresh air — oxygen above all! If our homes were completely airtight, we not only would risk suffocation, we would also be more susceptible to the toxic gases and fumes emitted by our paint, our carpeting, our gas appliances, and more.

The outgassing from our carpet and other building materials are known as “volatile organic compounds” or VOCs.

An appliance which you’ll be hearing more about as homes become better insulated and therefore more airtight is displayed schematically in the third column. It’s called an Energy Recovery Ventilator (ERV) or a Heat Recovery Ventilator (HRV).

Before I explain this appliance’s operation, let me tell you what it replaces: the exhaust fans in your bathrooms and above your kitchen stove. Those exhaust fans simply pump air out of your house, which causes fresh air to be sucked into your house via the gaps around your doors and windows and multiple other gaps you are not aware of.

That air which enters your home is not preconditioned in any way. It is whatever the temperature is outdoors, and in midwinter it could make your furnace work harder heating the cold air which naturally enters your home, whether or not those exhaust fans are operating.

Thus, the primary job of the ERV or HRV is to use the heat from the air being exhausted from your home to preheat the air that is entering your home without having those two sources of air mix with each other.  This is done through a heat exchanger. In the above diagram, the heat exchanger is in the middle of the device. The unit runs at low speed, taking the stale air from your bathrooms and kitchen (typically), through a metallic heat exchanger which then adds that heat to the air which is passing through the adjoining passageway from the outdoors into your living spaces. That fresh air replenishes the oxygen in your home. The picture below is of a typical HRV installation. Both images are sourced from homes.winnipegfreepress.com.

What I have described above is the function of the HRV, which only handles the transfer of heat from one air source to the other. The ERV also performs the transfer of humidity. Thus, if the cold air outside your house is very dry (typical of Denver’s climate), the ERV will transfer some of the moisture from the indoor air to the incoming air.

Neither the ERV nor the HRV measure or react to the presence of toxic gases in your home. That’s the added value of a third device, the CERV or Conditioning Energy Recovery Ventilator. If you’re concerned about indoor air quality, this is the device you’ll want to consider installing in your home.

Whereas the ERV and HRV may operate on an as-needed basis, the CERV is intended to run 24/7, constantly monitoring the level of CO2 and VOCs in your indoor air as it is drawn through the unit. If the levels of these or other pollutants are high, the unit’s fan will run faster. A recent update of the unit has the addition of a virus-killing UV light.

Also, a CERV contains a heat pump, so it can actually perform the function of a furnace, preheating the air which is drawn from outdoors (or recirculated within the house), not merely transferring the room temperature heat from the exhausted air to the incoming air.

I have written in the past about the Geos Community in Arvada. None of the homes in that community use natural gas. Instead, the townhomes are heated and cooled by a combination of a heat pump/mini-split system and a CERV which provides additional heating or cooling. The detached homes at Geos also have CERVs to complement the ground source heat pumps which provide the primary year-round heating and cooling of the homes. 

Learn more about CERVs at www.BuildEquinox.com. The local vendor is Todd Collins of AE Building Systems, 720-287-4290.

How to Recognize Scam Emails, Texts and Phone Calls

Senior citizens in particular are targets for scammers.  It’s easy to be taken in by a scam email or phone call, so here are some tips on how to recognize them.  I’m not an expert on this topic, but I’m speaking from my own experience. I have never been a victim of a scam because I’m careful. I’m sharing with you the care I take to avoid scammers.

If you do end up speaking with or exchanging emails with a scammer, remember this above all else: If it sounds too good to be true, it’s a scam.  If they ask for any personally identifying information, it’s a scam.  If they ask for money, it’s a scam. Better yet, though, it’s important to recognize the emails so you don’t open them and scammers’ phone numbers so you don’t answer them.  If they say they are from your bank, etc., hang up and call your bank.

Scam emails: The main danger with emails occurs when you open an attachment or click on a link that contains a virus.  Never click on a link or attachment you are not expecting. For attachments, look at the file name. If the suffix is “.htm” or “.html” it’s a website, not an attachment, and it will capture your information and suck you in. Word files (“.doc” or “.docx”) can also contain hidden links in them that capture your information or plant a virus on your computer. An Acrobat file (“.PDF”) might be safe, but I wouldn’t open one I’m not expecting from a trusted person. If the PDF asks you to enter something like a password or email address before opening, you know it’s a scam or virus, so don’t do it!

Look at the email address of the sender, but more importantly, float your cursor over the address to see what the sender’s real email address is, because it could be different.  That’s a red flag.  Look at the suffix on the email address. If it’s not “.com” or “.net” or “.org” or “.edu” or “.gov” it might be for a foreign country – another red flag.  If it says the attachment is a voicemail, or an invoice, or a “payment advice,” that attachment is probably a website and it’s a scam.  If you have opened an email and the whole message is one link because wherever you float the cursor you see the finger pointer instead of the arrow pointer, that’s a red flag.  Close the email and delete it! If there are links in an email, float your cursor over the link without clicking on it, and see if it’s the same. For example, the link might look legitimate, such a “microsoft.com,” but when you float over it you see some other address, perhaps ending in a country code (“.uk” or “.ru” etc.) that’s a red flag. Close and delete the message! If you do visit a website, float over any link within that website for the same reason.

Phone calls and text messages: It’s best to let unknown calls from unknown numbers go into voicemail. Usually a scammer won’t leave a voicemail, so don’t think you missed anything important.  Look at the phone number.  Never answer a call from an “unknown” number or a number from another country or a number from “United States” instead of a specific city. If you answer the phone and the person uses your legal first name instead of your nickname, and if they ask how you are today instead of just saying hello, they’re either a solicitor or a scammer. You don’t need to be polite. No need to say goodbye, just hang up. 

On text messages, use the same advice as above. Don’t click on a link. You can ignore text messages. If it’s a real person, they’ll call you if you don’t respond. Above any text message will be an icon for the sender. Touch it, then the word “Info” to learn more about who the sender may be.

I hope this has been helpful. If so, of it not, let me know!

David Dlugasch Is Golden Real Estate’s 2022 Top Producer

Congratulations to David Dlugasch, our top-producing Broker Associate for 2022! Last year he sold $5,625,700 worth of his own listings and represented buyers in the purchase of $5,278,900 worth of listings.

Since joining Golden Real Estate in October 2014, David has closed 47 listings and assisted buyers in closing on another 39 listings. He moved to Arvada from Crested Butte, where he owned his own brokerage, choosing to join Golden Real Estate because he was regular online reader of this very column. Thanks, David, for being one of our hardest working and most consistently productive broker associates.

David lives with his wife, Carol, in the Candelas subdivision in northern Arvada.

Here’s a Guide to the Tax Credits and Rebates Available for Making Your Home More Energy Efficient

Inspired by a recent article in The Washington Post, I’m able to provide you with a simplified guide to the improvements you can make to your home that might earn you a tax credit or other benefit under the Inflation Reduction Act (IRA).

If you are wealthy, some of those IRA benefits may not be available to you, so check with your tax advisor. Even if you don’t qualify for the tax credits or rebates, almost all of the following investments will produce savings down the road as well as being “the right thing to do.”

Heat pumps to replace your HVAC system and water heater are the first and greatest improvement you can make. Unlike gas and resistance-based electric devices, heat pumps move heat, they don’t generate heat. And a heat pump HVAC system uses far less electricity that a baseboard or other electric HVAC system does. The IRA provides for up to $2,000 tax credit for heat pump purchases, with extra benefits for low- and middle-income homeowners. I haven’t used this company yet myself, but you might contact Sensible Heating and Cooling, 720-876-7166, www.SensibleHeat.net, one of those rare vendors who will talk you into a heat pump HVAC system over a traditional one.

Many heat pump systems, including water heaters, are “hybrid,” meaning they have backup gas or electric resistance functions that kick in or can be activated when the heat pump can’t produce the needed heat. For example, a water heater in heat pump mode has a slower recovery than in conventional electric mode, so if you have a big family (or a teenager) you may find that you run out of hot water quickly and it takes longer than you want to reheat the water in the tank. In electric mode, you’ll get the quick hot water recovery you’re used to.

A heat pump HVAC system will probably work just fine without backup so long as you don’t turn down the thermostat too much overnight. Our office is heated solely by heat pump, and we leave it on 70 degrees 24/7, and it’s still way more affordable than the gas forced air furnace it replaced.

Xcel Energy charges commercial customers about $50 per month (that’s $600 per year!) just to have a gas meter before you burn any gas, which contributes greatly to making gas forced air more expensive than heat pump heating. Note: you need to have the gas meter removed, not just stop using gas, to save that $50 per month. Even in a residential application where the monthly meter fee is less, consider replacing all your natural gas appliances (including your fireplace and grill) so you can have the gas meter removed and save that facility charge plus those other gas-related fees that have exploded of late. There are great electric fireplaces on the market, and Rita & I love our electric grill!

Here’s food for thought: If you get rid of gas in your home and have only electric cars in your garage, you’ll never have to worry about your family being killed by carbon monoxide poisoning. In addition to spending less on home energy and fuel for your car(s), the IRA will reward you for every aspect of that conversion! And with enough solar panels on your roof, your home energy bill will be under $10 per month (to remain on the electrical grid), and you’ll pay nothing to fuel your transportation!

Induction stoves to replace gas ranges not only save you money (including an $840 rebate if you qualify based on income) but can improve you family’s health. Despite right-wing raging about this topic, it has been proven statistically that gas cooking has increased asthma cases in children and some adults. (Click here to read a study on this topic.) The rebate is available on non-induction electric stoves, but induction cooking costs less to operate and heats food and water faster. You can dip your toe in this technology by buying a single countertop induction burner for $50 to $70, as I did. You’ll be amazed. Click here to read an article about how chefs have come to prefer induction cooking. As they say, “try it, you’ll like it!”

Electric cars that cost under $55,000 and trucks or SUVs under $80,000 that are assembled in North America qualify for a federal tax credit of up to $7,500 and a Colorado tax credit of $2,000 (without those federal restrictions, which include an income cap of $150,000 single or $300,000 filing jointly). Even the Tesla Model Y’s base price is now below those price limits.

What’s new with the IRA is that you can get a federal tax credit of $4,000 or 30% of the purchase price (whichever is less) of a used EV that is at least 2 years old, has a purchase price under $25,000, and is purchased from a dealer. I have always advised that a used EV is your best buy, because a used EV is as good as a new EV since it has none of those components of a gas-powered car (such as transmission or engine) which may be about to fail. Google “used electric cars” and you’ll see many for sale by dealers. I just ran that search and found 72 EVs under $25,000 on autolist.com alone!

The IRA increased the tax credit on solar panels to 30% for the next 10 years, and, given the steady reduction in the cost of solar over the past two decades, this investment is a no-brainer, assuming you have a roof that’s not shaded by trees. (Ground mounted solar panels is an option if you have a large unshaded backyard area. Otherwise, consider buying solar panels in a “solar garden.”) Xcel Energy allows you to install enough panels to provide up to twice your average usage over the last 12 months, which is great, because that could provide all the electricity you will need for a not-yet-purchased EV or not-yet-electrified heating system.

My advice is to purchase your solar photovoltaic system outright, not lease it or sign up for a Power Purchase Agreement (PPA). When it comes to selling your house, anything other than a system that is seller-owned could complicate the sale. I’m a repeat customer of Golden Solar (303-955-6332), but also like Buglet Solar (303-903-9119). What these companies have in common, and which I think is important, is that they are local family-owned businesses, which I much prefer over a national firm such a Tesla or Sunrun Solar.

One situation in which a Power Purchase Agreement or lease works better is if the customer is a tax-exempt non-profit (which can’t benefit from tax credits).  Golden Solar put a solar array on the roof of a Golden museum doing a PPA that Golden Solar financed, taking the tax credit for it.  The museum pays no more than they were paying Xcel Energy to Golden Solar but will own the system after a few years. If you know of a non-profit that would like to go solar, have them contact Don at Golden Solar.

Improving your home’s insulation should always be the first step in saving money on energy. The IRA provides a 30% tax credit, up to $1,200 annually, for such improvements, specifying $600 for windows and $500 for doors. The gold standard in windows and doors is Alpen High-Performance Products, a Louisville CO company, which made the triple-pane windows we purchased for our South Golden Road office — expensive but worth it in terms of comfort and energy savings. Contact Todd Collins of AE Building Systems, 720-287-4290.

Whole-house energy efficiency retrofits are eligible for a rebate under the IRA, based on proven reduction in your home’s energy costs. Speak with someone from a company like Helio Home, Inc.  (720-460-1260) which covers most aspects of reducing home energy use covered by the IRA, from solar to insulation to appliances. The IRA also provides a $150 rebate on a home energy audit, which is an essential first-step to figuring out the best and most cost-effective efficiency improvements you can make. You can learn more about energy audits at www.REenergizeCO.com.

Buy a new washer and dryer! The new top-loading high-efficiency washers are the best, speaking from personal experience. The washer automatically reduces water consumption based on the size of the load; and a heat-pump electric dryer saves on electricity.

Landscaping, done right, can save on energy and water. Think shade trees and xeriscaping, or installing buffalo grass, which requires little watering or mowing. Call Darwin at Maple Leaf Landscaping, Inc. (720-290-8292), a client of mine, to discuss the possibilities at your house.

If your house doesn’t already have one, a whole-house fan is a great energy saver, allowing you to flush hot daytime air out of your house before activating the A/C when you come home. It can also allow you to leave the A/C off overnight by bringing in cool nighttime air on a quiet, low-speed setting. Whole-house fans cost between $500 and $2,000 installed. They don’t earn their own IRA benefit, but would contribute to the benefit you earn with the whole-house retrofit mentioned above. I am a happy repeat customer of Colorado Home Cooling, now part of Colorado Home Services, 303-986-5764.

Not mentioned in that Washington Post article was daylighting of your home, which is one of my favorite ways to reduce electricity consumption by drawing sunlight into dark interior spaces. I installed Velux sun tunnels in two of my past homes, including in a windowless garage, and in our former office on South Golden Road. For that, I used Mark Lundquist, owner of Design Skylights (303-674-7147).