Jim Smith's Blog

Winning a Bidding War Is Harder Than Ever for Buyers

It is a lot harder working for buyers these days. You’d be hard pressed to find a buyer’s agent who hasn’t lost more bidding wars than he has won for his clients. I don’t mind admitting that has certainly been true for me.

Last Sunday, however, I had a big success. My buyer fell in love with a patio home that backed to her alma mater, a Jeffco high school. Like her, the seller was a single woman, so maybe there was some sympathy there — I wouldn’t know.

It’s not accepted nowadays to present “love letters” from buyers, because they could lead to a fair housing violation, but it is okay to say things in a cover message with the contract written by me, not the buyer, so I made a point of saying that my buyer was an alum of that high school and relished buying this house. I don’t know if that helped either, but it didn’t hurt and it didn’t constitute a fair housing violation.

What did help was that I learned from the listing agent that while the seller was moving out of state, she was going to move her furniture to a friend’s house in the greater metro area. We have a moving truck which we make available to our buyers and sellers, but we can also offer it free to another agent’s client if it will help us win a bidding war. That did the trick for my buyer in this situation, and it also saved her several thousand dollars. Here is how and why.

In our offer we added an “additional provision” that Golden Real Estate (not my buyer) would provide totally free moving of the seller’s furniture anywhere in the Front Range, using our own moving truck and personnel, moving boxes and packing material.

Then, instead of a typical “escalation clause” offering to beat any competing offer by one or two thousand dollars (or more), I wrote that “buyer requests the opportunity to match any competing offer in order to retain for the seller the above mentioned totally free moving benefit.”

It worked. We were told the dollar amount of the best competing offer and were allowed to match, not beat, it. My buyer is now happily under contract for her dream home.

Any agent could make the same offer on behalf of his or her buyer, paying for the cost of moving. It’s just that we have the economy of having our own truck and moving personnel.

Since I’m often on the listing side of a bidding war, I have seen other strategies used by agents hoping to win a bidding war for their clients. A common one is to make a quick first offer that is substantially over the asking price but with an early acceptance deadline, hoping to get it under contract before anyone else can submit. This can pose a dilemma for the listing agent when his strategy, like ours, is to wait four days so that every possible buyer gets a change to compete.

Agreeing to accept an early offer like that should be the seller’s decision, however, not mine. Yes I gave my word that we would not sell the home in less than four days, but now I modify that promise by saying that, “in the event the seller wants to accept a particularly attractive early offer, we will give sufficient notice to every agent who has set a showing so that they can accelerate their showing and offering schedule.” We don’t want any buyer or their agent to be blindsided. As we like to say, “the only way a buyer will lose out is if he or she drops out.”

Abuse of Lockbox Access Is Serious But Rare

Access to listed properties has changed significantly over time. Long before I became a real estate broker, an agent wanting to show a listed property might have to go to the listing office to sign out the keys and bring them back after the showing. That approach would certainly not work in today’s market where 10 or more showings might be scheduled in a single day.

Then we saw the introduction of lockboxes, usually with alphabetic dials, like those padlocks on high school lockers. When I first confronted one of those lockboxes as a new agent, I had forgotten which way to turn first, and I took way too long to open the lockbox. It was quite embarrassing. They don’t teach that skill in real estate school!

Lockboxes with numeric push buttons are more common now, and they are my favorite for two reasons. First, you can open them in the dark, since you remember where each button is located. Second, no one will know what the code is by looking at it after you open it. Lockboxes with dials allow a buyer to look at the lockbox after it is open and memorize the code for unauthorized use later on.

Agents should never allow their buyers to know the lockbox code, nor should they give it to another agent, inspector or vendor without approval from the listing agent. Writing the code on a listing sheet or other paper which could be seen by the buyer is a no-no. I record the code for individual showings on my iPhone where only I can see it. If I’m showing several listings, I print out the agent instruction sheet for me, giving my client a version which does not have the lockbox codes.

Abuse of lockbox or other access is a serious matter that can subject a broker to suspension or loss of his/her license.

Electronic lockboxes are struggling to gain acceptance in our market, although they are quite common in other markets. These boxes will only open for agents when they are allowed access, preventing them from returning on another day or at another time without additional permission. Codes are unique for each showing agent, allowing listing agents and their sellers to know exactly when each agent came and left.

The main reason electronic lockboxes have not caught on here is that abuse of the mechanical lockboxes has been quite rare. We have insurance to protect our sellers from losses related to unauthorized access, but in two decades as a listing agent, I have never filed a claim, just as I have never had a loss sustained during an open house.

Don’t Fall for ‘Title Lock’ Services. They Are a Waste of Money and Don’t Provide Much Protection.

Perhaps you have seen advertisements or received a solicitation to purchase “title lock” service. A reader asked me to find out if it was a scam, so I asked my friends at First Integrity Title to check it out. Here’s what I learned.

The premise of the service is that the company monitors your public property information. It is supposed to alert you to changes to your home title (similar to credit monitoring) but is not as helpful or as necessary.

The truth is that it really isn’t as easy to steal your home’s title as they claim. Also, this is a monitoring service only. There is no “insurance” or help if your title is found to have changed, although Home Title Lock’s website does claim to provide a million dollars towards legal fees and costs to defend title from one of these scams. Doing so wouldn’t be terribly risky for the company, since the fraud is so rare and so easy to repair legally.

The reason a scammer would pretend to own your home is to take out a loan against it, pocket the money and disappear. The best target for such fraud would be a home that is owned free and clear. Any lender would require the purchase of title insurance, so if the scammer were successful in fooling a title company to insure that loan, it would be the title company at risk, not you.

Jerry Spaeth, a lawyer and the CEO of First Integrity Title, reported that in 22 years of doing title work, he has never seen a case where someone has been able to “steal” tile and then take out a loan, as they claim. And for only $15 a month, which such services typically charge, it would be difficult to be anything more than a monitoring service.

It is difficult to find out how many such frauds have been committed, because they would be lumped together statistically with wire fraud and identity theft.

The likelihood of needing this service is greater if you have several properties that you own, or if you own your home free and clear — and if you are elderly. The victim might not be able to receive the letters from the new mortgage company that a payment is late.

Again, you aren’t going to be getting support from most title lock services. They are just letting you know if something has taken place.

The title policy you received when you purchased your home does not provide protection for a fraud incident after the purchase of the policy. You can, however, monitor your property on assessment websites to verify that you are still the rightful owner. Every year you should be receiving valuation and tax notices from your county assessor and treasurer. If you don’t get such notices, contact the county to find out why.

If you have a credit monitoring service, as Rita and I do, you would be notified if a new loan is taken out in your name, and a no-cost “credit freeze” with the three credit bureaus would stymie anyone seeking to obtain credit in your name.

In conclusion, title lock service is not necessarily a scam, but it is questionable how useful the service is if there is little or no protection that comes with it.

Remember that Google is your friend. I found some useful information by Googling “title lock protection,” including a September 2020 piece from Fox 5 Atlanta calling title lock service a “Waste of Your Money.”

Real Estate Bidding Wars Are Not Abating

This is my monthly update on the real estate bidding wars. This week I chose to analyze the closings that occurred last Thursday, June 10th, to see how the bidding wars have evolved over the past four weeks. The source for this monthly analysis is REcolorado.com, the Denver MLS.

As I did in previous months, I limited my analysis to sales within a 15-mile radius of downtown Denver. I limited my search to homes, condos and townhouses that were on the MLS at least one day and not more than 6 days before going under contract. Those are the homes with bidding wars. I divided the results into homes which sold up to $500,000 and those that sold for more.

As you can see in this chart, the bidding wars only took off in earnest during February 2021, and they have kept accelerating month by month, enough that it raised the average ratio of closing price to listing price over all sales, not just the homes which sold in six days or less.

On June 10th there were 40 closings up to $500,000, compared to 44 closings on May 13th. The median home sold for 6.2% over its asking price, compared to 8.7% on May 13th. The highest ratio this time was 19.6% for a condo in Golden compared to 15.7% on May 13th for a home in southwest Denver. Only one listing sold for the asking price, and only two sold for less than listing price.

There were 37 homes that closed on June 10th for more than $500,000, compared to 56 homes on May 13th. The median home in that group sold for 7.7% over its listing price, compared to 8.1% on May 13th. Only three sold for the listing price, and none sold for less than the listing price. The highest overbid in this group was 20.9% for a one-story home in Lakewood on June 10 compared to 29.4% on May 13.

To have a statistically significant number of closings over $1 million, I analyzed the 82 such closings over a longer period — June 1-13. The median closing for those high-end homes was 6.1% over listing price, compared to 6.0% in May. Four homes sold for the listing price and 9 homes sold for less than the listing price. The highest overbid was for a 1979 ranch-style home in Jeffco’s Sixth Avenue West subdivision, which was listed at $1,080,000 and sold in 6 days for $1,575,000, 45.8% over listing price.

I’ll repeat this analysis on July 15.

We and Our Truck Go the Extra Mile for Our Clients!

Our clients have put a lot of miles on this box truck, saving them thousands of dollars on moving costs. They also get free moving boxes, packing paper and bubble wrap. They only pay for the gas used. The truck is also used twice a week by BGoldN to pick up food from Food Bank of the Rockies and by other non-profits, including Family Promise of Greater Denver and the Golden Chamber of Commerce.

We also use it ourselves every couple weeks to take truckloads of polystyrene (aka “Styrofoam,” a brand name) to a reprocessing center in Aurora, keeping over 200 cubic yards of the material out of landfills every year. People from all over Jefferson County (and beyond) bring their block white polystyrene to the Styrofoam Corral behind our office.

It’s Suddenly Much Easier to Qualify for a Refinance of Your Home Mortgage

Refinancing has been all the buzz this year. Many homeowners have taken advantage of record-low rates to refinance their homes. Unfortunately, lower-income borrowers, especially those who lost income streams due to Covid-19, were unable to refinance because of income requirements. According to the Federal Housing Finance Agency (FHFA), over two million families could not refinance in 2020 when they might have benefited from it. As of June 5, 2021, this is no longer the case. Lower-income homeowners may now potentially save hundreds of dollars per month on their mortgage under a government initiative called “RefiNow.”

I spoke with Jaxzann Riggs of The Mortgage Network to learn about this program.

We have all heard the term “refinancing,” but you may not know why someone might consider refinancing. Homeowners choose to refinance their mortgage for different reasons. Refinancing your home could allow you to secure a lower interest rate, which lowers monthly payments, to shorten the duration of your mortgage, to switch to a fixed-rate mortgage, or to access equity.

While refinancing may sound ideal for your situation, the process and guidelines post-COVID have been quite strict and restrictive. One important factor in qualifying for refinancing is your debt-to-income (DTI) ratio. Your DTI is the percentage of your gross monthly income that you pay each month towards your debt and other obligations, including mortgage, minimum credit card payments, car loans, and student loans. Traditional loans require DTI to be under a certain threshold to refinance — typically under a maximum of 44%. Many people, especially service industry workers and small business owners, lost their jobs and sources of income during the pandemic, and the regulation regarding DTI was an obstacle to refinancing. RefiNow may be able to change that.

RefiNow, Fannie Mae’s new refinance option, makes it easier for homeowners earning at or below 80% of their area median income (AMI) to refinance at a lower interest rate to reduce their monthly payment. This new program is designed to lower the barriers that keep low-income borrowers from refinancing, which have historically resulted in those borrowers refinancing at a slower pace than higher-income borrowers. With RefiNow, you are allowed to have a DTI of up to 65% (instead of 44%) and you will be given an appraisal credit of up to $500. The new program does not just benefit homeowners, it helps lenders because it improves the probability that homeowners who may have been struggling to make their current payments will be able to make future payments, resulting in fewer pandemic related foreclosures. Don’t despair if your loan is owned by Freddie Mac (FHLMC). Freddie is slated to offer a similar loan program in the next few weeks.

To qualify for RefiNow, you must have:

> A Fannie Mae-backed mortgage secured by a one-unit, principal residence. Unsure? Go to https://www.KnowYourOptions.com/loanlookup

> A current income at or below 80% of the Area Median Income (AMI) This varies by census tract, but your lender can look this up for you.

> Not have missed a mortgage payment in the past six months, and no more than one missed mortgage payment in the past 12 months.

> A debt-to-income ratio of 65% or less, and a minimum 620 FICO score (minimum 660 FICO score for manufactured homes).

> A reduction of at least $50 per month on the new loan and you may not access any of your equity.

If you are not sure if a RefiNow loan is right for you, reach out to Jaxzann Riggs at (303) 990-2992 with any questions and to discuss your best options.

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.

Let’s Make Our Summer a Little Bit Quieter

Walking our dog, Chloe, is a favorite daily routine for me. Recently, I passed a neighbor mowing his lawn with a battery electric lawn mower, and I thanked him for doing so. “I love it,” he replied, and it got me thinking how nice it would be if more neighbors ditched their noisy gasoline lawn mowers, edgers, trimmers and blowers now that electric versions of each (both battery & corded) are widely available and affordable.

The next time your gas-powered device needs a tune-up, use that money to purchase of an electric version and you’ll enjoy not only a quieter neighborhood but no future tune-ups, no struggles to start the device, and lower cost overall.

I have read that a lawn mower emits more pollution than an automobile. A quick Google search on the topic produced the following:

“The EPA estimates that hour- for-hour, gasoline powered lawn mowers produce 11 times as much pollution as a new car. According to the EPA, each gas-powered lawn mower produces as much air pollution as 43 new automobiles driven 12,000 miles per year – lawn care produces 13 billion pounds of toxic pollutants per year.”

My stepson has a small lawn and is happy to use an old-style rotary push mower. I have a 10-year-old corded electric mower that has never needed repair and a battery powered weed eater which only needs me to replace the string now and then — my biggest annoyance!

Just Listed: Littleton Home Backs to Greenbelt

Vintage Reserve is a special community in unincorporated Jeffco. This 4-BR home at 5359 W. Hoover Dr. (just listed for $875,000) has one of the best locations, backing to a greenbelt, with two trailheads just 4 doors away! Other trails lead to the neighborhood’s fabulous clubhouse, playground and picnic area. With a main-floor bedroom and 3/4 bath, this is a fine home for aging in place or for having senior guests. There’s a lot to like about this home, which requires little or no updating, unless you want to finish the walk-out basement, which has rough plumbing for a bath. Find more pictures and details at www.LittletonHome.info, then call your agent or Jim Smith at 303-525-1851 for a private showing. It will be open this Saturday, June 12th, from 11 a.m. to 2 p.m. Showings begin on Thursday, June 10th, and it will not be sold prior to June 14th.

Just Listed: 2-Bedroom Arvada Patio Home

Good patio homes are hard to find, and this one at 7575 Loveland St. in Arvada’s Saddle Brook subdivision is going to make some buyer very happy. It was just listed for $650,000. Like a true patio home, there is no mowing or yard maintenance to handle — it’s done by the HOA, along with snow removal from your driveway, walkway and front porch! It’s not a senior community, but seniors find the maintenance-free living to their liking, allowing them to “lock and leave” without anyone knowing they’re gone. Everything is on the main floor, including the laundry, and all appliances are included — even the high efficiency washer and dryer. The basement is unfinished, but does have rough plumbing for another bathroom and a second set of laundry hook-ups. You can take a video tour with drone footage at www.ArvadaPatioHome.info, then call your agent or Jim Smith for a private showing. This home will be open both Saturday and Sunday, June 12th & 13th, from 11 a.m. to 2 p.m.