Buyer Beware: You May Be on Candid Camera When Looking at a Home

The use of internet-connected cameras such as the Ring doorbell is becoming more and more common. Rita and I have both a Ring doorbell and four other cameras protecting the entrances to our home plus the garage, and the Golden Real Estate office has a total of 10 cameras covering the interior, exterior and our parking lot. Such systems are increasingly affordable and easy to set up, since they require no wiring and can be monitored on any smartphone. Their video (with sound) is motion-activated and uploaded to “the cloud” so that you can go back in time to see past activity. You can also be alerted real-time on your smartphone when motion is detected by any of the cameras.

With the widespread adoption of such internet-connected home cameras, it is becoming more and more possible for sellers to eavesdrop on buyers who tour their home. You can understand the value to a seller of hearing what you say as you look around. Imagine, for example, if you were caught on video saying to your agent, “I love this house! I’ll pay whatever I have to for it!”  You wouldn’t want the seller to hear that, would you?

There are, of course, legal implications to such surveillance. On the one hand, sellers have the right to install such equipment for home security, but buyers and their agents also have a “reasonable expectation of privacy” while touring your home when you’re not there.

While Colorado law allows you to record your conversations with another person secretly, that is only because you are a party to the conversation. Taping a conversation to which you are not a party is a serious matter for which you could be subject to both civil and criminal liability.

Every year, licensed real estate brokers are required to take a 4-hour real estate update class as one element of their continuing education requirement. This year’s class, which all Golden Real Estate agents take in January instead of later in the year, devotes 10 to 15 minutes to this topic of audio and video surveillance by sellers. 

In that update class, we were instructed to advise our buyer clients that they might be under surveillance while touring a home and should be careful what they say. We were also instructed to have a conversation with sellers about this topic, advising them of the legal dangers of recording buyers. It was suggested that, if our sellers do have such equipment, we urge them to post a notice next to the doorbell or prominently inside the house to the effect that “audio and video surveillance is in use” in the house. We should also put that information in the MLS listing, to protect ourselves as listing agents.

It is understandable for sellers to be concerned about strangers being escorted through their home by brokers who they do not know. When this issue is raised by a seller during a listing presentation, I let them know that no buyer will be touring their home without a licensed broker, and that all licensed brokers undergo a criminal background check and are fingerprinted in order to be licensed. Brokers would be risking their license and their livelihood to allow themselves or their buyers to commit a crime in your home. Moreover, the showing service is diligent about not providing the lockbox combination to anyone who is not a licensed broker. Your broker can also install an electronic lockbox which provides even greater accountability as to when each broker enters and leaves your home.

I have been a practicing real estate broker in Colorado for nearly two decades now, showing hundreds of listings per year to prospective buyers and holding scores of open houses for my listings.  I have yet to be made aware of any loss sustained by a seller or any misdeeds by my buyers.

Our low crime rate here in Colorado is reflected in our lowest-in-the-nation premiums for errors and omissions insurance.  In Colorado the cost of such insurance is $200-400 per year, depending on the coverage limits. In some states, like California, I’ve heard that brokers can pay that much per month for E&O coverage. 

Is Your Gas Furnace or Gas Water Heater About to Fail? Consider a Heat Pump

A reader called me last week because her gas furnace had quit working and, knowing my expertise regarding sustainability, she wanted my advice on replacing it.

I told her that this was an opportunity to do something other than buy a new gas furnace.  I told her about my Carrier “Hybrid Heat” furnace which uses an air-source heat pump for heating as well as cooling and only burns gas when the outdoor temperature dips well below freezing. With her solar panels, it’s possible she won’t even pay for the electricity consumed by the heat pump, and her gas consumption will plummet.

That hybrid system would use her home’s existing ductwork, but, since she has a one-story home, I suggested she consider a ductless mini-split heat pump system like the one we have at our office. I gave her the name of the vendor who installed both my home and office systems who could advise her which system was best for her.

I also suggested that she look into replacing her gas water heater with a heat-pump model when it fails.  My gas water heater is over 15 years old, so I’m thinking of replacing it before it fails. Home Depot sells a Rheem 50-gallon heat pump water heater (model #XE50T10HD50U1) for $1,299. Best off all, Xcel Energy gives its customers a $500 rebate for purchasing it.  I have enough solar panels to handle the extra electrical demand and eliminate much of my current gas usage, which is mostly for water heating, since I have that Carrier hybrid furnace. Our only other gas usage is for cooking and grilling.

Celebrating Martin Luther King Jr. With His Words

We’re all familiar with Martin Luther King Jr.’s “I Have a Dream” speech on the steps of the Lincoln Memorial, but this Monday, CBS This Morning (my favorite morning TV habit) featured the audio of Martin Luther King Jr.’s “American Dream” speech given on Feb. 5, 1964, at Drew University, interleaving the recording of his words with two of his children and one grandchild reading his words. It was very inspiring.

You can watch that well-produced segment online at: https://www.cbsnews.com/video/mlk-jr-s-children-grandchild-read-his-american-dream-speech/

You can read the full 6,700-word speech at: https://depts.drew.edu/lib/archives/online_exhibits/King/speech/TheAmericanDream.pdf

Plant-Based Meat Has Won Us Over

First, Rita and I tried the “Impossible Whopper” at Burger King, and we liked it — can’t tell it from the regular Whopper. Then Rita found the package shown here at Costco — eight 1/4-lb. patties for $14.99. She cooked them in a pan and seasoned them as she would regular burgers, topped with pepperjack cheese and sautéed mushrooms, and served the patties on a bed of romaine lettuce and sliced tomatoes with a balsamic vinaigrette dressing. On another occasion she substituted Roast Pineapple & Haberno Sauce for the dressing, and it was even more delicious.  Try it! You’ll thank me for telling you about them!

Committed as Rita and I are to mitigating climate change, we recognize the desirability of reducing our consumption of beef, and this product makes that really easy and enjoyable.

Let’s Separate Fact From Fiction Regarding Credit Scores & Home Mortgages

By JIM SMITH, Realtor

The ink may barely be dry on your 2020 financial resolutions, and already there is great news for those of you who have resolved to become first time homeowners or to increase your real estate holdings in 2020. Both the National Association of Realtors and the Mortgage Bankers Association predict that interest rates will remain at record lows (at or below 4.0%) for most of 2020. 

Of course, interest rates directly affect your home buying power, and you are probably aware that credit scores also directly impact the interest rates offered to you by mortgage lenders. What we don’t always know, however, are the specific actions that will hurt or improve our credit scores. 

So, let’s separate fact from fiction. I thank Jaxzann Riggs of The Mortgage Network for helping me with debunking the following fictions.

Fiction: Shopping for a mortgage lender and allowing more than one lender to review your credit report will hurt your credit score.

Not true. When multiple inquiries appear on your report from mortgage lenders, the scoring models assume that you are shopping for a home loan. Most scoring models consider inquiries from mortgage lenders that occur within a 15 to 45-day period to be one inquiry, having little or no impact on your score. Regularly monitoring your own credit score online prior to applying for a home loan is an effective way to identify any errors contained in your credit file and to obtain a sense of the score that lenders will be using when preparing credit offers for you. It is important to note however, that there are in excess of 20 different scoring models and that online “consumer” reports typically have a higher score than your mortgage lender sees when pulling a “tri-merged residential mortgage” report. Most lenders are willing to start the prequalifying process with a copy of your online report but will require their own report prior to issuing a preliminary loan commitment which is normally required at the time that you write an offer to purchase a property.

Fiction: Opening a new credit card account will increase your score.

The average age of your open accounts impacts your score, and since opening one or more new accounts brings the average age of your total credit profile down, opening new accounts is normally not wise. The exception to this is the prospective first-time buyer who has little or no credit. Obtaining a retail or major credit card helps to build credit “depth.”

Fiction: Carrying a balance helps to boost your score.

Maintaining a balance on your cards does not improve your score, it simply costs you more in interest fees. Utilization of available credit is an important factor in determining your score. If you are unable to pay your credit cards in full each month, keeping the balance on the card below 30% of the credit limit is best. Another strategy to improve “utilization” is to request that your card issuer increase your credit limit. By increasing your available credit line but not your balance, you instantly lower your utilization.

Fiction: Closing accounts that you don’t use will boost your score.

Rather than closing a high interest rate card that you no longer use, request that the creditor reduce the rate and/or occasionally use and then promptly repay the card in full. Closing accounts reduces the overage credit available to you, which negatively impacts both “utilization” and “duration” of your credit profile.

    Questions? Just call Jaxzann Riggs of The Mortgage Network at 303-990-2992.

In Colorado, Real Estate Brokers Are Granted the Limited Practice of Law

Colorado is a great state to buy and sell real estate — and to be a real estate broker. In other states, as many as four lawyers must be retained in the typical real estate transaction — one by each party to the contract, and one by the broker for each side. This can make the cost of buying and selling real estate in such states unduly expensive.

Although I have only been a licensed real estate broker in Colorado, I have bought and sold real estate in New York, Virginia and Hawaii.  Colorado is definitely the best.

In Colorado, the only costs of selling real estate are the 1) title insurance, 2) real estate commissions, and 3) the fee charged by the title company for closing the transaction, although there may be additional costs charged by your HOA or its management company, when applicable. There are no state transfer fees or taxes. Since the above fees are typically paid by the seller, a buyer who does not require a mortgage to purchase real estate pays only his share of the title company’s closing fee ($100 to $400 typically), plus the cost of recording the transaction with the county, which is 1/10th of 1% of the sales price. Buyers who take out a mortgage loan to finance their purchase are the only ones with significant additional costs when purchasing real estate in Colorado.

In 1957, the Colorado Bar Association sued to require lawyers’ involvement in real estate transactions, but the Colorado Supreme Court ruled in the Conway Bogue decision that real estate licensees could provide the limited legal service of interpreting and completing state-approved forms for buyers and sellers.

Among the arguments in support of that decision, the court cited the lack or shortage of lawyers in many Colorado counties and the fact that real estate licensees had been performing that function for 50 or more years with no evidence that the public — or lawyers — had been harmed.

The court did require that this service only be performed by licensees who were retained to represent one or both parties in the transaction and that no separate fee be charged for completing the forms beyond the compensation already being earned by the licensee for the transaction.

Sixty-three years later, the Conway Bogue decision is still the law in Colorado, allowing the limited practice of law by real estate brokers, and we can all be glad for it. Imagine if you had to pay $100 or more per hour to a lawyer to counsel you through every step of a real estate sale or purchase!

As I said, we licensees only have the ability to interpret and complete state-approved forms, such as listing agreements, buyer agency agreements, purchase contracts, counterproposals, amendments, disclosures, inspection objections, post-closing occupancy agreements, and the numerous other forms approved by the Colorado Real Estate Commission.

Any seller is allowed to replace those state-approved forms with ones created by an attorney, and home builders routinely use their own contracts. While we can and do represent buyers of new homes, we may not counsel our buyers regarding those documents, since that would constitute practicing law without a license. Instead, we must recommend that buyers hire a real estate lawyer to review them,  Of course, we only recommend legal advice (just as we recommend getting tax advice), but the buyer is free to ignore that recommendation, which many of them do, opting instead to study the documents by themselves and ask questions of the builder’s sales personnel.

Do You Really Need a Buyer’s Agent?

Like most real estate professionals, my broker associates and I make a living representing both sellers and buyers of real estate.  Occasionally I encounter a buyer who doesn’t want to have an agent of his own, preferring to deal directly with the listing agent.

The most common reason given is that the buyer thinks he can negotiate a better deal by saving the seller the 2.8% commission typically paid to a buyer’s agent.  In fact, doing so usually saves the seller nothing since the buyer’s agent is paid by the listing agent, not by the seller. Al-though our policy at Golden Real Estate is to reduce the listing commission if we don’t have to share it with the buyer’s agent, that’s not the practice among the majority of listing brokerages.

Also, there’s the issue of representation. If you deal directly with the listing agent, the best you can expect is that the agent will be a neutral party, but in most cases that agent will continue to work in the seller’s best interest and treat you as a “customer.”  As a buyer, you should really want someone on your side, negotiating in your best interest, not just regarding the contract price but later when it comes to inspection and other issues.  In the case of buying from a builder, such representation is even more important.

Real Estate Agents Have a Responsibility to Report Wrongdoing

As with many professions, we real estate professionals are largely, though not completely, self-policing. Indeed, in a recent continuing education class, we were taught that we have an “affirmative responsibility” to report wrongdoing by our colleagues, whether the offense is illegal, contrary to real estate commission or MLS rules, or, in the case of Realtors, is unethical.

(Many real estate agents belong to brokerages where membership in the Realtor association is not required, and only Realtors are bound by the Realtor Code of Ethics and can be disciplined for violating it. Ask if your broker is a Realtor.)

Of course, the public can also file complaints against licensees. You can do it online here or you can mail a complaint to the Division at 1560 Broadway, Suite 925, Denver CO 80202. You can ask to remain anonymous, but an investigator will call to interview you.

Unless a broker is independent, you can also complain to his brokerage. Ask to speak with the managing broker. If he’s a Realtor, you can file an ethics complaint with his Realtor association. Here’s a link for doing so online.

I have filed complaints about illegal behavior with the Division. I have also sent numerous emails to our MLS about violations of MLS rules and regulations — including last week when a listing agent listed himself instead of one of our broker associates as the selling agent for his listing. (Email compliance@REcolorado.com.) I have also filed ethics complaints against a fellow Realtor through my Realtor association.

By accepting that “affirmative responsibility” to report wrongdoing of any kind by fellow licensees and fellow Realtors, we protect and advance the reputation of our industry and of the Realtor brand. As managing broker at Golden Real Estate, I promote this responsibility, as I did at our weekly office meeting earlier this month.

Although some people like to demean real estate licensees and even Realtors, I have found that the vast majority of us are true professionals who put our clients’ interests above our own, as required by both law and ethics, and I am proud to be a member of this profession.

January Is National Radon Action Month. Here’s What You Need to Know:

Here in Colorado, about half our homes have elevated levels of radon, a naturally occurring gas created by the decay of radioactive radium in our soils. It is the leading cause of lung cancer in non-smokers. Here’s a link for an excellent YouTube video explaining radon and how it’s mitigated.

Most real estate professionals, including the agents at Golden Real Estate, are well aware of this issue and will always advise the buyers we represent to have the home they are buying tested for the level of radon gas as part of the home inspection process.

Notice that I didn’t say to test for the presence of radon gas, but rather the level of radon gas.  That’s because radon gas is present even in “fresh” air. But it can concentrate when it seeps into your basement, crawl space and even your above-grade living areas.

Since a high level of this gas is considered a “health and safety” issue, a seller is essentially obligated to accept responsibility for having the radon level mitigated or to compensate the buyer for doing it after closing. 

At Golden Real Estate, we have a hand-held device smaller than a TV remote which we can lend to sellers prior to listing their home so they’ll know in advance what level of radon a buyer’s inspector is likely to discover. Ace Hardware has this same device for sale for $199.

There are less expensive mail-in radon tests that you can purchase at Home Depot or Lowe’s, but they’re also free at multiple locations — including from our office at 17695 S. Golden Road in Golden. These DIY kits should not be considered adequate for use in a real estate transaction.

During the home sale, it’s best to have a certified radon measurement contactor do the official test. You can find a list at www.ColoradoRadon.info. The test utilizes an electronic device which samples the air every hour over a 48-hour period. It can detect whether the device has been disturbed and whether there have been changes in atmospheric conditions which might suggest that windows or doors have been opened to allow fresh air into the house. Inspectors charge between $100 and $150 for this test, but it’s well worth the expense, especially if the results of the test show that the level of radon gas exceeds the EPA action level of of 4 picocuries per liter of air. If the test shows a level greater than that, the buyer can demand that the seller have radon mitigated. That typically costs about $1,000, so the testing is well worth the additional inspection cost.

Below is a diagram showing how radon is mitigated use sub-slab depressurization:

(from Wikipedia)

Learn the True Cost of Selling Your Home off-MLS to an iBuyer Like Zillow

Perhaps you’ve heard the pitch from an iBuyer firm such as Open Door, Zillow Offers, or another firm with the word “Offers” in their name.

These companies are promoting the convenience of selling your home quickly for cash, without putting it on the market or having buyers traipse through your home, or worrying that their financing might fall through.

But what is the cost of that convenience?

My column on Aug. 22nd reported on the “true cost of selling to an iBuyer,” but you can’t know that cost personally until it’s your home. So let’s talk about your home!

The next time you get a solicitation to buy your home direct for cash without putting it on the market, go ahead and ask them for a quote.  Then call us and we’ll analyze the offer for free, with no obligation whatsoever.

Here’s what you need to know about the offer you’ll receive.

1)   They will tell you that you won’t pay a commission, but the contract will deduct a “service fee” which, in the case of the Open Door contract I wrote about in August, is 7%.

2)    There will be an inspection contingency. They’ll tell you that you don’t have to make any repairs, but the company will do an “assess-ment” and come up with a dollar figure they will deduct from the purchase price to cover “necessary” repairs. It could amount to tens of thousands of dollars–$38,563 in the case of the Open Door contract I reviewed in August.

3)   The good news is that you as seller are given the right to terminate the contract at any time prior to closing — at least according to that Open Door contract I reviewed.

Most of all, you need to know that these iBuyer firms are only buying your home because they expect to make a profit when they resell it. They will entice you with an offer that is reasonable, but in the following weeks that offer will be eroded by other provisions such as I’ve mentioned above.

Perhaps the convenience of selling a home for cash to someone who will resell it at a higher price makes sense for some sellers. My point is that you should know how much that convenience is going to cost you.

An “iBuyer” is nothing more or less than an investor who makes money by buying low and selling high, with or without making any improvements. For years I’ve been advising homeowners who receive unsolicited offers for their home to treat such an offer as the “opening bid,” and to talk to me or another Realtor about seeing how much more they can get for their home once it is exposed to the full market. That is only accomplished by putting a home on the MLS.

It’s all about maximizing exposure. The more potential buyers who learn about your home, the more offers you are likely to receive. I’m saddened to see how many homes are sold with zero days on the MLS.  Those homes were sold without entering them on the MLS, and the listing agent only puts the home on the MLS after closing as a courtesy to other agents (for market analysis purposes) and/or to receive credit for the sale in terms of personal sales volume.

Consistently over the past three years, between 60 and 160 homes per month in Denver & Jeffco have been entered on the MLS only after they sold. The majority of them sold at or below the listing price, because the home was not exposed to additional buyers, and a high percentage of them were “double-ended” by the listing agent, meaning that the agent doubled his commission by not giving other agents with willing buyers the opportunity to earn their half of the listing commission. 

Our policy at Golden Real Estate is to avoid selling a home before it has been on the MLS at least 3 or 4 days, during which all potential buyers have had a chance to see the home and consider making an offer. This is consistent with our responsibility under state law to put our sellers’ interest ahead of our own.

This policy is an expression of the value statement that appears on our yard signs — “Hometown service delivered with integrity.”

In my Aug. 22 column, I quoted a report on iBuyer transactions by Collateral Analytics. The final paragraph in their report is worth quoting again:

“In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendor. For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile, but what percentage of the market will want this service remains to be seen.”

Call me or any of our broker associates at 303-302-3636 before accepting an off-market offer for your home. And remember: even if you are already under contract with an iBuyer, you may have the right to terminate the sales contract.