Jim Smith's Blog

Many home buyers, especially first-time home buyers, would like to buy a home but harbor misconceptions about the obstacles they might face along the way. Here are some perceived obstacles.

Down Payment

Many buyers are misinformed about minimum down payment requirements.  They may think that a 20% down payment is required to purchase a home, or that they’ll be charged mortgage insurance if they put less than 20% down. In fact, some conventional loans require only 5% down, and while they do require mortgage insurance initially, that expense can go away once you can demonstrate 20% equity.

Indeed, even 5% is not the minimum down payment.  FHA loans require only a 3.5% down payment, and VA loans require no down payment at all to qualified veterans. The Colorado Housing Finance Authority (CHFA) can get a first-time home buyer into a house with only $1,000 out-of-pocket. CHFA also has a program which includes a down payment that is an outright gift to the buyer, and their Mortgage Credit Certificate program allows first-time and veteran homebuyers to get a tax credit for 20% of their interest expense for the life of the loan.

Credit Issues

The credit reporting agencies have done a good job of informing us about what is a good credit score, but we still encounter people who believe that derogatory credit entries are insurmountable barriers to home ownership. I had a client who had a bankruptcy and two foreclosures in her credit history, along with a sprinkling of minor late payments. Using one of our preferred lenders (Jaxzann Riggs), she still obtained a 3.5% down loan. While medical collections still factor into credit scoring, those under $2,000 are typically ignored by Fannie Mae and Freddie Mac underwriting software. Most credit obstacles can be overcome within a 6- to 12-month period if the client has some discretionary income.

Student Loan Debt

Fifteen years ago student loan debt averaged $15,000, but today it is $35,000 and growing. Most underwriters will now accept income-based repayment plans of student loans (if reported to the credit bureau) as opposed to fully amortizing payments. Fannie Mae now allows student loan debt to be included in refinances without categorizing the loan as “cash out” (which would impact the interest rate). Families with children living at home could use this option to reduce the burden associated with student loans.

Unwarranted Risk Aversion

Another emerging segment of our marketplace is millennials who experienced the loss of their family home. One day Dad was employed, and the next he was not, and 6 months later they were out of their home. They do not trust that the employment market will always be so robust and therefore opt for the perceived security afforded by renting. A good Realtor and loan officer can help a buyer understand and recognize the advantages of home ownership vs. renting, making the decision to buy feel safer.

Limited Inventory

While it is true that there are fewer active listings on the market and that there is more competitive bidding, especially in the lower price ranges, it is definitely possible to succeed at buying a home when you have the right real estate agent and the right loan officer.

It is possible to be notified within 15 minutes of any new listing that meets your search criteria, so there’s no reason to be late to the process — so long as you check your email regularly. Here at Golden Real Estate, we are particularly successful in winning bidding wars for our buyers. Just last week, for example, our buyer was the successful bidder for a Belmar townhome, which was accomplished by matching, not beating, the next best offer. How? By offering totally free moving to the seller using our moving truck, laborers, moving boxes and packing material.  All of these costs will be covered by Golden Real Estate, not by our buyer.  Of course, covering moving expenses is only one of the many advantages Golden Real Estate’s agents bring to the table, so give us a call!

Lenders and Loan Officers

A good loan officer, such as Jaxzann Riggs of The Mortgage Network, who assisted with this week’s column, can make a huge difference in helping buyers get into their first (or next) home.  A good local mortgage broker like Jaxzann makes a better impression with home sellers and their agents than any online lender and even some banks. You can reach Jaxzann at 303-990-2992.

 

Every January, economist Elliot Eisenberg comes to Denver from Washington, D.C. to update Realtors and lenders about the economy and the real estate market. I attended two of his presentations in January and was struck by his remarks about the recent tax reform legislation, which he called “a mistake.”

Reducing taxes when the economy is this healthy makes no sense, he said. Yes, it will have a positive effect on some business, but for only 12 to 18 months, and no more.

Part of what makes our economy healthy is our low unemployment rate, which can’t go much lower. In short, Eisenberg says we need more workers. In light of that statement, I asked him about the possible deportation of DACA children (many of whom are now working adults) and non-DACA illegal immigrants who are also working and paying taxes. He responded “absolutely” when asked if he believes that deporting these workers would only make matters worse for our economy.

I’m reminded of something former President George W. Bush said after Hurricane Harvey: “Good luck rebuilding Houston without immigrants!”

 

In my 16 years as a Realtor, I have learned that most people’s real estate needs arise from life’s many and varied transitions.  These can include relationship changes such as marriage and divorce, a birth or death in the family, health changes, and other reasons for upsizing or downsizing, as well as job relocation, job loss, and changes in income. People also relocate to be closer to grandchildren or other family members.

Clients have come to us because of most or all of these “transitions,” but perhaps the most common is, sadly, divorce. When couples divorce, one option is for one spouse to buy out the other, and although the court (in a non-amicable divorce) might require a valuation by a licensed appraiser, often we’ll be called upon to give a “Broker Price Opinion” of the home’s value. I don’t charge for this service, nor do I think most agents would. If a sale of the home is necessary, of course we’re available to assist in that, and the proceeds can be disbursed as the couple or the court dictate.

Medical changes or uncertainty, which can affect people of all ages, often necessitate a home sale. We can help the seller of a multi-level home find a wheelchair accessible home or simply one with fewer stairs, and discount the commission on the sale of their current home when we earn a commission on their purchase. If the seller is moving to a rental such as in a senior community, we can refer them to a specialist in that field, such as Jenn Gomer of Care Patrol.

Marriage or simply the combining of two households is a happier transition, and, again, look for your agent to discount the fee for selling your current homes in return for earning a commission on your new home.

Empty nesters (and others) come to us on occasion wanting to downsize. They may want to use their new-found freedom to travel, and ask us to find them a “lock-and-go” home such as a condo or patio home, where you have no maintenance responsibilities and it’s not obvious when you’re away.

When children head off the college, they may want to live in dorms or fraternities/sorrorities, but some parents want to invest in a home near campus that they can sell for a profit (or keep as a rental) after graduation.  They prefer to buy homes with three or more bedrooms so that classmates of their son or daughter can provide rental income for the parents.

Relocation is a big area of need, too. This is a good time to “sell high and buy low,” by moving from Denver to, say, Goodland, Kansas, where a recent client of mine was able to buy a bigger house using only the equity from the sale of their Arvada home.  Now they have no mortgage!

With so many jobs allowing telecommuting, some workers want to leave the hustle and bustle of the city and live in a quieter, perhaps rural setting with good internet service. A client of ours who works for the federal government is allowed to work from home, so he moved to a sleepy town in Mesa County, even though his “office” is 200 miles away in Lakewood!

What life transition are you facing?  Whatever it may be, it’s important that your real estate professional is ready to listen to your wants and needs and can be a compassionate consultant, supplying information and advice that helps you make the best decision for you and your family.  Call us!  We are eager to be of service.

 

Consider these reasons why you might prefer an electric car (EV) during the winter.

No warm up needed. Just get in and go. And the cabin will be warm within half a mile.  No puffing!  If your car is parked outside and has ice or snow on it, you can turn on the heat remotely without unlocking it 10 or 15 minutes before you want to leave.

You’ll never break down. Winter is a terrible time for a breakdown, isn’t it?  There’s nothing to break down in an EV, and it will never “stall.”  The only time you’ll see an electric car in the breakdown lane is if it was in an accident or has a flat tire.

No filling your tank during in the freezing rain or snow. Think of your EV like your smartphone. You plug it in at night and it’s fully charged in the morning. When you have an electric car, gas stations are just for cleaning your windshield and buying lottery tickets.

Traction is better in an EV. My all-wheel-drive Tesla is hands-down better in snow than my old Lexus RX 400h or, I wager, any car. Test drive one on a snow-packed road and you’ll be amazed, as I was.

You can leave the heat on while parked. It’s really nice to come back to a warm car with no ice to scrape. I left my locked Tesla’s heat on for several hours during a recent snowstorm and it only consumed a couple kilowatt-hours (22 cents’ worth of electricity, if you don’t have solar panels). When I was ready to leave, the windows were all clear and the cabin was 70 degrees!  The same feature works during summertime.  I don’t have to return to a car that’s over 100 degrees in the sun.

 

This is a common question that I get from my readers. Should they replace their appliances, paint the house, install hardwood floors or new carpeting, etc.

Let me share my usual response to this question. Keep in mind that improvements do not typically produce more in added value than what you pay for them.

The only improvements a seller should make, in my opinion, are ones which eliminate eyesores — that is, things which draw negative attention by a visitor.

I wouldn’t replace items that are dated but that are in good condition. I wouldn’t, for example, replace Formica counters that are in good condition, but I would replace them if they have burn marks or other damage.

Last summer, after years of partisan disagreement, the Colorado General Assembly passed, and the Governor signed into law, a construction defects law aimed at eliminating the single greatest impediment to the building of new condominiums in Colorado.

Previously, a condo board, without membership approval, could engage in litigation against their builder/developer for construction defects. I saw this happen firsthand about 10 years ago. A law firm specializing in such lawsuits made a hard-to-refuse offer to the condo board of directors, by which they would inspect the building in an effort to identify construction defects and then sue the developer for a cash settlement for found defects. These law firms typically work on a contingency basis, charging nothing to the condo association upfront, but keeping 30% or more of any winnings — plus reimbursement for all the inspections and other expenses.

So many law firms engaged in this practice that some insurance companies stopped writing policies for condo construction projects in Colorado. That’s why the vast majority of multi-family construction over the past several years has been of apartment buildings instead of condos. One exception has been for luxury condos, where the price point of the units made the risk worth taking on the part of builders and insurers.

For several years, Republican legislators pushed bills that swung the pendulum too far in the opposite direction, making it unlikely that any condo board could get the necessary member support  for litigation. On the other side were Democratic legislators, who believed that condo owners would be victimized by increasingly shoddy construction. Last year the two sides came together and unanimously approved a reasonable compromise.  No longer, regarding such matters, will condo boards be allowed to act without member approval. Also, the 2017 law (HB 1279) requires a 90-day election period during which each side can present both the pros and cons of litigation to the condo owners.

Clearly, the expectation was that condo construction would increase from 3% of new housing construction to the 20% it was a decade or more ago, but seven months later, it’s hard to find much of a surge.  MLS data shows a definite increase in the sale of new condos during 2017, but the numbers are still small, as shown in this chart. Hopefully we will see a more dramatic increase in condo sales by builders during 2018.

 

If you have noticed a slight slowing of our real estate market, you are not alone. My colleagues and I at Golden Real Estate have noticed it too and found some confirmation of that fact by a recent Redfin analysis reported in the Denver Business Journal.

That company reported that in  2017, Denver’s metro area had only one neighborhood among the nation’s top 25 most competitive neighborhoods — and it was ranked #25. By contrast, in 2016,  seven of the top 25 competitive neighborhoods nationwide were in the Denver metro area.

Redfin calculates neighborhoods’ competitiveness “based on several indicators of competition, including the percentage of homes that sold for more than their asking price, how quickly homes went under contract and annual price growth in 2017.”

The Denver neighborhood that made Redfin’s list this year was Athmar Park, east of Federal Blvd. between Alameda and Mississippi. The median sales price there was $310,000, up 17.2% over 2016. The average sale-to-list price ratio, according to Redfin, was 104%, but I calculated that it was 102.7% vs. 101.2% in 2016. Homes there spent an average of just 4 days on the market, down from 6 days in 2016.

Seattle, where Redfin is based, dominated the list with 19 of the 25 most competitive neighborhoods in the nation in 2017.  Let’s assume that’s coincidental!

First, let’s look at Denver statistics (scroll down for Jefferson County):

In the City & County of Denver as a whole, we can quantify the change in the real estate market by looking at the same criteria. Denver’s median sales price ($395,500) rose by 8.2% for 2017 over 2016.  Meanwhile median days on market held steady at 8, and the average sales price was 99.9% of list price, compared to 100.0% in 2016.

What follows is the breakdown of those statistics for various areas within the City & County of Denver:

Homes just west of Athmar Park in West Denver, which I’m defining as between Sheridan and Federal, from 6th Ave. to Yale Ave., had a median sales price of $289,000 in 2017, up 13.7% over 2016. Sold prices averaged 100.7% of listing price, up from 101.5% the year before. Median days on market remained unchanged at 6.

Stapleton remains a really hot market, with a year-over-year increase in median sales price of 19.9%, but homes sold more slowly (median 7 days vs. 6 days), and homes sold, on average, for 100.0% of their list price vs. 100.3% of their list price in 2016. The median sales price in 2017 was $530,750.

Homes in Green Valley Ranch (south of DIA) had a median sales price of $315,000, up 10.8%, but sold quicker (6 days last year vs. 7 days in 2016) and sold for 100.8% of list price, up from 100.6% in 2016.

Homes in Highlands, Berkeley and Sunnyside (between 26th Ave. and I-70, between Sheridan and I-25) had a modest 5.5% increase in median sales price ($523,500 in 2017), with median days on market of 8 days vs. 11 days in 2016, and homes sold for 99.6% of list price, unchanged from 2016.

Homes in Southwest Denver, that hodgepodge of annexed suburban neighborhoods south of Yale Avenue and west of the Platte River, experienced a 6.4% increase in median sales price over 2016. Days on market was 6 (up from 5 in 2016), with homes selling for 100.8% of list price on average, up from 100.7% in 2016. The median sales price here was $329,900.

The Washington Park area, from Alameda Avenue to I-25 between Logan Street and University Blvd., continues its steady rise in values, with a median 2017 sales price of $727,750, which was 7.2% above 2016. Median days on market fell to 8 in 2017, down from 14 days in 2016. The median ratio of sold price to list price was unchanged at 99.4% and has not exceeded 100% over the past five years.

Another high-priced section of Denver that has not exceeded that 100% ratio in the past five years is the North Country Club/Cherry Creek/Hilltop corridor, extending south from 6th Avenue to Cherry Creek and from Logan Street to Monaco Street. The median sales price in 2017 was $867,500, up only 2.1% from 2016. Over the past 5 years, the average ratio of sales price to sold price has never been above 98.4%, and in 2017 it dropped slightly to 98.1%. The days on market dropped slightly from 25 in 2016 to 24 in 2017.

Here are some Jefferson County statistics by area:

In Jefferson County, the median sales price was $389,000, up 8.1% from 2016.  Meanwhile median days on market held steady at 7, and the average sales price was 100.1% of list price, compared to 100.3% in 2016.

Those are countywide figures. Here is the breakdown based on city addresses within Jefferson County, keeping in mind that these are postal addresses, which include unincorporated areas:

Arvada matched the countywide median price ($389,000), also up 8.1%, but median days on market was 8, up from 7 in 2016, and homes sold, on average, for 100.2% of their list price vs. 100.7% of their list price in 2016.

Homes with Golden addresses, meanwhile, experienced a 5% increase in median sales price (to $530,000), with median days on market of 11 vs. 12 days in 2016, and homes sold for 99.4% of list price — unchanged from 2016. Homes within the city limits of Golden had the same median sales price ($530,000), up 2.6% from 2016, but sold quicker (7 days last year vs. 6 days in 2016) and sold for 100.3% of list price, down half a percentage point from 2016.

Wheat Ridge had a median sales price of $386,000, up 5.8% from 2016, with median days on market of 6 vs 7 days in 2016, and homes sold for 100.4% of list price, up from 100.2% in 2016.

Lastly, Lakewood experienced an 8.9% increase in median sales price (to $355,000). Days on market was unchanged at 6, with homes selling for 100.5% of list price on average, also unchanged from 2016.

In conclusion, although the pace of local markets  may not be quite as brisk as we’ve seen recently, it’s clear that we are still in a hot seller’s market. As evidenced by the number of homes that sell above their listed price, we continue to see competing offers,  although fewer of them.

But if I have learned anything about real estate, it’s that it is unpredictable. What I can predict is that Golden Real Estate agents will continue to serve buyers and sellers well, and that I’ll write another column next week!

Choosing the best agent and/or brokerage for listing your home is no small matter. For most people, their home sale or purchase is the biggest transaction of their life, one they would want handled by an experienced and resourceful agent and brokerage.

For many sellers, perhaps even most, the decision seems all too simple. We all have a relative, classmate or friend who holds a real estate license, and there’s a compulsion to use that person, or, to put it differently, a fear of upsetting or insulting that person by using someone who might, in fact, do a better job.

At the end of this article I will suggest how to navigate those waters, but first let me lay out the argument for using one of our great agents at Golden Real Estate.

Let’s accept as a premise that any listing agent’s job is to maximize exposure of your home and thereby get the highest possible price for it, perhaps with competing bidders driving the final price above the price at which it was listed.

Golden Real Estate’s “value proposition” is all about maximizing exposure of your home, beginning, of course, with featuring it in this column. We don’t have a featured listing in this edition, but regular readers know that one or more new listings appears here nearly every week. This column/ad appears in more than just this newspaper. It’s in four Jefferson County weekly newspapers — the Golden Transcript, Wheat Ridge Transcript, Arvada Press and Lakewood Sentinel — as well as in the YourHub section of every Denver Post delivered throughout Denver and Jefferson County — from Green Valley Ranch near DIA, to Evergreen/Conifer and beyond. Altogether, this ad exposes your home to nearly 200,000 newspaper readers — a great demographic!

The Denver Post version of this ad is then emailed to more than 800 subscribers, about half of whom are fellow agents. The articles and featured listings are also posted on our blog at www.JimSmithBlog.com and are archived at www.JimSmithColumns.com

In addition, we create a custom website for every listing, the URL for which is included in the “featured listing” article. On that website, as on the MLS, we post our magazine-quality HDR photos plus a narrated HD video tour, as well as the open house information. The video tour is hosted on YouTube, which provides additional exposure, and we promote the listing and every open house on our Facebook page, which is www.Facebook.com/GoldenRealEstate1.

Just as important as maximizing the number of people who learn about your home is making sure that the information is as complete as possible. We enter every possible bit of information on the MLS, instead of completing only the required fields. That means, for example, that instead of just entering “public remarks,” we enter a description of every room in the house, including dimensions, flooring, closet information, view out the windows, ceiling fan and other features that add to the sales pitch for your home. Unfortunately, this is not common practice among the majority of agents.

As you may know, listing agents can double their commission by not having to share it with a buyer’s agent. Toward that end, your agent might hold your home off the MLS for a week or two (and sometimes even longer!) in an attempt to find a buyer on their own. This is commonly done by putting a “coming soon” sign in your yard and advertising it as “coming soon” on websites such as NextDoor.com or craigslist.org. The listing agent might then convince a seller to go under contract with that first buyer and put the home on the MLS as “Under Contract” without it ever being listed as “Active.”

In 2017, there were 2,781 homes listed as “Sold” on REcolorado.com, the Denver MLS, with zero days on market. That means they were never “Active,” and therefore never exposed to the widest possible number of buyers. Not surprisingly, 19% of them sold for less than the listing price, and only 19.7% of them sold for more than the listing price.

By comparison, 4,007 homes were on the MLS for 2 days before going under contract. Among those sales, only 12.2% sold for less than full price, and 59.1% of them sold for more than full price. At Golden Real Estate, we have found that 4 days on market is the “sweet spot,” for the length of time it takes to attract the number of buyers that allows us to obtain the highest purchase price for our sellers.  Just last week, I had a listing which could have sold for $15,000 less than listing price on the second day, but we waited until day 5 and got it under contract for $11,500 over the listing price. Half of Golden Real Estate’s listings in 2017 sold at or above listing price, and 3 of them sold for more than 10% above listing price.

Above, I mentioned that a listing agent can double his or her commission by not having to share that commission with a buyer’s agent. At Golden Real Estate, it is our policy to have what’s called a “variable commission,” meaning that we reduce our commission when we sell a home ourselves.  Based on my own sampling, roughly 5% of the listings on the MLS are double-ended, but of those homes that sold last year with zero days on market, over 50% of them were double-ended, and less than half of those reduced their commission for doing so. When you interview a listing agent, ask if he or she will reduce their commission if they don’t have to share it with a buyer’s agent. If you ask, the agent will typically agree to do so, but I think you’ll find that most agents hope you won’t ask. At Golden Real Estate, we offer that discount without you having to ask for it. It’s on our printed list of services.

Now, most people who sell their home are also going to buy a home, and you should consider using the same agent who lists your home to help you buy your replacement home. Why? Because you should get a discount on your listing commission in return for allowing that agent to make a commission (paid by the seller) on your purchase. You sacrifice that opportunity when you don’t have a buyer’s agent and deal only with the listing agent on your purchase.

Too many buyers think they will get a better deal if they purchase a home without a buyer’s agent — that the seller saves that 2.8% co-op commission. But that’s not the case. Unless there’s a variable commission (and I already explained that only 15% of listings have a variable commission), the only person who profits from you not having a buyer’s agent is the listing agent, not the seller. In most cases, you’ll do a whole lot better by having your own listing agent earn that 2.8% commission on your purchase and discounting his listing commission by, say, 1%.

So, what about that friend or relative who expects you to hire him? Tell him/her that you want to use Golden Real Estate, which has agreed to pay him/her a 25% referral fee.

Buyers Should Use Us, Too!

I already mentioned that your listing agent should be your buyer’s agent, too, but if you are buying without selling, or have already sold your home, say, in another state, here are some reasons you should hire an agent from Golden Real Estate to represent you in the purchase of a home, whether a resale or a new home.

You need our advice on what to offer and you especially need our help if you find yourself competing with other buyers. We have a moving truck, which is free to you, but we also can offer it free to the seller as an incentive for them to accept your offer over that of another buyer. We have excellent home inspectors and loan officers, and you’ll appreciate our standard closing gift, which is a free energy audit of your new home.

Negotiation skills are needed not just to get under contract, but when it comes to negotiating inspection, appraisal or other less common issues. This is a particular strength here at Golden Real Estate.

Buying a home can be a tricky proposition, so don’t go it alone, and don’t put your trust in the listing agent, who isn’t looking out for your interests.

The phrase in the headline above is one of two value statements that appear on all of Golden Real Estate’s yard signs. (The other is “Hometown Service Delivered With Integrity.”) One of the ways in which we “model environmental responsibility” is in the efficient use of energy at our office.

>  First we had 5 kW of solar photovoltaic (PV) panels installed on the roof of our office.

>  Next, in 2012, we purchased our first electric car, a Chevy Volt. Then, in 2014 we purchased our first Tesla.

>  That led to the installation of another 5 kW of solar PV at the rear of our parking lot, followed by another 10 kW to support the free charging stations we had installed in our parking lot.

¨  In our office, we installed four sun tunnels (aka Solatubes, a brand name), which draw natural sunlight into our office, reducing our electrical consumption.

>  We removed the gas water heater that came with our building and installed a tankless electric one.

>  We super-insulated our building to reduce the amount of natural gas required to heat it.

Thus, it was only a matter of time before we stopped burning natural gas altogether. We had a heat pump (called a “mini-split”) system in-stalled, replacing the large natural gas furnace-A/C unit (shown here on our roof) which had effectively heated and cooled our office for many years, but which gave us a natural gas bill as high as $175 per month in the winter.

Following the installation of the mini-split system in late November, we had Xcel Energy remove our gas meter. As a result, our December 2017 Xcel  Energy bill was just $11.79, which is the what Xcel charges to be connected to their electric grid. That bill (and bills of the foreseeable future) reflected zero kilowatt-hours purchased from Xcel, which functions as our “battery,” allowing us to send excess solar-generated electricity to Xcel when the sun is shining, then draw it back when needed. This process (called “net metering”), enables us to power our office (including heating and cooling) and charge our electric cars and those of visitors without buying any electricity from Xcel.

Mini-splits are commonly used in other countries for the heating and cooling of homes and businesses and they’re beginning to gain traction in the United States because of their efficient use of electricity instead of natural gas or other fossil fuels.

Bill Lucas-Brown of GB3 Energy, the company that installed our system, believes that mini-splits are the future — so much so that they are the only heating and cooling systems he’s installing nowadays. On Bill’s recommendation, we had Bill install what he considers the best system on the market, made by Mitsubishi. It utilizes a single condenser unit that powers three wall-mounted interior units. It is so efficient, we just leave the wall units set at 70 degrees day and night.  It’s also an intelligent system, in that it can sense where people are and direct warm air (or cool air when needed) toward them.

Mini-splits are also ductless. A mini-split condenser can support multiple wall units, and in our application the coils from one roof-mounted unit (at left) run across our roof to the location of the three wall units mounted at ceiling height (below). This allowed us to remove the ducts hanging from our office ceiling, which we then re-painted white, making the office feel bigger and brighter.

We left the 30-year-old furnace and A/C unit on the roof, saving the cost of removing it by crane.  As you can see in the photo, the condenser unit which feeds all three wall units is quite small – even smaller than the A/C compressor sitting outside a typical home.

How does a heat pump work? Look at this diagram which I downloaded from www,ashen.org:

When it’s cold outside, a heat pump extracts heat from the outside air (which it can do even below freezing) and transfers that heat inside. When it’s warm outside, it reverses direction and acts like an air conditioner, removing heat from your home. A heat pump efficiently moves heat as opposed to generating it.

The diagram shows the architecture of a heat pump system for a typical home. In such an installation, you’ll see one or more ground-mounted condenser units, with coils running along the bottom of the exterior walls and then up the walls to where the interior wall units are positioned. Our system is similar except that our condenser unit is on the roof, which keeps both it and the coils to the three wall units out of sight.

The improved comfort level, accomplished with minimal noise and without obvious air flow, was immediately noticeable by our agents and visitors alike. You’re welcome to visit us and experience it yourself.

As mentioned above, we removed the furnace ducts. At right is a picture of those ducts sitting in our parking lot, waiting to be picked up for recycling.

So, what’s next at Golden Real Estate? It would be hard to improve upon the energy efficiency of our office, so our next move will likely be to replace our gasoline-burning 2004 box truck (provided free to Golden Real Estate’s buyers and sellers and to local non-profits) with a battery powered electric box truck. Electric box trucks are being manufactured in other countries and should be widely available here within the next few years. It was with that intention that we installed our two EV charging stations next to where we park our trucks, as shown in the picture at left. Currently, clients and non-profits who borrow our trucks at no cost are still expected to replace the gasoline they burn, but when they borrow our new electric truck, we can say, “Never mind about refueling it. Just plug it in when you return it.”

If you’d like more information on mini-split systems, you can call or text Bill Lucas-Brown at 970-846-4766.

 

In my Dec. 7th column, I sounded the alarm about certain provisions of the House and Senate tax bills which were particularly detrimental to the real estate market. Well, lobbyists from the National Association of Realtors (NAR) swung into action, and the worst of those provisions are not in the final conference committee bill — even though some of them were in both the Senate and House versions.

The greatest sigh of relief was heard when the exemption from capital gains on the sale of one’s primary residence (up to $500,000) was retained for sellers who have lived in their homes more than two but less than five years prior to selling their home.  Both versions of the tax bill had increased the qualifying period to five of the past eight years, negatively impacting nearly 20% of potential sellers. Implementation would have only further exacerbated the current shortage of active listings.

Despite the fact that both the House and Senate versions included that provision, the conference committee, whose job it is to reconcile different provisions, got rid of this one. We can probably credit the lobbying by NAR, reinforced by over 300,000 emails and phone calls made by NAR members like myself. There is no better example of the way NAR serves not only its members but also the industry as a whole and the general public in the protection of property rights. Those real estate agents who have chosen not to join a brokerage firm like Golden Real Estate, where every agent is a Realtor, should consider that NAR is serving their interests, too. Indeed, those non-Realtors benefit from the dues paid by us Realtors. This is another reason you should ask if your agent is a Realtor.

The mortgage interest tax deduction was saved entirely, unless your mortgage is in excess of $750,000. The prior limit was $1 million. This change won’t affect taxpayers in the metro area to the degree it will, say, in Aspen. Mortgage interest is also deductible on second-home mortgages up to the same limit — of particular interest to upper-income taxpayers.

The deductibility of state income taxes and local property taxes is another matter. The limit is $10,000 on those taxes combined. (This is one provision that disproportionately impacts the wealthy.) Thus, if you owe $10,000 in income taxes and $5,000 in property taxes (which includes, I believe, the ownership tax on your cars), only $10,000 of that $15,000 will be deductible for tax year 2018, compared to all of it being deductible for 2017. Don’t forget that the limit applies to all taxes paid during 2018, so if you make estimated tax payments during 2018, those are added to what you pay with your 2017 state return in April. The combination could easily push you beyond the $10,000 limit on deductibility.

For this reason, it may make sense for you to pre-pay your state income tax (postmarked by Dec. 31^st), in excess of what you’ll owe in April. Then on your 2017 return have the excess applied to your 2018 taxes instead of being refunded to you.

Mind you, I am speaking as a layman, not as any kind of tax advisor, based solely on my understanding of what I have read in the coverage of the tax bill and what my tax accountant has told me.

I heard on National Public Radio that, according to the Washington Post, 83% of the tax benefits will go to the top 1%, and only 17% of the tax benefits will go to the rest of us.  It’s hard to escape the conclusion that the tax cuts for the bottom 99% were merely window dressing — in effect, the price paid for passing a tax bill whose real purpose was to benefit the millionaire and billionaire class of which virtually every Congressman and Senator — and the President — is a member. As an aspiring member of that class myself, I find the process and the final bill offensive. Judging from the unpopularity of the final tax bill among voters, that ruse is not working as well as it could. When, if ever, has a tax cut been disliked by two-thirds of the voters? The GOP’s hope is that when the new withholding tables take effect in February, voters will forget that they were manipulated in this manner.  We’ll see!

One way the top 1% will benefit from the new tax bill is from an all-new tax deduction of 20% of “pass-through income” from certain entities, including S corporations and LLCs. I’m told, however, that middle class people can also take advantage of that deduction to save a significant amount on their taxes.

I’m advising my broker associates to create such entities instead of being paid directly by Golden Real Estate.  And, because our brokerage is an S Corporation, our tax accountant is telling Rita and me that we can expect to have over $50,000 of next year’s income go un-taxed — money that would have been taxable under 2017’s tax provisions.

In other news for real estate owners, the 1031 tax deferral program for investment properties was not eliminated.

Again, this is all second-hand information from a layman (me), and it is certainly possible that it is not entirely accurate or may not apply to you. Therefore, I encourage you to consult your own tax advisor to see what specific tax strategies you should consider.

The only action you might want to take today, as mentioned above, is the pre-payment of state income tax, and also property tax, if it is not escrowed and paid by your mortgage lender.

Mortgage Credit Certificate Program Saved

Two other real estate programs killed in the House version of the tax bill but revived by the conference committee are the private activity tax-exempt bonds, including single-family and multifamily Housing Bonds, and the Low Income Housing Tax Credit. The Mortgage Credit Certificate program, administered by the Colorado Housing Finance Authority, depends on the issuance of such bonds.

Federal Tax Credit for EV’s Also Saved

In an earlier column I reported that the $7,500 tax credit for purchasing electric vehicles was killed in both the House and Senate versions of the tax bill, but, lo and behold, the conference committee deleted all mention of that tax credit in the final tax bill, meaning that it remains in place. It has been speculated that the big automobile companies like GM, which are just now getting into making electric cars, are probably responsible for preserving the credit. The tax credit applies only to the first 200,000 EVs sold by a manufacturer, so its retention is less significant for Tesla and Nissan, which are already approaching that limit.