Tag: Colorado Real Estate Commission

The New Sellers Property Disclosure Is a Great Improvement

Every few years, the Division of Real Estate releases a revised Sellers Property Disclosure to be used by real estate brokers. A forms committee suggests revisions which then must be approved by the Colorado Real Estate Commission.

I wasn’t a big fan of the version which was released in 2018, but I’m a big fan of the one which is mandatory beginning on January 1, 2023. There are disclosures for each type of property. In this blog post, I’ll only talk about changes to the one for residential listings. Here’s a link to it, which you will need to download to scroll through it.

Some of the changes are subtle — for example, the seller is told to disclosure adverse materials facts instead of defects. That makes sense, since there was no definition of “defect” in the 2018 version.

Other changes are more substantive. For example, instead of just asking if the property is in an HOA, it asks for the name of the association(s) and contact information for each. If the neighborhood has cluster mailboxes, it asks for the location and number of the mailbox.

At the top of the form, it asks when the seller acquired the property, not only the year it was built as in the 2018 form. It also asks the seller to attach any reports, receipts or other documents “you believe necessary for the information you provide to be complete.” There was no such request in the prior version.

The seller is asked whether the home is subject to deed restrictions or affordable housing restrictions, and whether it is in a historic district. This is new.

Another sign of the times is that instead of asking if there is or has been tobacco smoke, it refers only to “smoking” and adds in parentheses “including in garages, unfinished space, or detached buildings.”

Under “Access and Parking,” the form asks if there are any limitations on parking or access due to size, number and type of vehicles. Instead of asking if there are “any access problems,” it asks the broader question of whether there are “access problems, issues or concerns.” Those three words are used elsewhere to expand on the question of “problems.”

In the section on “Use, zoning and legal issues,” instead of asking simply whether any additions or alterations have been made, it specifies whether they were made with a building permit and without a building permit, including “non-aesthetic alterations,” which is undefined. It also asks whether the property has been used for short-term rentals in the past year and whether there are “grandfathered conditions or uses.”

Under “Sewer,” the form asks for the name of the sewer service provider, the date of the last sewer scope, the date of the last septic use permit, inspection, and pumping — all useful information.

In the “Water” section, the form asks for the location of the water shutoff.  If there’s a well, it asks the date of the last inspection and service.  It asks the gallons per minute (GPM) of the well as of a specified date, and it asks the size in gallons of any cistern. Lastly, it asks whether the seller purchased any supplemental water in the last two years — an indication of the well’s adequacy.

The form asks the seller to identify the electricity, cable TV and internet service providers.

The instructor of the class I took regarding these new contracts and disclosures reminded us that the sellers property disclosure is to be accurate as of the date the home goes under contract. Therefore, if the property goes under contract after Dec. 31, 2022, this new form must be completed by the seller, but it does not need to be replaced if the listing is already pending but does not close until 2023.

That led me to adopt a new “best practice” which I’ll share here with my fellow listing agents. Instead of having the seller complete and sign the sellers property disclosure when I list the home, my practice henceforth will be to have the seller complete the document at the time of listing but to review and sign it only after going under contract with a buyer, thereby assuring that it is accurate as of the purchase contract date, as stated on the disclosure.

Integrity, for the Most Part, Still Rules in Real Estate

We all need to be careful that we are not scammed. We see scams all around us — in our emails, phone calls, text messages, and snail mail. Seniors in particular are targeted by scammers who have no shame about cheating someone out of their life savings.

Title companies warn buyers and sellers about wire fraud. Buyers have been known to get emails purportedly from their agent or title company giving them wiring instructions for their down payment or, in the case of a cash buyer, for the entire purchase price of a property they are buying, only to discover that they wired the money to a scammer on another continent from which it can never be retrieved.

Time shares (or fractional ownership) is another area rife with misrepresentation and deceptive practices that can trap an unwary buyer in the purchase of something they don’t really want and can’t really sell. (I speak from personal experience.)

And, yes, there are a few local real estate professionals who engage in illegal or improper behavior for which they get disciplined by the Colorado Real Estate Commission.

But I have to say that overall I have been very impressed by the level of integrity that I encounter among my fellow professionals.

Ask any Realtor, in particular, and he or she will probably tell you, as I can, that they can hardly recall a time when a fellow professional intentionally lied to them or misrepresented a client, listing or situation.

If, for example, I’m representing a buyer and the listing agent says there are three other offers and they’re all above full price, I’m confident in believing that to be true. I’ve completed hundreds of transactions and can’t recall one where I was told something that turned out not to be true or a fact withheld by the agent. Most sellers, I have found, are also aware of their responsibility to disclose all known defects, and, if not, their agent lets them know.

As an industry, we need to trust our fellow professionals, and I have found little or no reason not to. We are not just “honor bound” to be truthful. Being dishonest puts our very livelihood at risk, since any colleague or member of the public could report us to the Real Estate Commission, our MLS, or our Realtor Association, possibly resulting in a fine or even the loss of our license to practice real estate.

Email Alerts of New Listings Provide a Good Reason for Listing Your Home on the MLS

Yes, it’s a seller’s market, and maybe you think you don’t need to hire an agent to put your home on the MLS, but the opposite is true. Take, for example, the listing which was featured in this space last week. For 7 days it was listed as “Coming Soon” on our MLS, REcolorado, during which time it was not visible to non-mem-bers of the MLS (i.e., buyers). But that listing was emailed to over 250 buyers who had email alerts set up by their agents. One of those buyers tagged the listing as a “favorite” and another six tagged it as a “possibility.”

Those numbers, however, only reflect buyers who had included “coming soon” among the criteria that would trigger an alert. After the listing changed from “coming soon” to “active” on the MLS, the number of buyers who were alerted jumped to 720 and two more buyers tagged it as a “favorite.”  When a buyer tags a listing as either a “favorite” or a “possibility,” the buyer’s agent gets an email letting him or her know which client liked the listing and may want to see it when it’s “active” and showings are allowed.

These numbers don’t include the buyers who set up their own alerts on Zillow or other consumer-facing sites, including Redfin. Also, those websites don’t display “coming soon” listings until they have been changed to “active.” Thus, buyers who had agents include “coming soon” as a criterion benefited from a 1-week earlier notice of that listing than did any of those buyers who were setting up alerts on their own.

For buyers wanting the earliest alerts of new listings matching their search criteria, please make this a reason to have an agent set up alerts for you instead of setting up alerts on your own.

Knowing the power of MLS alerts should cause any seller to have second thoughts about selling without an agent. It used to be that sellers could hire a “limited service” agent who would put their home on the MLS for a flat fee (say, $300) without performing any other service, but that is now illegal. The Colorado Real Estate Commission has ruled that there are certain minimum services which must be performed by all listing agents. Those services include exercising “reasonable skill and care,” receiving and presenting all offers, disclosing any known material facts about the buyer (such as their ability to close), referring their client to legal and other specialists on topics about which the agent is not qualified, accounting for the receipt of earnest money, and keeping the seller fully informed throughout the transaction. 

Failure to perform those minimum services could subject the agent to discipline up to and including loss of license, which has caused “limited service” listings to disappear. If an agent offers such service to you, you should report them to the Division of Real Estate.

By the way, the Colorado Real Estate Commission has also ruled that it is the duty of all licensees to report known wrong-doing by other licensees, which their competitors are happy to do. We can be disciplined for not performing that duty.

Studies have shown that homes which are listed “for sale by owner” (FSBO) sell for less than ones which are listed by an agent on the MLS, and you can see why, because the more exposure your home has to prospective buyers, the more showings and offers you are likely to receive. And that difference in bottom line proceeds can far exceed the commission you are likely to pay.

Consider this: whether or not you hire a listing agent, you’re still likely to pay the “co-op” commission to the buyer’s agent, which is typically 2.8%. The  average listing commission (which includes that co-op commission) is now around 5.5%, not the 6% everyone tells you. As a result, the savings you might experience from not hiring a listing agent could be about 2.7%, and that is likely less than the increased selling price you might get from listing your home on the MLS with a true “full-service” agent such as my broker associates and myself.

Note: Some brokerages mislead you by promoting a 1% listing commission, but when they get into your home to sign you up, they disclose that the 1% is in addition to the 2.8% that they recommend as the  co-op commission and is increased further if they don’t earn a co-op commission on the purchase of your replacement home. It is also increased if they double-end the sale of your home, meaning that they don’t have to pay that 2.8% co-op commission to the buyer’s agent.

Such deceptive advertising, to me, is reason enough not to hire such a brokerage, but it may be hard for some people to say “no” to an agent they invited into their home with contract in hand.

Unlike such a brokerage, Golden Real Estate tells you upfront that we reduce our listing commission when we double-end the transaction, and we discount it further when you allow us to earn a commission on the purchase of your replacement home.

That said, our final commission might be only 1% or so higher than what you might pay to a discount brokerage, and our version of “full service” is much more complete than theirs.  For starters, we produce narrated videos tours on every listing. Our video tours are not just slideshows with music or un-narrated interactive tours which can be dizzying and annoying. Our narrated tours resemble an actual showing, where the listing agent is walking you through the house, talking all the time, pointing out this or that feature which may not be obvious otherwise. Are those quartz countertops? Are there slide-outs in those base cabinets?  Is that a wood-burning or gas fireplace? We have sold listings to out-of-towners who only “toured” the home on video, not seeing it in person until they flew into town for the inspection. That’s the power of narrated video tours.

What Defines a Bedroom? Neither the Real Estate Commission nor MLS Will Say

As a broker, I get to decide what constitutes a bedroom. We get no guidance or rules about that from either our MLS (REcolorado) or from the Colorado Real Estate Commission.

This week’s featured listing is a good example. When my seller purchased the condo in April 2017, it was advertised as a 2-bedroom unit, which is what the county assessor calls it. But that “second bedroom” has no window and no closet, measures only 9’ by 10’, and has double glass French doors between it and the kitchen area.

I could not in good conscience market that condo as anything other than a one-bedroom unit with a study.

I could “get away with” marketing the study as a “non-conforming” bedroom, but there are no definitions for that term, either. The term “non-conforming” is most often used for basement bedrooms which don’t have egress windows, although I’ve only used it when, for example, there was no bathroom on the same level or no door giving the room privacy.

On the other hand, I have seen basements listed as having a bedroom when the only door to that bedroom was the door at the top of the stairs. The most outlandish example I can recall was when an open loft overlooking the living room was listed as a bedroom, perhaps because there was a closet — but the nearest bathroom was downstairs. 

I don’t sense any interest on the part of the MLS (on whose Rules & Regulations Committee I have sat for over a decade) or the Colorado Real Estate Commission (to which I’ve applied for appointment) to come up with a definition of “bedroom.” As with other terms such as “raised ranch” or “garden level,” it’s left to the managing brokers (like me) or the listing agents themselves to decide how to describe the homes they market, and it’s up to buyers to make their own decisions to buy a home, irrespective of how it has been described on the MLS.

So, for what it’s worth, here’s my definition of a bedroom: It must have walls (no open lofts!), a window to the outdoors, its own door to common space, a 3/4 or full bathroom on the same level, and, optionally, a closet. The window does not have to qualify as an egress window. The closet is optional only if the room is big enough to allow for a piece of furniture (a wardrobe or armoire) that can serve as a closet. It has to be big enough to support a bed and dresser without being crowded (at least 9’ by 12’ or about 100 square feet).

It’s a judgment call as to whether a room without all those criteria should be called a “non-conforming” bedroom. I do take stock of whether the county assessor calls it a bedroom, but, as I said, the assessor called the study in my condo listing a bedroom, probably because the builder called it that on their plans. (Builders, like brokers, have their own ways of seeing things, and no one is there to contradict them.)

Buyers ask to see a listing based on its description in the MLS, and I’ve had a buyer get really annoyed when we went to see a 3-bedroom home (which was their minimum requirement) only to discover it was a 2-bedroom home. I shared that buyer’s annoyance in the feedback I provided, but that listing continued to claim three bedrooms.

Some brokerages contribute to the problem of inaccurate property descriptions by not allowing broker associates to enter and manage the MLS data for their own listings. That’s not how Golden Real Estate operates. As managing broker, I want my broker associates to enter their own listings on the MLS, and I usually will look at those listings and give my feedback or make changes directly on the MLS, which I’m able to do as their managing broker.

We have an office policy of providing maximum (not just accurate) information on each listing. That means entering data in all applicable MLS fields and not just  the mandatory ones. Many optional fields are quite important, not just useful, to buyers. These include each room’s dimensions and a general description of each room. A quick check of 71 current listings in Lakewood showed that only 13 of them included room dimensions and descriptions. A couple of them only listed bedrooms and bathrooms, not living rooms, kitchens, and other rooms. That’s because you can no longer just indicate the number of bedrooms and bathrooms, you must list each of them and the floor they are on, but you don’t need to enter dimensions or descriptions.

To me, describing the rooms is just as important as the “public remarks,” which is that one paragraph which you read on all the consumer websites to which each listing is populated (Zillow, Redfin, etc.). In describing each room, we like to list the floor covering (hardwood, tile, etc.) plus things like the view out the window, coved ceiling, ceiling fan, walk-in closet(s), access to deck or patio, fireplace (gas or wood), en suite bathroom, wainscoting, and more.  Sellers deserve no less.

Room dimensions and descriptions help to sell a home, so we owe it to our sellers to take advantage of that opportunity. It’s a shame that the majority of listing agents leave these non-mandatory fields blank.