Here are the key takeaways from a report released this week by Zillow:
> Homes listed for sale in the second half of April can expect to sell for 2.8% more, or about $9,300 on the typical U.S. home.
> The first two weeks of November are the worst time to list a home, associated with a 3.5% discount.
> The potential price difference between the best and worst times to list is 68% higher than it was pre-pandemic.
A couple weeks ago in this column, I warned homeowners that the current rise in home values means a proportionate increase in property valuations as of June 30, 2022, and therefore a likely rise in property taxes for 2023 and 2024.
I wrote that because of a typical 30% increase in what your home could have sold for on June 30, 2022, versus June 30, 2020, your property taxes could increase by 30%, but that didn’t take into account the effect of the Taxpayer Bill of Rights, or TABOR, which restricts how much revenue each tax jurisdiction can keep to population growth plus the increase in the cost of living.
Under TABOR, if a taxing jurisdiction collects more than that formula allows, it must refund the excess to the taxpayers.
However, many (but not all) jurisdictions obtained voter approval to keep any excess revenue. The term for this common ballot measure is “de-Brucing,” after Douglas Bruce, the author of TABOR.
All but two counties passed such ballot measures and won’t have to refund their excess revenues to taxpayers — or, more commonly, reduce their mill levies so they only collect the allowed amount of revenue. Jefferson County is one of those counties that has not de-Bruced, so Jeffco will likely reduce its mill levy for 2023 and 2024 to limit their property tax revenue despite the increase in valuations.
In any county, however, the biggest mill levy is that of the school district, and, again, most school districts, including Jeffco’s, have de-Bruced and can enjoy the coming windfall in revenue by not reducing their mill levies.
Any given property’s mill levy is the sum of individual mill levies from multiple taxing jurisdictions. You can see all those mill levies by looking for your property on the country assessor’s website. For example, in Jeffco, you’d go to http://propertysearch.jeffco.us. In other counties, just Google the county’s name + “assessor.”
For any given address, you’re likely to find between 5 and 15 different jurisdictions with individual mill levies. In unincorporated areas of Jefferson County, for example, you’ll find separate mill levies for the county, for Jeffco schools, for the country sheriff (“law enforcement”), for your local water district, local park district, local fire district, RTD, storm water and flood control district, etc.
As an aside, a lot of people think that “unincorporated” translates to lower property taxes, but the opposite is true. Consider the following: the West Metro Fire District, serving much of Lakewood, collects about 13.2 mills from property owners in its taxing district — and that’s just for fire protection. Meanwhile, the City of Golden’s current mill levy is less than that (12.34 mills) and includes all municipal services — fire, police, parks and recreation, and more. Golden may have higher real estate prices, but our real estate is taxed at a lower rate than in most other areas.
Many buyers and sellers and their agents have to deal with competing offers for new listings. The Colorado Real Estate Commission has offered no guidance on how to deal (or not deal) with multiple offer situations. Below, however, is NAR’s guidance based on the articles and Standards of Practice from the Realtor Code of Ethics. Note: The Code only applies to Realtors, and roughly half of licensed real estate brokers are not members of their local Realtor association.
“When representing a buyer, seller, landlord, tenant, or other client as an agent, Realtors® pledge themselves to protect and promote the interests of their clients. This obligation to the client’s interests is primary, but it does not relieve Realtors of their obligation to treat all parties honestly.” (from Article 1 of the 2014 Realtors Code of Ethics)
“Realtors shall submit offers and counter-offers objectively and as quickly as possible.” (Standard of Practice 1-6)
Perhaps no situation routinely faced by Realtors can be more frustrating, fraught with potential for misunderstanding and missed opportunity, and elusive of a formulaic solution than presenting and negotiating multiple purchase or lease offers and/or counter-offers on the same property. Consider the competing dynamics. Listing brokers are charged with helping sellers get the highest price and the most favorable terms for their property. Buyers’ brokers help their clients purchase property at the lowest price and on favorable terms. Balanced against the Code’s mandate of honesty is the imperative to refrain from making disclosures that may not, in the final analysis, be in a client’s interests. (Revised 11/01)
Will disclosing the existence of one offer make a second potential purchaser more likely to sign a full price purchase offer—or to pursue a different opportunity? Will telling several potential purchasers that each will be given a final opportunity to make their best offer result in spirited competition for the seller’s property—or in a table devoid of offers? What is fair? What is honest? What is to be done? Who decides? And why is there not a simple way to deal with these situations? As Realtors know, there are almost never simple answers to complex situations. And multiple offer presentations and negotiations are nothing if not complex. But, al-though there is not a single, standard approach to dealing with multiple offers, there are fundamental principles to guide Realtors. While these guidelines focus on negotiation of purchase offers, the following general principles are equally applicable to negotiation of lease agreements. (Revised 11/01)
Be aware of your duties to your client — seller or buyer — both as established in the Code of Ethics and in state law and regulations. (Revised 5/01)
The Code requires you to protect and promote your client’s interests. State law or regulations will likely also spell out duties you owe to your client. The Code requires that you be honest with all parties. State law or regulations will likely spell out duties you owe to other parties and to other real estate professionals. Those duties may vary from the general guidance offered here. Realtors need to be familiar with applicable laws and regulations. Be aware of your duties to other parties — both as established in the Code of Ethics and in state law and regulation. Remember that the decisions about how offers will be presented, how offers will be negotiated, whether counter-offers will be made and ultimately which offer, if any, will be accepted, are made by the seller — not by the listing broker. (Revised 5/01)
Remember that decisions about how counter-offers will be presented, how counter-offers will be negotiated, and whether a counter-offer will be accepted, are made by the buyer — not by the buyer’s broker. (Adopted 5/01)
When taking listings, explain to sellers that receiving multiple competing offers is a possibility. Explain the various ways they may be dealt with (e.g., acceptance of the “best” offer; informing all potential purchasers that other offers are on the table and inviting them to make their best offer; countering one offer while putting the others to the side; countering one offer while rejecting the other offers, etc.). Explain the pluses and minuses of each approach (patience may result in an even better offer; inviting each offeror to make their “best” offer may produce a better offer[s] than what is currently on the table—or may discourage offerors and result in their pursuing other properties). Explain that your advice is just that and that your past experience cannot guarantee what a particular buyer may do. Remember — and remind the seller — that the decisions are theirs to make — not yours, and that you are bound by their lawful and ethical instructions. When entering into buyer representation agreements, explain to buyers that you or your firm may represent more than one buyer-client, that more than one of your clients or your firm’s clients may be interested in purchasing the same property, and how offers and counter-offers will be negotiated if that happens. (Adopted 5/01)
Explain the pluses and minuses of various negotiating strategies (that a “low” initial offer may result in the buyer purchasing the desired property at less than the listed price — or in another, higher offer from another buyer being accepted; that a full price offer may result in the buyer purchasing the desired property while paying more than the seller might have taken for the property, etc.). (Adopted 5/01)
Explain to the buyer that sellers are not bound by the Code of Ethics. Sellers, in multiple offer situations, are not prohibited from “shopping” offers. Real estate brokers may, unless prohibited by law or regulation, “shop” offers. Therefore, Realtors assisting purchasers in formulating purchase offers should advise those purchasers it is possible that the existence, terms, and conditions of any offer they make may be disclosed to other purchasers by sellers or by sellers’ representatives except where such disclosure is prohibited by law or regulation. (Adopted 5/05)
Remember — and remind the buyer — that the decisions are theirs to make—not yours, and that you are bound by their lawful and ethical instructions. (Adopted 5/01)
If the possibility of multiple offers — and the various ways they might be dealt with — were not discussed with the seller when their property was listed and it becomes apparent that multiple offers may be (or have been) made, immediately explain the options and alternatives available to the sellers — and get direction from them. When representing sellers or buyers, be mindful of Standard of Practice 1-6’s charge to “. . . submit offers and counter-offers objectively and as quickly as possible.” (Revised 5/01)
With the seller’s approval “…divulge the existence of offers on the property” consistent with Standard of Practice 1-15. (Adopted 11/02)
While the Code of Ethics does not expressly mandate “fairness” (given its inherent subjectivity), remember that the Preamble has long noted that “. . . Realtor has come to connote competency, fairness, and high integrity. . . .” If a seller directs you to advise offerors about the existence of other purchase offers, fairness dictates that all offerors or their representatives be so informed. Article 3 calls on Realtors to “. . . cooperate with other brokers except when cooperation is not in the client’s best interest.” Implicit in cooperation is forthright sharing of information related to cooperative transactions and potential cooperative transactions. Much of the frustration that occurs in multiple offer situations results from cooperating brokers being unaware of the status of offers they have procured. Listing brokers should make reasonable efforts to keep cooperating brokers informed. Similarly, buyer brokers should make reasonable efforts to keep listing brokers informed about the status of counter-offers their seller-clients have made. (Revised 5/01)
Realize that in multiple offer situations only one offer will result in a sale and one (or more) potential purchasers will be disappointed that their offer was not accepted. While little can be done to assuage their disappointment, fair and honest treatment throughout the process; coupled with prompt, ongoing and open communication, will enhance the likelihood they will feel they were treated fairly and honestly. In this regard, “. . . Realtors can take no safer guide than that which has been handed down through the centuries, embodied in the Golden Rule, ‘Whatsoever ye would that others should do to you, do ye even so to them.’ ” (from the Preamble to the Code of Ethics). (Revised 5/05)
In Colorado, property taxes are based on a calculation of what each property might have sold for on June 30th of the prior even-numbered year.
That means the property taxes for 2023 and 2024 will be based on what your home could have sold for on June 30, 2022. Given the crazy surge in home prices, you could see a 30% or higher jump in your property’s assessed valuation and therefore a 30% or higher jump in your property taxes for the next two years.
The chart below shows the likely impact of the current run-up in median prices compared to the median prices in prior Junes of even-numbered years, based on data from REcolorado. Although your home’s valuation will be based on the sales of comparable homes near yours leading up to June 30, 2022, the fact that the median sold price of residential properties metro-wide will have increased by over 30% from June 30, 2020, suggests that your home’s valuation and therefore your taxes could rise by 30 percent or more.
I’ve estimated (conservatively) that the median sold price in June will be $570,000 because the median sold price was already $540,000 in February. That is already a 27.7% increase over June 2020.
That, however, is an average for the entire Denver metro area, defined for these purposes as within 25 miles of the state capitol. There are locales within the metro area where the increase in values over the last two years have approached 35% or more. Here is how that metro-wide 27.7% average increase of Feb. 2022 over June 2020 breaks down by county:
Denver County—19.5%
Jefferson County—30.1%
Douglas County—31.9%
Adams County—28.6%
Arapahoe County—27.1%
Boulder County—40.7%
Gilpin County—42.4%
The appreciation also varies greatly by city addresses:
Golden addresses—15.9%
Littleton addresses—26.0%
Arvada addresses—33.0%
Broomfield—27.2%
Centennial—36.9%
Aurora—30.5%
Highlands Ranch—31.8%
Castle Rock—36.5%
So, keep an eye on what homes like yours are selling for this April, May and June of this year to get a sense of what the county assessor’s valuation of your home will look like when you get that notification in May 2023.
About 50 readers are receiving “neighborhood alerts” from me. These are email alerts regarding all MLS listings within your particular neighborhood. Usually, the alerts cover a certain subdivision or ZIP code, but they could be structured to include only listings which are comparable to your own home. For example, if you have a 1970s ranch home, I could set up an alert that only includes ranch-style homes built between 1960 and 1990 within a half mile or mile of your home. This will give you the best indication of how the value of your own home may be calculated by your county assessor. Feel free to email me at my address below to request such an alert or to modify the alert I am already sending you.
I received a call this week from Jaxzann Riggs, owner of The Mortgage Network informing me of several changes occurring at FNMA and FHLMC that may “level” the playing field for some purchasers.
Roughly 17% of the homes sold in the last 12 months in the Denver metro area have been sold to investors, according to an article in the Denver Post. Demand for second homes has also skyrocketed, as newly remote workers seek more space and better surroundings. Until now, those purchasers were able to obtain loans with interest rates that were comparable to those being offered to purchasers who would be occupying their new home as their primary residence.
On Jan. 5th Fannie Mae and Freddie Mac (FNMA and FHLMC) jointly announced new “loan-level price adjustments” (or LLPAs) for high-balance, investment and second home loans. An LLPA is a risk–based fee assessed to mortgage borrowers using a conventional mortgage. Loan pricing adjustments vary by borrower, based on loan traits such as loan-to-value (LTV), credit score, occupancy type, and the number of units in a home. Borrowers often pay LLPAs in the form of higher mortgage rates. Increasing the LLPAs on high-balance, investment and second homes makes interest rates less attractive for the buyers and allows FNMA and FHLMC to offer new programs to help first-time or lower-income homebuyers.
Other recent changes by FNMA and FHLMC help self-employed borrowers. They have rescinded rules imposed in June 2020 requiring self-employed borrowers to supply a year-to-date P&L as well as their most recent 2 or 3 months of bank statements. This reduction in paperwork should make it much easier for self-employed borrowers to obtain financing.
Another benefit may be found in the potential for lower appraisal fees. With the current red hot housing market, demand for appraisers is outstripping the supply, pushing up fees and extending appraisal completion times. Enter technology. Fannie Mae will allow desktop appraisals for certain loans submitted after March 19. This technology may help alleviate the appraiser shortage in the long term and lower appraisal costs in the current market. Jaxzann reminded me that she pays for her clients’ appraisals so they can be ordered immediately upon acceptance of a purchaser’s offer. With the ability to obtain desktop appraisals, Jaxzann expects that loan approvals can consistently be obtained in two weeks.
Though median home prices have shot up in the last two years (by 25%, according to HUD), what hasn’t changed is that people still need their homes to serve as an anchor for their life.
If you are in the market for a jumbo loan, things have gotten easier. A jumbo loan is a mortgage that exceeds the conforming loan limit set by the federal government. Jumbo loans — meant to finance expensive properties — cannot be purchased or securitized by FNMA and FHLMC. Loan amounts above $684,250 are considered “jumbo” and often have higher standards for approval.
While people typically assume you need 10% down for a jumbo loan, there are currently products that allow as little as 3.5% down. This can free up some of your savings for being more competitive in this market, using funds for escalation causes, appraisal gaps, updates if the house isn’t in dream home condition.
Yes, today’s market can make buying a home stressful, but working with an experienced professional like Jaxzann Riggs will allow you to navigate its challenges. Call her at 303-990-2992 with your lending questions.
One of the most dependable indicators of a strong “seller’s market” is the number of listings which sell above their listing price, and by how much. Another is the number of days that a listing is on the MLS (“DOM”) before going under contract.
As shown in the chart below, drawn from REcolorado’s data for the period of January 2021 through last month, the seller’s market peaked in May and June of last year but has now surged again. All indications are that the surge will continue through the spring.
Average DOM is always higher than median DOM because there are many homes that languish on the market unsold because they are overpriced, or for another reason. What’s remarkable about this sellers market was how low the average DOM went as even those hard-to-sell homes attracted buyers.
As with the previous surge, the average DOM has sunk below 20 while the median DOM has revisited its all-time low of 4 days on the MLS.
(Note: These statistics are for residential listings in the metro Denver area, which I’ve defined here as within a 25-mile radius of the State Capitol.)
The rising cost of money — that is, the increase in mortgage rates projected for this year — will lure many buyers “off the fence” hoping a buy a home before interest rates rise further.
I foresee a stronger than usual seasonal jump in the number of new listings as spring arrives.
Many people believe, erroneously, that the best time to list a home is in the spring, so those people will be putting their homes up for sale in the coming weeks. In addition, as I wrote last week, many homeowners who weren’t thinking of selling before are likely to decide it’s a good time to “cash out.” But I don’t foresee that increase in supply going far to meet the needs of today’s home buyers, and I don’t see prices leveling off, much less declining.
It surprises many of us that homes are appraising at the high prices they are selling for, but when a winning bidder waives appraisal objection to win a bidding war — which is almost common nowadays — that sale becomes a comp that supports future appraisals at the same price or higher. (On the appraisal form, there’s a place to indicate a rising, falling or stable market, and when an appraiser checks the box that it’s a rising market, that gives him or her more leeway to appraise a home higher than recent comparable sales might otherwise justify, further fueling the frenzy.)
The real estate market is becoming less and less predictable, along with other elements of our economy and society. War could be imminent or a new Covid variant might come. God only knows!
Rita and I are both 74 years old, and, although I have no plans to retire at this time, we have decided for various reasons to sell our home and move into a 55-plus community. Knowing that many of my readers are seniors, I’ve decided to share some of our thinking.
When you’re our age, you can’t predict when you might have to sell, so I have always recommended that seniors do it while they can instead of waiting until they have to. It is also kinder to your heirs to downsize possessions yourself rather than leave that task to them after you die.
The run-up in home prices has been breathtaking, hasn’t it? It’s difficult to predict how much longer it will last, but Rita and I do know that we can be satisfied with the proceeds we will get from selling our home now. The income from those proceeds in a TransAmerica fund that guarantees a certain return despite market fluctuations would help pay the rent for our new apartment. And, since I’m not retiring yet, I’ll continue to have an income on top of that.
Social Security, Medicare and appropriate long-term care policies for each of us can provide additional peace of mind regarding our medical needs as we age.
Our decision to move into a 55-plus community also relieved us of the biggest dilemma facing homeowners who want to capitalize on selling their current home — how to find a place to buy in a very difficult market for buyers.
While it’s nearly impossible and highly frustrating to buy in this crazed seller’s market, and while the renter’s market is also extremely tight and expensive, there are many 55-plus communities like the one we chose that have units available. In addition, it’s the nature of these places that openings become available as other residents die or move into assisted living facilities.
You’ll want a professional to help you evaluate the different 55-plus communities that exist and that are opening every year. Some, like the one we chose, are straight rentals, but others require a 6-figure “buy-in” which can eat up the proceeds from the sale of your home. I suggest hiring Jenn Gomer, who is in the business of helping seniors find the community which is a right “fit” for their specific needs. You don’t pay Jenn for that service — she receives a fee from the community you select.
The dilemma mentioned above is solved by waiting until you have signed a lease on your rental (ours starts on April 1st), then putting your home on the market with a closing date 15 days after your lease begins. That way you have a reasonable amount of time to move into your rental (using Golden Real Estate’s free moving truck, free moving boxes and affordable laborers, if you listed with us). It also gives you time to dispose of your excess “stuff.”
It has been an interesting if exhausting process to let go of the family heirlooms, mementos, and other possessions that have slowly filled our unfinished basement over the years — stuff that we have lugged from one house to the next.
The Marshall fire had a psychological impact on us, too. We imagined if our own home were to be consumed by fire unexpectedly and we had to start over, losing everything we enjoy daily as well as all that stuff in our basement that we have been dragging along each time we bought a new home. Would we miss it? Of course, but we could live without it, couldn’t we?
There’s a freedom to be gained by releasing the past and living solely in the present. It felt good giving away things to Goodwill and other charities as well as to friends and relatives.
For example, since acquiring an electric bicycle several years ago, the three conventional bicycles we owned had been sitting unused in our basement and were never likely to see the light of day again. So we donated them, along with bicycle parts and accessories such as paniers and pumps, to the “Bicycle Recycle” program of the Golden Optimists Club, which refurbishes bicycles and donates them to low-income people. Making that donation felt great, on top of the feeling we got from clearing them and other stuff from our basement.
We thought about giving most of our furniture to victims of the Marshall fire, but realized that an estate sale was more practical and then we could donate money instead. Except for a few pieces, we’ve decided to purchase all-new furniture for our 2-bedroom/2-bath apartment at Avenida Lakewood.
It’s amazing how many papers were in boxes in our basement. I found tax returns going back to the 1980s which needed to be shredded. We also had the closed transactions of Golden Real Estate going back well beyond the number of years we’re required to retain them, and we were able to move the more recent transactions to the company’s new office in downtown Golden.
We had carpet remnants for carpeting that no longer existed at home and office. Bye-bye! We took multiple carloads of nice things that we didn’t need to Goodwill, which thankfully accepted all of it.
The wheelbarrows and gas generator that we never used but lent to Habitat for Humanity for its pumpkin patch each October are now in that organization’s own storage facility, not in our basement.
Anyone want to buy our really sweet upright piano?
Unless you’re wealthy, you probably aren’t in a position to purchase your next home without the proceeds from selling your current home. And in this hot seller’s market, it’s hard to win a bidding war when your offer needs to be contingent on the sale of your current home.
There are several companies that offer to solve this problem in one way or another. You’ve probably seen the TV commercials by Orchard saying they allow you to buy a home before selling your own, and perhaps you’re wondering whether you should work with them. Since I’m often asked what I think of such companies, I decided to make it the topic of this week’s column.
It’s not obvious from Orchard’s website exactly how they work, so I clicked on their website’s link for 260 reviews curated by Trustpilot. I like Trustpilot, because it allows you to view only the one-star reviews, which can be more informative than their five-star reviews.
From what I read, it appears that they make an “offer” of a “guaranteed price” for your home, giving you the impression that they will buy the home, but the reviews I read gave me the impression that they actually put your home on the market after you move into your new home. Under one of their three programs, they charge you rent on your new home, because Orchard Investments buys the home and flips it to you when your current home sells.
Some of the negative reviews complained of poor customer service, unreturned calls, and reassignment of the agent serving the client. (You may speak to your listing agent, but you don’t meet him/her.)
I posed as a seller/buyer on Orchard’s website to get some of my questions answered. Two unlicensed employees screened me for my intentions and to learn about my home before I got to speak with a licensed agent about their buy-before-you-sell program. All three conversations were on Zoom, including the evaluation of my home for valuation purposes. That session was on my phone so I could walk that employee through my home showing him its features.
My third Zoom meeting, which was with licensee Toni Thompson (who recognized me as a fellow broker), included a PowerPoint presentation describing Orchard’s 6% “Move First” program. In that program, you buy and move into your replacement home with Orchard, bringing up to 85% of the equity in your current home to the closing on your replacement home, and you borrow the rest from a mortgage lender of your choice (which could be Orchard’s own mortgage company).
Then they put your vacant home on the market after doing what you agree would help it sell better, such as painting, flooring improvements, etc. These costs will be deducted from your proceeds. If you choose not to use all your 85% equity on the purchase of your new home, you can get the balance at your closing. When your current home sells, you get the remaining proceeds minus their 6% commission and expenses.
Orchard’s third program is a conventional sell-then-buy program for which you’re required to use them on your purchase.
Now I’d like to describe some of the ways one can get around the problem which Orchard’s first two programs are designed to solve.
For starters, if you own your current home free and clear or with a low-balance mortgage, you can apply for a Home Equity Line of Credit (HELOC) for up to 80% of its current value at a credit union, bank or using a mortgage broker such a Wendy Renee of Fairway Independent Mortgage who has her office inside Golden Real Estate’s storefront. I also recommend Jaxzann Riggs of The Mortgage Network, who is the source for my column on home financing that is published on page 2 of YourHub on the third Thursday of each month.
A HELOC is like a mortgage (or second mortgage), but it’s only a line of credit, so you pay no interest on the funds until you draw them. You can’t get a HELOC when your home is on the market, but this strategy is assuming that you won’t put your home on the market until you’re under contract for your new home, and you don’t draw the funds from your HELOC until the closing of the home you’re buying. Thus, at most you’ll only pay one or two months’ interest on the HELOC funds while you go about listing and selling your current home. The HELOC, like your primary mortgage, is paid off at the closing of your current home.
Bridge loans are another option, but they carry a higher interest rate.
If you’re okay with selling your home before you start house hunting, I have a strategy for that. In this seller’s market you have the ability (if you price your home to get competing offers) to dictate the closing terms on the sale of your home.
For example, you could demand and get a 60-day closing and a 60-day post-closing occupancy agreement (PCOA). That’s a total of 120 days from when you go under contract for the sale of your current home until you close on your replacement home. Most contracts that fall do so based on inspection, which typically is scheduled 7 to 10 days after going under contract. Once you are under contract and “past inspection,” your contingent offer is almost as welcome as a non-contingent offer.
The 60-day limit on the PCOA is due to lenders’ requirement that you take possession of your new home within 60 days to qualify for the owner-occupant interest rate instead of the higher investor interest rate. There is a totally legal way to go beyond that 60-day limit while still having the PCOA specify a 60-day term. The PCOA has a paragraph in which a per diem penalty is specified for failing to give possession to the buyer. If that penalty is, say, $100 per day, that’s $3,000 “rent” for another 30 days’ occupancy. If, as is typical, the 60 days was rent-free, then paying $3,000 for a 3rd month feels even more reasonable.
Under the terms of the PCOA, the buyer can evict you and sue for damages, but if you have discussed this possibility ahead of time, it may grant you that needed 5th month to close on your replacement home.
Do you have experience with Orchard or another such company? Call me at 303-525-1851 or email me at Jim@GoldenRealEstate.com to share your experience and maybe I’ll have a follow-up on this concept in a future column.
Rita and I recently decided to sell our home and move into Avenida Lakewood, a two-year-old community near Colfax and Quail which boasts “Resort Inspired Living” for people 55 or older. (Actually, a spouse can be under 55.)
We were also looking at Vita Littleton, but Avenida is closer to Golden Real Estate’s office, and I’m not retiring.
But that’s the point. You don’t have to retire for living in a 55+ community to make sense. The rent for our two-bedroom, two-bathroom apartment with 4th floor mountain views is competitive with a comparable apartment with none of Avenida’s many amenities and activities which drew us to sign a one-year lease. And there’s no 6-figure buy-in or “entry fee” as there is with many 55+ communities.
Jenn Gomer of CarePatrol specializes in helping seniors like us find the community which best fits our needs, and she recommended Avenida to us. (We hadn’t heard of it.) If you’re in our demographic, I suggest you call her office at 720-675-8308 and discuss what might be best for you. Such communities vary greatly, with some, unlike Avenida, providing “continuity of care,” meaning that you don’t have to move if your health deteriorates and you require assisted living, nursing home or hospice care.
There’s a term in journalism called “the buried lead,” meaning that the key point of an article doesn’t appear until several paragraphs into it.
Well, last week’s column had a buried lead. You may recall that the headline spoke about the myth of the 6% listing commission. The point of the column was that it’s common for prospective sellers to think there’s a “standard” 6% commission that’s charged by most listing agents. In fact, as I explained, the listing commission is negotiable and has declined over the last 40 years from a 7% commission dictated by the Denver Board of Realtors to listing commissions averaging, according to surveys by the National Association of Realtors (NAR), in the mid-5% range.
What has slowed the decline of the listing commission is the more resilient “co-op” commission paid to buyer’s agents from the listing commission.
Until recently, 2.8% was almost universally offered to buyers’ agents. If listing agents offered less, they ran the risk of limiting the number of showings and contracts they would receive, since the amount of the co-op commission was prominently displayed on the MLS.
What’s now allowing listing commissions to drop to (or even below) 5% has been the freedom that listing agents now feel to offer a smaller co-op commission.
It has been my own practice to list homes for 5.6% because I felt it necessary to offer half of it — 2.8% — to the agent who represents the buyer. With a 2.5% co-op becoming more common (as I showed in last week’s column and as evidenced in the chart below), I’m more comfortable now listing homes, especially higher priced homes, for 5% instead of 5.6%. I believe next year’s survey by NAR will show a big drop in listing commissions, and it will be because of the lowering of co-op commissions.
In addition to being good news for sellers, this is not bad news for listing agents because of the increase in selling prices of listings. Getting 2.5% on a $700,000 transaction pays $3,500 more than getting 2.8% on that same listing when it sold for $500,000 a few years ago.
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