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

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

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

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

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

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

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

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

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

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

Do You Really Need a Buyer’s Agent?

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

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

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

Real Estate Agents Have a Responsibility to Report Wrongdoing

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

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

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

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

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

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

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

What Do the Year-End Stats Tell Us About Denver’s and Jeffco's Real Estate Market?

As with politics, “all real estate is local.” News reports about the national real estate market going up, down or sideways may or may not apply to where you live. I don’t have the space to provide the stats for your subdivision, but I can certainly provide them for Denver and for the metro area using data from REcolorado, our MLS.

    The charts below contain what I consider to be the most useful statistics for assessing the health of the real estate market in the City & County of Denver compared to the rest of the metro area, which I’m defining as within a 17-mile radius of the state capitol.  That radius includes Aurora but not Parker on the east and southeast, Highlands Ranch but not Castle Rock to the south, Golden to the west, and Broomfield and Thornton but not Brighton or Boulder to the north. Basically, it includes most of what I consider urban and suburban Denver.

What we learn from these statistics covering the last five years is that the median sales price has continued to rise by a significant amount every year, both in Denver and the rest of the metro area. The same was true for the price per square foot except for a slight dip between 2017 and 2018 in Denver (and, by the way, in Jeffco) but not for the rest of the metro area as a whole.

The ratio of selling price to listing price has been on a steady decline in both charts, but the drop in 2019 was much sharper, sinking below full price. Meanwhile, the median days that it took listings to go under contract was pretty steady until 2019, when it surged by over 50% both in Denver and the rest of the metro area. The number of sold listings has remained steady for all five years, but notice the surge in expired (unsold) listings in both 2018 and 2019. 

Now let’s look at how this December in Denver compared to previous Decembers:

In that chart you see that there has been an improvement over past years in every indicator except days on market and the number of listings that expired without selling. Median sold price and price per square foot are at record highs for December. The ratio of sold price to listing price is slightly higher than in 2018, although still under listing price. It will be interesting to see how January shapes up. As I write this on Monday evening, there have already been 125 closings of Denver listings and there were only 907 Denver listings under contract, so it’s not looking good for matching last January’s number of 1,665 sold listings.

Now, let’s look at the same analysis for Jefferson County’s real estate market.

What we learn from these statistics covering the last five years is that the median sales price has continued to rise by a significant amount every year, both in Jeffco and the rest of the metro area. The same was true for the price per square foot except for a decline between 2017 and 2018 in Jeffco, as in Denver, but not for the rest of the metro area as a whole.

The ratio of selling price to listing price has been on a steady decline in both charts, but the drop in 2019 was much sharper, sinking below full price. Meanwhile, the median days that it took listings to go under contract was pretty steady until 2019, when it surged by about 50% both in Jeffco and the rest of the metro area. The number of sold listings has remained steady for all five years, but notice the surge in expired (unsold) listings in both 2018 and 2019. 

Now let’s look at how this December in Jefferson County compared to previous Decembers:

In that chart you see that there has been an improvement over past years in every indicator, including a drop in the number of listings that expired without selling. Median sold price and price per square foot are at record highs for December. The ratio of sold price to listing price is slightly higher than in 2018, although still under listing price. It will be interesting to see how January shapes up. As I write this on Monday evening, there have already been 93 closings of Jeffco listings and there were 549 Jeffco listings under contract, so it’s looking pretty certain that we’ll beat January 2018’s number of 553 sold listings.

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

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

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

But what is the cost of that convenience?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It’s January — Time to Think Again About Losing Weight and Getting Fit

By JIM SMITH, Realtor®

It was four years ago this month that Rita and I made a decision that has changed our lives for the better — we enrolled in a program called “8 Weeks to Wellness” at Body In Balance Wellness Center, located near our home in Golden.

At the time, we were 68 years old and technically obese. I had a bit of a “beer belly” and weighed in the mid-240s. When the program ended in March 2016, I weighed under 220. At right are before and after pictures showing that much of my belly fat was gone.  As I write this, I weigh 206, because I have continued with the lifestyle which I learned during the 8-week program.

What is that program?  It’s a holistic program combining nutritional training, mindfulness, regular chiropractic adjustments and massages, and twice-weekly workouts with a trainer.

Since January is a time of year when we all think about shedding the weight we gained over the holidays and making other healthy resolutions, I thought it appropriate to share my personal story of making lifestyle changes that I know are leading to a longer, healthier life, and I invite you to learn about “8 Weeks to Wellness” and if it’s right for you — whether or not you’re a senior like us.

Let’s talk about nutrition first. Rita and I learned things we didn’t know from Drs. Leah and Scott Hahn during the program and at free lectures which they give each month. 

Dr. Leah’s class on sugar was particularly enlightening. We learned how much sugar is in processed foods and how bad it is for us.  Cancer feeds on sugar, and because so many foods contain sugar, Americans are consuming an average of 57 lbs. of added sugar per year.  That’s eleven 5-lb. bags of sugar per person! Our bodies can only metabolize between 1/2 and 1/3 that much sugar, so the rest of it has to be stored as fat — belly fat.

The key, I learned from the doctors, is to learn where that “added” sugar is hidden. They taught us about the glycemic index, which ranks carbohydrates according to how they affect blood glucose levels. Carbohydrates with a high glycemic index (such as in many snacks, bread and potatoes) raise blood glucose levels too quickly. The body needs time to absorb the sugar created by carbs, so you want to choose foods with a low glycemic index such as green vegetables. Also, sugar is literally addictive, creating appetite rather than satisfying it. It’s true — you can’t eat just one potato chip!

We also learned about “good fats” and “bad fats.” Did you know that the low-fat movement created by the government had the unintended consequence of increasing our sugar intake?  Since removing fat from foods makes them less tasty, food producers started adding sugar to low-fat products they sell us.

Obesity, we learned, is caused by all the excess sugar in our diets, and Type 2 diabetes is a natural biproduct of obesity caused by excess sugar intake.

So, in addition to reducing the granulated sugar we add to our foods, Rita and I have dramatically reduced our intake of added sugar by eliminating fast foods and soda beverages from our diet. We purchase only “real” foods, avoiding processed foods as much as possible, and we buy organic food, grass-fed beef and eggs from free-range chickens. (We shop at King Soopers, not at Whole Foods or Natural Grocers.)

It’s funny to think that we’re more concerned about the fuel we put in our cars than the fuel we put in our bodies. My handyman buys premium gasoline for his truck because he thinks it’s better for his engine, but you should see the food in his pantry!

Nutrition, however, is only one component of keeping our aging bodies healthy. We’ve all heard that we should exercise, but the doctors at Body in Balance have given Rita and me more context for its importance.

As we age, we all experience a loss of muscle mass. One evidence of muscle loss is the loose skin hanging from most old folks’ out-stretched biceps. That’s why I kept up my twice-weekly training sessions after the end of “8 Weeks to Wellness.”  And it’s working.

I used to think that hiring a personal trainer was a waste of money, but I was wrong. My Monday afternoon and Friday morning sessions last one-hour under the guidance of a certified personal trainer who creates a “workout of the day” that works all the different muscle groups in my body in a manner that never gets tedious or repetitive.  Through “bio-impedance analysis” I have seen the actual results of continuing this program — decreased fat and increased muscle mass in my body. Combined with my good nutrition and reduced weight, I will continue to age in good health and be less prone to falls and breaks. We should all strive for that as we age, and I urge you to consider the benefits.

Body In Balance Wellness Center, located in Golden, is a chiropractic office specializing in Network Spinal Analysis (NSA), which is more gentle than traditional chiropractic. In addition to their three chiropractors, they have two personal trainers in their fitness center, a functional medicine nutritionist, and two massage therapists on site. See www.BodyInBalanceChiropractic.com.

Because “8 Weeks to Wellness” made such a difference in Rita’s and my life, I encourage you to attend a free introduction to the program to be held at Body In Balance’s Golden facility, 755 Heritage Road, on Wednesday, January 22nd, at 6:15 p.m.

Call 303-215-0390 to reserve a seat. I’ll be there to share my story and answer questions.

Denver Post Series Uncovers the Corruption of Tax Districts Created by Developers

Four years ago, on Dec. 17, 2015, I devoted this weekly column to explaining why property tax rates vary so much around the metro area, mostly due to the creation by developers of “metropolitan  tax districts” to reimburse themselves for the cost of building the infrastructure for their subdivisions. A follow-up column on July 21, 2016, went into greater detail, giving examples of such tax districts created for Stapleton and Green Valley Ranch in Denver and Solterra and Candelas in Jefferson County. For example, in Candelas, adjacent to Rocky Flats, homeowners are paying a 70-mill tax levy on top of Arvada’s mill levy until the tax district infrastructure bonds are paid off. For a home valued at $500,000, that would be an additional property tax burden of nearly $3,000 per year, which would only increase based on rising property values for 30 years following construction. Below is an excerpt from that column, which quoted mill levies in effect that year:

You can read both columns at JimSmithColumns.com, where all my prior columns are archived – or simply click on the links provided above.

It was clear to me back then that homeowners would not recognize the special tax burden they would be facing as they purchased homes, since disclosure of that tax burden is buried in the flurry of documents buyers have to sign at closing.

Now, with more and more owners of homes in such subdivisions realizing what they got themselves into and how unfair it is, it was inevitable that some investigative reporter would dig into this topic in a way that I could not as a full-time Realtor. 

Earlier this month, investigative reporter David Migoya’s multi-part series on this important topic was published in the Denver Post following eight months of research. Perhaps you read that series.

Migoya provides an excellent summary of what these districts are: “Metro districts are taxing authorities created by subdivision developers, with the consent of the local government, for the sole purpose of selling government-like bonds to finance their projects. Repayment of the bonds is tied to future property taxes assessed to the homes that will eventually be built.”

Among the things I learned from Migoya’s multi-part series that I did not know or realize when I wrote about metropolitan tax districts in 2015 and 2016 was that this device of creating special tax districts for infrastructure investments began to be utilized because 1992’s Taxpayer Bill of Rights (TABOR) made it harder for cities or the county to invest in the infrastructure of new subdivisions, even though these subdivisions would ultimately pay for themselves through new property taxes. (I’m not fully convinced of that argument, since many newer subdivisions, including mine, were built without such tax districts.)

Migoya’s series went further to describe the scheming which kept property owners from being able to control the tax districts once the subdivisions were fully built out.

If you are in one of those newer subdivisions, you probably are subject to such a mill levy. If you didn’t read the series when it was published in the main section of this newspaper, I suggest you Google “Denver Post metropolitan tax districts” and read the full series. It should make your blood boil.

One could apply “scandalous” to how these tax districts were created and are run to profit developers at the expense of unwitting future homeowners, but the fact is that what the developers have done is legal, manipulating laws passed by the General Assembly and signed into law by previous Governors.

As Migoya explained so well in his opening installment on Dec. 5th, “Colorado law permits developers to elect themselves to serve on a district’s board of directors, then use that position to approve tens of millions of dollars in public financing for their businesses, and leverage the property taxes on homes they haven’t yet built. No regulations stop these developer-controlled boards from approving arrangements that are financially advantageous to their business, allowing them to finance overly ambitious plans without fear of liability, knowing future homeowners ultimately shoulder the burden.”

Surely the upcoming legislative session will feature hearings and legislation to address the worst abuses of this tax district tool, but the damage may be irreversible in the state’s 1,800 such existing tax districts, since they were created pursuant to existing laws.

Depending on how aware buyers and their agents become of these oversized tax burdens, the resale value of homes in those subdivisions should reflect the fact that they have a far greater tax burden than comparable homes in areas without such a developer-created tax district.  You can count on Golden Real Estate’s brokers being knowledgeable in this area.

The Value of Local Journalism

I have been concerned that the reduction in the reporting staff at the Denver Post would make investigate series like the one above a thing of the past. The “Afghanistan Papers” series by the Washington Post is another example. Subscribers make the investment in such journalism possible, so thank you for subscribing to the Denver Post.

By the way, please note that our “Real Estate Today” column in the Denver Post also needs your support. It is our primary marketing tool. You can assure this column’s continuation by coming to us with your real estate needs and recommending us to others. Thank you!