Films Sought for 2022 Colorado Environmental Film Festival

Golden Real Estate is a long-time corporate sponsor of the leading film festival. If you or someone you know wants to submit their film for this juried event, here’s some information for them:

The deadline for submissions is Oct. 22, but the submission fee goes up on Sept. 1st. Get submission information at ceff.net/submit.

Sellers Who Value Their Privacy & Security Can Make Their Home Visible Only to Agents

A recent email newsletter from our Denver MLS, REcolorado, to us members explained how sellers, through their listing agents, can literally sell their homes without their neighbors knowing about it — although your neighbors may ask why so many people are visiting your home, one after another!

To quote that newsletter article, “Whether they are a celebrity, in witness protection, or simply concerned for their safety, protecting the seller’s privacy is the primary concern.”

Although not mentioned in that article, it starts with the yard sign. There’s no requirement that you have a real estate sign in your front yard.

As you probably know, Realtor.com, Zillow, Trulia, Redfin, NextDoor and virtually every real estate website downloads its listings from the MLS, but your listing agent can opt out of such syndication, which also keeps it off REcolorado.com except for its logged-in members. However, the listing will still be emailed to buyers who have alerts set up by their agent.

There are lesser degrees of privacy available.  For example, a seller may be okay with displaying their home on public-facing websites, but only allow logged-in agents to see their address. That’s another option available to agents when they enter a listing on REcolorado.

Sellers also, of course, can dictate what interior pictures are shown of their home — or ask their agent to have no interior pictures at all.

As you probably know, it is recommended that sellers leave their home during showings and inspections, but I’ve had sellers who insisted on staying home during showings.

Recently, I had a husband and wife who insisted on being present for my open house. That’s okay, although unusual. The husband worked from home and insisted on keeping his home office locked to all visitors. We had a picture of his office on the MLS, and it was included in my video tour, but during showings a picture of the room’s interior was posted on the locked door to his office.

If you have video cameras installed inside and outside your home, that’s okay, too. To comply with privacy laws, you only need to post a warning sign visible to all visitors that video and audio surveillance is in use at this property. Adding that warning to the “broker remarks” on the MLS provides proof that you did notify all visitors, through their agent, of the video and audio monitoring present in your home. (The MLS system keeps a record of each and every change to the MLS listing, allowing you to prove that the warning was there from the beginning and not added later.)

If you don’t want your agent to install a lockbox containing the key to your home, that can be arranged. Just have the showing instructions say, “Seller will let you in and then step outside during the showing.”

Speaking of lockboxes, I recommend against the kind of lockboxes with dials, because anyone can look at the lockbox while it is open and see what the code is. That’s why we only use lockboxes with push buttons.

Electronic lockboxes are becoming more common in our market. The most common brand is SentriLock. Electronic lockboxes record the time when each agent enters and leaves the home, and showing agents can only use their access code for the approved date, not come back a second time without asking for a second showing.

Normally, we don’t tell the seller the code to the lockbox, because we don’t want the seller to give that code to a friend or cleaning person without our knowledge. However, I have on occasion given that code to a seller who wants to remove the key overnight.

I don’t want readers to get the impression that security is a big problem in our market. In two decades of listing homes, I have never had an incident where a visitor (including at open houses) stole something from one of my listings. Every licensed real estate agent has been fingerprinted and had a criminal background check done on them when they were licensed. They could lose their license and livelihood if they were later convicted of a felony. They would also put their license in jeopardy if they were to give a lockbox code to a buyer.

It should be noted that our showing service, ShowingTime, makes sure that no unlicensed person is able to get showing instructions for our listings. When an agent calls to set a showing using their own phone, ShowingTime knows from Caller ID which agent it is so they don’t have to check if they’re licensed. (They greet me by name when answering my calls.)

ShowingTime offers several options for allowing showings of your home. You can specify what hours you want to block showings, and these rule can vary by date or day of the week. 

You can also specify lead time for showing requests. One hour is a common lead time requirement, but some listings require prior day notice. In other words, your listing agent can pretty much set any rule you want regarding showings, and that rule is computer enforced, meaning the rules will not be violated due to human error.

Do you have other concerns?

Most Agents Are in Sales, Primarily of Themselves

Some real estate professionals may take offense at that statement, but I don’t say it to demean them in any way. I myself once had a “real estate coach” and I’ve been to a couple “superstar summits,” and the focus was always on prospecting and marketing and getting clients to hire you, not someone else.

In fact, I owe my facial appearance to one such coach, Tom Ferry, who said at his Palm Springs superstar event in 2003 that “people don’t trust agents with facial hair.”  I didn’t believe him, but the next week I asked a seller why he chose another agent to list his home, and he said, “Frankly, I didn’t trust you.” My mustache was gone that evening!

It makes absolute sense that agents, especially new ones, need to be coached on how to sell themselves as the “right” agent for buyers and sellers. I don’t disagree. But for most agents, that’s 90% of their selling effort. Once hired, they really don’t “sell” real estate, they advise, consult and coach buyers on the relative merits of the homes they choose to see.

The buyer counts on us to share our expertise, to identify features or defects that they might not notice, and to construct a winning offer, coach them on inspection issues, and guide them through to a successful closing.

The agents at Golden Real Estate don’t expend their time or money on prospecting. Yes, we network when we’re at the gym or elsewhere, but we don’t do mailings, cold calling and such because most of our clients have been reading this column for a decade or longer and are pre-sold on hiring us.

It’s a luxury we relish — spending most of our time on developing expertise instead of on selling ourselves to people who haven’t heard of us.

Just Listed: Ranch on 0.41 Acres Backs to Lakewood Gulch

This 1961 brick ranch at 705 Dudley Street in Lakewood backs to Lakewood Gulch. It is listed at $714,000. Actually, the stream runs through the back of the property, which includes both sides of the gulch. There are several great features of this home, including the 15’x32’ covered patio behind the garage with a built-in gas grill with chimney. There’s a gas fireplace in the kitchen and a wood-burning fireplace in the family room — and enough trees on the property to provide firewood! A trail to Holbrook Park (which straddles the same gulch and includes a playground) is just 100 feet west of this home! You can take a narrated video tour at www.LakewoodHome.info or by clicking on the thumbnail picture below. My broker associate, David Dlugasch, 303-908-4835, will be holding it open Saturday, Aug. 28th, 11 a.m. to 2 p.m.

Homeowners Ask About the Tax Implications of Selling Their Homes

Taxpayers (like me) appreciate the  capital gains exemption on the sale of one’s primary residence, but not everyone is familiar with how it works. A single person enjoys a $250,000 exemption and married couples (filing jointly) enjoy a $500,000 exemption on the profit they make on the sale of their home, providing they have owned and occupied it for two of the five years preceding its date of sale.

Given the runaway appreciation of homes that you and I have seen in 2020 and 2021, more homeowners are thinking of “cashing out” and wondering how much capital gains tax they may have to pay on the sale of their home.

The exemption applies to the gain over your home’s “basis,” not to the sales price. That basis begins with what you paid for your home but is increased by the amount of any improvements you have made to the home as well as the cost of selling it.

Thus, if you paid $200,000 for your home but you made, say, $50,000 in improvements (not repairs), your basis jumps to $250,000. Then add the cost of selling your home (commissions plus title insurance and other closing costs), which should amount to 5 or 6% of the sales price. If you sell your house for, say, $500,000, your basis would be increased by another $25-30,000.

Because your gain, in that example, would be under $250,000, your entire proceeds on the sale of your home would be tax-free, whether you’re single or married. For many sellers, however, the taxable gain could be well in excess of $250,000 or even $500,000.

If your spouse died less than two years prior to the closing and you haven’t remarried, you can still enjoy the full $500,000 tax exemption. Also, your basis is “stepped up” for your spouse’s half of the home, whether or not you owned your home as “joint tenants.” 

Also, if you were deployed at least 50 miles from your home, you can pause the 2-out-of-the-last-5-years rule by up to 10 years.

As with any IRS rule, it’s complicated, so you’ll want to visit www.irs.gov/publications/p523 to read IRS Publication 523. Reading it will be worth your time.

Moving Industry Struggles to Keep Up With Demand

A recent survey of the moving industry (at www.movebuddha.com) found the following:

71% of moving companies report experiencing delays in 2021 that exceed what is normal for the peak moving season.

67% of moving companies do not have enough drivers to cover demand, which many attribute at least partially to pandemic-related job loss.

Nearly half of moving companies are booked out at least three weeks further than in previous seasons.

Customer complaints about cancellations have risen 250% this season compared with 2019.

The survey dealt with both in-state and interstate moves. While we can’t help you with interstate, we can help you with in-state moves. If you buy or sell a home using one of Golden Real Estate’s agents, you get free use of our moving truck (similar to a large U-Haul) and access to our moving personnel at $25/man-hour. And if you use Golden Real Estate to sell your current home and buy your new home, we will even cover the labor and fuel costs. In either case, we provide free moving boxes (including those expensive wardrobe boxes), packing paper and bubble wrap.  You just pack and unpack!

Prior to listing sellers appreciate having the use of our truck for transporting stuff to relatives, storage, charities or the dump.

Apparently U-Haul is having trouble meeting demand, too. I know because recently a non-client asked to rent our truck.

Open House Sunday 1-3 pm at this 1937 Golden farmhouse for sale!

This 3-bedroom, 2⅓-bath home sits on a 0.45-acre lot atop the hill behind Colorado Mills at 13400 W. 10th Avenue, Golden. Built in 1937, it has a country feel to it, with its gravel driveway circling an old tree and its split-rail fencing. Every room has either birch or walnut wood paneling — not synthetic paneling, but real wood paneling, in-cluding on the slanted ceilings upstairs! The kitchen cabinets are not factory built, but built to fit from birch wood by the now-deceased master craftsman who lived here. The living room fireplace is set in a wall of Silver Plume granite, with a walnut mantel. Built-in cabinetry abounds, and there are even built-in desks and shelving (of birch) in the upstairs bedrooms. Originally on well and septic, the home is now on public water. The grounds include multiple fruit trees — pear, apple, apricot and walnut — and all the trees are maintained by Schulhoff under a yearly contract. I love this house, and you will too!  To fully appreciate it, watch my narrated video tour at http://www.WideAcresHome.com, or just click on this photo thumbnail:

The MLS’s Campaign Against ‘Pocket Listings’ Is Serious, With $1,500 Penalties

Last November, the National Association of Realtors (NAR) board of directors voted into existence a “Clear Cooperation Policy” (see below). The rule required all MLSs in the country to implement the policy by May 1st of 2021. Although there were some technical delays, the rule is in full force now and our MLS, REcolorado, is enforcing it with substantial fines for violations. (I know because I’m on the Rules & Regulations Committee.) Many MLS members have already received fines starting at $1,500, with only one warning notice given.

The rule basically says that there can be no advertising of any kind for a listing without making the listing active on the MLS so that all members of the MLS have the opportunity to show and sell it.  If a “for sale” sign is put on a listing or there is a social media ad for it, or any other kind of public promotion of the listing, the agent must put it on the MLS within one business day. Currently that means that if the sign or advertising appears in the morning, it must be on the MLS by 6:30 pm the same day.  If it is promoted in the afternoon, it should be on the MLS the following morning.

A listing can be listed on the MLS as “Coming Soon,” but that means no showing by anyone including the listing agent. Once a showing takes place, it must be changed to “Active” immediately, making it available to other MLS members. Also, if it’s “Coming Soon” on the MLS, there must be a Coming Soon sign rider on the yard sign.

Most NAR rules only apply to NAR members (aka “Realtors”), but since NAR requires all MLSs to implement the rule, it does apply to the thousands of agents who do not belong to a Realtor brokerage. 

The policy was intended to reduce the number of “pocket listings.” A pocket listing is one which an agent withholds from the MLS (i.e., keeps in his pocket) in hopes of selling it himself or herself and thereby not sharing the commission with another agent.

With such stringent enforcement of the rule — other MLS violations carry penalties as small as $25 — you’d think there would be a widespread shift away from agents selling their listings before they are shared on the MLS. 

To see if that was the case, I did some analysis of my own, counting the number of closings entered on REcolorado showing zero days on the MLS. I fully expected to see a drop in the number of such closings.

The first day that a listing is on the MLS, it is shown as 0 days in the MLS. If it is changed to pending (or closed) the same day, one can assume that the listing was not active on the MLS long enough for other agents to set a showing and submit an offer.

Much to my surprise, the number of homes listed as closed with zero days on the MLS has only increased over the last 24 months, as shown by the chart below. In fact, the highest number of such closings has occurred since the rule went into effect.

So what gives? This harsh penalty does not appear to be having the desired effect, but maybe some more publicity about it will create more awareness and more compliance. Agents can be suspended from membership in the MLS after enough violations, basically putting them out of business.

After three violations within the same brokerage, the brokerage itself starts getting penalized, with the fine starting at $5,000, so that should certainly increase the in-house training about the rule. I have made sure that my own broker associates are aware of the rule.

Homeowners can, of course, make their own private deals with a buyer and then call upon an agent to handle the paperwork, which is fine, since there’s no advertising or promotion of the listing by the agent.

Also, there’s a “brokerage exclusion” which allows an agent in a large brokerage to tell other agents within that brokerage about the listing, but that cannot include posting it on social media where other buyers could learn about it. These two work-arounds could explain many of the homes contributing to the chart’s high numbers.

Why Is It Called ‘Clear Cooperation Policy’?

The real estate industry is unlike any other industry I know. Through our many Multi-List Services or MLSs, we members agree to “cooperation and compensation.” In other words, each member agrees to share his/her listings with every other member, allowing them to sell that listing to a buyer, and to be compensated by the listing agent by an amount displayed on the MLS.

I like to compare our industry to the new car business. Imagine if you went to a Chevy dealer and described the kind of car you wanted, and the salesman said, “I think the Ford Explorer would be perfect for you.” The salesman takes you to the Ford dealer, gets the keys, and then joins you on a test drive. If you like it, the salesman writes up the contract and presents it to a Ford salesman, who then gives the Chevy salesman half his commission (which the Chevy salesman then splits with his dealership).

That’s how it works in real estate. The commission earned by a buyer’s agent (who is the selling agent)  is called the co-op commission, short for cooperation.

The MLSs have rules requiring a member to put all their listings on the MLS, typically within 3 business days.  NAR’s “Clear Cooperation Policy” tightens that rule to say that any agent who promotes a listing to prospective buyers in any way (including with a sign in the yard or a social media post) must put the listing on the MLS within one business day.

The NAR policy — now an MLS rule — was instigated by members upset that other members were withholding their listings from the MLS until they were sold, further frustrating both the agents and their buyers looking for homes to buy at a time of especially low inventory.

Title Insurance Is an Essential Part of Any Sale

In my June 17th column (which is archived at JimSmithColumns.com), I wrote about “title lock” insurance, which is being widely advertised. The headline for that column said it all: “Don’t Fall for ‘Title Lock’ Services. They Are a Waste of Money and Don’t Provide Much Protection.” Unfortunately, some readers thought I was referring to title insurance and asked me if it was really necessary.

Yes, any purchase or sale of real estate should include the purchase of an “owner’s title policy,” typically paid for by the seller. This policy in unlike other insurance policies, in that it is a one-time premium issued by a title insurance underwriter and sold either directly by the underwriter or by a title agency. It insures the buyer of the real estate against any liens against the property recorded with the county clerk and recorder.

If the purchase is being financed by a lender, that lender will require a “piggy-back” lender’s policy (paid by the buyer) from the same underwriter covering the lender against such claims up to the amount of the loan. (The owner’s policy covers the buyer up to the full purchase price.)  Title insurance should provide all the protection a buyer needs.

I also recommend requesting a credit freeze from the three credit bureaus. It costs nothing, and it prevents anyone from taking out a loan in your name and disappearing with the proceeds.

Every year you should get a notification of value from your county assessor. If you didn’t get one this year, you can look up your address on the county assessor’s website to make sure your home is still in your name.

In Jefferson County, you can visit http://assessor.jeffco.us. Use Google to find other county assessor sites.

Is the Real Estate Market Slowing, or Isn’t It? Here Are Some Useful Statistics.

Last week I did my regular update on the state of the bidding wars, but it left me unsatisfied because I knew that the market was slowing, yet the bidding wars seemed just as real, especially in the under-$500,000 price range.

The problem with my analysis was that I only looked at the homes which sold in 1 to 6 days because those are the listings which likely had bidding wars.

This week, I looked at the bigger picture but still limiting my analysis to residential listings on REcolorado that are within 15 miles of downtown Denver.

A chart containing some key statistics over the last 11 months is shown below. Here are my observations, which you can follow by looking at the chart’s columns from left to right.

First, it’s clear that the bidding wars started in earnest in February, when the ratio of closing price to listing price went above 100% for the first time. That ratio peaked in June and fell significantly in July, but is still far above 100%.

The number of active listings is still unseasonably low, but higher than it has been since last November. The number of listings under contract (pending) is lower than it was in May and June, but still higher than any of the other months on the chart.

The number of July closings is probably a bit higher than shown in the chart since I did this analysis on August 1st, and not all July closings had been reported, but it is clearly lower than June’s number, while higher than any other month since last October.

The number of new listings in July was higher than any other month except June, which reinforces what I’ve said for months, namely that the lack of inventory is not due to sellers keeping their homes off the market. Rather, homes sell so quickly that the number of active listings remains low.

The median days active in the MLS (DIM) has not risen, but the drop in average days in the MLS is very telling. The drop to 10 days is stunning and shows that even the homes that don’t sell immediately are selling faster than ever. Last July the number was 21 and in July 2019 the number was 23. In the past five years the average days in the MLS never fell below 16 until this April.

The last column shows that the inventory (in months) of homes for sale hasn’t been above one month since January, although it is the highest it has been since February.

The bottom line, then, is that, yes, the market is slowing but is still crazy hot. The trend, if there is one, is toward a gradual easing of the seller’s market in the Denver metro area, but it is well short of becoming a “balanced” market.

Will the end of the eviction moratorium have a big effect on the market?  My guess is that it may increase the number of new listings as landlords, especially small landlords, decide to sell rather than replace their evicted tenants. The opportunity to cash in on their properties’ increased value may be too much for some to resist, and the risk of continued lost income too great for some landlords.

There will not, I believe, be an increase in foreclosures or short sales, because very few property owners are likely to owe more than their property is worth. Because of that, they will simply sell.