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!

The Future of Heating is Heat Pumps, Not Gas Forced Air

Here in Colorado, as in much of the country, the typical home heating system is gas forced air. A gas flame heats up a plenum across which a fan blows air through ductwork into the various rooms of a house.  For cooling, the same ductwork and fan are used, but instead of the flame heating that plenum, the air passes over a set of coils beyond the plenum with super-chilled fluid created by an outdoor compressor.

Gas forced air, however, is relatively inefficient and is only common in the United States because of our exceptionally low cost of natural gas and other fossil fuels.

Elsewhere in the world, heating is done using heat pumps. What is a heat pump? Your central air unit is a heat pump, but it operates in only one direction—extracting heat from indoor air and dissipating it outdoors. A heat pump heating system simply reverses that process, creating heat by extracting heat from outdoor air and dissipating it in your home, either through your existing ductwork or through wall-mounted “mini-split” units. Unlike gas, a heat pump moves heat instead of creating it.

How a heat pump works to heat and cool a home using wall-mounted mini-split units heated and cooled by an exterior compressor.

Rita and I replaced our gas furnace in 2012 with a hybrid system by Carrier. It heats our home using the heat pump unless the outdoor temperature falls below freezing, at which point a gas burner kicks in. With our solar panels providing the electricity for the heat pump, our highest mid-winter Xcel bill is under $50. Meanwhile, at Golden Real Estate’s office, as described in my Jan. 4, 2018, newspaper column, we got rid of our furnace and ductwork and installed a ductless mini-split system (like in the above diagram), also powered by solar panels. As a result, our Xcel bill is under $11/month year-round.

Last Call for a Unique & Historic Golden Property

On January 1st, our listing at 623 14th Street goes off the market for a couple months. This 1867 home, built before Colorado was a state, and the lot behind it in downtown Golden represent a terrific opportunity.  There are two parcels to this listing, a rectangular lot with the historic home, currently zoned commercial, and a vacant triangular lot behind it. That lot has a wind turbine and an electric vehicle charging station on it. View the narrated video tour and drone footage and read the history of this home at www.HistoricGoldenHome.com, then call 303-525-1851 for a private showing.

Denver’s Winter Real Estate Market Isn’t Slowing As Much As Reported

Here at Golden Real Estate, we are used to having a pretty active real estate market during the winter months, but recent news reports suggested that the market has slowed dramatically, with sellers more reluctant than in the past to put their homes on the market. Statistics show that analysis to be overblown.

Below is a chart showing 6 years of June and November listing activity on REcolorado.com (Denver’s MLS) limited to the City & County of Denver. (Further down I analyze Jefferson County statistics.) December numbers are not available yet, so I’m only showing November activity. It’s not exactly winter, but the trend over 6 years is still useful for the purpose of this analysis.

What the analysis shows is that there was in fact an increase of sales during November over the previous year and nearly as many new listings. The number of active Denver listings in November was less than last year’s peak but still higher than the four previous Novembers. Both median and average days on market were only slightly higher, and the median sold price was much higher than last November. Moreover, the ratio of sold price to listing price was even higher this November than it was in November 2018.  As for this month, there have been 384 new listings through Dec. 16th — exactly the same as during the first 16 days of December 2018.

In contrast to Denver and the full MLS, Jefferson County showed a slight slowdown in every metric except the number of sales and the median sales price, as show in these statistics garnered from REcolorado:

While the number of November closings in Jefferson County this year is comparable to previous years, the number of new and active listings this November is markedly lower than last year, and the median and average days on market are markedly higher. Despite the slowdown, the median sold price is higher—a new record for November—but the ratio of sold price to listing price is lower than all five prior years..

As for this month (through last Sunday) we have 257 new listings here in Jeffco, compared to 250 new listings for the same 15 days in December 2018, so that’s unchanged, but almost every agent I’ve spoken to senses a slowdown in real estate activity that is greater than we typically experience at this time of year.

As I’ve written before, winter is, in fact, a good time to sell a home, but it’s true some sellers continue to think otherwise. If a home is not overpriced, it can sell quickly in the winter months for a variety of reasons, the biggest one being that there is less competition from other listings, but there are countless buyers still getting alerts from the MLS, Zillow and other websites when a new listing matches their search criteria.  Sellers also appreciate that only serious buyers ask their agents to show homes at this time of year. Lookie-loos are really a fair-weather phenomenon.

Call one of us at 303-302-3636 for a market analysis, including localized winter statistics. By the way, Golden Real Estate, although based in Jefferson County, is also active and successful in the Denver market. Please consider us when it’s time to sell or buy!

Golden Real Estate Uses an App to Protect Clients From Being Scammed

For over a year, we at Golden Real Estate have had access to an app that is only available to licensed real estate professionals for the purpose of protecting our clients (and us) from would-be criminals or scammers.

The app is called Forewarn, and it enables us to trace any phone number within seconds to verify the age, address, criminal record and other information about the caller.

At right is a screen shot from the app when I enter my own cell number, showing the many categories of information available for any person identified using the app. I urge my broker associates to use the app themselves or ask me to use it when they want to verify the background of any stranger who asks them to set up a showing. Any Realtor who joins Golden Real Estate has free access to this information to assist clients and for their personal safety.

We originally subscribed to this service to protect ourselves — especially our female agents — following the murder of a Louisiana agent by a person posing as a buyer. However, we have learned that it’s a service that could help clients and us from being scammed.

This app is not available to people outside the real estate profession, and any agent who applies for the app is also screened so the tool does not get into the hands of the wrong people.

We use this app to protect our clients from scammers who are increasingly targeting homeowners as well as home buyers.

As explained by Forewarn, fake internet listings, fake homeowners or sellers, and fake investors are just some of the reasons working with a real estate agent who has purchased this app can help buyers and sellers avoid scammers and avoid potentially losing thousands of dollars.

According to the FBI, there were 11,300 victims of fraud involving real estate in 2018, with victims losing almost $150 million  We can use the app to verify the identity of anyone pretending to be a landlord, seller, buyer or renter.  If we don’t have a phone number for the person, we can use the app to look them up by their name and city. If it’s an unusual name, we don’t even need the city, just the state.

Perhaps you, like so many, have received phone calls, letters or postcards from investors or individuals offering to buy your home. Homeowners have very few resources for verifying such a person’s identity or legitimacy. With this app, we can help you verify a buyer’s identity, and verify their financial history (bankruptcies, liens, judgments), while helping you get the best price for your home. On the other side, there are real estate investors being scammed as well. Being able to quickly verify identity and property ownership may help reduce the chance of fraud.

There are plenty of fraudulent activities in the real estate industry. Using the app, not only to verify prospects but also the other parties involved in a transaction, can reduce financial risk for you as well as bring to light fake identities.

There are so many kinds of scams that we can help you avoid. It’s one of the ways that our broker associates and I can add significant value to each real estate transaction and to our community.

As Realtors, we have many other resources available to us, such as an app which provides detailed information about properties anywhere in America, including the name of the owner(s) and estimated valuation.

This is another reason to work with a broker from Golden Real Estate.  Call one of us today!