Jim Smith – Page 41 – Jim Smith's Blog

Passive House Technology Underlies Going ‘Net Zero Energy’

“Passive House” is a concept born in Germany as “PassivHaus” but growing in popularity here in America. Although its primary focus is on reducing the heating and cooling needs of a home through proper north/south orientation, the placement of windows, and roof overhangs, it also includes design elements that make a home better for its inhabitants. It has many other positive impacts as well, including healthier and quieter spaces, greater durability, and greater comfort for inhabitants.”

Prior to the oil embargo of 1973, home builders did not concern themselves much with making homes energy efficient, but that all changed as we quickly realized how dependent we were on foreign countries for fossil fuels to heat our homes and fuel our cars. Homes built before then were poorly insulated, drafty and less healthy. (For example, lead-based paint wasn’t banned until 1978.)

The passive house concept took off in America as a result of that wake-up call. The “Lo-Cal” house created in 1976 consumed 60% less energy than the standard house at the time, and the concept continues to mature.

If you participated in any of the “green home” tours that Golden Real Estate co-sponsors each fall, you’ve learned about various passive home strategies in addition to “active” strategies such as solar power, heat pumps, geothermal heating, and energy recovery ventilators.

When “active” systems are introduced to a home with passive house design, they work more easily to create the ultimate goal of a “net zero energy” home — one which generates all the energy needed to heat, cool and power the home and, perhaps, charge the owner’s electric vehicles. Without passive house design features, you can still achieve net zero energy, but it may require substantially more solar panels to compensate for such factors as inferior orientation, fenestration (windows) and insulation.

You can learn all about passive home technology, including trainings and public events, online at www.phius.org. Also, search “Passive House SW” at www.meetup.org for local events.

An excellent example of new construction which combines passive house design with smart active systems in the Geos Community in Arvada, which you can learn about online at www.DiscoverGeos.com. The homes in Geos are all oriented to maximize solar gain in the winter, but also designed for sun shading in the summer. Some have a geothermal heating, while others have air source heat pumps and conditioning energy recovery ventilators (CERVs). The CERVs installed in the Geos homes not only provide heat when needed but also track the level of CO2 and volatile organic compounds (VOCs) in the air and adjust their function to reduce those levels, thereby improving indoor air quality.

None of the Geos homes uses natural gas, just solar-generated electricity.

Taxation of Residential vs. Non-Residential Property In Colorado Is a Growing Problem

How real estate is taxed varies greatly from state to state. Here in Colorado, we are blessed with very low property taxes compared to many other states. According to USA Today, Colorado has the 7th lowest property tax rates in the country, although that is a statewide average. The median-value home in Colorado has a property tax bill of just over $2,000 per year, whereas the median-value home in New Jersey, the highest taxed state, has an average property tax bill of over $7,200. In suburban New Jersey, property tax bills over $20,000 per year are not uncommon because of the higher values, not just due to higher local tax rates.

In Colorado, property taxes are very much a local affair. Recently there was a hullabaloo over Metropolitan Tax Districts, in which mill levies can double the property tax in newer subdivisions. You can read my Dec. 26 column on that topic at JimSmithColumns.com.

This week, however, I’m going to address a different property tax problem that is getting worse every year and has little prospect of being solved politically.

The problem is the growing differential in property tax rates for residential vs. commercial and other non-residential real estate, such as vacant land. First you need to understand that property taxes are levied against the “assessed” value of real estate, which is a small percentage of its actual value. While the assessment rate for residential property — currently 7.15% — keeps going down, the assessment rate for non-residential property is fixed by the state constitution at 29%. That means that the property tax on residential real estate is 1/4 the property tax on non-residential real estate of the same value.

Rita and I own two pieces of real estate—our south Golden home and the Golden Real Estate office building. The county assessor values our home at twice the value of the office building, but the property tax for our home is one-half the property tax for the office building.

Vacant land is considered non-residential, so it, too, has an assessment rate of 29%. As I’ve written before, this puts enormous pressure on the owners of vacant land to develop it, which is upsetting if, like me, you value keeping vacant land undeveloped.

To understand how unfair the taxation of vacant land can be, consider a 20-acre parcel in Jefferson County that is currently listed for sale. The county’s current valuation of the parcel for tax purposes is $275,554, so its assessed valuation is 29% of that, or $81,071. If the buyer of this land builds a high-end home on it, the valuation might increase, for argument’s sake, to $700,000, but its assessed valuation would be only 7.15% of that value, or $50,050. Thus, the property tax bill would drop by nearly 40%, even though the value of the parcel has nearly tripled! The current owner is paying over $7,000 per year for his land to sit vacant.

As I’ll explain below, the assessment rate for residential property keeps falling. Last year it was 7.2% and two years before that it was 7.96%. Prior to 1982, property of all types had an assessment rate of 30%, but the Gallagher Amendment changed the non-residential rate to 29% and the residential rate to 21%. Most significantly, the amendment also dictated that the residential assessment rate should be adjusted to retain that year’s 45:55 ratio of residential to non-residential statewide property tax revenue in subsequent years.

As a result of that provision, since total residential valuations have grown much faster than non-residential valuations statewide, the 21% assessment rate of residential property has kept falling and will continue to fall. And this is likely never to change, since owners of residential property are the voters, and it’s unlikely that homeowners would ever vote to increase their residential property taxes in order to soften the property tax burden of businesses.

Bottom line, residential real estate will continue to bear an ever smaller property tax burden compared to non-residential real estate, and owners of vacant land will feel more and more pressure to develop their vacant land or sell it to developers. The only alternative is to put livestock on the land or to farm it so they enjoy the even lower agricultural property tax rate, but the rules for qualifying for the agricultural rate are fairly strict and are aggressively audited, I would expect, since the cost to counties in lower tax revenue for agriculturally zoned property is pretty substantial.

As the Housing Crisis Deepens, Zoning Laws Are in the Crosshairs

In December 2018, Minneapolis made news when it abolished single-family zoning. That began a nationwide conversation about the use of zoning laws to restrict growth and density at a time when housing affordability was worsening and homelessness was increasing.

One of our broker associates, Chuck Brown, attended the National Association of Realtors convention last November in San Francisco. I had attended the same convention there several years ago. I hadn’t noticed many homeless people on the streets back then, but Chuck reported that it was way out of control now, with the streets overcrowded with homeless people.

You, like me, have probably followed the coverage of homelessness in Denver, with that city passing an urban camping ban, which was ruled unconstitutional by a lower court but is still being enforced pending an appeal by the city. It could go all the way to the Supreme Court.

The conversation over zoning created by Minneapolis 13 months ago is growing louder. That’s because the history of zoning is one of intentional discrimination. In researching this topic, I read a Fast Company posting on the history of zoning in San Francisco.. After the 1906 earthquake, the Chinese population there was targeted by zoning changes designed to promote and protect white enclaves. This was long before there were federal laws making discrimination based on race or national origin illegal.

That Fast Company article included the following detail regarding the role of the mortgage industry: “In 1934, as part of President Roosevelt’s New Deal, the Federal Housing Administration (FHA) was established to insure private mortgages. The FHA’s underwriting handbook included guidelines that pushed cities to create racially segregated neighborhoods and encouraged banks to avoid areas with ‘inharmonious racial groups,’ essentially meaning any neighborhood that wasn’t exclusively white.”

Another New Deal program to help homeowners threatened with foreclosure to refinance their home with low-interest long-term mortgages, provided lenders with “safety maps” which used red shading for risky areas which were under “threat of infiltration of foreign-born, negro, or lower grade population.” This is the origin of the term “redlining,” and the practice wasn’t outlawed until the Fair Housing Act of 1968.

Last week I attended a meeting of the Group Living Advisory Committee in Denver’s municipal building, where they are discussing a zoning amendment which would dramatically increase the number of unrelated persons who can live in a single family home. You can expect this proposal to arise in suburban jurisdictions, too, even if they don’t follow Minneapolis in getting rid of single-family zoning altogether.

I’ll be reporting again as this conversation evolves. Don’t shoot me. I’m just the messenger.

Buyer Beware: You May Be on Candid Camera When Looking at a Home

The use of internet-connected cameras such as the Ring doorbell is becoming more and more common. Rita and I have both a Ring doorbell and four other cameras protecting the entrances to our home plus the garage, and the Golden Real Estate office has a total of 10 cameras covering the interior, exterior and our parking lot. Such systems are increasingly affordable and easy to set up, since they require no wiring and can be monitored on any smartphone. Their video (with sound) is motion-activated and uploaded to “the cloud” so that you can go back in time to see past activity. You can also be alerted real-time on your smartphone when motion is detected by any of the cameras.

With the widespread adoption of such internet-connected home cameras, it is becoming more and more possible for sellers to eavesdrop on buyers who tour their home. You can understand the value to a seller of hearing what you say as you look around. Imagine, for example, if you were caught on video saying to your agent, “I love this house! I’ll pay whatever I have to for it!” You wouldn’t want the seller to hear that, would you?

There are, of course, legal implications to such surveillance. On the one hand, sellers have the right to install such equipment for home security, but buyers and their agents also have a “reasonable expectation of privacy” while touring your home when you’re not there.

While Colorado law allows you to record your conversations with another person secretly, that is only because you are a party to the conversation. Taping a conversation to which you are not a party is a serious matter for which you could be subject to both civil and criminal liability.

Every year, licensed real estate brokers are required to take a 4-hour real estate update class as one element of their continuing education requirement. This year’s class, which all Golden Real Estate agents take in January instead of later in the year, devotes 10 to 15 minutes to this topic of audio and video surveillance by sellers.

In that update class, we were instructed to advise our buyer clients that they might be under surveillance while touring a home and should be careful what they say. We were also instructed to have a conversation with sellers about this topic, advising them of the legal dangers of recording buyers. It was suggested that, if our sellers do have such equipment, we urge them to post a notice next to the doorbell or prominently inside the house to the effect that “audio and video surveillance is in use” in the house. We should also put that information in the MLS listing, to protect ourselves as listing agents.

It is understandable for sellers to be concerned about strangers being escorted through their home by brokers who they do not know. When this issue is raised by a seller during a listing presentation, I let them know that no buyer will be touring their home without a licensed broker, and that all licensed brokers undergo a criminal background check and are fingerprinted in order to be licensed. Brokers would be risking their license and their livelihood to allow themselves or their buyers to commit a crime in your home. Moreover, the showing service is diligent about not providing the lockbox combination to anyone who is not a licensed broker. Your broker can also install an electronic lockbox which provides even greater accountability as to when each broker enters and leaves your home.

I have been a practicing real estate broker in Colorado for nearly two decades now, showing hundreds of listings per year to prospective buyers and holding scores of open houses for my listings. I have yet to be made aware of any loss sustained by a seller or any misdeeds by my buyers.

Our low crime rate here in Colorado is reflected in our lowest-in-the-nation premiums for errors and omissions insurance. In Colorado the cost of such insurance is $200-400 per year, depending on the coverage limits. In some states, like California, I’ve heard that brokers can pay that much per month for E&O coverage.

Is Your Gas Furnace or Gas Water Heater About to Fail? Consider a Heat Pump

A reader called me last week because her gas furnace had quit working and, knowing my expertise regarding sustainability, she wanted my advice on replacing it.

I told her that this was an opportunity to do something other than buy a new gas furnace. I told her about my Carrier “Hybrid Heat” furnace which uses an air-source heat pump for heating as well as cooling and only burns gas when the outdoor temperature dips well below freezing. With her solar panels, it’s possible she won’t even pay for the electricity consumed by the heat pump, and her gas consumption will plummet.

That hybrid system would use her home’s existing ductwork, but, since she has a one-story home, I suggested she consider a ductless mini-split heat pump system like the one we have at our office. I gave her the name of the vendor who installed both my home and office systems who could advise her which system was best for her.

I also suggested that she look into replacing her gas water heater with a heat-pump model when it fails. My gas water heater is over 15 years old, so I’m thinking of replacing it before it fails. Home Depot sells a Rheem 50-gallon heat pump water heater (model #XE50T10HD50U1) for $1,299. Best off all, Xcel Energy gives its customers a $500 rebate for purchasing it. I have enough solar panels to handle the extra electrical demand and eliminate much of my current gas usage, which is mostly for water heating, since I have that Carrier hybrid furnace. Our only other gas usage is for cooking and grilling.

Plant-Based Meat Has Won Us Over

First, Rita and I tried the “Impossible Whopper” at Burger King, and we liked it — can’t tell it from the regular Whopper. Then Rita found the package shown here at Costco — eight 1/4-lb. patties for $14.99. She cooked them in a pan and seasoned them as she would regular burgers, topped with pepperjack cheese and sautéed mushrooms, and served the patties on a bed of romaine lettuce and sliced tomatoes with a balsamic vinaigrette dressing. On another occasion she substituted Roast Pineapple & Haberno Sauce for the dressing, and it was even more delicious. Try it! You’ll thank me for telling you about them!

Committed as Rita and I are to mitigating climate change, we recognize the desirability of reducing our consumption of beef, and this product makes that really easy and enjoyable.

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.

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.