Report From State Division of Insurance Details Extent of Underinsurance in Marshall Fire  

Since the devastating Marshall Fire last December in Boulder County, many homeowners may have contacted their insurers to see whether they might be under-insured, meaning that their homeowner’s policy does not cover the full cost of repair or replacement of their home should a similar disaster strike.

You may be interested to read the following April 26 release from the Colorado Division of Insurance containing initial estimates of the extent to which the homes destroyed in that fire were underinsured.

Here are the relevant paragraphs from that DOI release, omitting the charts referenced, which you can see on the division’s website:

Of the 951 total loss claims analyzed, 76 homes had guaranteed replacement coverage, meaning that the insurance policy on these homes provides coverage for replacement of the home with similar quality, square footage, finishes, etc. without a cap — meaning under-insurance is not a problem for these homes. These 76 homes represent 8% of the homes in the analysis. 

Determining the extent of the underinsurance issue is largely dependent on the anticipated rebuilding costs. The Division analyzed under-insurance using various rebuilding costs — $250, $300 and $350 per square foot. Of the 951 policies, here is the breakdown for how many are underinsured. [Chart omitted—see it on DOI’s website.] Note that these policies that are underinsured include both policies that have extended benefits coverage, meaning coverage that provides some additional coverage if rebuilding costs exceed policy limits (83% of policies), and policies without such extended coverage (9% of policies).

At a rebuild cost of $250 per square foot, a total of 344 (36%) policies are underinsured. 

 At $300 per square foot, 523 (55%) policies are underinsured.

At $350 per square foot, 639 (67%) are underinsured. 

The DOI also calculated the average amount of underinsurance per policy, using the same rebuilding costs of $250, $300 and $350 per square foot. 

At $250 per square foot, for the 344 policies, the average amount of underinsurance per policy is estimated at $98,967. 

At $300 per square foot, for the 523 policies, the average amount of underinsurance per policy is estimated at $164,855. 

At $350 per square foot, for the 639 policies, the average amount of underinsurance per policy is estimated at $242,670.

    The DOI will hold a town hall the week of May 16th to discuss this data and any other next steps that have been identified for assistance. As soon as a date and time are decided, information about the town hall will be posted on the Division’s Marshall Fire Response website, and information will be sent to the Division’s Marshall Fire email list.

I checked the Division of Insurance’s website, and it did not yet have information on when that town hall will take place. You can check it yourself in coming days at http://doi.colorado.gov.

I was disappointed that the report didn’t clarify why it was providing estimates based on those three different price-per-square-foot rebuilding costs, without mentioning why an insurer would use one or the other and why different insurers might use different cost figures for homes that were, for the most part, tract homes built to the same quality by the same builder or builders.

Consult your own insurance agent to see whether your policy contains “guaranteed replacement coverage” or if it could be added.

With Prices So High, Many Homeowners Are Wondering If It’s Time to Cash Out  

Rita and I are both 74 years old, and, although I have no plans to retire at this time, we have decided for various reasons to sell our home and move into a 55-plus community. Knowing that many of my readers are seniors, I’ve decided to share some of our thinking.

When you’re our age, you can’t predict when you might have to sell, so I have always recommended that seniors do it while they can instead of waiting until they have to. It is also kinder to your heirs to downsize possessions yourself rather than leave that task to them after you die.

The run-up in home prices has been breathtaking, hasn’t it? It’s difficult to predict how much longer it will last, but Rita and I do know that we can be satisfied with the proceeds we will get from selling our home now. The income from those proceeds in a TransAmerica fund that guarantees a certain return despite market fluctuations would help pay the rent for our new apartment. And, since I’m not retiring yet, I’ll continue to have an income on top of that.

Social Security, Medicare and appropriate long-term care policies for each of us can provide additional peace of mind regarding our medical needs as we age.

Our decision to move into a 55-plus community also relieved us of the biggest dilemma facing homeowners who want to capitalize on selling their current home — how to find a place to buy in a very difficult market for buyers.

While it’s nearly impossible and highly frustrating to buy in this crazed seller’s market, and while the renter’s market is also extremely tight and expensive, there are many 55-plus communities like the one we chose that have units available. In addition, it’s the nature of these places that openings become available as other residents die or move into assisted living facilities.

You’ll want a professional to help you evaluate the different 55-plus communities that exist and that are opening every year. Some, like the one we chose, are straight rentals, but others require a 6-figure “buy-in” which can eat up the proceeds from the sale of your home. I suggest hiring Jenn Gomer, who is in the business of helping seniors find the community which is a right “fit” for their specific needs. You don’t pay Jenn for that service — she receives a fee from the community you select.

The dilemma mentioned above is solved by waiting until you have signed a lease on your rental (ours starts on April 1st), then putting your home on the market with a closing date 15 days after your lease begins. That way you have a reasonable amount of time to move into your rental (using Golden Real Estate’s free moving truck, free moving boxes and affordable laborers, if you listed with us). It also gives you time to dispose of your excess “stuff.”

It has been an interesting if exhausting process to let go of the family heirlooms, mementos, and other possessions that have slowly filled our unfinished basement over the years — stuff that we have lugged from one house to the next.

The Marshall fire had a psychological impact on us, too.  We imagined if our own home were to be consumed by fire unexpectedly and we had to start over, losing everything we enjoy daily as well as all that stuff in our basement that we have been dragging along each time we bought a new home. Would we miss it? Of course, but we could live without it, couldn’t we?

There’s a freedom to be gained by releasing the past and living solely in the present. It felt good giving away things to Goodwill and other charities as well as to friends and relatives.

For example, since acquiring an electric bicycle several years ago, the three conventional bicycles we owned had been sitting unused in our basement and were never likely to see the light of day again. So we donated them, along with bicycle parts and accessories such as paniers and pumps, to the “Bicycle Recycle” program of the Golden Optimists Club, which refurbishes bicycles and donates them to low-income people. Making that donation felt great, on top of the feeling we got from clearing them and other stuff from our basement.

We thought about giving most of our furniture to victims of the Marshall fire, but realized that an estate sale was more practical and then we could donate money instead. Except for a few pieces, we’ve decided to purchase all-new furniture for our 2-bedroom/2-bath apartment at Avenida Lakewood.

It’s amazing how many papers were in boxes in our basement. I found tax returns going back to the 1980s which needed to be shredded. We also had the closed transactions of Golden Real Estate going back well beyond the number of years we’re required to retain them, and we were able to move the more recent transactions to the company’s new office in downtown Golden.

We had carpet remnants for carpeting that no longer existed at home and office. Bye-bye! We took multiple carloads of nice things that we didn’t need to Goodwill, which thankfully accepted all of it.

The wheelbarrows and gas generator that we never used but lent to Habitat for Humanity for its pumpkin patch each October are now in that organization’s own storage facility, not in our basement. 

Anyone want to buy our really sweet upright piano?

Why Aren’t More Homes Going on the MLS Amid This Record Shortage of Listings?  

This January, only 3,237 non-builder homes were entered for sale on the Denver MLS within 25 miles of downtown Denver, the lowest number of new resale listings in that area for any January in at least 10 years. That’s a big drop from January of 2020 (pre-pandemic), which saw 4,171 new listings of non-builder homes for sale.

I find these statistics surprising, given what an ideal time it is to sell one’s home. We’ve had a seller’s market throughout the pandemic, but this month it became a sellers market on steroids, partly because of the Marshall Fire, which destroyed over 1,000 homes, putting even more pressure on the limited supply of homes for rent and for sale.

Of January’s 3,237 new listings, 2,611 went under contract before month’s end, and the median time on market before they went under contract was a mere 4 days. Only 214 (8.2%) of them were active more than a week before going under contract.

Of those listings which went under contract before the month’s end, 284 of them closed in January, 227 selling for more than the listing price, with the median listing selling for 5.2% over listing.  More than 1 in 9 sold for at least 15% over the listing price. Obviously, most of the homes that went under contract were the subject of bidding wars, and the thing to remember about a bidding war is that there are losers — many losers who are still in the market, possibly interested in your home. Except for the small number who get totally discouraged and quit looking, they are still on the lookout for a home to buy.

Any new listing, if priced appropriately, should sell quickly and, frankly, for more than it will appraise for — but appraising is not generally a problem because, as we all know, a home is worth what a willing buyer will pay. We’re not seeing problems with homes appraising, especially when the listing agent can show the appraiser multiple arm’s length offers for close to the same price.

Even so, it is common practice now for winning bidders to waive appraisal objection, meaning they agree to bring additional cash to the closing if their lender won’t lend them the contracted amount because of a low appraisal.

Buyers are incentivized to purchase now more than they were last year (or even last month), because it’s quite clear that mortgage interest rates, which have hovered around 3% for a year or longer, have started rising. By the end of 2022, we may see interest rates for mortgages in the 4% range. On a $500,000 loan, a 1% higher interest rate equates to an additional $417 per month on your mortgage payment. That’s a strong incentive to buy now.

With the ranks of buyers swelling because of these and other factors, why aren’t homeowners putting their homes on the market?

The number one reason I encounter is that would-be sellers dread being a buyer in this market. Being a buyer is very frustrating, and although sellers know they will be able to sell quickly, they worry about being able to buy a replacement home. They understandably don’t want to end up homeless.

This problem is mitigated when a seller can make an offer that is not contingent on the sale of their current home, something that might be more possible than you think.

For example, if you have a lot of equity in your current home — say, for example, you owe $50,000 on your existing home, but it’s worth $700,000 — you can probably get a credit union to give you a Home Equity Line of Credit (HELOC) for 80% of your equity minus what you owe. In the above example, that would be about $500,000. 

The nice thing about a HELOC vs. a regular mortgage is that you don’t pay any interest until you draw on that line of credit, such as at the closing on the home you’re buying. Then you put your current home on the market, sell it quickly, and pay off the HELOC at closing, having paid as little as one month’s interest on that $500,000 loan.

I like credit unions because they are non-profit member organizations, and the closing costs are typically less than with other lenders. If the line of credit is small enough — say, 50% of your equity — credit unions have been known to waive a full appraisal, saving you several hundred dollars.

If you have a lot of money tied up in stocks that you don’t want to sell, you can borrow against them, then pay off the borrowed amount when you sell your current home.

If you have a large balance in an IRA, you can withdraw money from it and not pay any penalty for early withdrawal if you re-deposit the withdrawn amount within 60 days, which is possible since you’ll be selling your current home within that time period.

Another highly effective approach is to sell your home requiring a 60-day closing and a 60-day free rent-back, which gives you 120 days after going under contract to find and close on a replacement home as a cash buyer (if you’ll be netting enough from the sale).  You could also make the penalty for overstaying the free rent-back period be a reasonable rental amount such as $100 to $150 per day.  The seller still has the ability to evict you but may be open to this arrangement as long as you’re making a good faith effort to buy and move.

Sometimes a would-be seller tells me that they don’t want to buy while prices are so high. I point out that if you are selling and buying in the same market, it doesn’t matter what prices are, because you benefit in the same way on the sale of your current home.  The same applies in a depressed market.  Don’t want to sell because you won’t get what you’d like for your current home? If you’re buying in the same market, you won’t pay as much for your replacement home.

My broker associates and I are happy to arrange an in-person or phone conversation with you about selling your current home and/or buying a replacement home. Our phone numbers are below.

Jim Smith, Broker/Owner, 303-525-1851

Broker Associates:

Jim Swanson, 303-929-2727

Chuck Brown, 303-885-7855

David Dlugasch, 303-908-4835

Ty Scrable, 720-281-6783

Anapaula Schock, 303-917-1749

Houston Builder Specializes in Net Zero Homes Built of Concrete

A reader who has been following my columns about fire resistant home construction, including concrete, sent me information about a Houston TX builder, Everlasting Homes Building Group LLC, which uses RSG 3-D structural concrete insulated panels to build homes which are not only fire resistant but also meet “extraordinary levels of excellence in energy and performance.”

At the top of its excellent home page, EverlastingHomesGroup.com, is the following statement: “Our vision is to design and build the most comfortable, healthy, resilient & sustainable living spaces dedicated to creating the best net zero energy homes and communities for our future.” They promise to build homes “resistant to hurricanes, tornados & floods, extreme cold / hot weather, earthquakes & fires, wood-destroying insects, and allergens, pollens, molds & dust.”

The Buying of Homes Has Become More & More Frantic Since the Marshall Fire  

I had a busy weekend this last Saturday and Sunday. With two new listings, I held each open for two hours. I couldn’t even count the number of visitors at the single family home listing that I held open on Saturday. Listed at $495,000, over 120 agent showings had been scheduled during the five days that it was active, and I received 25 contracts for it by the Sunday afternoon deadline. It went under contract for $630,000 on Sunday evening.

Surprised by this level of interest, I did some research Monday to quantify the increased buyer activity. Here’s what I found.

During the first 23 days of January, 403 Jefferson County listings went under contract.  Of those, 295, or 73.2%, had been active a week or less at the time they went under contract..

But not only were new listings selling this month. Twenty-four, or 6%, of the listings that went under contract in the first 23 days of January had been languishing on the market for 3 months or longer. Three listings had been on the MLS for over half a year.

My very busy open house on Saturday, Jan. 22nd in Arvada

Of the 403 contracts written so far in January, 36 (8.9%) were for homes listed for $1 million or more. The most expensive home on that list, a 1930 ranch-style home in Genesee Ridge that had been on the MLS for 275 days, went under contract last Monday. This didn’t happen because of a recent price reduction. It had been listed at $5.9 million since last July 15th. It was originally listed at $6.6 million on April 1, 2021.

So, how does January’s activity compare with December’s?  In December, a total of 554 Jeffco homes went under contract, most of which have now closed. Of those, 336, or 60.6%, had been active a week or less, versus 73.2% of the January contracts Twenty-five of them, or 4.5%, had been active for three months or longer, versus 6% in January..

Forty-four Jeffco homes (7.9%) sold for $1 million or more in December, compared to 8.9% in January.

So, yes, statistics do reflect a more frantic sales pace in January.

Taking a longer perspective, let’s look at the 4th quarter of 2021 vs. the 4th quarter of 2020.

In the latest quarter, 56% of the homes went under contract in 7 days or less, versus 60.2% in Q4 of 2020. A smaller percentage of homes that had been on the MLS three months or longer sold in the 4th quarter of each year — 3.9% in 2020, down to 3.0% in 2021.

Having established the statistical basis for my observation that home buying has become more frantic this month, let’s look at possible reasons.

At least one of the 25 contracts I received last weekend for my Arvada listing was from a family which lost their home in the Marshall fire.  They are currently living in an Airbnb.  Others may have been from victims of that fire, but they didn’t say so in their offer.

Another buyer was an investor who told me that they were rushing to buy a home because they felt prices were rising at an increasing rate. This buyer thought that despite the bidding wars, they could get a better deal now than if they waited another year to add to their portfolio.

Rising interest rates and the expectation of further increases later on probably are playing a role. People want to buy before rates increase further. You may have read that a high percentage of buyers are cash buyers, but this has not been my experience, and only three or four of the 25 contracts I received for my listing.

How to Alert Residents About Approaching Wildfires  

Clearly many lives were saved in the Marshall Fire because it started in the morning and residents were awake and alert to the danger. Imagine if the fire had begun at 2 a.m.  How many more people might have died in their homes?

A reader suggested that community-based sirens could help to save lives, and that does sound like a good idea.

NextDoor is a great resource for alerting residents about all kinds of dangers, but it would not wake anyone up. Something like the Amber alert which makes a deafening alarm on cell phones could be effective. (I leave my cell phone on at night but it is purposely out of earshot for phone calls and text messages. I would, however, hear the loud alarm used for Amber alerts.)

The Amber alert should not itself be utilized for such a warning, because it can be silenced.  If there were a separate alert for fire danger, it’s unlikely that people would silence that alert or turn off their cell phones at night.

There are, I’ve found, many seniors who have held off buying cell phones, but the existence of such an alert might inspire them to purchase one. In addition to the low-cost providers, there is a program called Lifeline that provides free cell phones to households that are on various programs such as SNAP, SSI, Medicaid, etc. Learn more at www.AssuranceWireless.com. If you are currently paying for a landline telephone, you could get rid of it and port your phone number to the free cell phone that you get with this program. The cellphone can also provide you with free internet service via a “hotspot,” allowing you to save money on broadband, too.

We Want to Help Fire Victims Who Want to Relocate, Not Rebuild

If someone you know lost their home in last week’s fires and decides to relocate rather than rebuild, have them call us. Golden Real Estate will rebate 75% of our earned commission to any buyer who lost their home and all their furnishings in the fire, so they can use that money to buy new furnishings. Email Jim@GoldenRealEstate.com for more information.

You can donate, too, at www.CommFound.org.

Last Week’s Fire Disaster Is a Wakeup Call for Building More Fire-Resistant Homes  

My column on Nov. 29, 2018, followed the wildfire that took out the entire town of Paradise, California.

Last week we experienced a similar tragedy in our northern suburbs of Superior and Louisville. The difference was that this fire was driven by hurricane force winds that are all too common along the foothills.

Those winds weren’t limited to that area, and it was clear to Rita and me that a spark on Lookout Mountain (to which our home backs) might well have led to a similar catastrophe for the city of Golden. There’s no way to stop a fire driven by such winds.

You probably noticed, as I did, that the fire spared some houses while completely consuming adjoining houses, so perhaps it’s possible to increase the chances of being one of those skipped houses in a future wind-driven wildfire. Was it just luck, or did those homes have any features that may have helped spare them?

Today I’ll describe some features that might increase the chances of a home being skipped.

In high wind or low, it’s important to recognize that fires spread from home to home primarily by wind-blown embers. You’ve probably heard of insurance companies requiring homes in the “wildland urban interface” to create a “defensible space” around them by removing trees and other combustibles within, say, 20 to 30 feet of the home.

Useful as that might be, it’s more important that burning embers from further away not land on combustible material such as dead leaves, shrubbery, a wood deck, or a shingle roof.

There’s a useful website on this topic, www.DisasterSafety.org/wildfire. One of the links on that website that you’ll find useful is “What to do if a wildfire is approaching your home.”

California is, understandably, a leader in researching and rating building materials based on their fire resistance. Cal-Fire’s 48-page handbook dated Dec. 14, 2021, lists construction materials in 7 categories: decking; exterior windows; exterior wall siding and sheathing; exterior doors; under-eave protection; vents; and non-wood roof covering/assemblies.

If I were to invest in making my own home more fire resistant (which I am seriously considering in the wake of last week’s fires), here are some of the things I would investigate;

Metal roofing: I like the look of what is called “stone-coated steel” roofing. It looks from a distance like wood shake roofing. There’s an HOA in south Jeffco which requires wood shake roofing, but it will allow this kind of metal roofing. (It does not allow the more commonly used composition shingle roofing.)

Roof sprinklers: I have often thought it would make sense to install sprinkler heads at strategic locations on my roof to wet the roof if a fire is approaching. I’m going to ask a plumber about this concept. Sprinklers that douse the exterior walls might also be a good idea. I found on Amazon a kit of 2 roof sprinklers with gutter, wall or fence mounting and 50 feet of hose for $179.95, but I   like the idea of permanent sprinkler heads with through-the-roof plumbing, which I think my HOA would find less objectionable.

Motorized rolling metal shutters: I have seen these installed on a few Jeffco homes. They’re marketed for privacy and security, but they completely cover the windows when lowered and would surely help protect against fire. Some such systems allow the shutters to be operated via an app on your smartphone. One vendor is www.SomfySystems.com. Think of this as another reason for having a home battery backup system (which we have ordered) in case of power failure.

Non-combustible siding: The most common siding being installed by local builders is “HardieBoard” from James Hardie. Although it can be mistaken for wood siding, it is actually a non-combustible fiber cement product. It’s only 1/4 inch thick, however, so it only provides short-term protection and does not qualify as fire resistant, so it matters what is underneath it. (Refer to that Cal-Fire handbook of siding products.)

Special attention should be paid to the underside of roof overhangs, balconies and decks, where flames can be trapped. Roof soffits in most homes have vents which combine with vents on the roof to circulate outside air through the attic.  Unfortunately, this design can also allow the introduction of wind-blown embers into the attic. One way to eliminate these vents is to do what Meritage Homes did in building Arvada’s Richards Farm subdivision. The insulation of those homes is closed-cell foam sprayed onto the underside of the roofs, rather than the more typical blown-in cellulose or fiberglass batts resting on the floor of the attic, as is found in most homes. The attic in such homes becomes conditioned (i.e., heated) space, eliminating the need for soffit and roof vents. Meritage probably didn’t consider that making the homes more energy efficient in this way had the added benefit of making them more resistant to ember intrusion in a wildfire.

In past columns, I have promoted the all-electric home for sustainability and health reasons, but last week’s fires have provided another reason for doing away with natural gas. A large number of homes that were not destroyed are nevertheless enduring days and possibly weeks without natural gas for heating during some bitterly cold days. If any of those homeowners had switched to heat pumps for space heating and for hot water (as I have recommended), they would not be affected by the long delay involved in restoring gas service to their neighborhood. That might be an additional inducement to make the switch away from natural gas.

Homeowners in that area are being urged to boil water, so they might consider buying a countertop induction burner, which can boil water in one or two minutes, versus 10 or more minutes on a conventional range. I found 110V models online for $49-79.

It is not uncommon for homes to have “safe rooms” to which homeowners can retreat in case of a home invasion. If such a room were constructed in a basement with cinderblock walls, a metal door, and a concrete-and-metal ceiling, it might double as a survival room in the event of a wildfire when evacuation is a risky alternative. Given the increase in tornadoes due to climate change, it could also serve as a tornado shelter.

Although I have not researched it, I would guess that taking some of these precautions — especially metal roofing and the rolling metal shutters — might help to reduce your insurance premiums, as well as to possibly save your life and property in case of wildfire.