Tag: Real Estate

If You Don’t Put Your Home on the MLS, You May Not Get What Your Home Is Worth

A reader wrote me last week complaining that some homes in her subdivision are being sold privately for less than they should, without putting them on the MLS. It bothered her because doing so creates lower comps that could affect what she is able to get for her own home when she sells.

Just as important, there are buyers who would like to move into her neighborhood who are frustrated when a home is sold before they can submit their own offer for it. And, of course, sellers are not getting the highest possible price for their home, as I’ll explain below.

Among the culprits are fix-and-flippers and “iBuyers” such as Open Door and Zillow Offers, who convince sellers to take a cash offer, claiming to save them the cost and inconvenience of listing their home on the MLS. More about them below, as well. (See my Jan. 2, 2019 and my Aug. 22, 2019 columns about iBuyers.)

If anyone offers to buy your home for cash without listing it, there’s one thing you can be certain of: they’re going to pay you a price that leaves lots of room for profit. That is money that could be yours if only you exposed your home to the full market by putting it on the MLS.

The worst thing you can do in a “sellers market,” which is what we have now, is to sell your home off the MLS. The next worse thing you can do is, after putting your home on the MLS, to sell it to a buyer who quickly offers you full price. If someone offers you full price on day one, you can be sure that there are other buyers who’d be happy to pay even more. Four days should do it.

But there is something worse than both those scenarios, and that is to put your home on the market at a price which does not attract any offers. I tell my sellers that they can overprice their home, but they can’t underprice it, because a low price can trigger a bidding war. An experienced Realtor like myself can help you set the perfect listing price. Just remember not to accept the first offer — unless that offer comes long after you put your home on the market, because you overpriced it.

What I see all too often is sellers putting their home on the market at a wished-for price, then lowering the price reluctantly over several weeks, and ending up getting only one offer, not multiple offers, at a price that’s lower than what they might have gotten if they had priced the home right initially.

It’s tempting, I know, to accept an unsolicited offer to sell a home without paying 6% commission, but I can’t even remember the last time I charged 6% commission. Remember, 2.8% of any listing commission goes to the buyer’s agent. Typically, sellers who try to sell “by owner” end up paying that 2.8%, so they only save the difference between 2.8% and the full listing commission, which is 5.6% on average. At least that is what I charge, and I reduce it if I sell the home myself, and I reduce it further when I earn a commission on the purchase of the seller’s replacement home.

If you factor in the totally free moving which I provide (locally, of course) when you sell and buy with me, it’s hard to justify not putting your home on the MLS with Golden Real Estate, thereby exposing it to all those bidders in this still-hot seller’s market.

Our Denver MLS, REcolorado, is now enforcing a new rule called “Clear Cooperation,” which was voted into being by the National Association of Realtors last November. It requires MLS members to put their listings on the MLS within 24 hours of promoting their listings in any way.

The rule is very simple: If a listing agent promotes his or her listing in any way — with a yard sign, tweet, Facebook post, or newspaper article, etc. — the listing must be on the MLS, either as “Coming Soon” or “Active.”  If it’s “Coming Soon,” the sign must say so, and it can’t be shown, even by the listing agent himself. Once shown, it must be changed immediately to Active status, making it available for showings by all members of the MLS. Prior to Sept. 1st, REcolorado only issued warnings, but fines are now being levied for violations.

So, yes, there can be off-MLS sales, but not involving an MLS member unless there was no marketing at all, not even emails to his/her clients. With “pocket listings” now banned, the focus now turns to the iBuyers, companies like Open Door, Zillow Offers and others which directly solicit homeowners to purchase their homes, charging a 7% “service fee,” with the intention of flipping the home for a profit.

Only time will tell whether this new rule, with fines being levied, will make a big difference, but it surely will make some difference.

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.

Have You Owned Your Home a Long Time? Here Are Some Tips for Avoiding Capital Gains Tax

If you bought your primary residence back in the 1960s or 1970s, there’s a good chance that you’ll be pushing the limits of the capital gains tax exemption when it comes time to sell.

There is an exemption of capital gains tax of $250,000 (single) or $500,000 (married) for a home that was your principal residence for at least two of the five years preceding the sale. If you bought your house for, say, $30,000, in the 1960s, it’s quite possible that it’s worth 10 or 20 times that amount now, resulting in the possibility of capital gains taxation.

If one of a married couple moves out, the $500,000 exemption is preserved by the other spouse as long as the absent spouse is still alive, providing the couple sells the house within 3 years of both moving out.

Do not add your heirs to the title of your home as a “joint tenant” with right of survivorship.  That’s because your heirs inherit your original purchase price as their cost basis, whereas if they inherit the property through your will, the basis for them is stepped up to the fair market value of the home at the time of the inheritance, which will help them avoid capital gains tax when they sell it.

I am not a tax advisor, and am only recounting what I have been told by tax and estate-planning professionals. Consult your own tax professional before acting on anything I have written here.

Even if You’re a Sophisticated Buyer or Seller, You Need Us — And Here’s Why…

Perhaps you’ve heard the expression, “A lawyer who represents himself has a fool for a client.” Most lawyers respect that truism, which is why you see lawyers hiring other lawyers when they are sued or criminally charged..

The same truism can be applied to real estate. Just this week I received a contract to buy one of my listings from a couple who are both real estate agents, but the offer was written by another agent.  (I suspect he will share his 2.8% co-op commission with the buyers.)

There are also many buyers and sellers who aren’t agents but who are sufficiently experienced at buying and selling real estate to be considered “sophisticated” buyers or sellers. These persons may understandably think that they don’t need professional representation, saving themselves (if they’re selling) 3% or so on a listing commission. If they are buying without representation, they may think they can negotiate a lower purchase price by sparing the seller the 2.8% co-op commission typically paid to a buyer’s agent.

Let me debunk some misconceptions about each scenario separately — first for buyers.

Buyers typically pay nothing for professional representation, since buyers’ agents are universally compensated by the listing agent at a rate spelled out in the multi-list service (or “MLS”) to which all agents belong. Our Denver metro MLS is called REcolorado. Its website is www.REcolorado.com, which has both a consumer-facing and agent-facing side.

If you’re a buyer, you can go to that website and see all the listings which are currently available for purchase, and you can click on a link to email or call the agent for each listing. After that listing agent has determined that you don’t have an agency agreement with another agent, he or she will be delighted to help you buy his (or her) listing because he won’t have to give away half his commission to another agent. And he’ll probably ask you to hire him as a buyer’s agent if his own listing is not what you choose to buy, in which case he could earn 2.8% on that purchase.

If you, as a buyer, work with the listing agent, he or she will not, by law, be working in your best interest. At best, he’ll be a transaction broker, advising neither you nor his seller in the transaction. He won’t be able to advise you on the true value of the home or what you should offer, or how to respond to a counterproposal from the seller. He also won’t be able to advise you on inspection or other issues that arise during the transaction.  You’re on your own — literally helpless.

Moreover, the chances are that you’re not saving the seller any money by being unrepresented, since the listing agent gets to keep the entire commission when he doesn’t have to share it with a buyer’s agent.  My own research has shown that only 15% of listing agreements have a provision in which the commission is reduced if the agent doesn’t have to share his commission with a buyer’s agent. I know this to be true, because the MLS requires listing agents to disclose the existence of a “variable commission” in their listings. That’s one of the fields that is not displayed on the consumer-facing side of the MLS.

There are additional reasons why a buyer (in my opinion) should hire an agent instead of working directly with a listing agent — except when it’s a Golden Real Estate listing, as I’ll explain below. The most important reason is that a buyer’s agent, in addition to being your advocate in a transaction, has more access to information about listings than you have as a consumer.

For starters, agents have valuation software not available to consumers and can create a spreadsheet of comparable sales, so you’ll know whether a home’s listing price is reasonable. Zillow’s famed “zestimates,” by themselves, are not a dependable indicator of a property’s value.

Second, agents can do searches using any field on the MLS, not just the fields that are available to you as a consumer. Do you require a main-floor master? A second master suite? A fenced yard for your dog? An unfinished (or finished) basement? An agent can set up MLS searches on virtually any criterion that is important to you, and the system will notify you and your agent within 15 minutes of a new listing matching your specific search criteria.

As a buyer working with Golden Real Estate, you’ll enjoy added advantages to having representation, up to totally free moving using our own moving trucks, boxes and packing materials. With our focus on sustainability, one of my favorite closing gifts to buyers is a free energy audit of your new home — a $350 value. And if you have a home to sell, we reduce our commission on selling your current home. These benefits also apply when you’re buying one of our listings without your own agent. Call us for details.

Now let’s look at why sellers need to have professional representation.

Understandably, sellers have a huge incentive not to use an agent — they pay the commission for both agents in a transaction, which they assume (wrongly) is fixed at 6%. That would be a violation of federal antitrust laws. All commissions are negotiable. My personal rate is 5.6%, which I reduce to 4.6% if I don’t have to give 2.8% to a buyer’s agent. And I reduce those figures by another 1% if I earn a commission on the purchase of your replacement home. Because of federal laws against price fixing, I can’t dictate (or even discuss) what our other agents charge.

That’s still a lot of money, so you need to know what you’re getting for it.

At Golden Real Estate, sellers enjoy a free staging consultation, magazine quality still photos and professional quality narrated video tours which are posted on YouTube, the MLS, consumer real estate websites and on the custom website which we create for each listing. (Visit www.GRElistings.com to see the custom websites for our current active listings.)

We also provide free use of our moving trucks and moving boxes both to our sellers and to whoever buys our listings, even if their agent is with another brokerage. And, of course, all listings are featured in this column, which appears in eight editions of newspapers throughout both Denver and Jefferson counties.

We also have a proven track record of getting the highest possible prices for our sellers because of our skill at negotiating with buyers and their agents. Most agents will not reveal the offers they have in hand when they get multiple offers. We treat that situation like an auction, where everyone knows the highest current offer, and we regularly bid up the purchase price for our sellers — and the buyers and their agents appreciate not losing out in a blind bidding situation.