Every Industry Is Facing Disruption of Some Kind. How About Real Estate?

I just finished reading a white paper by the founder of Dotloop (part of Zillow Group) with the catchy title, “The End of the Traditional Real Estate Brokerage.”

The premise of the document is that unless a brokerage adopts that company’s “end-to-end collaborative platform,” it is destined to fail.  Hmm…. Is my successful brokerage, Golden Real Estate, destined to fail?

Basically, the argument is that mobile and digital technology is disrupting every industry and is also disrupting real estate.

“Disrupting,” however, implies winners and losers. I prefer to say that technology is revolutionizing real estate (as indeed every industry), but I see no end to Golden  Real Estate as a small, some say “boutique,” brokerage.

In my two decades as a Realtor (i.e., a member of the National Association of Realtors, not merely a licensed real estate professional), I have seen major transformation of the technologies, tools and software made available to brokers.

When I first got my license and joined the West Office of Coldwell Banker Residential Brokerage in Lakewood, we wrote our contracts on 3-ply NCR forms created for each of the many documents required in a real estate transaction. We used typewriters to complete them, or pressed firm with ballpoint pens.

Nowadays, virtually every agent uses on-line contracts. In our market, CTM eContracts is dominant in providing these contracts, and the integration of documents by agents on both sides of every transaction is impressive and… revolutionary. We love it!

Occasionally I will received a contract from an out-of-area agent, as I did just last week on one of my listings, that is not on CTM and uses a third-party e-signature program, DocuSign, for signing each document. (CTM has e-signature capability built into it, and it works great.)

Showing service technology has also evolved beautifully. The near-universal vendor in our market is ShowingTime, and it’s great how they have simplified the process of setting multiple showings, with well-timed route planning and management of feedback requests.

REcolorado, the Denver MLS, is introducing a replacement showing service called BrokerBay, which will have some further enhancements (and be included in our MLS fees), but it will have to be spectacular to be better than ShowingTime.

The MLS itself has been radically improved in the quarter century since it became web-based, and, as with their showing service proposal, continues to do the heavy lifting for us brokerages so that we have only the task of learning new ways of operating.

Despite these changes, I don’t think the in-person model of working with buyers and sellers is up for displacement, merely rapid and ongoing improvement.

Real Estate Bidding Wars Are Not Abating

This is my monthly update on the real estate bidding wars. This week I chose to analyze the closings that occurred last Thursday, June 10th, to see how the bidding wars have evolved over the past four weeks. The source for this monthly analysis is REcolorado.com, the Denver MLS.

As I did in previous months, I limited my analysis to sales within a 15-mile radius of downtown Denver. I limited my search to homes, condos and townhouses that were on the MLS at least one day and not more than 6 days before going under contract. Those are the homes with bidding wars. I divided the results into homes which sold up to $500,000 and those that sold for more.

As you can see in this chart, the bidding wars only took off in earnest during February 2021, and they have kept accelerating month by month, enough that it raised the average ratio of closing price to listing price over all sales, not just the homes which sold in six days or less.

On June 10th there were 40 closings up to $500,000, compared to 44 closings on May 13th. The median home sold for 6.2% over its asking price, compared to 8.7% on May 13th. The highest ratio this time was 19.6% for a condo in Golden compared to 15.7% on May 13th for a home in southwest Denver. Only one listing sold for the asking price, and only two sold for less than listing price.

There were 37 homes that closed on June 10th for more than $500,000, compared to 56 homes on May 13th. The median home in that group sold for 7.7% over its listing price, compared to 8.1% on May 13th. Only three sold for the listing price, and none sold for less than the listing price. The highest overbid in this group was 20.9% for a one-story home in Lakewood on June 10 compared to 29.4% on May 13.

To have a statistically significant number of closings over $1 million, I analyzed the 82 such closings over a longer period — June 1-13. The median closing for those high-end homes was 6.1% over listing price, compared to 6.0% in May. Four homes sold for the listing price and 9 homes sold for less than the listing price. The highest overbid was for a 1979 ranch-style home in Jeffco’s Sixth Avenue West subdivision, which was listed at $1,080,000 and sold in 6 days for $1,575,000, 45.8% over listing price.  

I’ll repeat this analysis on July 15.

1,200+ Metro Area Homes Are Sitting on MLS – No Bidding Wars for Them

No buyer wants to be in a bidding war, but there are many listings on the MLS that aren’t selling, and submitting an offer won’t put you into a bidding war. You might even buy them for less than their listing prices.

As I write this on Sunday, there are 1,241 active (that is, unsold) listings on the MLS within 25 miles of downtown Denver that have been active 10 or more days. There are 764 that have been active a month or longer, and 483 that have been active 60 days or longer. And it’s not as if those 483 listings are in the boondocks. The map shown here (from REcolorado) shows where they are.

483 Homes on the MLS for 60 Days or Longer

As I’ve written before, any agent can set you up to receive only listings which have been on the MLS a certain number of days. It is a good way to avoid bidding wars.

    Let me or one of my broker associates below know if you’d like us to set up an email alert like that for you.

Jim Smith, 303-525-1851

Jim Swanson, 303-929-2727

Chuck Brown, 303-885-7855

David Dlugasch, 303-908-4835

Ty Scrable, 720-281-6783

Andrea Cox, 720-446-8674

How High Are Bidding Wars Pushing Up Home Prices?

We’ve all heard some crazy examples of bidding wars in which homes have sold for way over their listing prices, so I took a snapshot of just one day’s closings, limited to a 15-mile radius of downtown Denver. That takes in an area from Broomfield to Highlands Ranch and from Golden to Aurora. It does not include the City of Boulder.

The day I chose was last Friday. The source was REcolorado.com.

I limited my search to homes, condos and townhouses that were on the MLS at least one day and no more than 6 days before going under contract. Those are the listings that experienced bidding wars. I divided the results into homes which sold up to $500,000 and those that sold for more than that.

On April 16th there were 48 closings up to $500,000. The median home sold for 4.7% over its asking price. It was a tri-level home in Aurora listed at $420,000 which sold in 3 days for $440,000. Only 3 homes sold for the listing price and 2 sold for less. The highest ratio was 25.8% for a home in Aurora that sold in 1 day.

There were 68 homes that closed on April 16th for more than $500,000. The median home in that group sold for 8.3% over its listing price.  It was a 1950 ranch in Denver’s North Hilltop neighborhood listed for $600,000 that sold in 3 days for $650,000. The highest overbid in this group was 18.8% for a 2-story home in Westminster listed for $425,000 that sold in 5 days for $505,000. Only 5 sold for the listing price and 4 sold for less.

To get a statistically meaningful number of closings over $1 million, I looked at 68 such closings from April 1-16. The median ratio was 4.3% over listing price. The highest was for a 1954 bungalow in Denver which was listed at $965,000 and sold for $1,205,000, 24.9% over listing.

Note: These statistics reflect the bidding wars that were taking place during late March, when most of these listings went under contract. Today’s bidding wars appear to be even more intense. Stay tuned!

NAR’s ‘Clear Cooperation’ Policy Is a First Step at Eliminating Pocket Listings

A “pocket listing” is a property which the listing agent does not put on the MLS, hoping to sell it himself or get it sold by other agents in his office. It’s not typically in the best interest of the seller, since the property is withheld from the full universe of potential buyers.

The organizing principle of the Multi-List System, or MLS, is “cooperation and compensation.” Every real estate agent working in the public arena needs to belong to the local MLS, because it’s only through the MLS that the agent can show and sell that MLS’s listings and be guaranteed the “co-op” commission displayed on the MLS.

A listing agent, naturally, would prefer not to give a big slice of the listing commission to the “cooperat-ing” broker who brings the buyer. He or she would much rather sell the listing, keeping the entire commission for him or herself. Meanwhile, other agents (and their buyers) are upset when they don’t have the opportunity to show a new listing and submit an offer, especially when there are so few listings on the market, as is currently the case.

The National Association of Realtors (NAR) took up the issue of pocket listings last year when it adopted a policy called Clear Cooperation. Essentially the policy says that if an MLS member advertises or promotes a listing in any way — including putting a “coming soon” sign in the yard or mentioning it on social media — that listing must be entered on the MLS within 24 hours. It can be listed as “coming soon” on the MLS, during which time it can’t be shown, including by the listing agent. Once it is shown, it must immediately be changed to “active,” allowing all MLS members to show and sell it.

Unfortunately for sellers, who are the big losers with pocket listings, this policy will never be completely effective. That is evident from the fact that over 7% of listings, by my count, are entered on the MLS only after they are sold. Unless a home remains active on the MLS for 3 or 4 days, it’s unlikely that all potential buyers will have had a chance to compete for it.

You may recall the featured listing in last week’s column. It was listed at $375,000, a price consistent with comparable sales, and we received a full-price offer on the first day. Our policy, however, is to get our sellers to wait four days before going under contract. We had 30 showings and received six offers by day four. By being transparent about the offers received, we were able to bid up the property by  more than $55,000 by day four. We did get an offer $35,000 over listing price on day two, but we waited. Our seller benefited from waiting 2 more days.

Sadly, most listing agents haven’t adopted this practice. They sell their listings too quickly, potentially costing their sellers thousands but also frustrating would-be buyers who might pay more. 

I have calculated that in addition to the 7% of listings being sold with zero days on the MLS, 15% are sold after only 1 or 2 days on the MLS.

One technique for minimizing showings by other agents has been to make a listing “active” but block showings with the showing service. Because the listing is “active,” the listing agent can show the property him or herself without technically violating the clear cooperation policy.

Another technique is the “office exclusive” option.  A listing can be marketed within a brokerage without putting it on the MLS. But once any kind of public marketing takes place, the listing must immediately be put on the MLS as either “coming soon” or “active.”

Happy Thanksgiving! What We at Golden Real Estate Are Grateful for

Thanksgiving has always been my favorite holiday. I’ve long known the value of practicing gratitude, and Thanksgiving reminds each of us to reflect on our blessings, both individually and as members of our larger communities.

And since these columns are published on Thursdays, it has become a tradition for me to pause on this particular Thursday  to write about my sincere gratitude as an individual, as a husband and step-father, as a Realtor, and as an American.

So, first of all, I’m grateful for having this platform to share with fellow real estate professionals and the general public what I know (and continue to learn) about real estate. Yes, I pay for it, but I have been rewarded greatly for the effort, both in terms of financial gain from the business it generates for me and my broker associates, and by the satisfaction it gives me from indulging in my first and favorite profession, journalism.

To be political for just a moment — and it’s sad to think this is political — I’m grateful for the mainstream media which has weathered four years of assault without forsaking journalistic standards. A free press is essential to our democracy, speaking truth to power unflinchingly.

Naturally, all of us at Golden Real Estate are grateful for those buyers and sellers who have entrusted us with their real estate needs. We know that the sale or purchase of a home is often our clients’ biggest single financial transaction, and we don’t take that responsibility lightly.

Real estate is an interesting profession. For most of us, it was not our first profession. In my case, I didn’t even think of becoming a real estate agent until my 50s. When I earned my license, I discovered several interesting facts about the profession, including that the median age of licensees was my age at the time, 54.

I also learned that it takes several years to become successful in real estate and that the average real estate agent has only two or three closings a year, not enough to make a good living. The majority of new agents give up in their first or second year, having wasted money they could ill afford to lose on software, signs, advertising, licensing and association fees, errors and omissions insurance and more.

I’m grateful when I have the opportunity to educate prospective agents about the difficulty of breaking into this profession and can save them the heartbreak of a lost year or two. But I’m also grateful when I am able to help our own broker associates succeed through the leads this column, our website, and our social media attract for us. As broker/owner, I also serve as a mentor and advisor to them, which I find quite satisfying.

I’m grateful for our MLS (Multiple Listing Service), REcolorado, which has made terrific strides toward being one of the best MLSs in the nation. I’m privileged to represent the Denver Metro Association of Realtors (DMAR) on the Rules & Regulations Committee, providing me with insights I’m then able to share in this space.

DMAR, too, has made great strides under its long-time executive director, Ann Turner. I’m grateful to her and the many Realtors who volunteer on DMAR committees, contributing to the high ethics and professionalism of our industry.

Not all real estate agents are members of the Realtor association, but they all benefit from the work that these associations do. We can all be grateful for the work of the National Association of Realtors, to which all the local Realtor associations belong. From its Washington, DC, office, it lobbies Congress to protect property rights and to fend off legislation that is harmful to our profession and in turn to all property owners.

More Metro Area Homes Went Under Contract in May 2020 Than Ever Before

Yes, the Covid-19 pandemic hurt the real estate market in April, but it sure made a rebound in May!  The 13-month chart below is for Adams, Arapahoe, Broomfield, Denver, Douglas and Jefferson counties.

Last week and this, you probably heard or read about how bad the real estate market was in April, and that was true here in the Denver Metro area, as it was throughout the country.

Pending sales of new and existing homes in April were roughly half the pending sales of April 2019. But pending sales in May surged to a number that was greater than the number for any month since before 2010, which is as far back as REcolorado’s statistics application goes.

The number of closings in May was somewhat low because of the low number of homes that went under contract in April.  The number of closings in any given month is always within range of the number of pending transactions the previous month.

(Note: The number of pending and closed sales for May is from June 1st, It could go up as additional May contracts are reported on June 2nd & 3rd.)

It should be noted that, despite the lower number of pending and closed listings in April compared to 2019, the median sold price was much higher — $435,000 vs. $415,000 in April 2019. The median sold price for May was also higher than the median sold price that month in 2019.

It’s also worth noting how quickly listings went under contract in April and in May. April listings went under contract in 5 days (median figure), which was even faster than last year, while May listings went under contract in 8 days (median) vs. 7 days last year.

These statistics may come as a surprise to those who think that the real estate market is on a downturn because of Covid-19.  I am as surprised as anyone at the resilience of our real estate market.

Driving the market is the fact that there is still a low supply of homes for sale and an over-supply of people needing or wanting to buy a home. That explains the low “Days in MLS” figure for April when the number of homes for sale was so low. Because so many sellers postponed putting their homes on the market during the lockdown, it became more of a seller’s market than before. That meant that the homes that were on the market had less competition for the large number of buyers.

Given what we’re seeing now, it’s hard to be pessimistic about the future of our real estate market, however pessimistic we might be about the country as a whole, given the rioting in multiple cities around the country, including Denver. We’ll see in June how much impact that may have.

Another wildcard is the possible resurgence of the coronavirus, given how our state, like others, has yielded to pressure to reopen earlier than CDC guidelines recommended. A resurgence could result in another stay-at-home order.

Coming: Big Changes to Denver’s MLS

It won’t be that obvious to consumers accessing our MLS at www.REcolorado.com, but agents who login to it will need to adjust to many changes that will take effect this coming Monday, January 13th. We at Golden Real Estate are studying the 45-minute instructional video provided to us by REcolorado.

The reason for the overhaul is to make the MLS database 100% compatible with national standards promulgated by the National Association of Realtors.

Another change coming within the next couple of months is an MLS rule restricting the use of “pocket listings” and “coming soon” listings, which are kept off the MLS, often to benefit the listing agent, not the seller. In a nutshell, the rule will say that any listing by an MLS member must be made active on the MLS within one day of any promotion of the listing, which includes putting a sign in the yard, promoting it online or on social media, or in any other way. 

Look for more details in this space on the roll-out of this rule when we get closer to its implementation. This rule was mandated in November by a nearly unanimous vote of the National Association of Realtors’ board of directors.

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!