Sellers love bidding wars. Buyers not so much. If you’re a buyer and want to avoid a bidding war, simply ask one of our agents (below) to set up an MLS alert including this criterion: Days in MLS >9. As I write this, there are 1,021 listings that have been active on REcolorado 1 to 9 days on MLS, but 4,044 that have been active over 9 days. A listing that has been on the MLS 10 days or longer is far less likely to have multiple offers (unless it just posted a big price drop).
There will always be people who are comfortable with selling their home without the assistance of a real estate professional. In 2019, 8% of sellers chose the For Sale By Owner approach. That’s an increased from 2018’s record low of 7%.
Here are some of the things with which you need to be comfortable if you choose the FSBO approach to selling your home.
Commissions: You will save on commissions, but not as much as you probably think. Listing commissions are negotiable, and the average commission is below the 6% you may think it is, and the listing commission includes the “co-op” commission paid to the buyer’s agent. In our market, that co-op commission is typically 2.8%.
Since most buyers choose to be represented by a buyer’s broker, you can expect that you won’t be able to save more than about 3% on commissions. Then you need to calculate whether selling without professional representation of your own is worth that reduced savings.
Net proceeds: It’s possible that you won’t get as high a price for your home without the marketing advantage of being listed on the MLS, which could attract multiple offers and even a bidding war.
Putting aside that bottom-line calculation, here are some other elements to be considered by the unrepresented seller.
Showings: How will you handle showings, including screening those who will be walking through your home? This is handled nicely by ShowingTime, the service utilized by virtually all agents in the Denver market. They make sure that only licensed agents are approved for showings. All licensed agents have been fingerprinted and passed a background check. In two decades of listing homes, I’ve never had an incident of theft or other crime associated with an agent showing of my listings.
Your time: Another consideration is the convenience of showings. Yes, you could purchase a lockbox and allow agent showings when you aren’t home, but you don’t want to give the lockbox code to buyers who don’t have an agent. Someone has to let them in.
Feedback: Another service provided by the showing service (only available to agents) is obtaining feedback after each showing and forwarding it to both seller and agent.
Disclosures: There are strict rules regarding disclosures of “adverse material conditions,” which real estate agents know well. If your home was built before 1978, there’s a 5-figure fine associated with failure to disclose possible lead-based paint hazards in your house, even if the disclosure would say there are no such hazards.
Pricing: Even in a seller’s market, an overpriced home can sit on the market for a long time and end up selling for less than if it were priced correctly in the beginning. Priced correctly, your home may attract competing offers, and an experienced agent (like us at Golden Real Estate) knows how to play those buyers against each other to get you the highest possible price.
“But it’s a seller’s market”: Yes, it’s easier in our long-running seller’s market to sell a single-family home (condos are stalling because of Covid-19), but that makes it all the more important to get your home in front of the full market to stimulate competition, which only a listing agent with access to the MLS can do for you. It’s no surprise that the number of FSBOs has fallen, not risen, because of this dynamic. Your net proceeds, even with a higher commission expense, could be much higher.
As 2020 limps to an end, we face so many unknowns. How bad will Covid-19 get before it’s brought under control? How bad will the wave of evictions be when the moratorium on them expires later this month? How many home owners will be forced into foreclosure? What relief will we get from our lame duck Congress? If Republicans retain control of the U.S. Senate, how much will Joe Biden be able to accomplish? For that matter, will there be a peaceful transfer of power?
Despite these unknowns, I’ll offer here some insights of my own but also share what I’m reading in trade publications and news services.
Realtor.com has released a “2021 housing forecast” that predicts home prices, which have spiked during the pandemic, will continue to rise through 2021, to the detriment of first-time home buyers. The historically low mortgage rates will also tick up in 2021, further reducing affordability. The report predicts a rate of 3.4% by year end — still quite low, but an increase over current rates well below 3%.
To quote realtor.com, “folks shouldn’t hold their breath for a bargain.”
The report predicts that the double-digit appreciation seen nationwide in 2020 will decline to a still high 5.7% in 2021.
That said, there remain “hordes of buyers” who can still buy homes and who are bidding up the prices of the homes that do come on the market.
As I’ve reported previously, the inventory of active listings is not low because sellers are reluctant to sell. Sellers know that now is the best time to sell. We are seeing record numbers of new listings, but they sell so quickly that the number of active listings remains low. And, of course, that dynamic is creating bidding wars which are driving up prices, beyond what comparable recent sales would justify.
That raises the question of how homes can appraise when they are bid up past their market value. The answer is two-fold. First of all, the winning bidders are often the ones who waive appraisal, and, secondly, an appraiser has to consider the existence of competing offers in determining market value. If a home sells for $30,000 over what it should appraise for based on recent sales of comparable properties, but the appraiser is told about losing bids that are as high or nearly as high, those other offers establish market value. Even if the appraisal then comes in below the contract price, the seller is typically able to stand firm, forcing the winning bidder to drop his appraisal objection or make room for buyer #2 to step in at the same price. This is bad news for buyers, but excellent news for sellers.
Getting back to the predictions for 2021, I believe that the Covid-19 effect I have described previously will continue well into 2021 and possibly beyond. That effect is a mass migration from crowded cities with high-rise condo and apartment buildings to single-family neighborhoods throughout Denver and the other metro counties.
That migration will continue to drive down prices in high-rise buildings while driving up prices in townhomes and detached single-family homes.
I should note, since I’m featuring a condo in Belmar Plaza this week, that the Covid-19 effect should not apply to that low-rise (5-story) building. A $690,000 condo there went under contract this week. On multiple visits to my own listing, I can’t recall sharing the elevator with another tenant more than once, and the stairs are an easy option since it’s only on the second floor.
The Denver Metro Realtor Association (DMAR) has just released a report by its Market Trends Committee which noted that 22 different records were broken during October. Below is their summary, which is based on statistics from REcolorado, the Denver MLS. These statistics are for the entire MLS which lists property statewide but primarily the Denver metro area. Below is my own analysis limited to the Jeffco statistics from the same MLS.
(All Residential) 4,821 represents the lowest October on record. The previous low for October was 6,731 in 2016.
(Detached) 2,643 represents the lowest October on record. The previous low for October was 4,720 in 2017.
CLOSE PRICE — MEDIAN
(All Residential) $475,000 represents the highest amount on record. The previous record was $460,000 recorded in July, August and September of this year.
(Detached) $519,900 represents the highest amount on record. The previous record was $510,000 in September of this year.
(Attached) $339,425 represents the highest amount on record. The previous record was $335,000 in September of this year.
CLOSE PRICE — AVERAGE
(All Residential) $561,999 represents the highest amount on record. The previous record was $540,890 recorded in July 2020.
(Detached) $625,100 represents the highest amount on record. The previous record was $602,264 in August 2020.
(Attached) $393,733 represents the highest amount on record. The previous record was $384,902 in September 2020.
DAYS IN MLS — MEDIAN
(All Residential) 6days represents the lowest October on record. The previous low for October was in 2015 of 10days.
(Detached) 6days represents the lowest October on record. The previous low for October was in 2015 of 11days.
DAYS IN MLS — AVERAGE
(All Residential) 24days represents the lowest October on record. The previous low for October was in 2015 of 25days.
(Detached) 23 days represents the lowest October on record. The previous low for October was in 2015 of 27days.
(Attached) 2,022 represents the highest October on record. The previous high for October was 1,657 in 2019.
(All Residential) 5,984 closed transactions represent the highest October on record. The previous high for October was 5,144 in 2019.
(Detached) 4,352 closed transactions represent the highest October on record. The previous high was 3,709 in 2019.
(Attached) 1,639 closed transactions represent the highest October on record. The previous high was 1,461 in 2017.
MONTHS OF INVENTORY
(All Residential) 0.81 months represents the lowest number on record. The previous record low was 0.91 months of inventory in September 2020.
(Detached) 0.61 months represents the lowest amount on record. The previous record was 0.72 months of inventory in September 2020.
(All Residential) 6,141 pending transactions represent the highest October on record. The previous high for October was 6,062 in 2017.
(Detached) 4,337 pending transactions represent the highest October on record. The previous high was 4,330 in 2017.
(Attached) 1,804 pending transactions represent the highest October on record. The previous high was 1,732 in 2017.
(All Residential) $3,363,002,016 sales volume represents the highest October on record. The previous high for October was $2,487,936,752 in 2019. July 2020 holds the all-time record of $3,965,805,480.
Of particular interest, in my opinion, is the difference between the median and average “Days in MLS.” While half the listings went under contract in 6 days or less, the average was 23 or 24 days. That gap is a reflection of how many homes are overpriced and linger on the market a long time, raising the average DIM when they finally go under contract. A search of currently pending MLS listings shows that 983 of them were “Active” for 100 days or longer before finally going under contract. Compare that to 4,097 listings that went under contract in 1 to 6 days.
The record low “inventory” continues in Jefferson County, as it does elsewhere in the metro area and much of the country. Most analysts will tell you that it’s because sellers are keeping their homes off the market for one reason or another, but that’s not the truth.
The truth is that there are a record number of new listings each month, but they sell so quickly that the number of active listings doesn’t have the opportunity to increase. Here are Jeffco’s October’s stats compared to prior years:
I like to look at weekly statistics. As of this past Sunday, there were 524 active listings in Jeffco of single family homes, condos and townhomes. There were 189 new listings in the 7 days ending on Oct. 8th, but there were 195 closings, 132 of which had gone under contract in 7 days or less. In real estate parlance, that computes to under 3 weeks of inventory — 524 ÷ 195.
As of Sunday, there were 1,088 Jeffco homes under contract, more than twice the number of active listings, and 55% of them went under contract in 7 days or less.
About those 189 new listings between Oct. 2 and Oct. 8, 137 of them were under contract by Oct. 8th. That’s what I was saying — homes are coming on the market, but they sell right away.
As I write this, the real estate market is a tale of two cities — or, more accurately, a tale of cities vs. suburbs. Because of the virus, Americans are “getting out of Dodge,” leaving the congestion of multi-story buildings and moving to the suburbs and the countryside.
The statistics tell the story. In a recent 30-day period, 46% of the sales in Jefferson County closed above their listing price after being on the MLS for a median of 5 days. It was quite the opposite in downtown Denver. There, during the same 30-day period, 87% of the listings (primarily condos in elevator buildings) sold below their listing prices with a median time on the MLS of 24 days.
It’s the same story nationwide, and for good reason. People are fearful of catching Covid-19, and they know that being in close quarters can’t be good. In the suburbs they can take their dog for a walk without using an elevator and without having to come within 6 feet of another human being. (I’m describing my own life here — I walk my dog Chloe every morning on a one-mile circuit around my subdivision and never come in close contact with the neighbors I encounter. Because of that, I don’t even need to wear a mask on these walks.)
We keep hearing that the inventory of homes for sale is at record low (except downtown), but that’s only true because homes are going under contract so quickly. The chart below, generated on REcolorado.com, tells the story well.
Using the most recent full-month MLS statistics for Jefferson county (September 2020), you can see that we actually had more new listings this September than in any of the five previous Septembers, yet the number of sold listings was nearly the same, so there was no way the number of active listings was going to increase and was, in fact, lower by far than the number of active listings in the five previous Septembers. The median time on the MLS of 5 days tells you why.
Moreover, the average ratio of sold price to listing price in Jeffco was 100%, as it had been every prior September except in 2019, and the price per finished square foot has continued to soar. The situation is similar in all suburban counties.
Clearly, the takeaway from this analysis is that if a homeowner is thinking of selling their home anytime soon, he or she would be smart to put their home on the market right now. Don’t think that just because winter is coming that buyers aren’t actively looking for homes. Last week in this column I promoted a 1973 ranch in Arvada that was “not particularly updated.” It didn’t even have a garage door opener for its one-car garage, and it had a backyard clothes line instead of a dryer. Yet that home attracted over 50 agent showings in 72 hours and 11 offers by Saturday evening, when it went under contract for $30,500 over its listing price.
A recent real estate industry article predicted a terrible winter for us real estate agents because of low inventory, but there are just as many homes for sale as ever — maybe more. You just have to act quickly because they are selling right away.
Another recent listing of mine also illustrates how hot the market is. The very first offer for my $530,000 tri-level listing in central Lakewood came in at $585,000, apparently from a buyer who had lost out in previous bidding wars and didn’t want that to happen again. The strategy worked, because no other agents would submit an offer when they learned that we had one that was $55,000 over full price.
Are you wondering what you might be able to get for your home? It costs you nothing to get a comparative market analysis from a real estate agent, and, regardless of where your home is, my broker associates and I are happy to provide that for you. Call us!
Much to the consternation of observers, the real estate market in metro Denver was hotter this August than it was in any previous August, according to the Market Trends Committee of the Denver Metro Association of Realtors (DMAR). At this rate, 2020’s statistics at year end will likely exceed 2019’s statistics.
The report covers an expanded metro area, including 11 counties instead of the 7 urban and suburban counties that you and I think of as “metro Denver.” The non-urban counties included in the report are Clear Creek, Gilpin, Elbert and Park.
Detachedsingle-family homes sold like crazy in August—up over 6% from August 2019, despite 50% fewer active listings at month’s end. The average sold price was up 13.8% from last year, and average days on market was down 23%.
Attachedhomes sold on a par with last year, although their inventory was also down — 19% fewer listings at month’s end. They did sell quicker, though, with days on market down by over 27%.
Unlike DMAR, I like to define the metro Denver market as within a 25-mile radius of the state capitol, as shown here, instead of by county. Using that method, the number of detached homes sold this August was up 13.7% from August 2019, and the sold price per finished square foot (my preferred metric) was up 7.0%. Average days on market dropped by 31%, but median days on market plunged 57% from 14 days in August 2019 to 6 days this year.
Even more interesting to me is that median days on market was in double digits until March 2020 — the first month of Covid-19 lockdown — when it dropped by 40% to 6 days, and remained in the 5- to 7-day range through August. It could be said that “Stay at Home” and “Safer at Home” really meant “Buy a Home” in the real estate business!
Average sold price within that 25-mile radius rose by 13.4% to $597,290, while median sold price rose by 11.6% to $505,000. The gap between average and median is attributable to a large number of million and multi-million dollar closings. I wish others would stop focusing on average stats for that reason.
The number of active listings (what we call “inventory”) plummeted from 6,483 in August 2019 to 3,444 in August 2020, a 47% decline.
Another measure of market strength is how many listings expire without selling. That number was 777 in August 2019, but it fell by 37% to 493 this year.
The average ratio of sold price to listing price was 100% both last August and this August — suggesting that roughly half the listings sold above full price. With half the homes selling in 6 days or less, it’s to be expected that there were multiple offers and possibly a bidding war on many listings.
This week my downtown Golden fixer-upper closed at $665,000, which was $40,000 over listing price. My Lakewood listing from last week is already under contract at $55,000 over full price. Clearly, the seller’s market is still hot despite the pandemic.
If you have considered selling your home, there couldn’t be a better time than now to put your home on the market. And you couldn’t do better than call one of us listed below to talk about it. Your home would, of course, be featured in my weekly Denver Post column and on this blog.
If you let us represent you in the purchase of your replacement home, the listing commission could be as low as 3.6% and qualify you for totally free moving!