Wednesday, November 27, 2013

Readers Ask More Questions About Selling U.S. Real Estate to China

[Published Nov. 28, 2013, in the Jeffco editions of the Denver Post's YourHub section.  An abbreviated version also appeared in five Jefferson County weekly newspapers.]

I have received numerous reader responses to last week’s column about the purchase of American real estate by Chinese nationals. Since there are probably other readers with the same questions, I thought I’d take yet another week to write about this topic.

My good friend Steve Stevens suggested that poor air quality in China’s big cities might be driving the wealthy to emigrate — mostly to rural China, but many to foreign countries with cleaner air and blue skies. Steve shared a New York Times article on this growing trend. (Nov. 23, “Urbanites flee China’s smog for blue skies.”)

Another reader asked whether we should worry about such immigrants, in sufficient numbers, controlling our government.  The short answer is that they get to pay property taxes, but they can’t vote unless they become American citizens.

Because I mentioned large-scale purchase of single family homes by REITs — Real Estate Investment Trusts which have traditionally purchased commercial or multi-family properties — in the same article with my decision to start listing homes on a Chinese website, one reader thought I was talking about an invasion of foreign nationals buying Jeffco homes.  That is an entirely separate matter, and most of those REITs are American investors looking to own single family rental properties, not foreign nationals buying homes “by the hundreds” to live in. And those large-scale purchases of single family homes by REITs will of necessity be spread out over entire metro areas and are limited to homes which “cash flow,” making them good rental properties.

How will Chinese buyers finance their U.S. real estate purchases?  They will pay cash, because one of their motives is to move cash out of China for fear of future actions or policies by the Chinese government.  The euphemism for this motivation is “wealth security.”

In this regard, perhaps you’ve heard that there’s a growing middle class in China with rising expectations. You see this in their air pollution due to purchasing so many cars.  As a result, China is gradually losing its allure as a place to manufacture goods inexpensively. Chinese business owners are beginning to move their manufacturing operations out of China — mostly to elsewhere in Asia, but in some cases to the United States, especially when their clients are U.S. companies. As they bring these jobs to America, the owners also want to live here.

Will they push up the values of our real estate? Yes, but no more than immigrants from California, New York and other sections of our country who see our housing prices as affordable by comparison.

Will they occupy these homes full-time, part-time or keep them as rentals? Probably a mix of all three — again, just like Californians or New Yorkers who buy here.

What happens when they sell? If they are not moving within Colorado, the closing company will withhold a portion of their proceeds to be applied toward capital gains tax based on the Colorado tax returns they must file the following year.

Are Realtors just being greedy by going after Chinese cash buyers? These buyers are already coming to Colorado and asking us to show them homes for sale. Reaching out to these buyers — as we would to others — using Internet marketing serves sellers, not just their agents.

Happy Thanksgiving! Here Are Some Things We’re Thankful For

[Published Nov. 28, 2013, in the Jeffco editions of the Denver Post's YourHub section]

Thank you, Denver Post (and 5 Jeffco weeklies), for making it affordable to advertise in this manner — writing my own column on deadline each week — and for including YourHub in the Post’s “Digital Replica Edition” for those of us who like to read newspapers on our computers.

Thank you, regular readers, for your feedback on individual columns — and for constituting 90% of my client base. That includes those who subscribe to my blog, getting email alerts on each submission. You, too, can subscribe at http://www.JimSmithBlog.com.

Thank you, dear clients — not just those who bring us “easy” transactions, but also those who give us the opportunity to learn from difficult transactions, or no transaction at all!

Thank you, Realtor associations — local, state and national — for tracking real estate issues and for lobbying to protect Americans’ property rights.

Thank you, Regional Air Quality Council, for the grant enabling Golden to install two EV charging stations in our parking lot. I look forward to attracting “green” agents with free fueling of their electric cars!

Finally, thank you to my eight broker associates and office assistant, for helping our company fulfill its potential in this crazy real estate market! You’re the best!  I enjoy mentoring and growing with you! And to Golden Real Estate's vice president... my wife, Rita!

This week's featured new listing: 2195 Foothills Drive South in Genesee

[Published Nov. 28, 2013, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]
 
 
2195 Foothills Drive South, Golden 80401
$699,000
 
This unique custom home is 2 stories with a main-floor master suite and oversized 3-car garage. It sits on a 1.2-acre lot “over the ridge” and thus beyond earshot of Interstate 70. The amenities in this part of Genesee are impressive — two clubhouses with swimming pools, fitness centers and three tennis courts. Elk and other wildlife are abundant here. You can learn more about this home at its website, http://www.GeneseeHome.info, where there is both a slideshow of still photos and a narrated video tour from YouTube. If you have been wanting to live in a foothills home that is 30 minutes from Denver but “a world away,” call broker associate Karon Hesse at 303-668-2445 to set a private showing!
 


Tuesday, November 19, 2013

What Are the Implications of Selling American Real Estate to China?

[Published Nov. 21, 2013, in the Jeffco editions of the Denver Post's YourHub section. An abbreviated version was published in five Jefferson County weekly newspapers.]

In last week’s column, I mentioned that Golden Real Estate has signed up with a Chinese real estate website, http://www.juwai.com, to publish our listings in Chinese.

One of our listings [see separate blog post] is already, at the seller’s request, posted on that website and getting hits.

Why are we doing this, and is it good policy to facilitate the purchase of American real estate by Chinese nationals?

It turns out that 85% of China’s  2.8 million high-net-worth citizens already send their children to study abroad and last year spent an estimated $50 billion buying real estate in 36 countries.

The United States is just one of many countries where the Chinese are buying real estate. A June 2013 report which I’ve posted at http://JimSmithColumns.com shows extensive buying of real estate in Europe, Asia, Australia, the Middle East, Brazil and Africa — not by businesses, but by individual Chinese wanting to invest/live outside China.

According to the China Private Wealth Report 2011, prepared by China Merchants Bank and Bain & Company, the key motivations for Chinese nationals to invest abroad are 1) children’s education, 2) getting cash out of China for security, and 3) preparation for retirement.

Chinese are not the only foreigners investing in and moving to the United States. Analyzing the list of sold homes published in last Saturday’s Denver Post, I figure that 4.5% of metro area sales are to buyers with Asian or Middle Eastern names.

But China is the only country with high-end cash buyers which severely limits online access to American real estate websites like realtor.com, Trulia and Zillow, as well as search engines like Google. That is what has driven the success of domestic Chinese websites like Juwai.com, which records 90 million searches per month within China.

Two readers sent me emails expressing the same questions and concerns which I had before signing up for this service, so I thought I would address them in this week’s column.

A reader from Morrison urged me not to "sell out" to the Chinese, who already own the Panama Canal. (I didn’t know that.)  He suggested it was greed that would motivate me to advertise our listings in China.

I responded to that reader and will share with the rest of my readers the considerations I had in making the decision to put our (and other brokerages’) listings on China’s leading real estate website. A half dozen other brokerages have contacted me about having Golden Real Estate upload selected listings to Juwai.com as part of their marketing strategy.

First, there’s my responsibility to my sellers to market their home and sell it for the highest possible price.  Having learned of this pool of cash buyers, could or should I refuse to show them our listings?

Secondly, these high-net-worth Chinese, themselves capitalists, are interested in the United States because they like living here in our free society. If anything, we are participating in their own subversion of China’s communist form of government by allowing them to experience our way of life. And these are bright, educated people who, like other Asians, are valuable additions to our population and commerce. They create businesses which create jobs for Americans. They are here already, stimulating our economy, and we should welcome them.

Pet Peeves of this Realtor

[Published Nov. 21, 2013, in the Jeffco editions of the Denver Post's YourHub section]

¨  Agents (or others) who don’t edit their email signatures to fit their recipients. It’s so easy to remove inappropriate items before clicking “Send”. Some of the signature files fill an entire screen with pictures, logos, boastful statements, links for searching for homes on their website. Not only can these elements be edited out before sending to, say, a fellow Realtor, most email programs allow you to have different email signatures for original emails vs. replies or forwards.

¨  Agents who don’t enter their own listings in the MLS, and then don’t read what their office assistant has entered.

¨  Agents who don’t put up “Under Contract” signs on their listings because they want to keep getting phone calls from buyers to sell them another house. If a sign says “for sale” but it’s not available to buy, isn’t that misrepresentation?

¨  Agents who say they were named a “5-Star Professional” by 5280 Magazine, when the magazine has absolutely nothing to do with the paid advertising supplement inserted in each September’s issue.

¨  Agents who exaggerate their level of success to prospective clients, knowing that without MLS access they can’t verify what they are told.

 

This Week’s Featured Jeffco Listing: Amazing Upgrades at Only $90/SF

[Published Nov. 21, 2013, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]


Do you appreciate granite countertops, slate and ceramic tile and hickory hardwood floors, professional grade kitchen appliances including a 6-burner Thermador cooktop, a pantry the size of a bedroom, fabulous light fixtures and high ceilings? This 6,087-sq.-ft. home at 2100 Iris Street near Lakewood‘s Crown Hill Park has all that and more!  How about a 1/3-acre lot with two storage sheds, circular driveway and RV parking in the back? How about a walk-out basement which is fully framed, wired and plumbed — just add drywall and carpeting!  And the price per total square foot is only $90!  Take the video tour at www.LakewoodHome.info, then call me to see it!  I’ll be holding it open this Sunday 1-4 p.m.

Wednesday, November 13, 2013

Here’s Some of What I Learned at Last Week’s NAR Convention

[Published Nov. 14, 2013, in the Jeffco editions of the Denver Post's YourHub section. A shorter version was published in five weekly Jeffco newspapers on the same day]

Every November, the National Association of Realtors holds its annual convention and expo. I’m writing this column from my hotel room on Monday night at the end of this year’s convention, which was held in San Francisco’s Moscone Center, Nov. 8-11.
One of my broker associates, Kristi Brunel, also attended.  For the most part Kristi and I attended different sessions and toured the hundreds of expo booths separately too, so I can’t speak for what Kristi learned, but we’ll compare notes back in Golden and be happy to share and discuss implementation with our team of associates.
Two big trends bowled me over. The first was the surge in purchases of American real estate by Chinese and other foreign nationals -- approximately 30% of all sales.  There are both individual purchases by high net worth individuals, and block purchases by investors — primarily large corporations and REITs (Real Estate Investment Trusts), which prior to now were investing in commercial properties and apartment complexes, but are now buying single family homes by the hundreds, sight unseen, as rentals, using local brokerages.  Golden Real Estate will be one of their Colorado companies helping these large institutional buyers acquire homes.
Also at this week’s convention I signed up to list our brokerage’s listings on China’s largest domestic real estate website, http://www.Juwai.com, which carries real estate listings from across the United States and around the world. All listings are translated into Chinese, and the website operates its own call center inside China to receive inquiries and forward them to us in English. This is the only way to reach China’s high net worth buyers of American real estate because China blocks American real estate websites such as realtor.com and search engines such as Google.com
Since our agreement allows us to list up to 100 properties at a time, we are reaching out to other brokerages and agents about listing their high-end properties for them on this Chinese website. 
What Kristi and I learned in the educational sessions we will be able to share with other broker associates who could not attend, because audio recordings of all 100+ sessions can be accessed online for free by us for the next 12 months.
Every time I go to a NAR convention, I spend more on products and services than I do on registration, travel and lodging, and this year was no exception. Here are some of the purchases I made for Golden Real Estate at this year’s event:
¨  A device and software package to allow us to shoot better interior photos of listings, so that both the interior scene and views out the windows are perfectly exposed.
¨  A subscription to professional training videos and materials to use in sales meetings and one-on-one with broker associates to improve our collective skills
¨  An improved software package to provide email alerts to buyers and better monitor listings that they like
¨  A phone app that makes follow-up with clients easier and more effective
¨  A touch-screen kiosk we can install in public places to allow self-serve searching of active listings
¨  A creative advertising package.

Why I’m Not Keen on Commission Bonuses

[Published Nov. 14, 2013, in the Jeffco editions of the Denver Post's YourHub section]

As you probably know, the buyer’s agent is usually compensated by the listing agent. It’s called a “co-op” commission paid to the “cooperating agent.”

Regardless of the commission which the listing agent charges the seller, he or she typically offers 2.8% from that commission to the agent who produces the buyer.  Back before the Justice Department said it constituted price fixing, there was a “standard” commission of 7%, and the “standard” co-op was 40% of that, which came to 2.8%.  Although listing commissions are now competitive and therefore completely negotiable, the 2.8% co-op remained because brokers found that if they reduced that incentive, other agents wouldn’t show their listigns. I experimented one year with offering 2.5% and learned that very lesson myself. Now I offer 2.8% again — or more.

Sometimes under “broker remarks” (not visible to the general public), I’ll see that a “bonus” of, say, $2,000 is being offered “for a full-price offer” or for a contract by a specified date, but that practice has always made me uneasy for ethical reasons. Agents are required to act in their clients’ best interest, and offering a bonus for producing a full-price offer constitutes an incentive to the buyer’s agent for him or her to do the opposite — to act in his or her own best interest. And since the incentive is hidden from the buyer, there’s the possibility that the agent won’t disclose the incentive to the buyer.
 
What's your opinion?  Use the comment feature of this blog!

 

This Week's Featured Foothills Listing: Huge Price Reduction in Conifer

[Published Nov. 14, 2013, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]

 
31041 Haldimand Drive, Conifer
Just Reduced to $69 per Square Foot!
 
You’ll see endless possibilities in this south facing 3,634-sq.-ft., 1-acre home at 31041 Haldimand Drive in Conifer. It features a 3-bedroom, 2-bath main house as well as a mother-in-law apartment or guest suite above the garage that has 2 bedrooms and 1 bath. A very bright solarium which has a kitchenette and full bath was added in 1996, and is perfect for an office/studio/workshop or for entertaining. It is separated from the main home by the 2-car heated garage (it’s at left in the photo), providing a nice degree of quiet and privacy. The wrap-around decks showcase beautiful rock outcroppings.  Originally offered for much more, the motivated seller has just reduced the price to $250,000, which computes to only $69 per sq. ft. — a fantastic deal! 
 
 Take a video tour (on YouTube) at www.ConiferHome.info, then
call broker associate Carrie Lovingier at 303-907-1278 for a showing!
 

Wednesday, November 6, 2013

The Year-End Rush Is On for Agents to Take a Soon-to-Be-Outdated Mandatory Update Class

[Published Nov. 7, 2013, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]

Every year, licensed real estate agents are required to take a 3-hour update class approved by the Colorado Real Estate Commission (CREC).  Although it is recommended that agents take this class early in the year, we agents tend to procrastinate and take the course in the fall — or as late as mid-December.

The trouble is that the primary content of the annual update course is an explanation of the contracts which became mandatory on January 1st.

Meanwhile, next year’s mandatory forms are released each September, and agents can take an optional CE class (as I did) as early as October teaching next year’s forms — while many of our colleagues are taking the mandatory course which is still teaching the soon-to-be-outdated forms!

The timing of the forms is the result of the state legislature’s calendar, implementing laws enacted by them and signed into law by the Governor, but not becoming effective until January 1st of the following year. (Each legislative session ends in early May.) 

With many new laws signed after the session ends, it takes until September for the forms committee of the CREC to develop the forms implementing those laws, plus making other improvements in wording, etc.

A few years ago, I recommended that the calendar be adjusted so that this year’s update class is only offered through September and that next year’s update class be taught starting in October or November.

Instead we have the current situation where this year’s contracts and forms are taught until New Year’s Eve, while other classes are teaching the new contracts which will become mandatory on January 1st.

Marcia Waters, the excellent Director of the Division of Real Estate, told me last week that such a change is not contemplated by the Commission at this time, although she would like to see all licensees take the class during the first half of the year.

We agents really do need to know the contents of the mandatory update class early in the year, but we are also human, so expect us to continue our procrastinating ways and not learn what we need to know until it is nearly obsolete.

Huh? Mercury in Retrograde?

[Published Nov. 7, 2013, in the Jeffco editions of the Denver Post's YourHub section]

A very curious thing is happening. So many transactions are problematic these days.  Certain clients — ours and those on the other side of transactions, as well as their agents — are suddenly being weirdly difficult. Not all, mind you, but more than usual.
 
(I should add, however, that I have also experienced some of the easiest and most wonderful transaction experiences in the past few weeks.  But those other transactions — wow!)

I asked my colleagues if they have observed this strangeness, and they agreed — it is a little weird out there!

One agent hesitated and said, somewhat sheepishly, “You may not relate to this, but Mercury is in retrograde.”

A child of the Sixties (like her) I do know something about astrology, but the remark still came as a surprise.

When I got home, I mentioned that exchange with my wife, but before I could repeat what that agent told me, Rita said, “Oh yes, Mercury is in retrograde.”  Good news: The current retrograde ends on Nov. 10th...

Wood Shake Roofs Pose Big Problem for Sellers & Buyers

[Published Nov. 7, 2013, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]

Until the mid-1990’s, it was common for high-end homes to be built with wood shake roofs. Indeed, the county assessor’s website still notes whether a home has a wood shake roof as if it were a premium feature, although I doubt their software still assigns extra value to any home based on that fact.

The tables have really turned, and now a wood shake roof is a liability, not an asset.  The insurance companies have contributed to the situation by charging more for homeowner’s insurance when the home has a wood shake roof.  Worse yet, the insurance companies now depreciate a wood shake roof — but not other roofs — when a claim is made. If your shake roof is destroyed in a hail storm, the insurer will not pay to replace the roof.  Instead they will give you its depreciated value.  If the roof is 15 to 20 years old — which it probably is by now — that value could be zero or nearly zero. And yet you were paying extra for coverage! If you have an old composition shingle roof that is damaged in a hail storm, most insurance companies will still buy you a new roof.

Because of these facts, I advise sellers to replace their wood shake roof before listing their home, and, when I’m representing a buyer, I advise him or her to insist on replacement of the roof in any offer I write. 

Replacing a wood shake roof with a composition shingle roof can cost $10,000 to $15,000 or more.  Call me for vendors I recommend.