What happens at a real estate closing? Answers to Common Questions

[Published June 28, 2012, in the Denver Post]

I witness between 30 and 50 real estate closings each year, but I realize that even a sophisticated buyer or seller can wonder what is expected of them, how utilities are transferred, how funds should be brought or taken, etc. This week I’ll answer some of those questions which I hear most frequently.

Do you need a lawyer? In some states, there can be as many as four lawyers involved in each closing, but in Colorado, I rarely see a lawyer involved in a real estate transaction. You’ll sign listing agreements and transaction documents containing a warning to consult a lawyer (and tax advisor), but it doesn’t happen much. Here in Colorado, real estate licensees are granted by statute “limited legal authority” to interpret the state approved real estate forms. We can tell you what the various terms and conditions mean without engaging in the practice of law, which would be illegal (unless your agent is also a lawyer admitted to the state bar).

What do you need to bring to closing? Just your driver’s license or photo ID, since you’ll be signing documents in front of a Notary, and the Notary requires such identification. Until you’re at the closing table, you will not need the services of a Notary except for signing a Power of Attorney granting someone else the power to sign documents for you, if applicable.

What utilities should you notify? You’ll want to notify the gas & electric utility just prior to closing so they can take final meter readings. They will not turn off their services, but merely wait for the buyer to identify himself, at which point your final readings becomes their initial readings.  You do not notify the water and sewer utilities. That is handled by the title company, which will escrow money from the seller at closing and send the seller a check for what’s left over after paying the bill.  The title company handles water & sewer because an unpaid water bill can become a lien against the property and they are insuring for the buyer that they are getting clear title to the property. By the way, in Colorado, unlike many states, the seller pays for the owner’s title insurance policy, which can be a major closing cost.

Of course, you also notify your telephone, cable and trash providers to terminate service. The buyer will have to order new service. It’s great that nowadays you can keep your existing landline phone number if you move within the same area code, although most people seem to be dispensing with landlines. (They’re not required for DSL broadband service.)

I’d be happy to answer your real estate closing questions, too.

In a Seller's Market, It's Tempting to Try to Sell Your Home Without an Agent

[Published June 21, 2012, in the Jeffco editions of the Denver Post]

Now that homes are selling quicker, I’m seeing more sellers who think that all they need is to get the home on the MLS for a flat fee (what is called a “Limited Service” listing), offer a 2.8% commission to the buyer’s agent and save 3% or more paid to a listing agent.

One of the homes I showed to a buyer this Monday was such a listing.  It was in the MLS, and the number to call for the showing was the seller’s cell phone.  He answered and said he’d be home — “just ring the doorbell.”  I seized the opportunity to interview him later about the “by owner” process.

This seller said he had gone to a “by owner” website which offers a free listing with one picture but also offers various upgrades including MLS listing—six months for $395 or one year for $495.  The seller didn't get to select his  listing agent, and, although he was able to write his own paragraph describing his house, he wasn’t given an MLS data sheet to fill in the non-mandatory data fields such as room dimensions and location, so those were blank on the MLS.

This seller is offering 2.8% co-op commission to the buyer’s broker, but he was told by the listing agent that this was negotiable, which is not entirely true. Technically, the buyer's agent is paid by the listing agent and the MLS listing is a promise of compensation which the listing agent can’t get out of.  The seller may indeed negotiate a lower commission than what was listed in the MLS, but after the closing the buyer’s agent could demand the compensation promised in the MLS at the time the contract was presented.  (This could come back to bite the listing agent, but not the seller.)

For pictures, the seller told the listor to use the pictures from the previous listing when the seller bought the house. This is not allowed without the previous listing agent’s permission, which, in this case, was not sought.

Currently, in Jefferson County there are 51 active “limited service” listings on Metrolist’s single-family database.  (I'm not including about 15 listings by home builders who pay agents to put one or more of their homes on the MLS, but have their own sales people with whom buyers must negotiate.) Most of the 51 non-builder listings are probably “by owner” listings where the seller paid a flat fee (usually $400 to $500) to be listed on the MLS.  Under Real Estate Commission rules, any offer must be presented to the listing agent, who then presents it to the seller.  Sometimes there are additional fees for negotiating the contract, the inspection notice and whatever else arises.

I checked on several of the listings and most were on realtor.com, which means the agents were Realtors.  Most of these listings, however, were not enhanced on realtor.com, and I didn’t find any with virtual tours.  All but 11 of the listings offered 2.8% or 3% commission to the buyer’s agent. One offered a penny, and two offered $1. 

But do those listing offering virtually no commission sell?  I checked the 103  “limited service” single-family sales in Jeffco for 2012 and only eight of them closed paying less than 2.8% and only two of those less paid than 2.4%.

To put it in perspective, then, sellers should realize that they’re only likely to save a little over 2% on commissions by going this route, since the average listing commission is reported by NAR to be just over 5% (of which most goes to the buyer's agent) and the seller is still paying various fees for service.

I’m sure "limited service" makes sense in the seller’s mind, but what is the seller giving up in return for saving 2%?

Mostly, one gives up marketing services — enhancement on realtor.com, advertising such I do with this column when I feature a new listing, syndication to consumer websites, virtual tours, video tours, color brochures, open houses, signage, free moving truck, etc. 

Of those 51 current "limited service" Jeffco listings mentioned above, only 16 had a showing service to handle showings, and most of the others had the seller’s phone number for setting showings. Two had no phone number. With a showing service comes the feedback process which can be quite useful, since the seller received no advice on pricing, etc.

Is "by owner" for you?  I suggest you interview one or more agents before making that decision.

Tasks I Perform to Market a New Listing

[Adapted from a much shorter column printed in the Denver Post on June 14, 2012]

One of my broker associates asked me to list all the things I do when I put a new listing on the market, so I decided to make that the topic of this week’s column.

1) After completing the listing agreement and the different disclosure forms, I consult with the seller to make sure the MLS data entry is complete and accurate. I don’t leave any data fields blank. Before shooting the pictures, I arrange for one of my broker associates, Karon Hesse, to provide a staging consultation. (She’s really good at this.) This helps the house to show its best.

2) I shoot the still photos myself (with a Nikon D3100), and then the video tour (with a wide-angle Sony HD digital Handycam). I then create the virtual tour (a slideshow with music) from the stills, and edit the video for uploading to YouTube.  I upload two versions of the video tour — the unbranded one required by the MLS, and one in which I provide my contact information for other websites. (In exchange for her staging consultation on my listings, I also shoot the pix and video tours for Karon’s listings.)

3) I create a web page for the new listing under “Our Listings” at www.GoldenRealEstate.com.  In addition to a lengthy description of the listing, I provide links to the YouTube video tour, the virtual tour, and to a printable PDF of the 2-sided flyer. On that web page I also promote the free use of our moving truck, even when the buyer has his own agent. If the buyer doesn’t have an agent, we promise free labor and gas, too, which has helped us “double-end” many of our listings. Since I discount my commission if I don’t have to pay a buyer’s agent, this is a win/win for the seller, the buyer and me.

4) I purchase a web URL from godaddy.com especially for each listing (for example, www.NorthGoldenHome.com), or I use one I already own, and I order the decal for a sign rider with that URL on it.  (Golden Real Estate currently owns over 60 URLs.)  The URL can’t be displayed on the MLS, but I can and do promote it on other websites.  I link the URL to the branded YouTube video tour and create a sub-domain (for example, http://details.NorthGoldenHome.com) that forwards to the listing’s web page on www.GoldenRealEstate.com.

5) I only enter the listing on the MLS when I have all the pictures to upload, and I write captions for all photos and put them in a logical order. If the seller has agreed to it, I order the home warranty from Colorado Home Warranty, and I promote it on the MLS and other websites, as well as on the listing flyer. When the home goes under contract, I alert the warranty company so they can provide the warranty policy to the buyer after closing.

6) I enter the showing instructions on the Centralized Showing Service website. I arrange for the seller to receive showing feedbacks as soon as I get them, and I provide the seller with a login on the showing service website so he/she can change showing instructions and review feedback. When an agent has not supplied feedback despite three email requests for feedback, I email or call the agent personally and obtain that feedback, which I then forward to the seller.

7) From the virtual tour software I create a flyer.  On the back of each flyer, I provide the full MLS print-out.  I print 30 or more two-sided color copies for the brochure box.

8) From the same software I create an html craigslist posting. I adapt that html code into an eflyer which I send to 7,000 other agents using eflyermarketing.com. .

9) I put a lockbox on the house and a sign in the ground, using a wooden yard-arm post (which my handyman Mark and I personally build) with a solar powered light fixture atop it. Instead of digging a post hole in the yard for this wooden post, I use a 24-inch spike which leaves no mark in the grass when the sign is removed after closing.  Below the main sign, I hang a "sign rider" promoting the URL for the listing’s YouTube video -- for example, "Tour This Home Online At www.NorthGoldenHome.com -- and another rider promoting the free moving truck and free moving boxes.  When appropriate, a third sign-rider promotes the open house.  I also mount a brochure box for the 2-sided flyer I have created. When appropriate, I also put one or two “Home for Sale” arrow signs with brochure boxes at nearby intersections.

10) I enhance the listing on realtor.com, trulia.com and zillow.com.  It costs Golden Real Estate about $1,500 per year to enhance all our listings on realtor.com, but it's well worth it.  It costs less on Trulia and Zillow. On realtor.com I have to upload the video tour.  On other websites, I simply link to the branded video tour on YouTube.

11) I order a jumbo “Just Listed” postcard mailed to 100 neighbors by Top Marketer.

12) I promote the listing in my weekly YourHub column, usually noting that the listing will be open on Saturday, 1-4 pm.  I then post that column on this blog, and I archive a PDF of the column to www.JimSmithColumns.com.

13) I hold that featured open house myself, or enlist a broker associate or unlicensed person, such as mortgage broker Daniel Raffield.  I promote each open house on the listing’s webpage, realtor.com, recolorado.com, trulia.com and zillow.com.

14) For many listings, when appropriate, I print up several "wall notes" -- like Post-Its that I stick around the house, alerting visitors to special features that may not be obvious to the casual observer.

__________

What you have read above is just the list of tasks related to putting a home on the market. Once a contract is received from a buyer or buyer’s agent, there’s a whole new list of tasks to be performed by the listing agent to produce a successful closing. If there is no closing, the agent gets no payment for the tasks performed, many of which required an outlay of money.

I have heard sellers complain that agents are overpaid because they put their listing on the MLS and do little else.  Perhaps there are some agents like that, but I hope, dear reader, that this list of tasks performed gives you an appreciation of the fact that this Realtor, at least, earns the commission which he is paid at closing.

It’s a Seller’s Market, as Buyers Put Half of Non-Foothills Listings Under Contract

[Published June 7, 2012, in the Denver Post -- expanded here]

My latest end-of-month statistical analysis shows that the buying spree in Jeffco and metro-wide has not slowed down as much as it has leveled off.  Here is my analysis by county or area.

At the end of April, exactly 50% of Jeffco’s non-foothills listings were under contract, and at the end of May, that percentage was basically unchanged at 50.4%.  Two other metro counties showed slight increases, although the percentage for the entire MLS showed it first decline since I started tracking this statistic in October.  With mortgage rates staying at record lows, buyers know that the time to wait is over.

Here is the breakdown by price range:

Last week I featured two new listings in this space. The one listed for $449,000 went under contract above asking price before we could hold the first open house, and the one for $399,000 went under contract to the first visitor at its first open house.  Other agents are witnessing the same phenomenon.

I have updated the “Buyer Needs” page on our website (www.GoldenRealEstate.com) and, like many other agents, have resorted to sending letters to homeowners asking if they’d be interested in selling to a buyer who is looking for a home like theirs.

Uncertainty in the Euro zone is reportedly contributing to keeping interest rates low in the United States, but, whatever the reason, buyers are definitely taking advantage of the increased affordability on homes in every price range due to low interest rates.