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Wednesday, February 27, 2013

This week's featured new listing: Lochwood Townhome

[Published Feb. 28, 2013, in the Denver Post and in five Jeffco weekly newspapers]

For more information, including a narrated YouTube video tour and a slideshow of still photos, visit this home online at

Golden Real Estate Welcomes Two New Agents

[Published Feb. 28, 2013, in the Denver Post and in 5 Jeffco weekly newspapers]

Having grown up in the construction business, Mark Spencer (left) is very knowledgeable about home construction and renovations. This comes in handy with his own residence and investment property. As a Realtor, Mark is able to better serve his clients with his knowledge of home construction. Meanwhile, Tom Warriner’s (right) educational background in zoning, accountability for school performance, and extensive hands-on renovation skills has provided a diverse skill set that will benefit both his seller and buyer clients.

Note: Full bios of these agents can be found at - click on the button for "Our Agents"

Mark Spencer can be reached at 303-842-4480, or
Tom Warriner can be reached at 720-257-1878, or

Note: This week's Featured New Listing is by Tom Warriner.

An Unwary Buyer Could Be Blindsided at Closing and Lose Earnest Money

[Published Feb. 28, 2013, in the Denver Post and 5 Jeffco weeklies - except for final 5 paragraphs]

By JIM SMITH, Realtor®

There is a little-noticed provision written into the state-approved real estate contract to buy and sell real estate that could blindside a buyer and cause him or her to lose their earnest money and not get the house they think they’re about to purchase.

I’m referring to Section 4.4.2 of the Contract to Buy & Sell, which reads as follows: All funds required to be paid at Closing or as otherwise agreed in writing between the parties shall be timely paid to allow disbursement by Closing Company at Closing OR SUCH PARTY SHALL BE IN DEFAULT.  [caps in original]

Although I’ve never seen it happen, that section of the standard contract allows a seller to declare a buyer in default if all funds have not arrived at the time of closing.  With default thus established, the seller gets to keep the buyer’s earnest money and then proceed with a back-up contract.

This has not been a big fear in the past, but now that we’re seeing multiple offers on listings, it could very well happen.  (Let me know if you've seen this happen!)

How does a buyer’s agent prevent this disaster from happening? It’s pretty simple — write into the contract that the time and place of closing is set by the buyer’s agent, not the seller’s agent, and not by “mutual agreement.”  This would allow the buyer’s agent to announce that the closing is postponed and keep postponing it as late as midnight that day.  (Only the day of closing is specified in the contract.) If the contract lets the listing agent set the time and place of closing, then make sure all funds are wired the day before a morning closing.

Last fall I represented a buyer in the purchase of a home where the seller tried every trick in the book to terminate the contract. The best of those tricks was to cloud title to the property so that my buyer’s lender wouldn’t fund the closing.
The title company refused to issue a title commitment because of the cloud on title, but I was able to convince them to schedule the closing anyway so that the buyer could prove readiness to close.  (It was the refusal to issue a title commitment that was the specific reason the lender wouldn't underwrite a loan and wire funds.)
I knew that if my buyer couldn't have sufficient funds in the closing company's hands at the time of closing, the listing agent could show up, declare my client in default, demand forfeiture of $5,000 earnest money and terminate the contract.  Since the lender wouldn't send the funds, I convinced my Buyer to withdraw sufficient funds from her IRA and wire them to the title company in time for closing.  (Without this ability to produce cash at closing, we would have been forced to accept termination, hopefully in return for release of the earnest money.)
The buyer and I showed up for the closing and, in the absence of the seller and listing agent, we were able to declare the seller in default and demand specific performance.  Within a few weeks, the seller relented, removed the cloud on title, and agreed to a closing.  The seller realized -- and we knew she would -- that if she had not relented, the buyer would have prevailed in court and not only forced the sale, but the seller could have been required to pay for the buyer's legal costs and even damages.  By relenting, the seller only had to pay her own legal costs. 
My buyer's lender processed the loan and got the funds to the title company in time, and the title company wired the IRA funds back to the IRA account.  Best of all, since the funds were gone for less than 60 days, there was no penalty on the funds' withdrawal. 
PS: This scenario was only possible because I fully understood critical aspects of the contract to buy and sell real estate. (I also had a good real estate lawyer to advise and represent my buyer.)  If, instead of hiring me, my buyer had dealt directly with the listing agent or had an agent of her own without such knowledge, this story might not have had the happy ending it did for her. 

Wednesday, February 20, 2013

Just Listed: Highly Upgraded Home in Golden's Village at Mountain Ridge

[Published Feb. 21, 2013, in the Denver Post and in five Jefferson County weekly newspapers]

330 Washington Street, Golden
The outstanding curb appeal is more than matched by interior upgrades in this 4-bedroom, 4-bath home — the all-Viking kitchen, hardwood floors throughout (even the stairs), included home theater equipment, high-end Hot Spring hot tub, great views—the list of features is unending. $495,000.
Open Sat., Feb. 23, 1-4 pm and Sun., Feb. 24, 2-5 pm

Hiwan Hills Home Just Listed

[Published Feb. 21, 2013, in the Denver Post and in five Jefferson County weekly newspapers]

28966 Clover Lane, Evergreen CO 80439
Situated on a wooded acre with priceless mountain views to the west, this 3-bedroom, 3-bath custom-built mountain contemporary home is a gem in a private, peaceful setting. Entertain or quietly observe the wonders of nature from two decks. Two moss rock fireplaces add atmosphere to the large living and family rooms. The master suite occupies the entire top floor.  Two guest bedrooms share their own living space on the lower level. You will love the great room & gourmet eat-in kitchen!  $525,000.
Open Sat., Feb. 23, 1-4 pm and Sun., Feb. 24, 2-5 pm.

This Seller’s Market Inspires Greater Use of Escalation Clauses in Contracts

[Published Feb. 21, 2013, in the Denver Post and in five Jefferson County weekly newspapers]

I have utilized escalation clauses for years when representing buyers in multiple-offer situations.  For the most part, my colleagues competing for the same listings were unaware of this tool, but this week I’m going to share this increasingly utilized tool with them and you, while educating my readers about how escalation clauses work.

An escalation clause (inserted under “additional provisions”) says that, in the event there’s a higher priced offer from another buyer, this buyer will pay “x” dollars more than said offer, up to a limit of “x” dollars.  Sometimes, no limit is given.

You know you’re competing with other buyers when the listing agent tells you (or your agent) to submit your “highest and best” offer.

An escalation clause can help you get that coveted listing, although it typically is not accepted in the case of foreclosures. I’ve used an escalation clause successfully in less competitive situations, but it’s getting trickier now that more offers are being submitted and more agents are using the same clause. 

There are a few things to keep in mind when using this tool.  First and foremost, the seller doesn't have to play along.  He/she can choose to counter any of the other offers and, if he/she counters your offer, the seller can ignore your demand to provide evidence of the competing offer you are besting.  So there!
I never include a cap, because that reveals how high my buyer is willing to bid. If the buyer worries that the counter will be too high, I remind him that he doesn’t have to accept the counter, and even if he did, he could terminate under the inspection objection (or other) provision of the contract.

Wednesday, February 13, 2013

Sprawling Ranch on 1/2 Acre Has Great Upgrades

[Published Feb. 14, 2013, in the Denver Post and in five Jefferson County weekly newspapers]

16603 W. 56th Drive, Golden 80401
Just east of North Table Mountain is a hard-to-find subdivision of high-end homes called Table Mountain Meadows. This 4-bedroom, 4-bath home epitomizes the custom-built home with all the most popular upgrades. Slab granite, hardwood, stainless steel appliances, stamped concrete, epoxy garage floors, jetted tub, plumbed gas BBQ, 9’ and vaulted ceilings, dance floor, fitness center (equipment included!), huge cedar closet, skylights, high-end window coverings, crown moldings, roll-outs and 42” cabinets — the list of upgrades is unending! Open this Saturday, Feb. 16th, 2-5 p.m. 
Take a narrated video tour of this listing at

Buyers Learn How to Avoid Disclosing Inspection Issues to Lenders

[Published Feb. 14, 2013, in the Denver Post and in five Jefferson County weekly newspapers]

Effective this year, buyers are required to submit any inspection resolution to their lender, which has the potential of raising red flags with mortgage underwriters.

Let’s say, for example, that mold was discovered during inspection and the buyer demands mitigation. Seller offers to resolve the issue by providing a monetary concession equal to the cost of mitigation. But mold is a huge red flag for lenders. The solution: Buyer withdraws his inspection objection and the parties sign an amend/extend for a concession equal to the mitigation cost. But might this approach not subject the buyer (and agent) to a charge of mortgage fraud?

It’s Almost Scary How Buyers Are Bidding Up Properties Above Listing Price

[Published Feb. 14, 2013, in the Denver Post and in five Jefferson County weekly newspapers]

This week I got a taste of how hot this seller’s market is getting. I showed a home which had so much deferred maintenance that even the exterior trim was rotting, yet it attracted four competing offers, two of them over the listing price, which the listing agent himself agreed was not justified by comps.  He explained that the bankruptcy trustee handling the sale had observed the overbidding of new listings and wanted to try the higher listing price.

Meanwhile, another agent called me because she is about to list a foreclosure that I had listed for $290,000 several years ago, before foreclosure — and it didn’t sell then. Now the home was in even worse shape, and the agent wanted my advice on what price to list it at.  I had to say that it would probably sell easily for $290,000 now, despite its much worse condition.

The agent, who specializes in bank-owned properties told me that Fannie Mae is now routinely listing their foreclosures at $30,000 over the prices recommended by the brokers it hires to give BPO’s (broker price opinions).  They, too, are sensing this seller's market.

Apparently, appraisers are going along with these greatly increased valuations, but double-digit price increases can, over time, create a housing bubble that will only burst later on. Slower appreciation is much better for a market.

Like other showing agents, I’m warning buyers that homes are “flying off the shelves,” going under contract with multiple offers as soon as they’re put on the market. The statistics support that statement. Of those current listings on the market 10 days or less, 23% are already under contract. Of those put on the MLS less than a month ago, 39% are under contract — and 137 of those have already closed (mostly for cash), 52 of them at full price, and 26 of them above their listing price.  [Statistics gathered on Monday, Feb. 11th.]

Wednesday, February 6, 2013

This Week's Featured New Listing: Friendly Hills Home With View of Foothills

[Published Feb. 7, 2013, in the Denver Post and in five Jeffco weekly newspapers]

4674 S. Devinney Court, Morrison

Imagine home ownership in this desirable location just a short drive to Red Rocks, other parks and golf courses! This split-level home with 3 bedrooms and 2 baths has a finished basement with a bonus room suitable for an office or hobby room. The new interior paint is almost dry and brand new carpet is in the bedrooms and family room.  Hardwood floors grace the kitchen and dining/living room area, and both baths are tiled.  The deck is being stained in the backyard, which includes a dog run and storage shed.  This comfortable home is located in a quiet neighborhood, yet convenient to C-470 and I-70.  Be one of the first to check it out as it is being held open from noon to 3:00 this Saturday. Feb. 9, 2013!  Listed this week at $240,000.

Fees on FHA-Insured Loans Are Rising, Hurting First-Time Buyers the Most

[Published Feb. 7, 2013, in the Denver Post and in five Jeffco weekly newspapers]

There is often confusion about the role of FHA (Federal Housing Administration, a division of the Department of Housing and Urban Development) in financing home purchases.  FHA does not lend money; they insure a mortgage against the possible default of the borrower.  When an FHA-insured loan goes into foreclosure, HUD reimburses the lender and takes ownership of the property, which then becomes a “HUD home” and is sold by HUD to a new buyer.

So, where does the money come from to satisfy the lender’s claim?  The money comes from the Mutual Mortgage Insurance Fund (MMIF).  The MMIF is funded by two forms of the Mortgage Insurance Premium (MIP), one paid by the borrower at closing (the “Upfront MIP”, currently 1.75% and financed into the loan), and the second on a continuing basis through the renewal MIP, which is divided by twelve and added to the borrower’s monthly payment, just like homeowner’s insurance or property taxes.  Because of the huge losses suffered by the MMIF as a result of the flood of foreclosures in recent years, FHA has raised its MIP several times.  At the beginning of the crisis, borrowers paid 1.0% in upfront MIP and paid 0.55% in renewal MIP. In the case of 15-year loans, the annual MIP was eliminated once the principal loan amount fell to 78% loan-to-value.

Since then, the upfront MIP has nearly doubled to 1.75%, and the renewal MIP has more than doubled to the present level of 1.25%  Effective with FHA case numbers issued on or after June 3, 2013, the renewal MIP will rise to 1.35%. In addition, the MIP on 15-year loans will no longer be eliminated when the borrower achieves 22% equity.  In other words, even when you owe 5% of what your home is worth, you will still be paying an annual insurance premium of over 1% of the remaining principal to protect FHA from you defaulting on your loan.  It would be fair to call this a fee rather than an insurance premium, since there’s virtually no risk to insure against!

These fees are becoming so significant now, that buyers should consider FHA loans a last resort. Essentially, the borrower is paying just under 2% of the loan amount at inception (financed with the loan so you don’t noticed it as much), plus more than 1% of the remaining principal each year for the life of the loan.

When they can, home buyers should consider non-FHA options (“conventional” mortgages), many of which offer low down payments and lower MIP fees. 

Saturday, February 2, 2013

Analysis shows amazing surge in buyer activity

Here's the statistical analysis I do at the end of each month showing the percentage of MLS inventory that is under contract by city, county or area.  Not only was the surge in percentage from December 31 to January 31 the highest of the last 13 months, but the percentages in each area were higher than at any time in 2012 except for the months & areas shown in red:

The chart below shows that this surge in buyer activity was reflected in every price range, too, although the increase was softer in the $600's:

For a frigid January, this activity is extraordinary.  Would-be sellers would be well advised to put their homes on the market now instead of waiting for the spring or summer "selling season."