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Wednesday, December 30, 2015

Lobbying by NAR Serves All Agents, But Also America’s Homeowners

This month we had an excellent example of our Realtor dues at work.  There was a strong possibility that the new highway funding bill in Congress would have robbed a crucial housing finance fund to pay for our nation’s highways.

If it weren’t for the lobbying efforts of the National Association of Realtors (NAR) — funded by Realtor dues — there’s a good chance that they would have gotten away with it.

The “Fixing America’s Surface Transportation Act” (FAST Act) had a provision in the Senate-passed version that would have used the loan guarantee fees (“G-Fees”) of Fannie Mae and Freddie Mac as a funding source for highways, but that provision was removed in conference committee, preserving an important pillar of our nation’s housing finance system, in which 90% of all home loans are guaranteed by the government.

This was only the most dramatic example of the power of NAR’s lobbying and its ability to mobilize its members — the nation’s 1.1 million dues-paying Realtors — to educate lawmakers on issues that are important not only to our industry but to you, America’s homeowners.

Another recurring threat is the elimination of the home mortgage tax deduction.  Imagine the effect if this tax deduction were eliminated.  It would have a disastrous impact on our nation’s economy, not just on homeowners.  It is NAR which keeps the pressure on Congress not to kill that benefit of homeownership.

NAR’s lobbying efforts go beyond real estate, investing its resources, for example, in pushing for net neutrality and for patent reform aimed at eliminating the scourge of “patent trolls.”

With so many dues-paying members, NAR is a powerful lobbying force in Washington, on a par, I suspect, with the National Rifle Association. Yet there are another million licensed real estate agents who have not joined their local Realtor association (which is how you join NAR).  These agents shouldn’t refer to themselves as “Realtors,” which is a trademark, commonly misused as a synonym for agent.  Half of America’s real estate agents are not Realtors.

Those non-Realtors either can’t or don’t want to “pay their dues” — literally and figuratively — to protect the interests of America’s homeowners — yet they benefit from NAR’s successes.

When you see or hear an advertisement urging you to “make sure your agent is a Realtor,” to me this is what it’s about. 

By the way, NAR’s efforts to protect your interests and, consequently, the interests of all real estate professionals are not limited to the national level.  Just as much money is spent lobbying our state legislators, funded by the portion of Realtor dues that goes to state and local associations. We are represented by Realtor lobbyists here in Colorado, not only before the General Assembly, but also before the Colorado Real Estate Commission.

Especially in an era when state and local legislators are term-limited, our elected officials need lobbyists like ours to educate them about important real estate issues.  An example of this is the highly partisan battle over construction defects legislation. Current Colorado law makes it possible for any condo board — without consulting its membership — to sue their builder for construction defects. The threat of such litigation — which has cost builders and their insurance companies millions — has been a key factor in bringing condo construction to a virtual halt (except for the higher end) in Colorado.  That’s why so much of the multi-family construction that you see in the metro area is rental apartments instead of condos for purchase.

The battle for construction defects reform is highly partisan, and our legislators need help separating rhetoric from facts.  Republicans want to make it virtually impossible to sue a builder, while Democrats understandably want to protect buyers of condos from shoddy construction. My position is that condo associations should be able to sue, but only after a majority vote of condo owners at a membership meeting. This year’s failed legislation required that the vote had to be by a majority of all condo owners, whether or not they attend a meeting, which is an unreasonably high bar, since most condo associations struggle to get a quorum of 10% at their annual meetings. 

On the state level, term limits have had the unintended consequence of making lobbyists more powerful but also more essential.  By the time a legislator becomes truly knowledgeable about issues such as construction defects, he or she has to leave office. That’s why well-intentioned and non-partisan lobbyists like ours play such a crucial role. Realtor dues make that possible.

Why would a licensed real estate agent not want to be a Realtor?  While there may be some agents who don’t want to join NAR for philosophical or ideological reasons (which makes little sense to me), for most agents I suspect it’s a financial decision. 

Selling real estate is not a high-paying profession except for the 10 to 20 percent who are top producers.  A statistically significant percentage of agents — I’ve heard estimates as high as 30% — go an entire year without a commission check.  For those agents, paying $500 per year to support NAR and its state and local Realtor associations is simply not in the cards.  Remember, agents also have to purchase errors and omissions insurance ($200-300 per year), pay license renewal fees, pay MLS fees (over $400 per year), and renew their contract software annually (over $200 per year), not to mention car, computer, software, phone and other costs.  When an agent has little or no income, NAR’s dues are first to go.

NAR expects dues payments from every agent in a Realtor brokerage, and if an agent doesn’t join, the broker must pay the equivalent.  As a result, brokers require their agents to be Realtors. The result has been that some brokerages have created similarly named spin-offs which don’t have a Realtor in charge and can use their non-dues-paying status to recruit non-Realtor agents.

NAR and CAR (the Colorado Association of Realtors) say in their advertisements that you should ask if your agent is a Realtor because only Realtors subscribe to the Realtor Code of Ethics, but I think buyers and especially sellers should ask if their agent is a Realtor for a simpler reason — you want an agent who is successful enough not to scrimp on expenses.  If you list your home with an agent who can not afford to pay Realtor dues, how much do you think he or she will spend marketing your home?  Quite possibly, that listing agent will do little more than put your home on the MLS with point-and-shoot photographs and wait for other agents to bring a buyer. That ends up giving the rest of us agents, including Realtors, a bad image. 

Statistics show that Realtors are more successful that non-Realtors

  • For example, the 290 Realtor agents at HomeSmart Realty Group averaged 2.1 sold listings per agent this year (through last week). The 248 non-Realtor agents at its sister brokerage, HomeSmart Realty Group of Colorado, averaged 1.2 sold listings per agent. 
  • The 355 Realtor agents at Brokers Guild Cherry Creek Ltd. averaged 2.6 sold listings per agent, but the 405 non-Realtor agents at Brokers Guild Classic averaged 1.2 sold listings per agent. 
  • The 293 Realtor agents at Your Castle Real Estate, Inc. averaged 4.2 sold listings per agent, but the 189 non-Realtor agents at Your Castle Services averaged only 1.1 sold listings — not exactly a living wage.

Golden Real Estate’s nine Realtor agents averaged 5.8 sold listings in 2015, plus an equal number of closings in which they represented buyers.

Published Dec. 31, 2015, in the YourHub section of the Denver Post.

Thursday, December 24, 2015

Holiday Greetings to Our Readers, Clients and Friends

In our increasingly busy lives, we sometimes overlook life’s niceties, like sending out holiday greeting cards.  Such was the case this year.

So, instead of writing another column on real estate, let me use this space to send our collective and individual wishes for a joyous Christmas season—regardless of faith—to all of our many friends and clients.

Among our nine agents, including myself, we served over 100 client families in 2015 and nearly as many in previous years, so there are a lot of you to thank for the privilege of serving your real estate needs

For most of you it was a pleasant experience, as reflected in our reviews on, but it’s unavoidable (and undeniable) that we didn’t leave everyone with a warm and fuzzy feeling.  I myself had one client — a fellow church member — who needed to downsize and who felt that I didn’t do an adequate job of explaining the risk entailed in finding a replacement home once he had to move out of his current home.  In this market, trying to sell and then buy can be tricky, and we do our best to pull off that trick for those who can’t buy without selling first. In this one case, the timing didn’t work out, but are glad he did find a new home following a couple months renting.

You’ll see his negative review in this regard on, but that’s the beauty of that website — you can’t cherry pick the reviews that are displayed, making it the most trusted review website for Realtors.

Back to the good stuff.  We have been blessed with great clients — including him — and we love them all. We are in this business because all of us enjoy serving. We do our level best to go beyond what buyers and sellers might expect from real estate professionals. 

Decades ago my sister Susie had a quote from Confucius on her refrigerator that I have never forgotten.  It said, “Concentrate on giving and the getting will take care of itself.”  I later discovered, after adopting it as a business principle, that Confucius never said that, although it sounded like something a wise man like him would have said. At least Susie said it, and I believed it.

To me, that quotation reflects the spirit of this season we call Christmas.  A gift is something you give without expectation of return, and when it’s given in that spirit, you never know what the returns will be, but they’ll probably be good! 

I’m pleased that this “culture” of Golden Real Estate has attracted eight like-minded professionals.  I didn’t recruit any of them. They all asked to join our brokerage, perhaps because of our culture of giving and serving unconditionally.

Our agents are active in their own right, too. Karon Hesse and Kristi Brunel are “front and center” not only in the picture at right, but also in their own charitable activities — Karon with her ongoing mission outreach to Rwanda, and Kristi with her service to the Christian Action Guild, where Kim Taylor also donates time. A few of us are frequent blood donors, too.

We are always coming up with new ways to “give.”  Well known examples include our free moving truck (used by local non-profits, not just clients); free moving boxes and packing materials, free staging consultations, free electric vehicle charging stations, a free smartphone app for finding service providers, and the accepting of Styrofoam for recycling.

Following a peaceful and joyous holiday, we wish you a happy and prosperous New Year.

Tuesday, December 15, 2015

Understanding Residential Property Taxes & Why They Vary So Much

We all know that property taxes vary from state to state but they also can vary greatly right here in Jefferson County.  You have neighbors who may be paying half — or double — what you are paying each year in property taxes.

Over the years I have sold homes to families relocating from other states, and in each case they have been delighted with how low Colorado’s property taxes are compared to where they were moving from. A couple relocating from New Jersey said they had been paying $12,000 per year in property tax on a home valued under $500,000.

I’ve been told that in California residential property taxes can’t increase as long as you own your home, which can result in dramatically different property taxes on the same street based on the year of purchase.

We can be thankful that real estate property taxes here are equitable, based on actual valuation as determined by the county assessor’s computer system. Variation in property taxes is related to which taxing authorities serve each address.

Perhaps you’ll be surprised to learn that property taxes are consistently lower in incorporated cities.  That’s because the cities paid for the streets, sewers, water lines and other infrastructure and builders only have to pay to connect new homes to the sewer and water lines — what are known as “tap” fees. 

When a developer acquires pasture land in an unincorporated area and wants to put homes on it, he must build the streets, curbs, sewer lines, detention ponds, etc. and may choose to build that cost into the price of those new homes.  More common, however, is for the developer to petition the county (or city, if within an incorporated area) to create a “metropolitan district” to pay for that infrastructure through the issuance of bonds.  A mill levy (property tax) is created to repay those bonds over, typically, the next 30 years.  Thus, when you buy that new home, you are paying for the construction of the home at closing, but you’ll also be paying — through your property taxes — for the cost of building the infrastructure over the next 30 years. 

What does that payment, in taxes, amount to?  Let's say you buy a home worth $500,000 -- and the assessor's doesn't increase its value for 30 years.  The typical district mill levy is 50 mills.  The owner(s) of your house will pay about $60,000 to the district over the next 30 years.  (At least those property taxes are deductible!)

See the box at right which describes how property taxes are calculated.

Let’s say you buy a $500,000 home in Candelas, that huge multi-builder development next to Rocky Flats.  The Vauxmont Metropolitan District, which built the infrastructure there, has a 70-mill tax levy to pay off its bonds, bringing the total mill levy to roughly 170 mills.  If the county assessor assigns a value of $500,000 to your home, your property tax on that home will be about $6,800.  A home with the same $500,000 value in older sections of Arvada likely has a mill levy of 101 mills, meaning the property taxes on equivalent homes in Candelas is about 70% higher than on homes which are not in a metropolitan tax district.

Golden’s mill levy is 89.05. If you bought a home in Golden’s newest subdivision, Canyon View, your $500,000 home has an annual tax bill of about $3,550 per year.  That’s because the developer, not a metropolitan district, paid for the infrastructure.  The price of your home included what the builder paid for the infrastructure.

In Westwoods Mesa, KB Home paid for the infrastructure, so it has only Arvada’s 101-mill property tax levy.  As a result, a home valued by the assessor at $500,000 will incur only $4,000 per year in property taxes.   

You might reasonably ask why you don’t pay less for homes in Candelas since the builder doesn’t have to factor infrastructure costs into the pricing of the home.  You won’t like the answer. The answer is that buyers don’t realize the difference, and homes are priced alike whether there were infrastructure costs or not.  And that is why more and more builders are creating these tax districts when they build a new subdivision on open land.

There are currently 50 metropolitan districts in Jeffco with mill levies of 30 mills or more and almost as many with mill levies between 10 and 29 mills. Here's the entire list of these districts and their mill levies: 

Here's the Jeffco Assessor's web page from which I extracted the above list.  You may find it more readable there.  Here's the link:
I’m told that metropolitan districts may not pay in advance for the infrastructure but only reimburse the builder later on.  So the builder does pay upfront for the infrastructure, but he gets a lump sum reimbursement from the metropolitan district while in the process of selling the new homes themselves.  The district can charge an administrative fee.  For example, 6.25 of Leyden Rock's 46.25 mills go toward administrative costs for the district (salaries? postage?) and only 40 mills go toward repayment of the bonds with interest. 

Published in more abbreviated form on Dec. 17, 2016, in the YourHub section of the Denver Post and in four Jefferson County weekly newspapers