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Wednesday, July 27, 2016

Who Pays for What When You Buy or Sell Real Estate? It’s All Negotiable

Compared to most other states, Colorado is blessed with low costs for both buyers and sellers. The biggest costs for buyers apply only when there’s a mortgage. For sellers, the only significant costs are the purchase of title insurance for the buyer and the commissions owed to both agents. 

But buyers don’t always pay the “buyer” costs and sellers don’t always pay the “seller” costs. What follows is more detail about typical closing costs and how the payment of them can be shifted between buyer and seller:

* Commissions to the listing and selling agents are always paid by the seller, although it doesn’t have to be that way. Listing agreements specify the total commission paid by the seller, and how much of that commission the listing agent will share with a buyer’s agent — if there is one. The MLS requires that the listing agent offer compensation to other MLS members, but that offer could be as low as $1.00. Typically it is 2.8%, but not always.  

Denver’s 2.8% co-op originated when listing commissions were fixed by the Board of Realtors at 7% and it was deemed appropriate to give 40% of that amount to the buyer’s agent.  When the Department of Justice declared such price-fixing illegal, the listing commissions started dropping to where they now average between 5 and 5.5%.  The 2.8% co-op commission, however, has lived on, out of fear that agents wouldn’t show homes which paid them smaller commissions.  As a result, it’s not uncommon for buyers’ agents to get bigger commission checks than listing agents at closings.

Many buyers are under the impression that the seller pays the buyer’s agent’s commission, and that an unrepresented buyer saves a seller 2.8%, but it doesn’t work that way.  If the buyer doesn’t have an agent, it just means that the listing agent keeps that 2.8% — unless his listing agreement with the seller provides for a “variable” commission. For example, my listing agreements always have a provision that if I don’t have to share my commission with a buyer’s agent, the commission charged to the seller is reduced by 1%.  This way it’s a win-win.  I earn more, and the seller pays less. Only 15% of listing agents (my calculation) include this provision in their listing agreements. If a listing agent doesn’t proactively offer that discount, you will want to request it.

* Title insurance is the other big cost to sellers at closing.  Here in Colorado (unlike elsewhere, I’m told) this is typically the seller’s expense on the theory that it’s the seller’s obligation to provide clear title to the property being sold. The cost of title insurance is pegged to the sale price and is regulated by the state.  Each title company must file their rates with the Division of Insurance, so they tend to be competitive. What’s not competitive and therefore varies a lot is the “re-issue” rate. Most title policy underwriters offer big discounts if a title policy had been written on the property (even by another company) up to 5 years or more prior to the current closing date. Title policies are issued when you refinance a mortgage, not just when you buy a house, so the majority of transactions nowadays qualify for a re-issue discount — if you choose the right title company for the closing.  Ask!

* Buyers who don’t pay cash have the highest closing costs on real estate transactions. These fees are imposed by the lenders and can vary greatly. Typically, the lower the interest rate you are quoted, the higher these fees will be, so don’t just go by the interest rate. That’s the purpose of the “Loan Estimate” document now required in all such transactions. Space does not permit me to be more detailed here, but you absolutely should comparison shop lenders.

Mortgage-related costs are sometimes paid by the seller through “concessions.”  The purchase contract can include a provision that the seller will pay up to “x” dollars toward buyer’s loan costs, but this is a direct hit to the seller’s bottom line.  Buyers use this strategy so that closing costs can be included in the mortgage. For example, instead of buying a house for $250,000, the contract might have a purchase price of $255,000, with the seller paying $5,000 of the buyer’s loan closing costs.

* One of those mortgage-related expenses is the title policy that protects the lender. This is a “piggy-back” policy on the policy purchased by the seller to protect the buyer. As with re-issue rates, the rates for these lender policies vary among title companies. Buyers theoretically get to choose their own title company for the lender policy, but the title company writing the seller’s policy will give the buyer the best price.

* The fees charged by HOA management companies can be scandalously high and are totally unregulated.  We’re talking hundreds of dollars for nothing more than providing a status letter (showing whether the seller is current on his HOA dues), providing board meeting minutes and financial statements, and changing the name of the property owner on their books.  Worst of all, these fees benefit only the management company, not the HOA itself.  Usually the seller pays these fees, but a buyer might offer to pay them as an incentive to accept their contract. over the contract from another buyer.

* The “closing services fee” charged by the title company for conducting the actual closing can vary significantly. I’ve seen this fee range from $100 to $700. It is typically split 50/50 by the buyer and seller, but again a buyer could offer to pay the full fee as an inducement to accept their contract instead of another buyer’s.

That covers the common costs of closing a real estate transaction. There are other deductions from sellers’ proceeds, but these are not costs of selling.  The biggest of these is paying off any mortgage or other liens. In addition, the seller will be debited for property taxes pro-rated to the date of closing, and a few hundred dollars will be escrowed toward of the final water bill.

After closing, the seller can expect three checks—a tax & insurance escrow refund from the mortgage company, a return premium on the homeowner’s insurance, and the balance of the water escrow from the title company.

Published July 28, 2016, in the YourHub section of the Denver Post and in four Jefferson County weekly newspapers.

Graduates of ‘8 Weeks to Wellness’ Learn Lifelong Strategies for Weight Loss & Good Health


In March, I wrote in my page 3 YourHub column that I had lost 25 pounds in a program called 8 Weeks to Wellness. Now, five months later, I can report that I have not regained any of that weight. I weighed in the 240’s before the program and today I still weigh in the 210’s.  More importantly, while my weight hasn't changed, I lost 8 pounds of fat and gained 8 pounds of muscle during those five months.

My wife, Rita, also lost 20+ pounds when we took the program together in January and February, but she has regained about five pounds, only because her slow recovery from a late-March knee replacement has kept her from exercising the way she’d like.

Meanwhile, three couples who read my column signed up for the program, which they recently completed with similar success. All three of those couples are confident they’ll maintain their weight loss.
Roger, 71, lost 21 pounds.  He says the last time he weighed what he does now was in the 1970’s.  His wife, Joanne, 70, has lost 10 pounds.
Jim, 64, lost 22 pounds and is positively slender now at 138 pounds. The last time he weighed 138 was in high school. His wife, Lynn, 64, lost 28 pounds and could lose some more, which she is continuing to do on her own. Lynn told me that statins had previously reduced her cholesterol from the 270’s to the 170’s, but now her cholesterol is in the 120’s without taking statins. It’s common for graduates to no longer need certain drugs.  I myself stopped taking Prilosec.
Tom, 80, lost 30 pounds, going from 250 pounds before the program to 220 pounds at the end. Tom says the last time he weighed 220 was when he retired from the LAPD 25 years ago and did the Nutrisystem program. His wife, Carole, 78, lost 11 pounds. Both expect to stop taking certain meds after they see their doctors.
I have discussed with each of these couples why this program offers long-term success while other programs don’t.  We all agree that it is the education about diet and how the program created new habits in exercise as well as in what we eat.
For example, during the program we learned about the ill effects of sugar and, surprisingly, of low-calorie sugar substitutes. We learned about the glycemic index and what foods have a high glycemic index vs. a low glycemic index. 
Many weight-loss programs, such as those Tom and Lynn previously took, involve supplements and meals sold by the program. In 8 Weeks to Wellness we were provided with a protein powder for making twice-daily shakes, but mostly we were taught what to buy, cook and eat. With our success in the program, we’re all determined to keep making the same food decisions after the program ended as well as to continue our cardio and strength training regimens. (Most of us didn’t even have a regimen before the program!)

8 Weeks to Wellness is a holistic approach to wellness that balances sound nutrition (through education, not the sale of product) with personalized training to build muscle, not just lose fat, along with neuro-skeletal adjustment, massage, and guided meditation to reduce stress.
This program is offered locally by Body In Balance Wellness Center at 755 Heritage Road in Golden.  They’re one of the only chiropractic offices you’ll find which has a fitness center with personal trainers on staff who get directions (like a prescription) from the doctors to customize the workouts of clients so they get the most out of each one-hour cardio and strength training session.
Many chiropractic offices have X-ray machines, but this office has other tools for measuring such things as intracellular water, inflammatory markers, heart rate, fat and muscle mass and so much more.  In addition, a comprehensive blood analysis is done at the beginning and end of the 8 weeks to assess every aspect of each client’s health and to measure improvement over the 8 weeks.
Without exception, clients who undergo this 8-week course show improvement in important indicators such as cholesterol,  blood glucose, triglycerides, and more. 
I am not compensated for my endorsement of this program other than being reimbursed for the cost of this ad space. Rita and I are simply evangelists for the program because of how it has changed our own lives. You’re welcome to call me at 303-525-1851 or Rita at 303-277-1996 or visit for more info.
Attend a free introduction to 8 Weeks to Wellness at 6:30 p.m. on August 3 at Body in Balance’s office. Call 303-215-0390 to reserve your seat(s).  August 17th is a free movie night at Body in Balance. They’ll be screening That Sugar Film.  On Sept. 14th they have a free class explaining the top secrets of improving your health. Ask about other classes.

Published July 28, 2016, in the YourHub section of the Denver Post.