New Website Helps Buyers/Sellers Verify Agent Performance

[Published March 1, 2012, in the Denver Post]

     Sellers struggle when it comes to selecting the best real estate agent. One reason is that there is literally nowhere — except the member-only MLS — to find statistics about an agent’s performance.

     Attempts to provide rankings or reviews of real estate agents have been attempted unsuccessfully by numerous parties, including Zillow and Redfin, and the Realtor associations have toyed with the idea over the years, but without success. Basically, the vast majority of agents, including Realtors, are not doing a lot of business — NAR reports that the average member’s gross income last year was only $36,000 — and that has scuttled any attempt at introducing such a service.

The public, however, still needs to get the raw facts on agent performance: number of listings sold, average days on market, and even whether the agent is a Realtor and the status of their license.

So I have created a website, where, for a nominal fee, anyone can request the stats on one or more agents with whom they are considering doing business. It’s in beta testing now, but go ahead and give it a spin!

The web address is http://www.RealEstateAgentCheck.com/  

Home Buyers Can Save by Purchasing Before FHA Fees Go Up on April 1st

[Published March 1, 2012, in the Denver Post]

      A quick check of Metrolist, the Denver MLS, shows that about 30% of homes purchased for $400,000 or less are financed with an FHA-insured loan. These loans are popular because they require only a 3.5% down payment.

      FHA interest rates are comparable to those for conventional loans, but extra fees are charged, both upfront and monthly, for mortgage insurance premium (MIP). These fees replenish FHA’s reserves, which have been depleted by the high number of foreclosures on FHA-insured loans in recent years.

      There is a 75% increase in the upfront fee for those FHA loans initiated after April 1, 2012. This upfront payment, which is currently 1% of the loan amount (and can simply be added to the principal), increases to 1.75%. Thus, on a $300,000 loan, this added principal amount is currently $3,000, but will increase to $5,250 on an FHA loan initiated in April, adding about $11 to the monthly mortgage payment in the above example (based on a 4% interest rate).

    Currently, the monthly mortgage insurance premium is 1.15% annually (1.1% when the down payment is 5% or more), and this fee increases by 0.1% to 1.25% and 1.2% respectively.  Thus, on the same $300,000 loan, the monthly MIP payment is currently $287.50 (assuming 3.5% down payment), but goes up to $312.50, an increase of $25 per month.

That $25 increase, unlike the $287.50, does not go to the FHA. Instead it goes to the Social Security Trust Fund. As noted in my Jan. 12th column, this increase is mandated by the Temporary Payroll Tax Cut Continuation Act of 2011, which was passed in December. That act reduced the Social Security tax for just two months, but is charged to new borrowers for the next 10 years. Doesn’t seem fair, does it? 

On their website, HUD calculates that the average FHA borrower will pay only $5 more each month for that additional mortgage insurance premium, but I don’t see how they could come up with such a low estimate.

The monthly MIP must be paid for 5 years, regardless of the percentage down payment, but can be removed once the homeowner can document 20% or more equity.

Current FHA loans, and loans initiated before April 1, 2012, are not subject to these higher fees.

Conventional loans are also affected by an increase comparable to that $25 per month, but it will be reflected in the loan’s interest rate instead of appearing as an additional fee. 

Not All Regulation Is Bad -- In Some Critical Areas, We Could Use More of It

[As published in the Denver Post on Feb. 23, 2012]

When I first got into real estate in 2002, I remember that any felon could, upon leaving prison, print up business cards declaring himself a “mortgage broker,” and Colorado had one of the highest levels of mortgage fraud in the nation. 

In the years since, the legislature passed a law requiring registration, and a couple years later required licensing.  Nowadays, it’s even harder to become a mortgage broker than it is to become a real estate agent. There are tests to get licensed, continuing education requirements and mandatory bonding to protect clients.  Now Colorado has some of the strictest regulation of mortgage brokers in the nation and the lowest level of mortgage fraud.

This isn’t to say that regulation doesn’t go too far in some areas. When it is implemented administratively vs. legislatively, it can fail to consider unforeseen impacts and, yes, common sense.  When regulation is imposed by a legislative body,  there are hearings at which interested parties can testify and educate the lawmakers. Lobbyists, such as those representing the state and national Realtor and mortgage broker associations can educate committee members about such impacts.

An example of an administratively imposed regulation is the Home Valuation Code of Conduct (HVCC), which was introduced to reduce appraisal fraud, but was done behind closed doors to settle a lawsuit by then-Attorney General of New York Andrew Cuomo. I have written in the past about this ill-conceived regulation voluntarily adopted by Fannie Mae and others which took the selection of appraisers out of the hands of mortgage lenders and introduced appraisal management companies (AMC’s) which are, yes, unregulated. To maximize profits, AMC’s do not have to require geographic or other competence by the appraisers who agree to work for the lower wages they pay. Five years later, we are still struggling to regulate AMC’s and still suffering from bad appraisals. Many good, experienced appraisers are leaving the business.

An effort is underway finally to regulate homeowner associations (HOA’s) and the management companies which they hire. I have complained in previous columns about the fees which management companies charge to HOA members at the time of a sale for providing simple information or for changing the name of the homeowner on their records. Knowing that the sale can’t close without these services, the companies extort huge fees, and none of that money benefits the HOA.

Emails Perpetuate Mistruth About a 3.8% Medicare Tax on Real Estate Sales

[As published Feb. 16, 2012, in the Denver Post]

I guess it was to be expected, now that the presidential election year has arrived.  Over 18 months ago I wrote about an email being circulated by the anti-Obama crowd misrepresenting a Medicare tax contained in the Affordable Healthcare Act.

The new tax contained in “Obamacare” extends the 3.8% payroll tax for Medicare to investment income for taxpayers whose Adjusted Gross Income (AGI) is over $200,000 (for a single filer) or over $250,000 (for married filers).

Currently, the Medicare tax, like the Social Security tax, is applied only to “earned” income, but Obama-care extended it to “unearned” income for the super-rich.

The emails which are circulating again claim that if you sell your home for $100,000, you’ll pay $3,800 in “sales tax,” but they neglect to mention that (1) the tax is on profit, not on sales price, (2) that the $250,000 (single)/$500,000 (married) exemption of gains on primary residence still applies, and (3) that the tax only applies if your AGI exceeds $200,000 (single) or $250,000 (married). 

So while the emails — which are still being circulated by Obama-haters — state that this tax applies to the entire purchase price on every home sale, it is, in fact, unlikely to apply to more than 1% of the population.

Even if a married millionaire were to sell his home for $600,000 more than he paid for it, he would probably have no taxable gain at all, since $500,000 of the gain is exempt, and his costs of selling could be over $100,000.  And how many millionaires are selling their homes for a big profit nowadays?

Here’s an offer for those who believe they’ll be taxed — List with me and I’ll pay the tax for you out of the commission I earn!

So, right off the bat, let’s recognize that almost no homeowner is going to be paying the Medicare tax on the sale of his/her home.  And if they are, it’s not 3.8% of the sale price but 3.8% of the profit in excess of $250,000 or $500,000.

So that leaves only investors — you know, the guys with really good accountants who probably have an AGI well below those of us with earned income. If any of them pays this tax on their AGI over $200,000 or $250,000, they can afford it. Period.

Yet, when this truth is explained to the Obama-haters, their response is typified by this response from a Realtor on a LinkedIn group which I monitor: “Even though this only applies to the top 5%, it is only the beginning…”  Or, more typically, they don’t hear you and keep on spreading the mistruth.

Why Owners Who’d Like to Sell Their Homes Aren’t Putting Them on Market

[Published Feb. 9, 2012, in the Denver Post]

In recent columns, I’ve pointed out the rapidly declining inventory and the need for more listings.  There is no better time than right now to put a home on the market. Buyers, lured by record low interest rates, are snapping up the few homes on the market—when the price is right.

This is especially true in the lower price ranges.  When I did my monthly analysis on Feb. 1st, I found that 40% of all front range listings under $200,000 are under contract. That figure drops to 37.4% for homes between $200K and $300K, and to 29.5% for homes from $300K to $400K.

Between $400K and $500K, 22.4% of the listings are under contract, and between $500K and $600K the percentage is 20.9%. Above that price range, the percentage keeps dropping, so only 9.1% of homes priced over $1 million are under contract.  But that’s still a pretty hot market.

That raises the question, “Why aren’t more people who want to sell putting their homes on the market? Let me speculate on some of the reasons, and perhaps some readers will want to suggest their own reasons.

Reason #1: Sellers are “under water,” owing more than they can sell their home for.  This is especially true in the higher price ranges, as well in areas impacted by foreclosures and short sales.

Reason #2: Sellers are not under water, but they don’t have enough equity to produce the cash they’d need for a down payment on their next home. (Those who are wanting to buy under $420,000 may not know that with an FHA loan they can put down at little as 3.5%, or with a CHFA loan as little as $1,000.)  Observation: If you’ve been wanting to refinance your current home and have good credit but not enough equity for the refi, you probably do have enough equity to buy a different home at low rates with an FHA loan!

Reason #3: Would-be sellers want to wait until the value of their home increases. However, if these sellers expect to buy another home after selling, they need to realize that if they wait until their home’s value increases, then they’ll probably end up paying more for the home they purchase, so they might as well “take a loss” on their current home. It evens out in the end.

Reason #4: Sellers are worried about their job security and loss of income to support a new loan.

I’m sure there are many other reasons, and I’d love to read them on this blog. Or call me at 303-525-1851.

EXTRA! Percentage of Listings Under Contract Shoots Even Higher in January

This dramatic increase in the percentage of listings under contract is despite the fact that the listing inventory increased by 14.5% in January over December. 

(Inventory is defined as Active + Pending + Under Contract.)

Scupltor John DeAndrea Created "Linda" in This Home's Studio

My listing at 1235 Pierce Street was previously owned by the well-known sculptor John DeAndrea, whose famous work, Linda, was created in the studio located behind the 3,322-sq.-ft. home and its 4-car garage. The person who bought this home from DeAndrea and is now selling it keeps a framed Denver Art Museum poster of the work above the studio door. DeAndrea’s overspray can still be seen on one of the posts in the converted pole barn. The house itself is special, combining the retention of its 1928 style with modern conveniences such as a Sub Zero fridge, soapstone countertops, steam shower, hardwood floors and original light fixtures. It’s a short walk to the Lakewood Country Club and the coming light rail line. You can take a narrated video tour of the home on its website, www.LakewoodEstate.info. Open this Saturday, Feb. 4, 2012, 1-4 p.m.

National press reports continue to mislead & confuse local buyers & sellers

[Published Feb. 2, 2012 in the Denver Post]

You can’t blame would-be buyers and sellers from being confused by the conflicting housing reports which they read in the press and see on TV.  One such would-be seller sent me a frantic email last week, saying, “See article link below.  Worst year EVER for home sales.  And now that Bernanke has told everyone that rates will stay low until 2015, all incentive to buy a home has evaporated.”

This was a classic example of being misled by a national report.  The article which he sent me was about national statistics on new home sales.  Indeed, the headline read, “New home purchases fall, 2011 worst ever for sales.”

Within the article was buried good news for existing home sales, but it was hard for the reader to take in once the misunderstanding was instilled.  Here is the sixth paragraph: “Sales of previously occupied homes rose in December for a third straight month. Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might consider buying this year. And home construction picked up in the final quarter of last year.”

That was Thursday’s national news.  On Friday, the following story appeared in the Denver Post: “Home builders in Colorado pulled more permits during the first 11 months of 2011 than they did during all of the previous year.”

Then, on Monday, Realty Times, an online real estate news service, reported, “The National Association of Realtors (NAR) latest existing home sales survey shows that sales are on the rise again. This is the third straight month of increases as well as rising above year ago levels.” (Emphasis added.)

The lesson here is two-fold. First, the existing home market is different than the new home market, and, second, the Colorado market is different than the national market.  I’ve pointed that out in this column several times a year over the past decade!

NAR is good about consistently reminding everyone in their TV commercials that “all real estate is local” and that’s why it’s important to consult a local Realtor about your local market. Yet, every time they issue a national report on home sales, I don’t see that caveat included.

The market here in Colorado, and especially in this part of Jefferson County, remains hot. Buyers are snapping up the available listings, and we can’t list more homes quickly enough.

Sen. Bennet’s SAVE Act Will Bring Sense to Valuing Solar-Powered Homes

[Published Jan. 26, 2012, in the Denver Post]

I had the privilege of representing the Realtor community last week at a press conference promoting the SAVE Act, an important (and rare) bi-partisan bill co-sponsored by Sen. Michael Bennet, (D-Colorado) and Sen. Johnny Isakson (R-Georgia).

“SAVE” is an acronym for “Sensible Accounting to Value Energy.”  The act is long overdue, and let’s hope it does not become a victim of the partisan gridlock in Congress. Besides its bi-partisan sponsorship in the Senate, it costs nothing, merely instructs underwriters to modify appraisal guidelines.

On the one hand the Act will improve the underwriting of mortgages by requiring energy costs to be considered alongside property taxes and insurance.  It makes no sense that lenders don’t factor in the cost of operating a house when determining whether a borrower can afford it.  After all, the average energy costs of American homes today is greater than the average cost of property taxes.

The flip side, which is dear to me as the owner of a solar-powered home, is that appraisers will be empowered to assign extra value to homes which consume less energy, whether through extra insulation or on-site power generation.

As I’ve written in the past, appraisers — and the underwriters who must accept their appraisals — are not allowed under current guidelines to give value to such efficiency unless there are comparable sales proving that homes with these features have sold for more than homes without them.

Personally, I have sold two listings which had photovoltaic (PV) systems resulting in near-zero electrical bills.  Both sold for no more than homes which lacked such systems, because there were no comps to support extra value.  The result of those sales merely reinforced the problem, since they created comps which proved such systems have no value! It’s a catch-22 situation which the SAVE Act  and a “greener” MLS can address.

Sen. Isakson, himself a 30-year practitioner of residential real estate in Georgia, points out that in addition to improving underwriting guidelines (which could reduce foreclosures), the bill could actually create jobs by improving the return on investment for energy efficiency and renewable energy improvement made by homeowners.  Currently, you can expect far less (or zero) return from such investments than, say, for redoing a kitchen or bathroom.

Here's a story to remind us of when we were much "greener"

My sister Janet, who lives in Sweden, forwarded this story to me, which she received from an 80-year-old Venezuelan friend of hers:

The Green Thing
In the line at the store, the cashier told an older woman that she should bring her own grocery bags because plastic bags weren't good for the environment.

The woman apologized to her and explained, "We didn't have the green thing back in my day."

The clerk responded, "That's our problem today. Your generation did not care enough to save our environment."

He was right -- our generation didn't have the green thing in its day.

Back then, we returned milk bottles, soda bottles and beer bottles to the store. The store sent them back to the plant to be washed and sterilized and refilled, so it could use the same bottles over and over. So they really were recycled.

But we didn't have the green thing back in our day.

We walked up stairs, because we didn't have an escalator in every store and office building. We walked to the grocery store and didn't climb into a 300-horsepower machine every time we had to go two blocks.

But she was right. We didn't have the green thing in our day.

Back then, we washed the baby's diapers because we didn't have the throw-away kind. We dried clothes on a line, not in an energy gobbling machine burning up 220 volts -- wind and solar power really did dry the clothes. Kids got hand-me-down clothes from their brothers or sisters, not always brand-new clothing. But that old lady is right; we didn't have the green thing back in our day.

Back then, we had one TV, or radio, in the house -- not a TV in every room. And the TV had a small screen the size of a handkerchief (remember them?), not a screen the size of the state of Montana.

In the kitchen, we blended and stirred by hand because we didn't have electric machines to do everything for us.

When we packaged a fragile item to send in the mail, we used a wadded up old newspaper to cushion it, not Styrofoam or plastic bubble wrap.

Back then, we didn't fire up an engine and burn gasoline just to cut the lawn. We used a push mower that ran on human power. We exercised by working so we didn't need to go to a health club to run on treadmills that operate on electricity.

But she's right; we didn't have the green thing back then.

We drank from a fountain when we were thirsty instead of using a cup or a plastic bottle every time we had a drink of water.

We refilled writing pens with ink instead of buying a new pen, and we replaced the razor blades in a razor instead of throwing away the whole razor just because the blade got dull.

But we didn't have the green thing back then.

Back then, people took the streetcar or a bus and kids rode their bikes to school or walked instead of turning their moms into a 24-hour taxi service.

We had one electrical outlet in a room, not an entire bank of sockets to power a dozen appliances. And we didn't need a computerized gadget to receive a signal beamed from satellites 2,000 miles out in space in order to find the nearest pizza joint.

We didn't have the green thing back then?

Supply of Homes for Sale Is Being Depleted; We Need More Homes on Market

[As published on Jan. 19, 2012, in the Denver Post]

The statistics speak for themselves. Right now there are 31% fewer homes for sale on the Denver MLS than there were at this time last year.  In the non-foothills portion of Jefferson County, the inventory of homes for sale is down 39% from a year ago. 

Despite fewer homes to choose from, the number of homes under contract is up by 13% from last year.  Thus, the percentage of inventory that is under contract is 27.5% vs. 18.8% a year ago.  In Jeffco, that percentage is even higher.

The bottom line message could not be clearer.  If you are thinking of selling your home, there is no better time than now to put it on the market.  We need inventory!

Buyers are buying right now, and for a very good reason.  The interest rates are at record lows. Look at these rates offered by a lender with whom I do business:  30-Yr Fixed—3.75% (Jumbo* 3.875%)  15-Yr Fixed—3.0% (Jumbo—3.125%)  5/1 ARM—2.125% (Jumbo—same rate)  FHA 30-Yr Fixed—3.75% (no points)

The above rates all include one point, except for FHA. If you want to pay no points on the non-FHA loans, the rate is 0.25% to 0.375% higher. 

As a guide, each 1% change in rate on a $250,000 loan saves or costs the borrower about $50,000 in interest over a 30-year term.

Not only should sellers consider putting their home on the market at this time, but buyers should get off the fence and buy before rates go up. Remember, you can buy a home with as little as $1,000 down in Colorado, thanks to the Colorado Housing and Finance Authority (CHFA). If you don’t have a good lender, I’d be happy to refer you to one.  Call me at 303-525-1851.

*A “jumbo” loan is a loan over the conventional loan limit of $417,000.