Following Backlash, Jeffco Commissioners Drop Plan to Legislate Beltway

[Published April 26, 2012 in the Denver Post]

Last week I described the effort by Jefferson County’s Board of Commissioners to introduce legislation which would create an authority with “super eminent domain” powers to complete the beltway from northeast of Highway 36 though Jeffco and Golden to connect with C-470.

This Monday, that effort was killed by the Commissioners themselves, following quite a backlash from the public and from legislators who considered the proposal a massive overreach and an unwarranted gutting of long established local powers.

Commissioner Don Rosier told me at press-time (Tuesday) that the Governor and CDOT requested that they drop the proposal and return to the negotiating table.

Prior to this short-lived effort, the Commissioners had essentially given up on forcing a beltway though Golden and had created a public highway authority to secure private investors for a toll-road north of Golden connecting Highway 93 and Highway 128 but leaving gaps south through Golden and between Highway 128 and the beltway’s current end east of the Boulder Turnpike. (Nevertheless, the Commissioners and the highway authority continue to promote their toll road as “completing the beltway,” and the press has generally picked up on that inaccurate and lame phraseology.)

The proposed legislation was perceived by toll road critics (including myself) as a desperate last ditch effort to get the beltway completed, since negotiation with Golden to drop its opposition to the toll road had backfired and even led to Golden filing suit against the use of contaminated Rocky Flats land for part of the right-of-way.

An equally questionable strategy (already in place) for establishing the “privately funded” toll road has been the use of Jeffco Open Space funds (from sales tax revenue) to facilitate purchase of the 300-foot right-of-way though Rocky Flats. Here’s how it was explained to me Tuesday by Assistant County Administrator Kate Newman:

The County gave $1.225 million in general funds to the toll road authority, which put those funds into escrow to buy the 300-foot right-of-way. Meanwhile, the County put $5.1 million of Open Space funds into escrow as its contribution to the purchase of another parcel (Section 16) to be deeded over to US Fish & Wildlife, but that fully-funded transaction only closes when and if the authority closes on the right-of-way purchase. I wouldn’t be surprised if this comingling of purposes were to trigger another lawsuit, this time over the misuse of Open Space funds.

Jeffco Commissioners Ask Legislators to Create a Beltway Completion Authority With Unprecedents Powers

[Published April 19, 2012, in the Denver Post]

Democracy and due process are all good and fine, but they do have their limits, don’t they?  The three Jeffco Commissioners, fed up with Golden’s refusal to back down on its opposition to the toll road boondoggle north of town, have decided to ask the state legislature to do away with “home rule” cities’ ability to block projects within their city limits.

This is ironic, since the commissioners gave up years ago on pushing a beltway through Golden itself and merely tried to build a toll road connecting State Highway 93 with Highway 120 south of Flatirons Mall.  Having failed to bribe Golden to drop its opposition to that toll road, they have decided to get the legislature to pass a “beltway completion bill” that would not only order construction of the toll road but extend it through Golden itself.

Sen. Betty Boyd, who chairs the Senate Transportation Committee, has been identified as the “sponsor” of the bill, but the Senator’s secretary told me on Monday that she has not received a draft of the bill and “there is no such bill.”

Nevertheless, the full text of the non-existent bill, drafted by the Jeffco commissioners, has been released, and is even promoted in the county’s own employee newsletter, Frontline. You can find links to the bill and an interpretation of its impact on Colorado cities at www.JimSmithColumns.com.

This brash attempt to short circuit the democratic process is reminiscent of when Colorado’s two U.S. Senators passed a midnight bill without hearings which mandated construction of the “super-tower” on Lookout Mountain. Regardless of how you felt about the tower, it was shocking that two politicians could, in effect, say, “enough of this democratic crap, build the damn tower!” Our county commissioners are now trying to accomplish the same feat on the state level regarding their pet development scheme/beltway.

It couldn’t be clearer by now that completing the beltway has nothing to do with meeting transportation needs in the northwest quadrant.  CDOT’s own multi-million-dollar studies proved that.  Rather, the beltway effort has everything to do with lining the pockets of developers and those real estate professionals who will profit from their development.  If they succeed, we can look forward to the kind of sprawl that has overrun the other three quadrants of the metro area after their sections of the beltway were completed.

I emailed and called Sen. Boyd’s office asking the Senator for comment on the bill prior to deadline, but she never called me -- and still hasn't two days later.

15-Year Fixed Rate Mortgage Hits New All-Time Record Low

[From Realty Times this morning]

In Freddie Mac's results of its Primary Mortgage Market Survey®, average fixed mortgage rates declined for the third consecutive week on the heels of a weaker than expected employment report. The 30-year fixed averaged just above its record low while the 15-year fixed averaged a new all-time record low of 3.11 percent breaking its previous low of 3.13 percent on March 8, 2012.
Full Story: http://realtytimes.com/rtpages/20120413_freddierate.htm

Radon Gas in Your Home -- Its Risks and Its Mitigation

[Published April 12, 2012, in the Denver Post]

During the current legislative session the risks of radon gas in our homes and what to do about it was raised when two state legislators put forth a bill — killed in a House committee — to require sellers to test for radon before putting their homes on the market and to provide those test results to prospective buyers.

The bill’s sponsor described radon as “a radioactive gas that kills hundreds of Coloradans each year due to lung cancer.” I have seen no studies, however, that provide reasonable documentation of this claim. With so many other contributing factors to lung cancer, how do you prove that someone got lung cancer specifically because of exposure to radon in their home?

Regardless of the validity of the danger, requiring sellers to provide test results would only endanger Coloradans further, which is why I testified against it. The bill would have allowed sellers to buy a $10 radon kit, place it anywhere in their home and mail it into a lab for analysis, then provide the report to prospective buyers as an indicator of the radon level in their home.

Radon is a naturally occurring gas that seeps out of the ground virtually everywhere. As such, we are exposed to it in highly dispersed form every day when we are outdoors. The danger comes when it seeps from the ground into your home, where it is contained instead of being dispersed into the atmosphere. If the level is high enough, it could certainly pose a health risk, especially to children who sleep in or spend significant time in that area.

A proper test for radon is done with an electronic device, placed by a professional in the lowest living area of a home, which samples the air once an hour for 48 hours. If the device is unplugged and moved, or if windows and doors are left open during the test, it will be obvious in the print-out. Such a test costs $100 to $150, but it is virtually tamper proof. Every buyer should pay for such a test instead of depending on a seller’s $10 test. Tests provided by sellers would only result in fewer buyers spending money on a valid test.

If radon is shown to be above the EPA’s “action level” of 4 picocuries per liter, mitigation can cost $800 to $1,200, depending on the home. The process involves installing a constantly running fan which sucks air from the gravel bed under your home’s concrete slab and expells it at the roof line. Cracks in the concrete slab are also caulked and sump pits sealed. If the home has a crawl space, ventilating it (which also controls humidity and mold accumulation) can also reduce the radon level.

If you don't think the housing market is improving, ask any Realtor!

[Published April 5, 2012 in the Denver Post]

At the end of every month I run a count of active and under contract homes on Metrolist, the Denver MLS which also displays listings from the other two MLS’s serving Colorado’s Front Range. I post my findings on my blog (see previous posting), but this week they deserve mention in my column, too. 

The trend since I started doing these reports last October has been steadily up, depleting available listings faster than would-be sellers can replenish them.

Back in October, 23.9% of all unsold listings on the three MLS’s were under contract. The remaining 76.1% were available.  Today, 44.1% of unsold listings are under contract, leaving only 55.9% available to purchase. In other words, the single biggest contributor to the shrinking inventory is that buyers are snapping up listings faster than new ones can be added.

Everyone in our little office is busier than they’ve ever been.  We have far more buyers and sellers under contract than we have active listings.  It’s common to have other buyers competing with our buyers for listings. Just last week, I submitted a full price offer for a client on a home, and even had an additional provision that she would exceed any competing offer by $1,000.  We lost to another buyer who offered a cash closing in 6 days at $5,000 over asking price.  That’s the kind of market we’re experiencing now.

The supply vs. demand ratio is so unbalanced right now, that homes are selling for more than they might appraise for based on last year’s sales. This is not necessarily a problem, since appraisers do give some weight to the offer itself when determining value.

Percentage of Listings Under Contract Surges Ever Higher

I have just completed my end-of-month analysis as of March 31st, based on data from Metrolist but including listings from all three Front Range MLS's.  Here are the shocking statistics:

The Term "Realtor" is Misused as Much as "Kleenex" -- Including by Realtors

[Published Mar 29, 2012 in the Denver Post]

The National Association of Realtors (NAR) has spent millions of our dues dollars on educational ads urging consumers to “make sure your agent is a Realtor,” but it’s clear to me that it hasn’t sunk in with the general public, which continues to use “Realtor” as a synonym for “real estate agent" — as do many Realtors!

“Realtor,” like “Kleenex,” is a brand name — a trademark — and, just as not all facial tissues are Kleenex tissues, not all real estate agents are Realtors.

It costs about $500 per year for a licensed real estate agent to join his or her local Realtor association, which also makes the agent a member of the state and national associations. As dues increase, more and more agents are wondering whether it’s worth paying those dues when they could save that money and still be allowed to join the MLS.  Our MLS, Metrolist, unlike some MLS’s around the country, does not require an agent to be a Realtor in order to be a member of the MLS.

Although I don’t consider it a smart move, each year more and more Realtors are dropping their Realtor association membership and joining non-Realtor companies  such as Home Real Estate Colorado LLC and Brokers Guild Classic.  (If I were a Realtor with Home Real Estate or Brokers Guild Cherry Creek, I think I would be upset that my Realtor status was being compromised in the minds of the public by having these like-named firms.)

As far as I know, no one at the Realtor associations or NAR is tracking how many ex-Realtors  quit the business or merely quit being Realtors. When I was on the board of the local Realtor association, I suggested that the organization do exit interviews to answer this question. I volunteered to do it myself, but simply never had the time to devote to that task.

As NAR and the local Realtor associations attempt to educate the general public that “Realtor” is a trademark and should be capitalized (like Kleenex), I’m sure it must be frustrating for NAR to see Realtors themselves not capitalizing the term as well as using it as a synonym for “real estate agent.”

Ann Turner, the executive director of the Denver Metro Association of Realtors, taught me several years ago that one should only use the term “Realtor” when it can be replaced with “member of the National Association of Realtors” without changing the sentence’s meaning.  That explanation has served me well, and if you look at my previous columns, you’ll notice that I rarely even use the word Realtor -- except in my byline.

How to Respond to Agents Who Send You Letters or Ring Your Doorbell

[Published Mar. 22, 2012, in the Denver Post]

There is a such a shortage of listings on the MLS right now that many agents (not mine) are flooding neighborhoods with letters claiming to have a buyer looking for a home there. Should you believe such letters, and how should you respond?

I know this is happening because recently I listed several homes (two of which sold in a few days for full price or higher), and the sellers told me about the letters they had received.  I was given one of those letters, and it turned out to be valid.  (The agent sold a nearby listing of mine to her reported buyer.)

I realize, however, (and so should you) that sometimes this approach is used by agents as a technique to get in your door and list your home.  The agent can always explain that the buyer they spoke of bought another house.

So what is a good way to respond when you get such a letter (or visit) from an agent?

If you are thinking of selling, I recommend that you call the agent and invite him or her over. The more agents the better, because they will then have seen your house if you end up putting it on the market.

The agents will probably come to “preview” the listing for their buyer, which is fine.  If they bring the buyer, all the better. Regardless, you should not list your home in order to sell it to their buyer. Rather, tell the agent that you won’t list with anyone until they have a chance to submit a for-sale-by-owner contract at a 2.8% commission.  If they can’t produce a contract under that arrangement, then I wouldn’t recommend listing with that agent, because they may have been bluffing about the buyer, and you want to demand complete integrity from any agent you end up hiring.

Since your visit from each agent will, in effect, prove to be a listing presentation, you need to be prepared to interview them and not just listen to their presentation.    To assist you with that process, I wrote a column in 2010 listing 18 questions to ask a potential listing agent.  That column was so popular that I gave it a URL of its own, www.The18Questions.com.  Use that column in your interview, and feel free to call me to verify any statistics agents provide about their own success as a listing agent, since doing so requires MLS access.

Believe it or not, we are in a sellers’ market right now, with listings — if they are priced right — going under contract very quickly. I urge you to subscribe to my blog (www.JimSmithBlog. com) where you will not only get this column before it is printed, but also get my monthly market activity reports.

Sellers Answer the Call, With a Surge of New Listing Activity

[Published Mar. 15, 2012 in the Denver Post]

Last week’s headline proclaimed that the percentage of MLS listings under contract had surged past the 40% mark.  Indeed, this Monday, I checked again and the percentage is over 42%.

Fortunately, sellers are responding to the call for them to list their homes now. In Jeffco alone (not counting the foothills areas) 408 new listings were entered on the MLS in the first 10 days of March.  The figure for the total MLS is 2,666 — and 537 of those are already under contract!

For comparison, more homes (3,425) were entered on the MLS during the same 10 days a year ago, but of those only 208 were under contract by the 13th of that month.   We still need to see more homes added to the active inventory.  As of press time, the active inventory was 11,139, up from the beginning of the month, but, as I pointed out above, the percentage of the total inventory that has gone under contract is still rising.

I can’t think of a better time, if you’re thinking of selling this year, to put your home on the market.

Here at Golden Real Estate, that surge in new listings is especially evident.  I have three new listings I’m featuring this week.  I already have two new listings to feature next week and at least one more to feature the following week — so far. I have been invited to meet with would-be sellers — often more than one — almost every day and have been kept busy creating video tours, slideshows, websites, etc.  I know my broker associates are equally busy, and I’m forced to look outside Golden Real Estate to find agents to help me hold open all these new listings on Saturdays.

Percentage of Listings Under Contract Surges Past the 40% Mark!

[Published March 8, 2012, in the Denver Post]

I’ve been tracking this statistic since October, and the trend is almost shocking. As of Tuesday, Mar. 6th, 42.3% of all MLS listings in the non-foothills areas of Jeffco are under contract.

Here’s how the percentage under contract for the entire MLS has risen in just 5 months:

      Oct. 31—23.9%

      Nov. 30—27.3%

      Dec. 31—26.8%

      Jan. 31—29.8%

      Feb. 29—39.7%

When I checked again just now(Tuesday, Mar. 6), that percentage had risen further to 41.2%.  Think about it — four out of 10 “for sale” signs you see are in front of homes that are under contract!  Back in November, I thought 27.3% was high!

How high can this figure go?  In Denver Southwest, Denver Northeast, the City of Aurora and Adams County it has already surpassed 50%. For condos under $100,000, 59.5% are under contract. In Jeffco, that figure is 64%.

Buyers are snapping up listings faster than sellers can put them on the market.  For example, the total inventory on Feb. 29 was 500 higher than on Jan. 31st, but the number of homes not under contract fell by 400 during the same time-frame.

Anyone who is thinking about selling their home should seriously consider putting their home on the market now, because, if it is priced right, it should sell quickly.

This is not to say that homes in all price ranges are selling quickly.  Here’s the percentage of inventory under contract by price range as of Feb. 29th:

     Under $200,000—56.3%

     $200,001-300,000—40.6%

     $300,001-400,000—33.7%

     $400,001-500,000—28.7%

     $500,001-600,000—22.8%

     $601,001-700,000—20.6%

     $700,001-$1,000,000—16.3%

     Over $1,000,000—11.1%

I attribute this prolonged winter-time spurt of buying primarily to the record low interest rates. (I just refinanced my home for 2.875% on a 5/1 ARM.)  The fact that interest rates recently started creeping upward has only pushed more buyers off the fence.

Think about it. The same dynamic that makes you buy gas this week if you know it will be more expensive next week is making buyers buy now before interest rates (and prices) go higher.

Like many agents, I have buyers who can’t find what they want, so I have created a "Buyer Needs" page on our company website, www.Golden RealEstate.com. That way sellers might actually be able to sell their home without putting it on the market.  Does it get any better than that?

My full statistical analysis by area and price range is posted just below this posting.

Buyers are Buying Faster Than Sellers Are Listing

As of February 29th, the percentage of unsold MLS inventory that is under contract jumped by a third overall, as shown by the following chart.  What's interesting to me is that the number of unsold homes on the MLS was up by 500 listings over January, but the number of active listings was down by about 400!  This means that while sellers are jumping into the market, buyers are buying even faster.  This is a hot market!

It should be noted, however, that the buying spree is much stronger in the lower price ranges, as shown by this chart:

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.