MARKET CONDITIONS

Some of the reports that I follow are showing some improvement in Colorado employment figures.  If you have been following my observations for the past few months then you know that this is the change for which I have been waiting as a harbinger of some better numbers for home sales and prices.  If those reports continue to be positive then you can look for home price improvement during 2012.  I have worked through three other real estate “corrections” and with those the bounce back was most significant at the beginning.  This time I see a more gradual and longer period for improving prices.

MAINTENANCE HINT

One of the regular maintenance recommendations made by many inspectors is to replace the beeswax seal at the connection between toilet and waste line about every five years.  I had not been convinced until a recent visit to one of my clients.  I am now a believer.  The leak and accompanying ceiling damage at the home was directly attributed to a deteriorated wax seal.  In an era of many bathroom renovations it is important that the gap between the toilet and the waste line that is created by adding cement board and ceramic tile is bridged by a designed spacer and not just filled by a second beeswax seal. Replacement can be done by some homeowners but many will be better served leaving this to a professional.

It is my hope that the type of information provided in these messages will encourage you to protect what is probably your most expensive asset and  to consider and Exclusive Buyer’s Agent for your Colorado home search and purchase.

GRI is the acronym for “Graduate of the Real Estate Institute.  The “title” is granted to Realtors who complete a series of courses that are intended to increase their professional knowledge and performance.  I have always been a little suspicious about whether or not that result is typically achieved and if it improves representation received by home buyers. 

My question has been answered.

One of my colleagues recently completed the GRI course titled “Working With Buyers”.  Perhaps the title itself is most significant as it is working “with”, not “for” buyers and that may really reflect the attitude and performance of the “traditional” real estate community.  The following quote is from the course materials and what set me off on this post.

“NEVER raise an objection the buyer hasn’t thought of.  They will come up with plenty of objections on their own.  They don’t need your help.”

I almost could not believe that this would be the position being taught to licensed brokers in Colorado.  But there it is.  It is no wonder that so many consumers hold real estate brokers in such low esteem.  That was not all.  As I reviewed the course material, I felt that far too much was directed at manipulating buyers rather than representing and assisting them although I do recognize that my practice is so different from the majority of brokers that my perspective may be a little narrow.

What should you do as an informed consumer?

It is my hope that by exposing what is learned by most brokers that many of you will seek and find a trained and experienced EXCLUSIVE Buyer’s Agent (EBA).  An EBA will be comitted to your needs, will represent your interests and yes, will point out the negatives as well as the positives in any home that you see.  Please call me for assistance in the Denver Metro area or for a referral to another location. 

 Russ Murray,  russ@buyerbroker-denver.com, 303-721-1100,ext. 1

The system of compensation to brokers as it has existed for decades has included an element of “socialism”.  That is, brokers could not afford to handle low dollar transactions if they were not also doing some larger transactions.  The percentage paid on that small transaction would just not pay the overhead and leave enough to make a living.  Thus, the higher dollar purchaser subsidizes the lower priced transaction.  In addition, the typical “success based” compensation formula results in many hours of work that do not always result in payment to the broker.

Every once in awhile a consumer will comment that a broker is “making a lot” on a given transaction.  What the consumer does not see is the hours that the broker may have spent with someone who did not buy or sell or the hours on that smaller transaction mentioned in the first paragraph.  The business model practiced by most brokers allows all of this to occur, provides for consumers to often receive services for which they do not pay and sets up a system where the professional services do not seem to be valued by consumers or by brokers.

What is the option?  How can I save significant money?

You can hire your real estate just like you hire an your attorney or your accountant; BY THE HOUR.  This is not “success” based compensation.  You can expect to pay a “retainer fee” and then to be billed at stated intervals for your broker’s time.  By agreement your agent should then be able to negotiate a price reduction based on the seller not paying your broker or, by agreement, your broker could pay that amount toward your “pre-paid expenses and/or closing costs”.  By my observation and experience this will result in savings at purchases of $300,000 and up.  That is dependent upon the hourly rate of the broker and just how focused is the buyer.  For instance, on a recent $500,000 purchase, my client realized a savings of $7,500.   Again by observation, consumers seem to be more careful of time when they are paying for it and will drive by potential homes  and not request to see homes that just do not work.

Is this “fee for service” arrangement available with all brokers?

No.  Many are comfortable with the current “system” and have simply not given any thought to other options.  Sometimes they simply do not know how to properly value their time.  It is certainly worth asking.

It is definitely available from me.  I love being paid for my time and, at the same time, saving money for my clients! 

Contact Russ Murray, russ@buyerbroker-denver.com or 303-721-1100

Most subdivisions created since the late 1960’s have included some level of restrictions regarding the exteriors of homes.   The goal of the developer was to protect the appearance of the neighborhood by ensuring that the homes built would be consistent with the developer’s “vision” and let the early buyers know that subsequent homes would have to meet similar standards. The early covenants typically dealt only with minimum construction standards and set-backs. 

The “Evolution”

Read covenants from new subdivisions and you will find that residents must have the approval of a “Design Review Committee” for any exterior additions and/or changes to the structure or the landscape.  Sometimes they must use the HOA mandated trash collection company.  Leaving garage doors closed is frequently a requirement.  Certain species of trees and bushes are excluded.  Parking of RV’s and boats is prohibited.  You get the idea.  The goal is always to “protect” the neighborhood values.  At the same time some prospective residents do not want that much control over their use of their home.  The only option then is to go to an older neighborhood or to move to large enough property that it is not part of an HOA.  When I visit some of those older neighborhoods with clients they often comment about the number of large RV’s, some “unusual” exterior color choices and an overall lack of continuity.  We are soon back to newer areas.  As to the large site option, these are often more miles from work and other activities as well as more expensive.

So, read before you purchase.

Covenants are usually pretty straightforward.  If you need a 6′ high privacy fence for your own comfort or to restrain a large dog, look carefully for fence limitations.  Do NOT trust what you see.  That other 6′ fence may be in violation.  If you plan to replace a deteriorated wood shake roof with a composition roof be sure that the covenants do not limit your choices AND that the “design review committee” is allowing your choice.  For the first time, I have just found covenants that severely limit the display of the American Flag.  My client finds that to be very objectionable but loves the home.  They will try to effect a change to the covenants after they move in.  I am also working with a client who is purchasing a property where they can keep horses and am finding that just because horses are “allowed” that does not convey the number.  That number may be county mandated or, as I found recently, at the discretion of that same “design review committe”.  That group gets to decide how many horses your site can support.

Avoid surprises.

Be sure you are working with a broker who is on your side and who will obtain those covenants for you to review well ahead of any deadline for objection.  Be open with “your” broker regarding your need and projected use of the property so that you can look for clauses that might limit your enjoyment. 

If your purchase is in the Denver Metro Area, contact me.  I am an Exclusive Buyer’s Agent and will always be on your side.  Russ Murray russ@buyerbroker-denver.com

At this time of year plants are having major growth spurts and can get ahead of your trimming.  Take a walk around your house and cut back where needed.

These communities can range from high-rise condominium buildings to stand-alone patio homes.  What they share in common is that the owners write a check each month to pay for various maintenance costs.  That last comment is important.

Know What Your HOA Dues Cover

Some cover “everything” including heating and cooling.  These can be among the more expensive.  The most typical HOA covers grounds maintenance, trash collection,  exterior maintenance (including roof) and insurance.  We can break those down even further so that you know what questions to ask.

Grounds – This is usually everything outside but if you happen to be in a patio home, areas inside your fence may not be included.  Ask!

Exterior – Again, usually everything from painting to deck maintenance.  What about windows?  Again, read and ask BEFORE YOU PURCHASE!

Insurance -  This will usually include the structure but find out how much of the finish work is included.  Some policies go only “to the paint” and the owner is responsible for cabinets, fixtures and appliances.  Ask.  If you need a separate policy it will be very affordable. (But very expensive if you don’t have it!)

What is the Association’s financial condition?

This becomes a little more difficult to evaluate and if you are not working with a broker who can provide good support, you may even want the financials reviewed by a trusted financial professional.  An important category will be something like “Reserve for Replacement” or “Capital Reserves”.  These will be the funds used for other than month-to-month and year-to-year maintenance activities.  Items that will typically be budgeted here are replacing paving and concrete, roof replacement, swimming pool equipment replacement and HVAC replacement.  Repainting is sometimes in this category and sometimes in the annual budget as an ongoing activity.  A good HOA will have a “reserve study” performed every five years or so by an outside company and you should ask to see it.  Then compare the recommendation with the budget.  You should be able to acquire all of this information from the HOA management company or from the HOA board.

Other Questions to Ask

When was the last dues increase?  This is important because the HOA Board can usually approve small increases and it can be in the best interests of the community for them to do so because large increases later may be difficult if approval by the residents is required.

Has the BOD recommended and/or approved a dues increase that is not reflected in the current disclosure?  You need to know your immediate obligations and if they are changing.

When was the last “special assessment” and/or is one approved and/or recommended?  Special assessments occur when an association has not paid attention to “replacement reserves”, finds that a major item requires attention and there is no money available.  Special assessments can be devastating to many owners.

What is the current delinquency?  I am writing this in June 2010 and with a significant increase in loan defaults, there can also be non payment of HOA dues.  The problem is obvious and while the delinquent dues are almost always collected, the short-term affect is significant.  If this gets over about 15%, many lenders will not make loans for purchase within the community.

What is the current percent of non-resident owners?  You will always find that owner-occupants take more interest in, and better care of, a home.  When investor ownership approaches 30% there will be some limitation to financing a purchase.

Okay, I have satisfactory answers and I am purchasing.  What now?

Now become involved!  Serving on the BOD or committees may not be the most rewarding of activities but it is the best way for you to know what is happening with your HOA and to have more influenc in its management.

Need help?

I have covered a lot in a short time and you are right to be concerned.  If you want excellent representation and help with this evaluation, it is available.  I am an Exclusive Buyer Agent (EBA) and always and only represent the interests of my buyer-clients.

Russ Murray       russ@buyerbroker-denver.com       303-721-1100

One of the most interesting observations of our discussions is that we are not talking about “how to make more money”.  We are always talking about how to better serve consumers and help them to have a better home buying experience.  You will find that quite different from the education portions of most traditional broker’s meetings.

Exclusive Buyer Agents (EBA’s) work always and only in the best interests of their buyer clients.  If you or anyone you know is anticipating a home purchase, you will want to include interviewing an EBA as a part of that process.

You can contact me at russ@buyerbroker-denver.com or 303-721-1100, ext. 1.

Russ Murray

Make your best offer – And stick with it!

Interesting.  I think that most buyers (and perhaps many licensees) believe that you go in low and then work up to a price that you, the buyer, are willing to pay and that the seller is willing to accept.  The theory is that you will get the best price.  Well, three of my recent transactions, all in the $400,000 to $500,000 range, suggest that is not always the case.  I did extensive market analysis for my clients and they each had a number that was acceptable to them but, in various degrees, below the value that I had derived.  Because of the lower figures, I suggested that we offer their “highest and best” up front and to let the seller know of the buyer’s position.

Three different results

In the first case, the seller promptly accepted the offer.  We had learned that the transaction was to be via Power of Attorney.  I have learned that in these cases the objective is often “get it sold”, not “get the absolute best price”.  My buyers did not need a loan and could close quickly.  Done!

In the second case, my clients were also cash buyers with flexibility in the closing date and looking for a really “good deal”.  In this situation we were able to learn that the owners had recently divorced.  A divorce is also an indication that the “sale”, rather than the “price” can be more important.  We went in with an agressively low offer which was countered.  I discussed this with my clients and we dicided to reject the counter and to let the seller know that if they changed their minds to let us know.  Five days later I received a call from the listing broker saying the seller would accept my client’s offer. Done!

The third situation was slightly different.  My clients directed an offer below the range that I had calculated which was $25,000 under the asking price.  The seller countered with just $10,000 below asking.  My client did go up by $5,000 which seemed to irritate the listing broker.  The seller rejected that counter and we once again said “let us know if you have a change of heart”.  Less than twelve hours later I received a call that the sellers had accepted my clients.  Done!

So, how do you know when to use this technique?

Try to have a broker on your side who is willing to do some research into the seller’s situation and motivation and who has enough experience to be able to evaluate conditions.  Of course, you also need to be willing to walk away from a particular house.

If you are in the Denver area, you can contact me for that expertise.

Russ Murray     russ@buyerbroker-denver.com   303-721-1100, ext. 1

Late one night, just blocks from the Capitol, a mugger jumped into the path of a well-dressed fellow and stuck a gun in his ribs.  “Give me your money,” the thief demanded.  “Are you kidding?” the man said.  “I’m a U.S. Congressman!”  “In that case,” the mugger growled, cocking his weapon, “give me my money.” –  Playboy Magazine

I could not help myself from venturing into this territory.  I acknowledge that other than having paid taxes for the past 40-plus years this is out of my area of expertise.  However the internet is a wonderful place, particularly if you limit it to verifiable facts rather than opinion or hyperbole.  This information is from www.taxfoundation.org which labels itself “non-partisan”.  My observation is that their data seem to be accurate and factual.  The editorial content will probably appeal more to people who are fiscally conservative.

Who Pays What?

This information reflects 2007 data; the most recent year for which the IRS has finalized the results.  Also, these figures are for INCOME tax.  Social Security, Medicare and other state and local taxes are not included.

- The top 5% of taxpayers, with “Adjusted Gross Income” (AGI) above $160,000 had 37% of the AGI  and paid 61% of the income tax collected.

- The top 25%, with AGI above $67,000 had 69% of AGI and paid 87% of taxes.

- The bottom 50% with AGI below $33,000 had 12% of AGI and paid 3% of taxes.

Preliminary figures for 2008 indicate the following

Taxpayers with AGI at $250,000 and above had 26% of AGI and paid 46% of taxes.

Estimate for 2010

47% of taxpayers will pay NO income tax.

How painful is it to pay your taxes?

Those of us who are self-employed have a really good idea of the “system”.  I reserve 40% of each check received to pay my quarterly deposits which do include, along with income tax, social security, medicare and Colorado income tax.  Yours are probably not that different, just more hidden due to “withholding” and the employer paying half of the social security deposit.

Think about the above

Taxes are a price we pay for our society.  47% of filers not paying any income tax is a pretty high percentage of citizens without a stake in our government.

That was when a  Denver Post reporter used information provided by a local real estate broker to announce “Metro-area home prices rise 15% over a year ago”.  The broker (who presumably provided the data) was quoted and named in the article and did not refute the conclusion.  I guess “any press is fine.  Just spell my name right”.  In my evaluation, I concluded that it was an irresponsible use of “median” data and an irresponsible conclusion.

S & P Case-Schiller Wins Again

You will continue to see me refer to Case-Schiller because they use “same house sales” to make their evaluation.  And guess what?  Denver prices are up an overall 2.6% for January 2009 to January 2010.  And what else?  The same broker who seemed to support the “15%” increase is right there supporting and being quoted regarding the 2.8% increase. (Disclaimer – The 15% increase was generated as a “median” for February of 2010 and 2009.  The 2.9% is a year-to-year for January.  Case-Schiller is a little (lot?) more conservative and waits for final data.)

Is your home value up by 2.6%?

It may well be.  But as you are reading my blog you know that I continue to maintain that values are very local and what may be true for a home in Parker, may be different for a home in Green Valley Ranch.  Talk to a professional if you need to know.

Is this 2.6% a “sign”?

I am not so sure.  The tax credit “stimulus” has had some effect.  That ends from an “under contract” perspective on April 30th and a closing perspective on June 30th.  After that we will see how the unencumbered market responds.  There is still a lot of unemployment and not much job growth and we will need to see both of those before we have vibrant housing market.

Agree, disagree, have questions?

Leave a comment and I will respond.  Or, contact me directly.  I am an Exclusive Buyer Agent (EBA).  I choose to always and only represent the interests of my buyer clients.

Russ Murray               303-721-1100, ext. 1    russ@buyerbroker-denver.com