Mary Beth Loves Denver

Buyers are Liars?

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Mon, 02 Mar 2009 13:20:38 -0500

There’s a saying in the real estate world that “buyers are liars.” I don't necessarily like this particular phrase, because it sounds like we're saying that buyers are somehow dishonest. And that's not at all what it means. It’s not that buyers walk in and deliberately tell lies to their real estate agents. It’s more that what buyers think they want in a house and what they actually wind up wanting are often two very different things.

Case in point: my brother, whom I love very much and who is definitely not a liar. He wanted to buy a house. A house, as in “detached property with a yard.” He was very adamant about this point, because he has a very sweet yellow lab named Jake who needs space to run around and survey his empire and do his occasional duty. So we traipsed around town looking at lots of houses with lots of big yards.

And then I get a call. That very same brother is very excited. He’s spent the entire morning with a sales rep over at Riverfront. They have a great place that he really loves, and . . .

“Riverfront? Those are condos. What about Jake and the yard and surveying his empire and all that?”

“I think I can teach him to pee in a box on the balcony.”

That’s what realtors mean when they say that buyers are liars.

The point for you buyers is that, when you’re all pre-approved and it’s time to go out looking at houses, you need to keep a dialogue going with your agent about what you need, what you want and what you don’t want. Those needs and wants may change over time, once you’ve seen a couple of houses and get a clearer picture of what’s available. That’s okay. Just keep the conversation going.

The point for agents is that we need to listen carefully to what our clients are saying. Not just as in "I want a condo with two bedrooms in this part of town," but why they want what they want. What are their needs, their interests? Are their other options that would meet those needs as well?

Most buyers have a pretty clear idea of what they want. Some have ideas that are too clear. (“It has to be made of stucco, sit on a corner, and have a kitchen with a window over the sink that faces to the south and looks over a peony garden that’s four feet wide by eight feet deep with a tree in the middle.”) Others aren’t clear enough. (“I don’t care what the house is like or what part of town it’s in, as long as it’s a good deal.”)

Buyers: the first time you meet with your agent, be clear about what you know you want – area, size, number of bedrooms, age and condition of the house, etc. He or she will ask you a lot of questions, so you don’t have to come in with a list all prepared or anything. Just talk to him or her about what you think you want, and why.

You may prefer a newer house. But would an older house that’s been nicely remodeled be an option for you as well? You may say you need four bedrooms, but is that because you need four bedrooms, or do you need three bedrooms and a home office? If it’s the latter, then a three bedroom home with a study might work for you as well.

People sometimes ask me “How many houses do buyers generally look at before finding the one they want?” That depends completely on the buyer and the circumstances. I had one buyer who decided he wanted the first home we looked at. (Well, the first one we looked at after he realized he wanted a house in Park Hill instead of a condo in the Highlands.) I had another who claims we looked at 70 houses before finding the right one for her. I stopped counting, but I don’t think we hit 70.

It’s okay to fall in love with the first house you look at. It’s okay to say “Look no more, this is it!” It’s also okay to walk into a house and say “No, this isn’t it” and walk right back out without seeing the rest of the house. You won’t offend your agent. He didn’t build the house, after all. It’s okay to say “this isn’t it” before you even walk in. You don’t even have to get out of the car if you’re certain you don’t like the house, or the area, or whatever.

Remember that you probably aren’t going to find perfect. But you will find “right” for you. I’m a big fan of giving buyers the time and space they need to find the best house for their needs. It may happen on the first outing. It may not. Some buyers are in a bigger hurry than others, and thus have to choose more quickly. However it works, you should never, ever be pressured by a realtor or anybody else to buy a particular home when you’re not comfortable with the decision.

The way I see it, the transaction will be over soon enough. But the buyers are going to live in that house for a long, long time. I don’t want them to wake up every morning cursing me because I talked them into buying something they didn’t really want.

Buyers and agents, talk to each other. Listen to each other. Your agent will probably have suggestions and ideas about your various options, about resale values and a host of other issues related to your search. Take all of that into account. And then remember that, in the end, the decision is yours, and yours alone.

Well, yours, and the sellers who accept or reject your offer, and the lender who will tell you whether or not you can have the money to buy it . . .

Tales of Mortgage Horror

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Sat, 28 Feb 2009 09:00:16 -0500

If anything is going to go wrong in a home purchase, it’s very likely going to have something to do with the loan. Borrowing money to buy property in today’s environment is very, very complicated.

Buyers -- for your sake, for the sake of your realtor and the sake of everyone’s sanity -- please choose a good, reliable loan officer with a verifiable track record of successful closings and happy customers. In today’s climate, a bad or lazy or irresponsible loan officer can make everybody’s life miserable, and can delay a closing or even completely sink a deal.

A few true stories:

Loan officer is planning to come to closing. Loan officer doesn’t show up. Neither does the money that is supposed to be wired to close the transaction. Buyer, seller and their respective families — which include four sick children and a woman with Alzheimers, sit in a room at the title company for two hours, waiting. Finally everybody signs and leaves. Next day, loan still hasn’t funded. I spend the morning on the phone with underwriters, etc., until it funds. Loan officer calls me that afternoon and says “I’m sorry I didn’t return your call. I was at lunch.” You don’t get to go to lunch when your loan hasn’t funded.

Buyer decides to work with a national mortgage company he’s heard advertised on the radio. “Loan officer” doesn’t return calls, is nearly impossible to reach. After weeks, loan officer realizes that buyer is receiving too many concessions from seller to approve the loan. She suggests that some of those concessions be passed from seller to buyer outside of closing and not be disclosed on the HUD-1 statement. This is loan fraud. Loan officer seems very surprised when I point this little fact out to her. Buyer winds up having to switch lenders two weeks before close. I have several heart failures.

Buyer chooses to work with out-of-state mortgage company his employer recommends. This lender’s out-of-state loan processor, unfamiliar with Colorado real estate practice, estimates closing costs over $10,000 higher than they will actually be. Buyer calls his loan officer to express his displeasure. Loan officer proceeds to essentially disappear, not returning my calls nor buyer’s calls. Buyer is upset, wants to back out of the deal. Closing cost mess is straightened out with the help of my friend, the good lender who isn’t even involved in the transaction, and buyer elects to continue. Then, two days before closing, I receive a call from the processor telling me that underwriting has denied the loan because they don’t like the appraisal. The appraisal, mind you, valued the property at the purchase price. Plus, the buyer is putting 20% down, so lender is only risking 80% of appraised purchase price. But it turns out that the loan officer, who has long since disappeared, didn’t choose an appraiser who was approved by the lender. Buyer calls an officer of the mortgage company. A heated discussion ensues, culminating in the mortgage officer shouting an expletive (that rhymes with “duck stew”) at the buyer and then hanging up on him. Buyer’s options are to either pay several hundred dollars to have the property appraised by an approved appraiser and hope the results are good, or switch to a new lender at a higher interest rate (rates have risen since he locked the original loan). Either option will delay close by one to two weeks. Buyer once again thinks he wants to back out. That afternoon, I get a call saying mortgage has been approved after all because officer who hung up on buyer felt guilty and pled buyer’s case to underwriting. But buyer isn’t sure he wants to go through with it. Buyer finally decides to proceed. Closing is delayed two additional days. The day of closing, loan funds aren’t showing up at title company. We discover that this is because lender is waiting for some random form that Colorado doesn’t require. Loan finally funds. I check in to cardiac ICU unit.

I’m not the only real estate agent with stories like this. Fortunately, Colorado now requires loan officers to be licensed with the state. So if somebody screws up, they can be reported. This will hopefully, over time, sift out the riff-raff.

So how do you find a reliable loan officer? Start by asking your real estate agent. He or she has sat at enough closing tables to know who’s reliable and who isn’t. Most agents have lenders they deal with regularly. Those loan officers are probably going to go the extra mile for you, because they want those agents to keep referring business to them.

Other avenues? Ask your friends, family, co-workers what lenders they’ve worked with, and how it went. If they say “Okay, I guess,” move on. Look for the one who says “She was fantastic!”

Whatever you do, if you live in a state that requires loan officers to be licensed, be sure to work with a licensed loan officer. Not “well, I’m not licensed, but the paperwork will show an agent who is.” Work directly with someone who is licensed in your state. And, preferably, someone who actually works in your state. Laws vary widely from state to state. Unfamiliarity with your local laws and real estate customs can be deadly for your deal.

I Scream, You Scream . . .

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Mon, 23 Feb 2009 12:51:25 -0500

What self-respecting Denver-ite would be crazy enough to hang out at an ice cream shop in the middle of winter?

I would, for one. But the funny thing, I'm not alone. Even now, in February, this place is frequently packed. But then again, this is no ordinary ice cream shop.

It’s called Red Trolley Cake and Cone, it’s located on 32nd Ave between Clay and Bryant, and (full disclosure), it’s owned by my sister and brother-in-law.

I’d say this place is fabulous even if I wasn’t related to the owners. The ice cream is homemade, created right here on the premises by one Denver’s top pastry chefs. And the flavors!! Oh . . . my . . . gosh. There’s the standard vanilla, strawberry and chocolate, of course. (The chocolate gelato is to die for.) But then things get interesting. As I sit here looking at the freezer display, I see ice cream flavors like Cassia Cinnamon, Praline Cookies and Cream, White Chocolate Chip Mint and Bing Cherry Cheesecake, as well as Lemon Meringue Pie Sherbet (with real pieces of pie crust!) In the gelato case, I see twelve different flavors – flavors like Banana Yogurt, Green Apple Sorbetto, Orange Cream, Wildberry Sorbetto, and my personal favorite, Colorado Honey Almond Orange.

There are malts, shakes, sundaes – and root beer floats that taste like they did when we were kids. And, to keep the winter chill away there's awesome coffee. And plenty of cookies and other non-frozen sweet treats. All of it made the natural way -- with no high fructose corn syrup, and no artificial anything.

So here I am on a Tuesday afternoon, with my sweet little one year old niece Audrey on my lap, working. I plan to be here a lot. And, to insure that I still fit through the doorway on my future visits, I’m availing myself of the greatest invention in the world – the Tiny Trolley. It’s a tiny little cone of ice cream, and it only costs a buck. Great for little kids, and for their aunts who want to be able to hang out here regularly without having to buy a new wardrobe.

So if you're in Denver, come on by and check it out. The address is 2639 W. 32nd Ave. It’s the very red building on the north side of the street between Bryant and Clay. You can learn more at www.redtrolleydenver.com.

See ya there!!

Even Within Denver, Some Areas Are Doing Better Than Others

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Wed, 18 Feb 2009 15:00:20 -0500

I have a buyer who’s trying to decide between Thornton and the northwest Denver Highlands area.

Well, he’s actually pretty well decided, but I did some research anyway, to demonstrate that all real estate is TRULY local, right down to the neighborhood. I checked sold statistics for each area over the past 12 months. What I found was fascinating.

Let’s start with Thornton, a suburb north of town. I have other buyers under contract up there, and I’ve been amazed at how much house one can buy up there for around $200,000. No wonder. Prices have come down significantly. Over the past 12 months, the average home price in Thornton has decreased 7.7%, while the median price is down 5%.

Meanwhile, in the Highlands neighborhood, the average price is UP 17%, while the median is up 16%.

Of course, it’s important to keep in mind that there is a lot of scraping going on in the Highlands neighborhood, which can skew the price statistics. If you scrape a $100,000 house and erect a $750,000 house in its place, the average sold price in the neighborhood is going to skyrocket, but it won’t reflect the increase in value of the individual homes. So, since my buyer is looking in the 200K price range anyway, I searched the Highlands for sold properties under 300K, to eliminate the “scrape effect.” And I still found that the average sold price was up 1.3%, while the median was up a whopping 14.3%.

So, what’s a buyer to do? Well, if he needs a lot of house for the money, and plans to stay a while, and wants to take advantage of recent price drops, he might want to look at Thornton. However, if he’s buying with resale in mind (and wants a very cute, charming area) he might want to stay in northwest Denver, knowing that it has held its value even in a declining market.

This kind of knowledge is important, not just for buyers, but for seller, and for everyone who owns a home or who follows the market. So often we hear news reports that say “Home values in Denver dropped x% over the past year” or even “Home values nationally dropped x%”, and we automatically think “Well, what’s x% of the value of my house? That must be how much value it has lost.”

But it doesn’t work that way. Not only are different cities appreciating and depreciating at different rates, but so are neighborhoods within those cities. Often values can shift fairly dramatically within a block or two. Even though a metro area (like Denver) may be depreciating, neighborhoods within that metro area can be appreciating — sometimes significantly.

Location, location, location.

Beware of Brokers Bearing Bucks

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Wed, 25 Feb 2009 10:23:48 -0500

A while back, a real estate agent’s flyer showed up in my mailbox. In it, Mr. Agent announced that if anyone referred a client to him, he would pay that person $300 when the transaction closed.

Three hundred bucks. That’s a lot of money — enough to make anybody want to start combing through their mental Rolodex to find this guy a prospect or two. It’s a pretty good deal for Mr. Agent, too. After all, $300 really isn’t a lot of money to get him a client and a closed transaction he wouldn’t have had otherwise.

So why wouldn’t every real estate agent offer a deal like that?

Simple. Because it’s illegal.

And it’s not just a “little bit” illegal, or illegal only here and there. It’s prohibited by federal law. The Real Estate Settlement and Procedures Act (RESPA) governs all real estate transactions that involve a goverment entity (like FHA loans) or a financial institution that is regulated or insured by the federal government (like every bank and mortgage provider). So RESPA applies to every transaction involving a loan, unless the funds are coming from underneath Uncle Barney’s mattress.

12 USC Section 2607 (a) says, “No person shall give and no person shall receive any fee … [pursuant to a referral agreement].” The paragraph goes on to exempt referrals between two people who are both licensed to sell real estate. But referral fees between agents and nonlicensed people are not exempted. Both broker and recipient would be guilty of a violation. And what a violation it is — punishable by fines up to $10,000 and a maximum of one year in prison!

Suddenly that three hundred bucks isn’t looking so good, is it?

What baffles me is how any competent real estate agent could not know that. In our world, RESPA looms large over everything. It regulates what gifts we can receive and from whom we can receive them. It regulates what fees we can pay and to whom we can pay them. We’re constantly being reminded of the long arm of RESPA and the penalties of running afoul of the regulations. If an agent doesn’t know about RESPA policies, it makes me wonder what else he doesn’t know.

Even if this practice wasn’t illegal, I’d have a problem with it. After all, if you asked a friend for a referral to a good realtor, what criterion would you want them to use? Would you prefer “I know and trust this person” or “I know nothing about this guy, but I get three hundred bucks if I can get you to use him.” I want people to refer me because they know I’m good at what I do and that I’ll take good care of their friends, not because I’ve paid them off.

At any rate, beware of brokers bearing bucks!!

What if You Have to Sell In This Market?

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Tue, 24 Feb 2009 18:54:51 -0500

So what happens if you have to sell you house in a down market?

Say you’ve been transferred. Or you got married, and two houses is one more than you need. Or your family is growing, and more square footage is now a necessity instead of a luxury. Or you need to downsize your home to meet your newly-downsized income.

As I said last time, (did I promise to write again “tomorrow”?) that isn’t necessarily a bad thing in this market. Many Denver neighborhoods are plugging right along, appreciating at a lovely rate. Others have just stagnated for the past few years. And yes, some have taken a market-value tumble.

Regardless, homes are still selling in this market. There’s more competition, to be sure. Gone are the days of sticking a sign in the yard and watching the buyers line up. If you want yours to be the one that sells, you need to put some thought into it.

The first step is to check out your competition. You obviously can’t see all of the competition, because most buyers are looking at more than one neighborhood. But you can see the immediate competition – the other homes on the market in your price range that are near your house. Have your realtor show you pictures of the listings. If possible, schedule an appointment with him or her to actually go see those houses.

These are the other houses your buyers are looking at on the same day they look at yours. They are your competition.

First of all, your house needs to be nicer than theirs. Obviously, if they have a remodeled kitchen and you don’t, you won’t remodel yours just to get the upper hand. But whatever is in your control that makes your house better, do it.

Update

A lot of updates don’t make sense when you’re selling a house. Others do. Flooring is one. If your carpet is old or worn or just unattractive, install new carpet. Sellers constantly say to me, “But won’t the buyers want to choose their own carpet?” Maybe, if they really thought about it logically. The problem is, buyers are not at their most logical when choosing a home. They’re emotional. And when they see ratty carpet, they think “ratty house.” New carpet looks good, it smells good, and it screams “new!!”

Paint is another good, easy, inexpensive fix. New paint, like new carpet, gives the house a “new” smell. It’s like new-car smell. It affects buyers on a level they can’t really describe. Plus, in warm neutral colors, it looks good. Incidentally, if you have any, umm . . . “bold” colors in your house, it’s especially important to neutralize them. With my buyers, houses get names. You don’t want yours to be “Purple Wall House.”

Minor kitchen improvements are also helpful. If your countertops or appliances are particularly dated, investing in new will pay off in the end. If your cabinets are old and worn, look into painting them. Put new hardware on them. There’s a lot you can do to make them look better without having to replace them.

Clean

Your house needs to be the cleanest. Trust me, buyers notice this. Not just the obvious things like trash in the middle of the room. Everything. You want shiny chrome. Dust-free corners. Clutter-free surfaces. Streak-free windows. Have the house professionally cleaned before it’s listed, and then keep it clean until it’s not yours any more.

Smells are really, really important. I’m a freak for smells. If a house smells funny or “off”, buyers notice. I have buyers who walk out if they don’t like the smell in a listing. Pets, food, trash – they can all affect the smell of a house.

The thing is, people often don’t notice the smells in their own houses. So ask a friend. Ask your realtor. Ask someone who will be straight with you. And then deal with it. If you have pet smells, thoroughly clean the carpet and any other surface the pet is exposed to. And then, ideally, send the pet on a vacation to Aunt Sally’s until the house sells.

Never ever try to cover up smells. It doesn’t work. I once showed a condo where the owner had obviously sprinkled cologne around to cover up some kind of obnoxious odor. It smelled like obnoxious odor mingled with cologne. It was disgusting.

Stage

To stage a home means to strategically arrange furniture and accessories to make the house more appealing to buyers. This is really important. I bring a professional stager in on all of my occupied listings.

If you have a vacant listing and you want to sell it fast, you might want to look into staging that as well. A vacant property can seem stark and cold. Stagers rent furniture to go into vacant properties, to make them look more warm and “homey.” It makes a big difference. Staged properties tend to sell sooner, and for more money, than those that aren’t staged.

Price

So after your house is updated and cleaned and staged, you need to price it. And not only does it need to be the nicest property in the neighborhood, it needs to be the best-priced.

Seriously. In the old days, we’d tell people that they needed to spruce up and stage their homes so they could sell them for more money. Today, we say that you need to spruce up and stage your home so you can sell it. Period. It’s hard to sell a house when there’s so much competition on the market. Buyers look at a lot of houses. Yours has to stand out.

Of course, your house may not be the nicest house in the neighborhood. Your neighbor’s house may be full of cherry and granite and marble. They may have diamond-studded stairs. All the more reason to price uber reasonably. The less your house stands out for being the nicest, the more it needs to stand out by being clean and well-priced for the market.

There are two kinds of houses that sell in this market. The first type is the junky, ripped up foreclosures that sell for far less than market value. The second type is homes that are nicer and better priced than their competition.

Trust me, you want to be in one of those two categories.

Remodeling to Sell? Think Twice . . .

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Wed, 25 Feb 2009 09:53:50 -0500

I just read the annual “Cost vs. Value” report for 2008. It shows how much common remodeling projects cost, and how much they increase the value of a home. Results are divided by region, with some particularly common projects broken down by metro area.

Guess what? In the Mountain Region, not a single remodeling project recouped its cost. In other words, remodel if you want to live in it and enjoy it. But don’t remodel to make money if you’re ready to sell. It apparently doesn’t pay these days.

Some examples: Replacing exterior siding was, nationally, a very popular option. Still didn’t pay for itself in most places. The national average gave it an 81% return on investment. In Denver, it gave an 84% return.

Adding a deck? Cost will be roughly $10,923. And it’ll add just under $9000 to the value of your home. New windows? 77% return.

And then there’s the old standard favorite, the kitchen remodel. It’ll cost around $21,000, but only add about $17,000 to the value of the home.

Why so little return from remodeling these days? Basically, construction prices are going up and home prices are remaining stagnant. So you’re paying for the increasingly expensive commodity, but not seeing a parallel increase on the return side.

Note that this is referring to remodeling jobs, not smaller “facelift” type projects. Painting, new carpet — projects like that are inexpensive, and tend to give a bigger bang for the buck at closing time. They change the “feel” of a house without the high price tag of a remodel.

So when it comes to projects that help a house to sell, think small and pretty.

Is Now a Good Time to Buy in Denver?

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Mon, 16 Feb 2009 09:41:35 -0500

In a word, “yes.” Now is most definitely a good time to buy real estate in Denver.

I remember Denver’s real estate bust in the 1980’s. I wasn’t living here at the time, but I’d come home to visit and see that I could buy a condo in Denver for less than I paid for my car. (Well, less than the average person paid for the average car. I don’t think my ride at the time was worth a whole lot.) I, of course, had no interest in buying any of these bargain-basement condos because a) I didn’t live here, b) I had no money, and c) I naively assumed that their value would always remain low.

If I’d only known then what I know now. If I had scraped together every dime I had, bought one of those condos and rented it out, I’d be thanking my young self for it today.

Unfortunately, my crystal ball is in the shop, so I don’t know at the moment when housing values in Denver will start to climb. The market indicators show that we’ve reached the bottom. So it should happen sooner rather than later. I don’t know if the wider economic crisis will delay it. I do know that Denver’s economy frequently runs counter to the national economy. Given that interest rates are likely to remain low, and that Denver’s employment situation looks "relatively" good, I have every reason to be optimistic about the Denver market.

So yes, I believe that this is an incredible time to buy. Market conditions have driven prices down in many areas. Housing is “on sale.”

Get in on the sale while you can.

I'm Rich! I'm Rich!

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Mon, 16 Feb 2009 09:49:14 -0500

I have super, super good news. I have inherited 2.5 million dollars!

I know what you’re thinking. she probably just got one of those random email from somebody in Ghana telling her she’s inherited money from the late somebody or other. But no, I’m not that gullible. I didn’t just get a random email from somebody in Ghana. I got a phone call from somebody in Ghana. Several phone calls, actually. And then a few emails, but they referenced our phone conversations.

So that’s way more legitimate, right?

Here’s what happened. This guy died. I didn’t know the deceased, I’ve never heard of the deceased, but apparently he died in a car accident along with his wife and daughter, who were his beneficiaries. He had no relatives, as he was an orphan who made his way to Ghana in 1975. Therefore, they have concluded that I am his next of kin, since we share the same nationality and the same last name. His name was Steven Beth’s Corner.

Huh?

I have to admit, this last part confused me a little bit. My last name isn’t “Corner” or “Beth’s Corner.” If it were, my name would be “Mary Beth’s Corner.”

Then I remembered. On my speaking web site (www.reallove.net), there is a section on the home page called “Mary Beth’s Corner,” where I post random tidbits that I think might be interesting to readers. Either by some massive coincidence an orphan named Steven Beth’s Corner has died with his family and my unfortunately worded home page has hampered their search for the legitimate heir (perhaps the elderly Mrs. Edna Beth’s Corner in central Ohio), or somebody with a particularly low IQ is attempting to scam me.

Do you think this means I don’t get the money?

Do I Need a Real Estate Agent to Buy from a Builder?

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Mon, 16 Feb 2009 09:53:40 -0500

The other day, I ran into someone I hadn’t seen in a while. She had just moved back into town, so I asked here where she was living. She looked at me sheepishly and said “I bought a house. I was going to call you but it was new construction and I didn’t think I needed to and the whole experience was awful and I really wish I’d called you first.”

A lot of people think they don’t need a real estate agent when they’re buying a new home from a builder. After all, they don’t need help finding a new house. The builders advertise all over the internet and the newspapers, and they have those nice models with the helpful salespeople who walk buyers through the whole process. What’s left for a real estate agent to do?

Plenty. First of all, those nice helpful sales people work for the builder, not for you. They’re not looking out for your best interest. They’re looking out for the employer’s best interest. If you don’t have representation, then there’s nobody in the transaction looking out for your interests.

Buying new construction from a builder is a lot different than buying an existing home from an individual seller. First of all, when you buy a home from a homeowner who is working with a real estate agent, the contract guiding the transaction must be the official Colorado Contract To Buy and Sell Real Estate. That contract was drafted by the Colorado Real Estate Commission, and is amended every year, to make sure that buyers and sellers are protected.

But not new construction. If you buy a house from a builder, you use the builder’s contract. The contract drafted by the builder’s lawyers, to protect the builder’s interests. Do you think those lawyers sit around trying to think of ways to look out for your best interests as a buyer? Don’t bet on it.

Second, you have those on-site sales people who, if you have no representation, will be instructing you and guiding you through the whole process. They’re often very nice people. I’ve worked with several of them whom I liked very much. But don’t forget who’s signing their paycheck. It’s not their job to see that your interests are protected.

How often, in this market, do you think unrepresented buyers pay too much for new construction? It’s easy for a buyer to assume that a builder knows the market, and that their homes are priced accordingly. But that’s not always the case, especially in a stale market. There are times when new homes are priced too high. When builders first set prices for a new development, there’s a little bit of guesswork involved. They don’t necessarily know that those initial prices will hold. That can be a big bummer for the first people to waltz in during the initial excitement period and pay the asking price. Because if the homes are overpriced, sales will usually peter out fairly quickly, and the builder winds up dropping the price. And that leaves the initial buyers in the position of having paid more for their homes than everyone else who moves in later. Guess what happens when it’s time to sell?

A good real estate agent will tell buyers when a new home is overpriced, and attempt to negotiate a better deal. If the builder isn’t dealing, he or she will advise the buyers to move on.

Sometimes, buyers attempt to purchase new construction without representation because they think they can get a better deal if the builder doesn’t have to pay an agent’s commission. That isn’t going to happen. Builders know that charging less to buyers without representation means charging more for buyers with representation, which amounts to penalizing buyers for having representation. That doesn’t make them look so good. It also hurts their relationships with local real estate professionals, and they really don’t want that. They need buyer’s agents to show their product to their clients. So they won’t stab us in the back by penalizing our buyers.

The cost of paying a buyer’s agent commission is built into the price of a house. The buyer is going to pay it whether or not any commission is paid. If the buyer is unrepresented, that money just goes back into the builder’s pocket.

The thing is, most builders expect Realtors to accompany clients on their first visit to a community in order to allow that agent to represent the clients. So call your Realtor before you start wandering through open houses. (Not working with a Realtor yet? Call me!) Personally, I’m happy to go wandering with my clients, even if they’re not sure they’re serious yet. And keep a stack of your agent’s cards with you. That way if you happen to pass by a model home and justhave to go in, you can hand the card to the onsite person, tell him or her upfront that you’re already working with an agent, and make sure the builder will honor your relationship before you go traipsing through the model.

Pick up the phone before you start looking. Call a Realtor. You’ve got everything to gain and nothing to lose.

Top Ten Tips for Repairing a Listing Before Market

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Mon, 16 Feb 2009 10:01:01 -0500

It’s getting more and more important to prep a house before putting it on the market. There’s a LOT of competition out there. The buyers who are looking at your listing are looking at a bunch of other listings in the same area. Yours has to stand out. What’s worse, some of that competition is bound to come from foreclosures. And they’re going to stand out because they’re priced 5% to 10% lower than yours. (I know that doesn’t seem like a lot as a percentage, but 10% of $200,000 is $20,000. That’s a lot of competition!)

So if you want to sell your listing without letting it go at a foreclosure price, it’s got to be in better shape than a foreclosure. Buyers might overlook bent screens, dinged woodwork and broken shingles if they think they’re getting a great deal. But at market price, they don’t like to see that stuff.

I saw a great article on MSN a while back on the top ten repairs to make before selling a home. It’s here.

My favorite part of this has to do with smells. I’m a freak about this. When I’m with buyers, we usually give nicknames to each house we see. It’s easier and more fun to remember a home as “Big Plaid Wallpaper House” than as “You know, the one on Vance Court. Two story, blue trim, 2000 square feet . . .”

And when a house smells, guess what name it gets. “Smelly Cat House.” Or “Weird Cologne Trying To Cover Up Smelly Cat House.” A bad smell will drive buyers away. So will a weird smell that’s clearly an attempt to cover up a bad smell.

If you’re selling a house that contains smelly pets, a smoker, weird or aromatic foods, or anything else with an overwhelming olifactory presence, you need to do some work. Get rid of the source of the smell. (Seriously, it’s best if Kitty lives elsewhere for a while.) And then clean or get rid of everything that harbors the smell.

I know it’s hard to for sellers to notice what their own house smells like. So tell them. Tactfully.

And hope they take the answer very, very seriously.

The Art of Negotiation: More is Not Always Better

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Mon, 16 Feb 2009 10:04:30 -0500

Part of being a good realtor is to negotiate well on behalf of clients. That, after all, is supposed to be the reason we exist as a profession — to look out for what is best for those clients when they’re buying or selling real estate.

But being a good negotiator is more than just the ability to be cagey or slick. It’s about understanding human nature and knowing what kind of behavior or “tactics” are appropriate in a given situation.

Case in point. Sellers get an offer on their house. The offer is significantly under market value, no doubt because the buyers have watched too much television news, and are convinced that all sellers are desperate and that they can swoop in and pick up real estate at bargain basement prices. The agent’s cover letter lists a couple of minor issues — like the color of the bedrooms and the “need” to replace a small area of perfectly good but not perfectly new carpet — as the reason for the low offer.

Sellers are annoyed, and have no interest in selling at the offered price. They’re preparing to counter at a reasonable price, and gritting their teeth because they suspect that even if they do reach a mutually acceptable price, these won’t be easy people to work with.

And then, lo and behold, another offer comes in. So it’s a multiple bid situation. (Yes, it still happens in this market — more often than you might think.) Throughout the negotiations, agent #1 and her buyers are clearly “playing the angles” — refusing to commit to or sign written counters, keeping their offers verbal, trying to stay as low as possible until the last possible moment and then suddenly bumping up. Meanwhile, agent and buyer #2 are cooperative and pleasant. Buyers don’t hide the fact that they’re in love with the home. They sign and return counters immediately. They work in good faith within the framework sellers have set up.

In the end, both prospective buyers have come up to a price very close to asking. #1’s final offer winds up being slightly higher (after literally bumping it up $6000 in 5 minutes after realizing they were falling out of the running).

And yet the sellers choose #2. Why? Because a real estate transaction is about more than raw numbers. Determining a mutually agreeable price is just the first in a long series of negotiations culminating in the close of the sale. There’s inspection, negotation on what repairs will be done and when, and the host of unanticipated issues that can arise during the contract period. Even if buyers and sellers never meet, they’re working together. They know when the other party is being difficult, and it affects everybody involved in the transaction. I’ve seen it happen over and over again. When you get one party, be it buyer, seller or agent, who is overly defensive and paranoid, the stress level goes up all around. Everybody becomes defensive, and subsequent negotiations are drawn out and difficult. When everyone is cooperative and looking to be fair and reasonable, the entire contract period can actually be a pleasant experience.

The sellers in this case are good people who want to be fair and want to do the right thing. And they want to work with somebody they trust to be on the same page.

None of this is to say that there’s anything wrong with seller’s working to get the best price they can for their home, or with a buyer trying to get the best deal possible. That’s what we do for our clients. But are better and worse ways to go about doing that. In an impersonal corporate situation, or in a case where one party has proven untrustworthy, perhaps cagey game-playing is the way to go. But when families are buying and selling their homes, it’s not the time to play slippery ace negotiator.

It can backfire. Badly.

We Make Ugly Deals

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Mon, 16 Feb 2009 10:10:41 -0500

You’ve probably seen the “We Buy Ugly Houses” billboards. They’re done by a company called Home Vestors, which buys houses for below market rates, for cash, with quick closing times. It’s a set-up that appeals to people who are so desperate to get out of a house quickly that they’re willing to take less than what they could get if they took the time to list and sell the house on the open market. I’ve never had any contact with Home Vestors, so to the best of my knowledge they’re perfectly honest and do a good job at what they do — which is buying houses for a lot less than their owners could otherwise have sold them for.

I HAVE, however, had some experience with at least one independent businessperson (NOT affiliated with Home Vestors) working on the same basic business model. And I didn’t find him to be quite so honest.

A woman called me because this “nice man” had, for the past three years, been coming to her home offering to buy it. Over time “offering” had become “pressuring.” She was feeling like it was time to sell, and was thinking of taking him up on his offer because it would involve a lot less hassle than going through the whole listing process. It would have been VERY easy, what with him showing up at the house regularly with pen in hand, insisting that she sign. I asked her to show me the contract.

Holy cow! I don’t know where to being with all of the subtle ways he was ripping her off. We can start with the price, which was WAY below what I knew the property was worth. Then there was the non-existent earnest money. And the clause where he had the right to immediately begin repairs to the house — and she would be contractually obligated to pay him two dollars for every dollar he spent. And the other clause where if she changed her mind, he would sue her and she would have to pay for all of his attorney’s costs.

It went on and on like that, but you get the idea.

I told her to run and run fast.

She asked me to list the property for her. I did — at $70,000 more than he was offering her. And it went under contract in a single day.

That’s a whole lot more money in her pocket for really a lot LESS hassle than she would have gone through continuing to deal with him.

The moral of the story? Beware of deals that look too good to be true.

Sellers who use a realtor make more money

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Tue, 17 Feb 2009 22:59:31 -0500

Before I was a Realtor, I was a “realtor-wannabe.” I was always the one volunteering to help friends (and sometimes total strangers) look for a new home. When somebody new moved into town, I was the “chamber of commerce” — giving them tours, showing them neighborhoods, talking through their housing options. I loved doing that, and it’s one of the reasons I hung up my “amateur” standing and became a professional Realtor.

But one time I took it too far. I tried to sell my own home as a “for sale by owner” (FSBO). “Why not?” I thought. “It’s a hot market, I don’t need help finding a buyer. And I could put all of that extra money in my pocket.”

Famous last words.

It WAS a hot market, so it only took a couple of open houses and I had a buyer. Buyer didn’t have an agent either. It was just the two of us — the blind leading the blind. One of us (I don’t remember which) found a contract template at an office supply store, we wrote it up, and we were good to go.

Or so we thought.

I got a call from the title company a few weeks later. Any conversation that starts “Gee, I’m glad I’m not you,” can’t possibly end well.

The house hadn’t appraised for the agreed-upon sales price. The buyer was freaking out. I had no idea whether or not I had to let her out of the deal, or if I could force her to buy it anyway. I didn’t think my templated contract had given her an “out” for appraisal. I called an attorney, who told me I didn’t have a leg to stand on. She walked — no, ran — and I called a Realtor.

Looking back on that episode from the perspective of all of the real estate training I’ve had since, I see that the transaction would have been doomed 19 different ways even if the property had appraised. She wasn’t planning on an inspection. I had never had it inspected, so I had no idea what lurked behind the walls. I had no familiarity with the various disclosures required by state law.

It was a lawsuit waiting to happen.

Believe me when I say that I understand the temptation to try to save that 3.2% of the purchase price. It’s a lot of money to any homeowner — it was a lot of money to me then, and it’s still a lot of money to me now.

But what I’ve learned is that the math isn’t so straightforward in a home sale. At the end of the day, someone who sells by owner probably doesn’t wind up with an extra 3.2% in their pocket. In fact, the best statistics I’ve seen show that it’s the sellers who use an agent who wind up pocketing more money — a lot more money. According to National Association of Realtors’ Profile of Home Buyers and Sellers for 2006, FSBO homes sold for an average of 36% less than homes sold with a real estate agent. That’s thirty six percent. Not three point six percent. Thirty six. Over one third.

It makes sense to me. Realtors know how to prepare a home for sale. They know how to market it. They know how to position it to maximize the sales price (without, mind you, pricing it so high that it won’t appraise and the buyer runs off like a scared bunny.) And, most important, they know the ins and outs of the sometimes very complex laws and paperwork and disclosures, so that a post-closing lawsuit doesn’t sap whatever profit may have come from the sale.

Another factor: when buyers see a FSBO, they immediately start doing math in their heads. “Let’s see, if they’re not paying an agent, then I’m knocking 3.2% off my offer price.” And if they’re not coming in with a buyer’s agent, you can bet that another 2.8% is going to come off the offer as well.

I can’t guarantee that any one home is going to sell for 36% more with an agent than it would as a FSBO. But I’m pretty danged sure that the difference is going to be enough to make it well worth your while to hire a real estate professional.

The Denver Market is Coming Back!

Mary Beth Bonacci CRS, SRES (RE/MAX Alliance) — Mon, 16 Feb 2009 09:45:19 -0500

Everywhere I turn, I hear that the Denver market has turned and is poised for a rebound. Great news. But I wanted to see exactly where all of this optimism was coming from. So I started digging into the numbers.

The numbers look very, very good.

From September 2007 to September 2008, inventory (the number of homes on the market), dropped nearly 20%. The number of houses sold increased 15%. The average days a home is on the market before it sells dropped 5%. And – get this – the “months’ supply” of homes on the market dropped a whopping 30%.

Why does this signal a rebound? Because the problem in our market (and in any difficult real estate market) has been that we’ve had a lot more sellers than buyers. And — thanks to the law of supply and demand – when you have less demand for a product, the price tends to drop. How do we know we have more sellers than buyers? Inventory. When a lot of houses build up on the market, we know we have more people trying to sell their houses than we have people willing to buy those houses. So, with all of the competition for fewer buyers, houses sit on the market longer, reflected in the average days on market statistic. All of this leads to the “months of inventory”, which is what you get when you take the number of houses on the market divided by how many are selling every month. That tells us how long it would take to sell all of those houses if no new houses were to come onto the market.

When more houses are selling and less houses are sitting in inventory, that tells us that the market is becoming more balanced. It tells us we have more buyers in the market, buying houses and reducing inventory.

Why has this happened? Well, the average sales price might give us a hint. It has dropped 14.8% in the past year. Median sales price dropped 11.8%. Apparently prices have dropped to a level where homes are attractive to buyers. It’s the law of supply and demand again. When the price drops, demand increases. As demand continues to increase, prices rise to meet the demand.

At any rate, it’s very good news for Denver real estate.