A Word About Independent Brokers

19 Jul

Many of the real estate professionals represented on this site are independent brokers.  What does that mean?  An independent is a broker who does not work for a large franchise brand name– you know, the ones you see doing all that mass market advertising on tv and other media. You may have never heard of some of the firms run by independents, but that doesn’t mean they’re not among the best in this business.  Here’s an excerpt from a recent Realty Times article discussing how independents successfully share the same playing field with the big guys:

“The real estate industry is run by independents.  Despite inroads by franchise brands to scoop  up aging brokers’ companies, providing them with  an exit strategy, half of brokers range from mom and pop shops to sizeable independent firms with multiple offices.  The other half are franchise owners, or franchise-owned brokerages.   It came down to reputation and community identity that was worth more than a national brand name, according to the players…”*

Whether an independent is a 1 or a 100 person office, you can be sure you’ll be getting your money’s worth.  This is not to say that their colleagues in the franchise companies are not worth your time, for many of the best and the brightest are among their ranks too.  We’re just saying that the average experience level of independents probably exceeds that of the average franchise broker.  As a matter of fact, most states require a certain level of experience before a broker can even be licensed as an independent. So it is no wonder that a majority of independents started their career working for a franchise or a large independent.  Only after enough time in the trenches did any of these brokers bravely decide to go out on his or her own, without the security of a major brand name.  Check out your local independent broker.  You’ll be glad you did!

*Click here for complete article in the Realty Times on Independent Brokers

Paul Hill has been a real estate broker since 1994.  Having worked for both a franchise broker and a large independent, he struck out on his own some time ago to form the Property Owner’s Network.  Paul’s working motto is “I’ll never tell you what you want to hear, unless its the truth!”   Paul is also the founder of Independent Real Estate Brokers of Colorado (IREBCO), an association of independent brokers.


Worried About Buying a Haunted Home? What’s the Real Estate Industry’s Take on Haunted Houses?

24 Jun

There have been some changes in Colorado real state rules and regs re buyer agency and disclosure of psychological stigmas. This article has not yet been updated and does not reflect these changes. Contact the author for updates.

Haunted Houses have been the source of many a scary story, and the practice of real estate has not been immune to them. Ask any real estate broker who has been in the business long enough if he/she has ever had a strange experience in one of the homes they were showing or selling. Whether a believer or not, many would admit that they did.

Consider the broker who is selling a home in a nasty divorce situation… sometimes one can just sense the acrimony, even though it may now be vacant. There is a spectrum of energy left in homes, ranging from just a little bit to downright humongous! Consider a home where there was a murder, a suicide, or some other kind of violent energetic episode, and you may be considering a haunted house!

How do you as a buyer of real estate know whether a house is afflicted with negative energy? Your own perceptions are the first to be acknowledged; if you just don’t feel good there, perhaps it is best to move on. But if you are persistent, and you think the home is just “too good of a deal”, some remedial action is possible. Hiring a feng shui consultant or a house healer may be in order. In more extreme cases, a priest or minister can be asked to bless the house, or a psychic can be called in for a session. If you’re more inclined to the high tech approach, bring in your local ghost hunters with all the latest equipment. We won’t talk about exorcisms, the most extreme solution.

What if a broker thinks that a home for sale is haunted? Does she have a duty to tell the buyer? Colorado real estate law does speak to this issue: under Section 38-35.5-101 of the CRS Statutes:

Nondisclosure of Information Psychologically Impacting Real Property we note in Paragraph 2…
“No cause of action shall arise against a real estate broker… for failing to disclose such circumstance occurring on the property which might psychologically impact or stigmatize such property.”

Language in the standard listing contract in Colorado has been revised to read:

5.2. Broker must not disclose the following information without the informed consent of Seller:
91 5.2.1. That Seller is willing to accept less than the asking price for the Property;
92 5.2.2. What the motivating factors are for Seller to sell the Property;
93 5.2.3. That Seller will agree to financing terms other than those offered;
94 5.2.4. Any material information about Seller unless disclosure is required by law or failure to disclose such
95 information would constitute fraud or dishonest dealing; or
96 5.2.5. Any facts or suspicions regarding circumstances that could psychologically impact or stigmatize the Property

In other words, Colorado law makers didn’t want brokers to be able to inadvertently stigmatize a property by saying it was the scene of emotionally violent acts like murder or suicide, let alone being haunted (see Related Story for a different state’s interpretation).

On the other hand, you as a buyer would certainly want to know this before you inherit some things in the house you may not want. But what if a property has a well known reputation, like Briarhurst Manor in Manitou Springs? When it was recently on the market, the listing broker made no bones about disclosing the “haunting.” But since it was purchased there has been no further news. If it were to come up for sale again and I was the new listing broker, would I disclose the alleged haunting to an uninformed buyer (Better to Disclose)?  Only if I could get the consent of my client in this state, even though one could argue it would be hard to stigmatize a property that already has such a reputation.  Would I disclose as a Buyer’s Broker who represented the buyer and not the seller?  Yes.

But what if that property in Colorado* did not have such a reputation, and you were shown it as a buyer? What if you sensed something wrong? Even if you were convinced it was haunted and the broker showing it agreed, the next time he showed it to a different buyer he would not be required to disclose his opinion.

Haunted Houses are part of the real estate market and part of our modern culture, regardless of what you may or may not believe. Whether you’re buying or selling, it dosen’t have to be Halloween to sleep well in a haunted house!

Paul Hill
All Rights Reserved

*Most states have their own laws regarding disclosure of  psychologically stigmatized properties due to death, murder, suicide, etc., but may not specifically refer to hauntings, ghosts, or other paranormal phenomena. Consult your local broker or your state’s department of real estate for details.


Selling Points!*

23 Jun

Traditionally, one buys a home using the same tried & true criteria:  price, location, condition, square footage, bedrooms/baths, amenities. There are of course other items, but these are among the most important.  A choice is made on financial considerations as a function of the physical parameters of the property.  Is the home worth what you can buy it for, given its physical attributes?  If you decide that it is, you or your broker will draft an offer and negotiate the sale.  Once it’s accepted, your lender’s appraiser will evaluate and confirm its value by comparing it to similar properties that have sold.  Successful inspection, title work, mortgage commitment… then off you go to closing!  Unfortunately, too many new owners experience some degree of buyer’s remorse when they realize, perhaps months or even years later, that their home’s life is not what they expected.  The reasons for this are many.  Maybe a hidden defect becomes apparent as time goes by.  Maybe the owner’s sense of community and shared values is compromised as the true nature of the home’s setting unfolds.  There can be many other negative results, but prior to making an offer, employing a more holistic approach using the following Selling Points* criteria can assure better outcomes…

Character.  A home’s character can be defined as a unique set of attributes that provide depth and dimension to the experience of inhabiting it.  Yes, this is a subjective determination, but most of us know when a house either has it or lacks it.  The factors that determine character may be architectural touches, the layout of the floor plan, or the building materials used, but each contributes to a secure sense of place and comfort.

Aesthetics.  This is closely related to character.  Again a subjective call, but the fact is homes that are visually pleasing in terms of design, landscaping and setting have a positive curb appeal that enhances both current value and insures the appreciation of future value.  Financial aspects aside, a family will feel good in a house that looks good!

Privacy.  One of the most overlooked aspects of home buying, privacy is a function of both sight and sound. You want to be insulated from sight lines that allow your neighbors and passers-by to look into your life, and at the same time you don’t need to see unpleasantness around you, whether it’s transitory or permanent.  Sound becomes a factor if it constitutes noise pollution… detracting from your sense of privacy and often undetected on a first or even second showing, especially if it occurs randomly or in the wee hours.

Eco-Consciousness.  We can broadly define  eco-consciousness as an awareness of your home’s proper place in the ecosystem.  Some places contribute to it better than others, but as applied to a house, we think of how it does or does not integrate with you, it’s local environment, and our planet as a whole.  Eco-conscious variables include the positive benefits of solar gain and shade, natural light infusion, energy efficiency, and water purity and availability.  Negative forms include anything that diminishes integration with our environment or damages our health, from light, noise, odor, water and air pollution to toxic contamination.

Sustainability.  A close cousin to eco-consciousness, sustainability in housing refers to how they are built, maintained and improved.  Whether building new or remodeling the old, did you or the contractor use long lasting, energy efficient and whenever possible recycled materials and non-damaging construction techniques?  You want your home to be built with as little resource depletion as possible, and you want it to outlast your mortgage!

Energy Flow.  Every living space (and workspace) has a flow of energy in, around, and through it.  Asian philosophy calls this flow Qi (chi), and the study of it in living spaces is feng shui .  Whether you believe in this phenomenon or not, today more and more real estate practitioners are evaluating this characteristic for their clients.

While a prime determinant of positive energy flow is the arrangement of your home’s decor, it is also a function of your home’s setting, design and floor plan, which cannot easily be altered.  Better to select a property with optimum energy flow to start, and enhance it later with your own decorating and furniture designs.

Physical & Spiritual Health.  Eco-consciousness is to sustainability as energy flow is to both physical and spiritual health.  On the negative side, houses and the living spaces within them are energetic containers that absorb and hold not only germs and pollutants, but also the bad experiences of those within it.  These may linger after who or whatever introduced them are long gone.  On the positive side, most people would prefer that their home hold in sunshine, warmth, the smell of homemade cookies, and the sweet memories of those who had lived there before.   Physical things:  There are things in and about a home that can damage the structure, make you sick, or hurt your children!  Here is just a partial list:   bacteria & virusnatural cleanersradonmoldexpansive soil, lack of fresh air exchangersdustchemicals from carpetingChinese drywallPVC pipelead paint or pipeswindow blindsformaldehyde insulationgas appliances, etc.   Non-physical things:  Like energy flow, the spiritual health of a house can be felt by those sensitive to its influence, but it is important to know that it exists independently of your belief in it.  Those who live in negatively affected space may begin to feel that way themselves, as poor spiritual health in your home has a cumulative effect.  Living spaces can and should be screened for this condition before a purchase is made.

Topography.  The lay of the land… topography (and its inverse, subography) determines more than anything else how well your home is situated on the planet, and it’s degree of connectedness to surrounding areas.  Was the soil appropriate for building; is it fertile enough for planting and gardening?  On your lot are there elevations, pathways, natural barriers and openings, flat areas, rock outcroppings, and room for dogs and kids to roam?  

On the negative side, does your house lie above or near a geologic fault line; is it literally “undermined” by old mining tunnels (not uncommon in western Colorado), or is your lot’s underlying substructure ideal for gas or oil drilling?  Most owners in Colorado own only surface rights to their property, and seldom possess the mineral rights beneath (also learn about the 1951 Oil & Gas Conservation Act).

On the positive side, is your home on or near a desirable natural formation, like a south or southwest facing slope or hillside?  Are there views of landscapes or cityscapes that you need to augment your imagination and creativity?  To let your mind and body roam, is your property adjacent to a national forest, open space, or even a golf course or cemetery?    Does that empty land across the street promise to remain that way via conservation easement, or is it subject to development beyond your control?

Access to Resources.  Whether you as a homeowner are outgoing, community-oriented and gregarious, or self-sufficient, individualistic and to-yourself, your access to resources outside the home is important. Where your home is in relationship to other people, places, and things should be strongly considered. Things like gas prices and traffic will not only affect your commutability to work, but also your convenience to quality schools, adequate shopping, and availability of family and friends. More importantly, time and distance from providers can be critical when it comes to both emergency and routine health care.   Walkability measures how easy and convenient it is to walk (or bike) from your house to where you have to get to on a daily basis without using gasoline!

These are resources that just about everyone needs.  Cultural amenities like libraries, universities and museums also mean a lot to many people.  Natural resources outside your property, like parks, hiking trails, running rivers, etc. are equally as important to others.  Living in the country can be isolating or rewarding, whether for the purpose of quietude and privacy, or simply as a matter of perceived survival. Similarly, life in a suburban subdivision can be sterile and conforming, or it can be comfortable and secure. Know thyself; understand your fit into the rural, urban, and suburban cultures around you, and you will know the resources you require…

Safety & Security.  Often used interchangeably, safety can be defined as your immunity from danger, whether accidental or the result of deliberate behavior.  Security refers to the protection you establish to insure your safety. Feeling safe where you live involves many elements, including good police & fire departments, a low crime rate, gated communities, neighborhood watches, home security systems, etc.  Protecting you, your family and your property against the ever-present threat of criminal behaviour or the possibility of accident is not to be underestimated.

*  *  *

Additional Helpful Links:

Sources of Indoor Air Pollution

*Selling Points is a proprietary system of evaluating and selling residential property.  Copyright 2014, Paul Hill, All Rights Reserved

Broker, I need you… broker, get lost!

24 Jan

The above sentence describes the biggest love-hate relationship in the residential real estate business. More and more I’m seeing FSBO’s (For Sale by Owners) trying to sell on their own while at the same time inviting a broker to bring a buyer if they can’t find one themselves. If the broker does and the sale closes, they’ll pay that broker a so-called “co-op”; i.e., about half of a typical commission for their trouble. But in addition to beating the seller at the who finds the buyer first game, the catch for the broker is that she has to show up at the seller’s door with that buyer in hand. No advertising, marketing, knowing the owner or even much about the property itself is required ahead of time! Just get that buyer to show up and make a good offer, and everything will be ok.  In theory.

There are a few more complications, like at what point does the seller sign something to promise to pay that commission at closing? Normally, that’s a listing agreement.

But while our seller embraces this marriage of convenience with a “buyer’s agent” for as long as he or she is needed, they’ll sic the dogs on anyone who shows up wanting to get a relationship in writing ahead of time. You may have seen the ads saying “will work w/ a buyer’s agent, but please no calls from listing agents!” Of course sellers do get hassled to death hearing from ambitious brokers who may want to list their property. But that annoyance does not mean the seller should completely trash the idea of working with a good listing agent.

It doesn’t have to be stay away you agents who want to know for whom you’ll work and what you’ll have to do to earn a commission. Yes, that’s called a “listing.” But some sellers think its easier to fly without one, feeling a buyer’s agent and a listing agent are two different kinds of people that work under two sets of rules. Its as if one had 3 legs and 2 arms, and the other 2 legs and 3 arms. While its true that any agent can specialize in working exclusively with buyers or sellers, by and large most good ones do work under one set of rules and can competently and fairly handle both sides of the same street. If I were a buyer, I wouldn’t want to work with a buyer’s broker who had no “on the street” experience with representing sellers. And I couldn’t see the reverse either. One broker has to know what that other broker is thinking since neither one can represent both parties at the same time for the same property. In Colorado, one broker can represent the buyer or the seller, or neither as a neutral third party (a transaction broker), if non-representation is what the customer really wants and just needs someone to shuffle the paper.

Listing agents look for buyers for properties their clients are selling; buyer’s agents search the MLS for homes for buyers they already have (though many buyers checkout properties they find themselves online).

But too many buyer’s agents don’t even look at FSBOs, as they’re not all organized into a single database and thus hard to find. Even if they found the right FSBO, they would have to work with both their buyer and the seller at the same time in some capacity. Some don’t want to do all that work for a half commission (they’d rather do half that work for half the commission). Easier for them to steer their buyer towards an MLS listing that comes complete with another broker ready to share the work.

ADVICE: Sellers, think about working with someone smart enough to market and understand your property from both points of view. Find someone who knows the subtleties and nuances of this complicated market, including the psychology and economics of selling solo. Define the relevant relationships and put it in writing.  Look for someone savvy enough to snag a prospective buyer to come out, take a look, and write an offer maybe. Or at the very least, work professionally with another broker who is already working with their buyer.

Two more Important Safety Tips: 1) with the proper agreement, a FSBO can continue to sell on their own for no commission while their broker seeks a buyer, and 2) all commission rates are negotiable!

A good broker tells his or her client about this stuff, and then does the job professionally for both buyers and sellers, spelling out who does what for whom and how they intend to do it ahead of time. Listing agent or Buyer’s Agent, they’re just two sides of the same coin.


Why It Costs So Much to Sell Real Estate

8 Aug

Just about every real estate broker uses the same process to sell your home. The idea is to post your property information to a large database (the Multiple Listing Service–MLS) so that another broker with a buyer in hand finds it and comes forward. The product of the process is an outcome: your property, sold. No one can argue with the product/outcome, but one can question the process that gets you there.

Every product has its price, based largely on the process used to make it. In the case of real estate,the price has to be sufficient to pay the two brokers who are responsible for the process: a relatively large commission which used to be as high as 7% or more for a typical single family home. But due to competitive pressures, in the last few years its fallen to a mathematical average of somewhere between 5 and 6% (our guess).  That percentage of the final sale price has to be shared between the two brokers, which is in many cases 2.8 or 3% to the selling broker (the one with the buyer), and the rest to the listing broker, which could be 2 to 3% or less. Its important to note that there are no standard commissions agreed upon by brokers, as that would be price fixing, which is illegal. So the rates do vary a bit, but tend to be in these ranges.  But gross commission rates (and even broker “splits”) cannot be fixed by prior agreement among brokers!  When we discuss “average,” we mean the mathematical average of a given set of rates contained in listing agreements for a given area or office.  Of course we are not privy to that information, so our numbers are purely theoretical and anecdotal.

Each broker takes home a check from the closing, made payable to that broker’s boss, the owner of the brokerage. Then the boss usually pays only part of that check to the broker who earned it. This could be as low as 50%, or range on up to 70 or 80% of the take. In so-called “100% shops,” the broker can keep all of that payment if he or she had been paying his boss a hefty monthly fee all along.

For example if home sells for $300,000 and the seller has promised to pay the listing broker 5%, the total commission due at closing is $15,000.  But the listing broker via the MLS has promised to pay the broker who brought the buyer 3%, so he has to pay her $9,000 from that $15,000, leaving the lister $6,000.  So both brokers go back to their respective offices and hand over the checks to the managing broker.  One manager may have a 50/50 commission split contract with his broker, so he cuts him a check for 1/2 of the $9,000, or $4,500, and keeps the rest for the company.  The other broker’s boss might have an 80/20 compensation agreement with his broker, so he takes the $6,000 and gives the lister a check for $4,800 and keeps the difference.

So that’s the system. A process that hasn’t changed very much since the MLS was invented, It certainly hasn’t changed much since 2008, when the real estate industry suffered its greatest slide since the Great Depression.

The challenge to sellers these days is twofold: at what price point do you offer to sell, and assuming you’re not selling on your own as a For Sale by Owner (FSBO), what broker do you hire if everyone uses the same process to achieve the desired outcome? We’re all selling the same inventory on the shelf with the same tools in the same way!

When it comes to selecting a broker, a recent National Association of Realtors survey found that only 3% of respondents thought that the real estate company itself was the most important factor. There were other factors, but most respondents (24%) felt that honesty and trustworthiness were the most significant factors, something much harder to quantify. Sellers have added some intangibles to the mix along with hard money costs.

If only you knew a broker who was honest. worked differently, and charged less for the desired outcome, you could wind up with less anxiety about who’s taking who to the bank, and more money in your pocket at the closing table.

Real Estate Has Changed

5 Jul

…but the way most buy and sell it has not. After surviving the worst downturn since the Great Depression, brokers are using the same  business model they used just before things went south. You’d think they would have changed the way brokerage is now practiced:  one property; two brokers; one large commission.

As we still recover from the bubble that burst, we find values rising again along with interest rates–an anomaly.  Usually rising interest rates put a drag on rising prices, as buyers get progressively unable to qualify as rates go up.  Prices then stabilize, or begin to go down if rates continue the uptick.  But we’re somewhere between the lines as of this writing.  The only reason prices continue to rise is because inventory remains relatively low while demand is still increasing. Fence-sitting buyers are figuring this out and jumping into the game.  They know that if they don’t act soon, rising rates will keep them on the sidelines whether they like it or not.

So as the old Chinese curse says, may you live in interesting times.  We are in interesting real estate times to be sure.  Some of the hot hot markets are beginning to cool a bit, and the marginal markets around the state are still wondering when the latest boom is going to hit them.  Sellers succeed depending on where they are, while buyers are still having a heck of a time qualifying for mortgages and competing for available properties.

My favorite old non-Chinese proverb says:  if you don’t like the rules of the game, make your own game and write your own rules. If enough dissatisfied buyers and sellers did that, the rules of the game of real estate would change and we might avoid these dramatic imbalances in the market.  How about a buyer for every seller?  Sounds like a chicken in every pot, doesn’t it?  How about a listing broker who sells his or her own listing and charges only 1/2 the typical commission?  Crazier still.  How about banks who open the gates just a crack more to let more prospective buyers get loans?  I must be nuts…


Visit http://www.ourcoloradohomes.net for more info.