Gateway Village Denver, cO

As you know we just listed this spectacularly remodeled home for $169,900 on Monday.  Today is Wednesday.  This speaks to just how prompt you are as a buyer’s agent.  Thank you also for excitedly calling me from the property to let me know you were putting together an offer and that you will need a response this evening.  Needless to say, this marked a bit of a high point for my day.

Thanks for sending the 40MB scanned offer directly to my email in separate pieces.  In the email,  I could not help but notice the long list of letters following your name.  You are certified as a specialist in residential property and since you passed the $225 dollar class, you are now an expert negotiator, congratulations.

Unfortunately,  it appears your offer is going to fall a little short.  Let me explain.   Prior to listing, I spent quite a bit of time with my client determining exactly where the property fell with regard to the competition.  That is no doubt why you, who have been feverishly trying to find a property for your buyer, noticed that my listing was the best property available in the area that falls in the price range that your client is looking at.

Thanks for making me aware of the sold comps as well.  You must think that I had not considered them when arriving at the list price but I actually have.  You see, just because one floor plan sells for a price does not mean that is the absolute value of the property.  Apparently, some appraisers like to compare properties by the condition and the square footage.  So a similar home, a little smaller than my listing, that sells for a price that suggests $120 a square foot was an appropriate price may suggest my larger home is also worth $120 SF.   Of course, that’s not an absolute either but is an actual method some people use to find value when homes tend to vary a little bit from one another.  Either way it doesn’t matter, we are only asking $101 per SF and the appraiser will have no problem seeing the difference between a distressed property and a non-distressed property. 

As a general suggestion, when you want to know what a home is worth, you probably should not start by comparing it to a foreclosure or short sale…unless of course it actually is.  This home is not a foreclosure or a short sale.  In fact, as you had noticed, this property is not distressed in any way.  It is actually quite nice, or as you point out, perhaps too nice. 

Yes, my client is an investor and yes we did recently purchase this property at the public trustee’s auction.  Yes, I do believe that he should make a healthy profit on this home.  You might take note that what he paid for it at the auction has nothing to do with what the property is actually worth.  To put it in perspective, what would your client offer if we took away the appliances and features that make this home so nice?  Also, what if the home didn’t have title insurance and could not be inspected?  In fact, let’s pretend you couldn’t even see inside before you made your offer and your buyer had to pay all cash.  Clearly, this is not the same situation as when my seller purchased the property and in many ways, it is not even the same property as was purchased at the auction. 

As you explained to me, your client doesn’t qualify for the list price so it’s really not worth making a counter.  Thanks, that makes my job fairly easy though it does confuse me a little bit.  Shouldn’t the buyer qualify to buy the homes you are showing him?  Now I do not want to tell you how you should run your business but working with buyers that can actually buy the property you show them will make you much more effective.

What really confused me is that you then explained that he didn’t necessarily need all the closing costs you also asked for.   Really? 

I’ve also noticed that you seem to be using the “let’s see what sticks” method of negotiating.  Personally, I don’t believe in it.  It’s right up there with the idea that you could offer $20,000 dollars less and we should just meet in the middle.  Is that what is taught in the negotiation expert certification class?  I’d love to know because if that’s the trick, then I could save my money for the certification that says I work well with senior citizens.  So my question is,  why all the coy games?

Thanks for sending over the heavily redacted and initialed contract that seems to be filled out incorrectly.  Per our conversation, you mentioned you sort of needed that money for closing costs then mention it in multiple locations throughout the contract.  A couple years ago, the Colorado Real Estate commission changed the standard purchase contract so that, now when you do that,  I have to add them all together effectively doubling the amount you had mentioned to me on the phone.    I am sure if you had closed more than one buying transaction in the last 3 years, you probably would have realized that…then again…maybe you did realize it and were just trying to be sneaky.  I would certainly be impressed if that were the case. 

 Either way, as written, the contract cannot be accepted as is.  Of course, this makes your initial offer a bit of an exercise for all of us rather than an actual offer that could be accepted but thanks for keeping me on my toes.

As far as a counter offer goes, I’m not sure we should bother.  Especially since your buyer doesn’t qualify for anything higher than your offer.  Wouldn’t my seller be at risk accepting an offer from your buyer at a higher price now that we know he simply won’t qualify for the loan?  I’m afraid we’re going to have you talk to someone we trust at an actual bank that can let us know if we’re wasting our time or not.  Your  ‘conditional’ preapproval letter from your mortgage broker  is not a preapproval letter and we can’t treat it as such.

Again, thank you very much for your offer.  While it seems to be a complete waste of my time, it is not.   Because of your efforts, I know I have a hot property.   To be on the market just two days and to already have an offer, that must mean I’m doing something right.  I know that we must be  one of the best properties available in the area and in this price range, otherwise you would have written your offer on a different property.  This makes me quite optimistic of getting an acceptable offer worked out for my seller though I’m quite sorry that it probably won’t be with you and your client.

Sincerely,

Spencer Barron

1464 S Benton St - FlatGrass Realty

We have had multiple offers at, above and below the list price from investors willing to pay cash. Why? Because investors work from what it could be worth to them rather than the list price. Most of the offers (not all) we received from traditional buyers tended to net a value under the list price. If the traditional buyer did their homework, they would know that the home is worth much more than the list price. The list price was just a tool to attract attention or to get a cash buyer involved. The same home down the block sold earlier this year for around $170,000 and that wasn’t even a full remodel. This home could fetch $175,00-$180,000 with a good remodel.

This home’s value is being held down by a handful of local foreclosures that though comparable on paper, sold in days to investors. Some of which have already been flipped. I’m guessing most agents didn’t take the time to look at what it could be worth, the ‘adjusted retail value’ of the property.
This is just one example, if you want to see lot’s of examples, take a look at the HUD bid statistics that come out each week. You’ll be able to see all the bids. You’ll notice that the vast majority of buyers make a ’shot in the dark’ approach to their bid rather than considering the actual value of the home. That’s frustrating for me to watch. Whereas I’m working to attract an investor offer, HUD prioritizes owner occupants over investors. This can be a great opportunity for the average buyer to put themselves into a home with a great equity position. If only they (or their agent) would do the math.

New Federal law effective from August until December 31, 2012 says they can stay through their previous lease as long as they continue to honor the terms of the lease. Alternatively, a 90 day notice is given for the renters to vacate.

You can see more of it here.

I’ve always tried to take the best photos possible for my listings. Sometimes it means making multiple trips to the listing just to get the right lighting. Recently though, I began employing new HDR (high dynamic range) photography techniques using my digital SLR camera that have significantly improved both quality of the pictures and the number of showings I get to my listings.

Often, HDR techniques are used for an artistic rendered effect but you can often take advantage of the process for difficult shots you would otherwise be unable to get.

Before I say how we do it, I just wanted to emphasize why you should. Most agents, take below average to slightly better than average photos. The key word in that sentence was “average”. I don’t want to be average. I want to look like the best. The way listings appear on the internet or on your local MLS will most likely be in the context of other home photos. I want to be the best on that list. I promise you, that even agents can be influenced by the photos. If an agent has 50 possible homes to show and will only have time to show 10-15 in a day (that’s a lot of homes), the agent has to screen out the good ones. Assuming that the homes are fairly similar, it often will come down to having the right photos.

Of course, you could just hire the local Obeo photographer or someone similar who offers a photography and virtual tour service. I use them too. But lots of other agents do too. Besides, don’t you want to do more than the next agent? Being better, especially when it comes to the visuals, will go along way in a listing apointment. But who wants to be slightly better than average? (If you answered “I do”, you should read “The Dip“.)

Think of it like this. When you watch a basketball game and you see the guy dunk over the defender. Just remember, nobody wants to be the guy being dunked over. (Here’s an example if you want to think about it some more) I would rather be the guy that is dunking. I don’t feel bad about it. It’s not my fault if other agents are not doing all they can.

Point is that being average isn’t the goal. More eyes, means more showings, which becomes more sales. I’m not saying that you should alter your photos, rather take use of modern technology that lets you take photos that previously only talented photographers using special film and dark room techniques could achieve.

Here’s what I’m talking about. On the left is the picture from the professional photographer (who I also hire) on the right, my photo.
In the Washington Park neighborhood, 900 S Vine. The professional’s usually do a decent enough job on the inside but usually don’t do anything more than a representational shot for the outside. When I decided to reshoot the front photo, it was winter so the trees didn’t look as nice anymore and the front was enclosed by flower boxes that had vines in them…the vines end up looking like dead twigs. To get around this, I went in close with my wide angle lens and did a long exposure HDR series before the street lights came on and made everything orange. Here’s the difference.

Here’s another example of 13706 E Weaver Ave, in Centennial, CO which just went under contract. North facing homes like this can be difficult to get good photo of, especially during the winter. HDR helps you get around that.

You can do the same for your interior photographs as well…

While everyone is going to have their own ideas about what they think is the better photo, in my experience, it’s really about what is going to ‘jump off the page more’. High dynamic range photography can help you get your properties noticed.

The process is simple, 3 or more exposures (minimum if you’re not shooting ‘in RAW’) bracketed 1 or 2 stops apart to achieve a series of under exposed, correct and over exposed photos (or sim), all from the same location using a tripod.

These photos are then merged into one HDR file that will then need to be rendered using a process that controls the ‘development’ process along the same ways photo technicians might ‘burn’ and ‘dodge’ a photo to make darker areas lighter or lighter areas darker. Only with digital, this process can be automated. My current software of choice is PhotoMatix but you can achieve the same results in new versions of Photoshop (CS3+) if that’s what you have.

This isn’t as hard as it looks, you can download the trial version of PhotoMatix and see for yourself. You may just be able to put to use that nice camera you bought.

These shots represent my first and second attempts at this, so I offer my apologies to the truly talented photographers out there as I run afoul their techniques and the execution of their art.

Here’s and example of the Green Valley Subdivision in Denver, Colorado

Notice that once current home values cross the value of what was paid on the 1st position loan, there is a spike in foreclosures.

Foreclosure rates in Green Valley Ranch

just to add some more perspective…

An example of a highly localized collapse of home prices common in many cities.

It’s something to think about. It’s not just a matter of a few bad loans, lost jobs and problems paying health expenses, for many neighborhoods that may be close to a similar tipping point. Because of the substantial amount of money invested into Green Valley Ranch, I would expect that they’ll recover from the collapse within 5 years as the foreclosure sales work through the system. For other neighborhoods in Denver, I’m a lot less optimistic.

“If you don’t like this offer, you won’t like the next.”

Often times, foresight and taking action are more useful than waiting for the perfect approach. There is a lost time cost that needs to be considered.

Confidence is at the core of the problem. Perhaps we shouldn’t call it confidence, as at this point, that term is almost laughable. We’ll call it “faith”. Faith that you’ll have a job and you will continue to make a living is central to being a good little consumer. Faith in businesses is at the core of how a business may raise money to cover their operating expenses. Faithful businesses lend money as they hold the belief that the vast majority of people and other businesses they lend to are good for it (What if they’re wrong?). Faithful consumers, spend money between paychecks using credit cards because they can count on that check (What if they lose their jobs?). What happens as the once faithful businesses begin to doubt that they’ll be paid back (What if we don’t get paid for that last invoice?). What happens when the once faithful consumers can’t get credit or know that soon they could be out of a job. When minor liquidity problems turn into a financial ‘ice age’, what then?

One only wonders how Bernanke and Paulson could keep people in the ‘pews’ and involved in the day to day business of being a good consumer if those people lose their faith in the system entirely. If those people begin to feel that they could be out of a job next week what effect does that have. How much will that cost the economy. What happens when they feel that everything they’ve worked for, their house and their savings, could be lost. Heaven forbid they even take a look at their 401k plan. Pretty soon people would be (some already are) stuffing their mattresses with money and buying gold bars.

Think of Washington Mutual, people lacked faith that it was safe. They felt it was not safe enough to hold their money and not safe enough to be lent money even short term. People start pulling money out of the bank. Their credit rating gets cut down to that they can no longer raise money. Soon enough their $310 Billion in illiquid (frozen) assets are taken from them and sold to JPMorgan for $1.9 Billion where the ‘thawed out’ assets are instantly worth much more.

The concept that the value of a business, an asset, or your dollar is determined by market forces presupposes that there is a market. What happens when there is no market? That being said, bail away. Take action to establish that there is a market. Draw a line in the sand or something.

The real estate market usually is subject to certain cyclical phenomena that vary by area. In Denver, winter usually brings a slowdown in the real estate market, marked by slightly lower prices and sales volume. Typically as early as January or February the seasonal market begins to turn around. Well..not this year.

This chart is a stochastic representation of real estate sales prices over the last couple years. I love technical analysis, almost to a fault. In evaluating stocks, charts like these help traders identify trends and compare the current market price to past prices to identify opportunities. To keep it simple, when the blue line crosses up through the red line, this marks the best time to buy in the market. When the blue line crosses down through the red line that’s when you should sell. When prices go one way when the stochastic suggests another, that’s when there might be a trend reversal coming.

Imagine how many REALTOR friends you would have if you bought and sold that often. Thankfully, this model is usually only applied to stocks. A stock’s liquidity makes it possible for it to be bought and sold in shortened time spans. While it is a poor tool for evaluating the length of a trend and potential buying opportunities, it’s great at determining cycles and safer entry and exit points.

Here are a few things you might notice by examining your market in this way.
1. When is typically the best time of year to buy a home? If we look at the chart, it becomes obvious that the best time to buy a home would be between August and February. Of course, if you look at the actually sales stats, you would notice that August might just be the best month to buy a home during the year because not only is there a slight drop in pricing, there is a larger supply of homes to chose from. Deep down, I would never suggest that you rely on the time of year as the number one reason to buy or sell a home, but it always helps to know where you’re at in the cycle so you know what to expect.

2. How has the credit crunch affected home sales in Denver? From my observations, the availability of credit for lower income and even middle income buyers with lower credit scores has significantly slowed the market. Notice how the chart shows a longer, flatter curve all the way into April (2008) compared to previous years with the market bottoming between December and February. This means sellers can expect continued pressure on high home prices. It doesn’t mean things aren’t selling, it just means your going to need to work harder, show better and price lower than you used to.

3. How long will this last? Who really knows. I wouldn’t expect to see stability return next year at this time without significant improvements in the economy. (I here Microsoft wants more sun and is considering Denver…not really but that’s the instant boom I’m looking for.) Additionally, if REALTOR’s out there still think next year will be better, think again. Foreclosures are driving the market down by far out weighing the slowing local economy. Until lender owned inventory starts drying up, expect more of the incredible buying opportunities and poor selling prices. That being said, I’m keeping an eye on the price of ownership when compared to renting, the ratio of home prices to median income, the economy and inflation. There are encouraging signs and improving signs in many of these statistics.

If you saw one of my previous posts regarding the real estate bubble, you would know I don’t believe Denver is a true bubble candidate and thus has a shorter fall. I would expect that prices would continue to decline through Spring of 2009 finally bottoming during that Summer. I wouldn’t expect an immediate recovery either. Prices will likely stabilize before racing back up. Denver homes will start to look pretty affordable by spring of 2010. To arrive at that, you have to make a few leaps of faith regarding inflation, demand and foreclosures peaking this summer. But I’m sure I’m still more accurate than NAR’s method.
Sometimes though, an opportunity can come along that would likely never come again. Housing is very inconsistent and resists almost every opportunity to have an absolute value price. Most great opportunities will appear only for a couple of days before a savvy waiting investor would pounce. At this moment there are hundreds of homes in Denver that didn’t last a week on the market before being snatched up. If it’s a good deal, it’s a good deal. Who cares if you could of saved $5000 here or there when you get what you want and it has a great long term outlook either for you and your family, your pocket book or both?

Not to mention, the smart money loves these down turns. They need them to get into positions they couldn’t normally get into in strong upswings.

A long bottom can represent a real opportunity for some people in some areas. Of course, in most instances, we don’t usually refer to ourselves as the smart money, though we all wish it to be true.

So what have I learned so far? I’ve learned enough C++ to know that I hate when things become very tedious. That really helped with pushing me towards learning more about Ruby and Ruby on Rails. I was able to use C++ for an actual application though. I wrote a parser to convert an online directory of addresses to a comma delimited file so it could be used to create mailing labels. Pretty exciting stuff isn’t it.

I learned more HTML and CSS. No time wasted there. Besides all the CSS you come across playing around with blogs, you can also use it to help with designs of actual websites. Who knew? Hopefully, my site, ValueRents.com will be online sooner than later. That’s the website I’ve been working on in a round about manner for a couple of years. I dusted the concept off and developed a frontend for the site but still need to plug in some sort of backend. One day ValueRents.com will help landlords find the best properties then manage their rental properties from one location. I apparently have a few more things to figure out before it all comes together. I might make some attempts to redevelop the theme for this site. How hard could it be?

And to wrap it all up, a few classes in database design and SQL. I got to tell you, there’s nothing like bending raw data to your every whim. Hours of fun. I can’t even begin to explain how happy I am to finally stop using Excel to run calculations on the thousands of foreclosure records I have. Mysql and SQL Server are so much more fun. So maybe I can start using Excel for what it was intended–spreadsheets and quick and dirty charts.

So that’s what I’ve been up to while the real estate megalith cracks and crumbles. I’ll have more on that in coming posts. I can’t help but think though, where there are problems, there is an opportunity. I haven’t seen such great deals in Denver real estate since I moved here 8 years ago. Hopefully, the web development education I’m giving myself will help me take advantage of the dozens of opportunities I see every day. Time will tell.

the “deal with the owner is independent of the owners deal with the bank.”  … “Generally speaking, the rights of the lender are greater than the rights of the tenant.”

Seems reasonable enough but I can’t help but wonder about the fairness of that. 

 What about a tenants right to quiet enjoyment?

   I wonder if the tenant shouldn’t contact an attorney.  Wouldn’t the tenant have a claim of non-performance?

Regardless, if you or someone you know in Colorado are facing problems with foreclosure, you should definitely contact an attorney if you have any questions about your rights.

You should also take advantage of the Colorado Foreclosure Hotline at 1-877-601-HOPE (4673).