QUESTION: “Have you heard of the real estate broker business model where, if you do most of the legwork in searching out your perfect home, the broker will split the commissions with you? It seems like a pretty good gig. I find the house online, even set up the showings with the listing agent and then I get half of the commissions at closing!? Sounds too good to be true. Wanted to hear your thoughts…”

MY ANSWER: There are many reasons why this is shady, sleezy, and illegal, and ill-advised, but here’s a few to chew on:

1. Would You Work For Free? Then Why Ask Someone Else To? - First, he is telling HIS clients to SIGN an exclusive agency agreement which states that his is supposed to represent them and will get paid for it. However, he then states on his website his buyers should ask the listing agent to show them the home. So, he is asking the listing agent to do his job, the listing agent isn’t getting paid any more for their time doing this, and the buyer gets the savings. Pretty shady asking someone to work for free. Digging deeper, these type of outfits often encourage the buyers to NOT tell the listing agent they have a realtor so that the agent is inclined to show it to them (vs having the buyer’s agent show it to them). Then once they find a house they like the buyer coincidentally says “actually….I have thought more about it and I think I want someone to represent me….and then engages Mr. Shady Broker.

2. You Are Swimming With Sharks – To follow up on the issue above when the listing agent is showing you homes, you need to know that the listing agent is working FOR the seller and is TRAINED to negotiate and sell real estate. You are not (sorry to call it out so bluntly, but if you were, you would be a real estate broker and not be considering hiring Mr. Shady Agent). So, here is an average Joe (unrepresented at the showing) discussing a huge financial transaction with a highly trained sales pro. This is like representing yourself in court for big felony and potential prison sentence. No matter how skilled someone thinks they are at negotiating, if Average Joe is in casual conversation with the other side’s agent, they will give away critical pieces of information which will be negotiation ammunition used against them when Mr. Shady Realtor puts in the offer or them. Why would someone risk costing themselves $10′s of thousands of dollars by doing this…all to save 1/2 the buyer agent commission (maybe $3000)?

3. It’s Illegal – They Fudge Their Way Around This – the following is directly from the Colorado agency agreement that all agents in the state use for buyers, and Mr. Shady Realtor requires his buyers to sign thereby acknowledging this. Check out the bolded part about no discounts.

4. News Headline: “Brain Surgeon Rebates Patients” – That would sound weird wouldn’t it? Sure it would. If you were suffering from a brain tumor, would you choose the Dr. that agreed to rebate you part of what the insurance company pays him? We are not talking about a $5000 roof where many people try to get a roofer to do it for the insurance payment less the deductible. We are talking about a $300k, $500k, or $1M + investment that has serious short and long term implications. For many people, their home also plays an important role in their retirement plan etc. If someone is competing on being the cheapest and that’s what they hang their hat on, then that is making a strong statement that they prioritize being cheap over providing exceptional service and value. The cliche “you get what you pay for” is true. Have you ever gone with a cheaper alternative and then were disappointed and regretful later? The latest for me was a $100 plumbing fix that turned into a $850 mistake after Mr. Shady Plumber messed it up. I had to bring in a true professional to fix his mess and it cost triple what the initial repair would have cost if I had the pro do it in the first place!

5. If It’s Savings You Want…Go Rob a Bank – Ok, not literally. If the real goal is to just make the most money in a home purchase and pay your agent as little as possible, you would be better off going to a bank/auction/or court sale and get a steal on a home there. These often are done without brokers, so no commissions, and you often can get homes at an even deeper discount and you don’t pay ANY commissions.

Hope this helps – let me know what questions you have and how else I can help. As you can tell, I strongly encourage you (or anyone for that matter) to stay away from these types of outfits.

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The buyer must be an owner-occupant, utilizing financing insured by the Federal Housing Administration (FHA).  Standard FHA underwriting guidelines apply, and the sale must be for the full amount of the current list price.

There is also, “The Good Neighbor Next Door Program”

Law enforcement officers, pre-Kindergarten through 12th grade teachers and firefighters/emergency medical technicians can contribute to community revitalization while becoming homeowners through HUD’s Good Neighbor Next Door Sales Program.  HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return you must commit to live in the property for 36 months as your sole residence.

What is different about buying a HUD Home? Taylor Realty Group is a registered HUD Broker, which means we can show HUD Homes and submit buyer offers to HUD.  If you would like more information, and/or have specific questions/concerns about purchasing a HUD Home, contact us today!

#1: Deducting the wrong year for property taxes

You take a tax deduction for property taxes in the year you (or the holder of your escrow account) actually paid them. Some taxing authorities work a year behind — that is, you’re not billed for 2011 property taxes until 2012. But that’s irrelevant to the feds.

Enter on your federal forms whatever amount you actually paid in 2011, no matter what the date is on your tax bill.

#2: Confusing escrow amount for actual taxes paid

If your lender escrows funds to pay your property taxes, don’t just deduct the amount escrowed. The regular amount you pay into your escrow account each month to cover property taxes is probably a little more or a little less than your property tax bill. Your lender will adjust the amount every year or so to realign the two.

For example, your tax bill might be $1,200, but your lender may have collected $1,100 or $1,300 in escrow over the year. Deduct only $1,200. Your lender will send you an official statement listing the actual taxes paid. Use that. Don’t just add up 12 months of escrow property tax payments.

#3: Deducting points paid to refinance

Deduct points you paid your lender to secure your mortgage in full for the year you bought your home. However, when you refinance,you must deduct points over the life of your new loan. If you paid $2,000 in points to refinance into a 15-year mortgage, your tax deduction is $133 per year.

#4: Failing to deduct private mortgage insurance

Lenders require home buyers with a down payment of less than 20% to purchase private mortgage insurance (PMI). Avoid the common mistake of forgetting to deduct your PMI payments. However, note the deduction begins to phase out once your adjusted gross income reaches $100,000 and disappears entirely when your AGI surpasses $109,000. Also, unless Congress acts to extend the PMI deduction again, 2011 is the last tax year for which you can take this deduction.

#5: Misjudging the home office tax deduction

This deduction may not be as good as it seems. It’s complicated, often doesn’t amount to much of a deduction, has to be recaptured if you turn a profit when you sell your home, and can pique the IRS’s interest in your return. Claim it only if it’s worth those drawbacks.

#6: Missing the first-time home buyer tax credit

While the original home buyer tax credit deadline passed in April 2010 (and isn’t available in 2012), military families and some government workers on assignment outside the U.S. were given an extension until April 30, 2011, to get a home under contract and take advantage of up to $8,000 in tax credits for first-time buyers and $6,500 in credits for repeat buyers.

It applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.

#7: Failing to track home-related expenses

If the IRS comes a-knockin’, don’t be scrambling to compile your records. Many people forget to track home office and home maintenance and repair expenses. File away documents as you go. For example, save each manufacturer’s certification statement for energy tax credits, insurance company statements for PMI, and lender or government statements to confirm property taxes paid.#8: Forgetting to keep track of capital gains

If you sold your main home last year, don’t forget to pay capital gains taxes on any profit. However, you can exclude $250,000 (or $500,000 if you’re a married couple) of any profits from taxes. So if you bought a home for $100,000 and sold it for $400,000, your capital gains are $300,000. If you’re single, you owe taxes on $50,000 of gains. However, there are minimum time limits for holding property to take advantage of the exclusions, and other details. Consult IRS Publication 523.

#9: Filing incorrectly for energy tax credits

If you made any eligible improvement, fill out Form 5695. Part I, which covers the 30%/$1,500 credit for such items as insulation and windows, is fairly straightforward. But Part II, which covers the 30%/no-limit items such as geothermal heat pumps, can be incredibly complex and involves crosschecking with half a dozen other IRS forms. Read the instructions carefully.

#10: Claiming too much for the mortgage interest tax deduction

You can deduct mortgage interest only up to $1 million of mortgage debt. If you have $1.2 million in mortgage debt, for example, deduct only the mortgage interest attributable to the first $1 million.

This article provides general information about tax laws and consequences, but shouldn’t be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

Times have changed and so has  Colorado real estate market. Here are 7 tips I believe are critical for home sellers to have success in this market.

Another key stat - Sold homes are UP 15% from this time last year

What does this mean?

For Sellers: Less competition and more homes are selling…so the market is becoming more favorable for sellers than it has been.

For Buyers: Fewer choices. Buyers now have to decide what is a bigger priority in a home and be more willing to compromise on their criteria to get a bigger selection i.e. price, location, etc. For buyers with specific criteria they may be disappointed with the limited options available.

In Summary: The Denver real estate market prices are holding steady over the past 12 months. Inventory is down BIG, and sold homes are up 15%. These are all good indicators that the market is improving. When demand increases and supply decreases, basic economics tells us that prices will go up. If this trend continues in 2012 then this price recovery is what I would expect.

What to watch for:

• Shadow inventory – some industry experts claim that banks are holding onto their foreclosed homes vs putting them on the market…but may flood the market this spring. Will this happen? It’s all speculation.If it does then inventory will rise, prices will go down slightly, and the recovery will take longer. If this doesn’t happen, the indicators above could pull us through a recovery faster than we expect.
• Loosened Lending Guidelines – The guidelines seem to be getting looser for getting a mortgage and at the very least, there are more options for buyers other than the 20% down conventional loan. So….if this trend continues…there will be more buyers…which increases demand…and wala…continued market improvement.

1. Choosing a Discount Listing Agent

This may sound self serving and or like a solicitation, but hear me out. In these tighter economic conditions, many sellers choose their listing agent based on the commission their listing agent charges. There is no “Standard” commission and it varies greatly between companies, and even agents within the same company. However, negotiating is one of the main functions of your realtor/real estate agent. How quickly did they decide to come down in their commission?  If their job is to get you the highest price for your home and that agent is willing to give up their money that quickly, how fast would they be willing to give up YOUR money in the negotiation?  For example, if he/she went from 3% to 2% that is 33% discount – is that really who you want negotiating for you?

How to Avoid It – Hire an agent who is an expert negotiator and don’t choose your agent based on cost alone. Evaluate their entire business proposal, marketing plan, experience, etc. Often an agent can charge slightly more but you still walk away with more money because they can negotiate a higher price and terms for your home.

2. Rejecting an Offer (the folded arms approach as I call it)

When an offer comes in, this should be cause for celebration and flattery! Let’s remind ourselves that someone is saying they want to buy your house. You certainly don’t have to accept it. What is important to remember is that offer is the price/terms a buyer is willing to pay based on market conditions etc and not meant to insult you. It’s not personal. Often, buyer’s decide on an offer price based on poor information, what a friend told them, or some strategy they “Googled”. Don’t take it personal.

What To Do Instead: Counter the offer. Have your agent draw up a counter. If the buyer’s offer is ridiculous then counter at full price. The key is to counter and not reject. This tells the buyer and their agent that you are serious about selling, want to make something work, but will not accept something ridiculous. The last time we did this we ended up bringing the parties together and their home sold. At closing, the buyers told me “Sorry about the originally low offer….our agent told us to do that…but we didn’t want to. Thanks for not being a jerk about it.” Always counter – never reject.

3. Refusing to Pay Buyer’s Closing Costs

Let me ask you a question Mr/Mrs Seller. What is more important, the sales price of your home, or how much money you walk away with (herein I will call it NET)? The NET of course! So, who cares if the buyer want’s you to “pay” $50k in closing costs for them….raise the price by $50k….and it’s the same NET to you! That is an exaggerated example but I am being serious here. So many sellers get stuck on the idea that they absolutely don’t want to pay buyer’s closing costs and that the buyers should pay for their own expenses. The reality in today’s market is this: Buyer’s are having a harder time saving a down payment and with heightened down-payment requirements, it’s challenging for some buyers to come up with the additional 2%-3% to cover their closing costs on top of the 5% – 20% they are already coming to the table with for a down-payment.

Still not convinced, check this out. YOU ARE NOT EVEN PAYING THEM….THE BUYER’s ARE FINANCING THEM. Look at these options

• Option A =  $350,000 Sales Price & $0 towards buyer’s closing costs = $350,000 NET
• Option B = $355,000 Sales PRice & $5000 towards buyer’s closing costs = $350,000 NET
• The difference: The buyers are really financing that $5000 and are paying interest on it for 30 years. It isn’t costing you (the seller) anything additional.

How To Avoid It: Focus on the NET of the offer. Be willing to pay any concession the buyer needs/wants so long as you get the NET you want.

4. Thinking That What You “Need” Determines Market Value

Ultimately, whether we like it or not, buyer’s ultimately determine market value. What someone is willing to pay IS the market value. If what someone is willing to pay is not what you “need”, the variable we need to adjust is TIME. Maybe another 6 months, or in some cases, another 6 years, but only time will eventually lead to increased market value. Just because you “need” an amount does not mean a buyer will pay it.

How To Avoid It:

Get educated on what similar homes to yours have sold for in the last 3 months. Hire an agent with intimate market knowledge of your area and have them present a market report with pricing recommendations. Price your home where it is compelling to buyers based on this data and not on your desires. If it’s too low, you might consider waiting for the market value to increase.

5. Us vs. Them Mentality

Often Sellers think a mutually beneficial negotiation isn’t possible but it is.

How to Avoid This:

Find out what is most important to both parties and try to accommodate both side’s wishes. You will be amazed that by asking “what is most important” to the other party that you can often make both sides very happy and have an enjoyable transaction.

Why could the holidays be a good time to sell? 79%  of the agents surveyed said that more serious buyers come out during the holidays, and 61% say less competition from other properties make it a great time to sell.

Why Are The Holidays a BAD Time To Sell: The biggest hurdles sellers face during the holidays are keeping the home ready to show (clean and staged), accommodating showings when they often have company and events planned at home, winter weather conditions and buyers’ vacation schedules resulting in fewer buyers.

My Take

I lean toward the 40% who say it’s NOT a great time to sell. In addition to the reasons above, critical vendors like inspectors, title closers, lenders, and underwriters are often on vacation or on a part time schedule. This makes putting all the pieces together for smooth & on time closing challenging. Yes inventory is down so there is less competition, but there are also fewer buyers so ultimately it’s a wash.

If you are listed well before the Holidays then stay on the market so you don’t lose your marketing feeds and momentum. However, if you are thinking about going ON the market….I say take some time to enjoy Christmas/New Years/etc and hit it hard once your Christmas lights come down and life returns to “normal.” You will be better prepared to handle the logistics and stress that can accompany selling a home.

When a tree falls

Your neighbor is responsible when a tree falls over your shared property line only if you can prove he was aware that his tree was a hazard and refused to remedy the problem. Regardless, your insurance company restores your property first, and later decides whether or not to pursue reimbursement from the neighbor or his insurer if the neighbor was negligent in maintaining the tree.

Before a tree falls

Write a letter to your neighbor before his dead, diseased or listing tree falls through your roof or over your property line.

The letter should include:

• Description of the problem

• Photographs

• Request for action

• Attorney letterhead–not necessary but indicates you mean business.

Trim their trees

If the limbs of a tree hang over your property line, you may trim the branches up to the property line, but not cut down the entire tree. If a tree dies after your little pruning, the neighbor can pursue a claim against you in civil or small claims court. Depending on the laws of your state, your neighbor may have to prove the damage was deliberate or caused by negligence, but may also be able to recover up to three times the value of the tree.

Before you cut, tell your neighbors what you intend to do to protect your property. They may offer to trim the whole tree instead of risking your half-oaked job.

Your tree falls

It’s always a good idea to take care of your big and beautiful trees, and keep receipts for trimmings and other care.

But if your tree falls over a neighbor’s property line, do nothing until their insurance company contacts you. You may not be liable unless you knew or should have known the tree was in a dangerous condition.  If you pruned a tree or shored up trunks to prevent problems, gather your receipts to prove your diligence.