Working with a Realtor – Buyers Agent vs. Transaction Broker

Working with a Realtor – Buyers Agent vs. Transaction Broker

When a buyer is working with a real estate agent in Colorado there are two ways in which to work, as a Buyers Agent or as a Transaction Broker.  It may seem to make sense to a buyer that if they are working with a Realtor that they are “their agent” and will automatically be working on their behalf.  This ins’t true.  In order to have a true agent a buyer must take that next step sign a buyers agent agreement.  If there is no written agreement you still have someone working with you but not necessarily for you.  In this post I will outline the differences between the two relationships.

Working With A Buyers Agent

  • You can liken working with a buyers agent as working with a coach who has your best interests in mind.  Think fiduciary, advocate or agency.
  • Working with a Realtor as a buyers agent requires a written contract.  This contract set’s forth loyalty and compensation.  Loyalty is the promise of the buyer to work with just one agent, and depending upon how the contract is completed the buyer may be guaranteeing a commission to their agent upon completion of a purchase.  See the note on compensation below.
  • A buyers agent works as a fiduciary to their client.  They owe duties of care including: obedience, accountability, loyalty (including confidentiality) and disclosure.
  • In addition to the uniform duties owed to all clients (see the list under the “Transaction Broker” section, a real estate agent working as a buyers agent is obligated to:
    • Promote the interests of their client with the utmost good faith, loyalty and fidelity.
    • Seek a price or lease rate and terms that are acceptable to their client.
    • Counsel their client as to any material benefits or risks of a transaction.

Working With A Transaction Broker

  • You can liken working with a buyers agent as working with a referee who helps you through a transaction.
  • In Colorado, unless there is a buyers agency contract signed, it is presumed that a Realtor is working as a transaction broker. There is no written contract needed.
  • A transaction broker assists one or more parties through a real estate transaction with communication, interposition, negotiation, advisement, contract terms and help at the closing table, all without being an agent or an advocate.
  • The uniform duties due to all parties a real estate agent comes into contact with are:
    • Perform the terms of any written or oral agreement with Seller
    • Present all offers to and from Seller in a timely manner regardless of whether the property is subject to a contract for sale
    • Disclose to Seller adverse material facts actually known by Broker
    • Advise Seller regarding the transaction and advise Seller to obtain expert advice as to material matters about which Broker knows but the specifics of which are beyond the expertise of the Broker
    • Account in a timely manner for all money and property received
    • Keep Seller fully informed regarding the transaction
    • Broker must not disclose the following information without the informed consent of Seller:
    • – That Seller is willing to accept less than the asking price for the property
    • – What the motivating factors are for Seller to sell the property
    • – That Seller will agree to financing terms other than those offered
    • – Any material information about Seller unless disclosure is required by law or failure to disclose such information would constitute fraud or dishonest dealing, or
    • – Any facts or suspicions regarding circumstances that could psychologically impact or stigmatize the property.
    • Seller consents to Broker’s disclosure of Seller’s confidential information to the supervising broker or designee for the purpose of proper supervision, provided such supervising broker or designee does not further disclose such information without consent of Seller, or use such information to the detriment of Seller
    • Brokerage firm may have agreements with other Sellers to market and sell their property
    • Broker may show alternative properties not owned by Seller to other prospective buyers and list competing properties for sale
    • Broker is not obligated to seek additional offers to purchase the property while the property is subject to a contract for sale
    • Broker has no duty to conduct an independent inspection of the property for the benefit of a buyer and has no duty to independently verify the accuracy or completeness of statements made by Seller or independent inspectors. Broker has no duty to conduct an independent investigation of a buyer’s financial condition or to verify the accuracy or completeness of any statement made by a buyer
    • Seller is not liable for Broker’s acts or omissions that have not been approved, directed, or ratified by Seller
    • When asked, Broker (will or will not) disclose to prospective buyers and cooperating brokers the existence of offers on the property and whether the offers were obtained by Broker, a Broker within Brokerage firm or by another broker.

Compensation

In the vast majority of cases the compensation due a real estate agent are not affected by whether they are working as a Transaction Broker or as a Buyers Agent.  When an agent shows a property that is listed through the MLS there is an offer of compensation from the listing broker to agent working with the buyer.  This co-op commission is not a fixed amount and there is a space for compensation amount offered to both a Transaction Broker or a Buyers Agent, however in most cases the offer is the same.  So as long as this amount is acceptable to the agent or is otherwise in agreement with the minimum amount specified in the Buyers Agency agreement the compensation to the agent isn’t an issue for the buyer.

Neil Kearney is Again Recognized as a Five Star Real Estate Agent Award Winner

Neil Kearney is Again Recognized as a Five Star Real Estate Agent Award Winner

Neil Kearney has once again been recognized as one of the top real estate professionals in the Denver Metro Area.  The “Five Star Professional” award in the real estate category is awarded each year based upon independent research and interviews with actual clients from the past year.

The Five Star Professional research team applies a vigorous research and evaluation process to identify service professionals who provide quality services to their clients. Professionals do not pay a fee to be considered or placed on the final list of Five Star award winners.  Along with outstanding survey results the real estate agents who are considered must obtain a high standard of production.

This year the criteria was tightened, and under 750 real estate agents in the Denver Metro Market were recognized as a Five Star Professionals. There are currently over 20,000 licensed real estate agents in the Denver area.  Neil feels honored to be once again be designated award winner.  This is one of the most credible awards a real estate agent can receive because it is based upon direct feedback from recent clients.  Only the highest scoring agents are selected.

Here is a description of the research methodology that is used.  Five Star Professional follows standard survey practices used by other professional research organizations. The research also includes a regulatory review to provide necessary checks and balances.                                                  Five Star Professional conducts research to help consumers with the important decision of selecting a service professional. The Five Star award is presented to wealth managers, real estate agents, mortgage professionals, home/auto insurance professionals and dentists in more than 45 markets in the U.S. and Canada.The Five Star Professional research team applies a vigorous research and evaluation process to identify service professionals who provide quality services to their clients. Professionals do not pay a fee to be considered or placed on the final list of Five Star award winners.

In each market, award winners are listed at no cost in a special advertising section within the city/regional magazine and on fivestarprofessional.com.

Five Star Professional follows standard survey practices used by other professional research organizations. The research also includes a regulatory review to provide necessary checks and balances.

Five Star Professional:

  • Conducts comprehensive research
  • Recognizes service professionals
  • Partners with leading city/regional magazines
  • Helps award winners gain the recognition they deserve
Home Search Zillow Sued For Inaccurate Zestimate’s

Home Search Zillow Sued For Inaccurate Zestimate’s

ZillowThis past May, Zillow, the online real estate search company was sued by a Chicago based home building company who claimed that Zillow’s online Automated Value Model (AVM) is deceiving home buyers with prices below the true value of properties leading to frustrated sellers. Furthermore the suit claims that Zillow’s “Zestimates” are in violation of the legal description of an appraisal, which under Illinois law must be administered by a licensed appraiser. Zillow defends themselves by stating that their Zestimates claim only to be approximations not true appraisals; to which the suit responds stating that whether or not they are technically appraisals homeowners are viewing them as such leading to confusion and irritation. It will be interesting to see over the coming months how this lawsuit plays out. It’s clear that Zillow’s Zestimate and other AVM’s which are becoming common across the internet are being used by consumers to determine the approximate value of their home.  But in my experience, many times this approximation isn’t close to the true market value.

So just how accurate are Zestimates. In a Nationwide study conducted by Zillow it was found that their Zestimates fall within 5% of the sales price of homes 53.9% of the time, within 10% of the sales price 75.6% of the time and finally within 20% of the sales price 89.7% of the time. Back in 2007 when Zillow was just getting its footing I conducted my own research local to Boulder on the subject and found that on a whole Zillow’s algorithm was 99% accurate.  However, when I took a closer look I found that there was an 18.4% standard deviation.  Additionally, the outliers were up to 50% off.  Although Zestimates generally do a good job when looking over a large pool of properties, their approximation for any specific property within that pool can many times be significantly off of the true value.

To read my 2007 article click here.

With home values rising as fast as they are in Boulder and with Automated Value Models such as “Zestimates”  readily available, inexpensive and simple to use, it’s easy to understand why so many consumers gravitate towards them. It’s important to remember though that the very nature of AVM’s being automated hinder their ability to provide an accurate evaluation of properties all of the time. AVM’s fail to take into account many critical and influential aspects of a property that can greatly affect the value such as the current condition, recent upgrades (or the lack thereof), actual square footage, views and other details. After understanding these substantial flaws it becomes clear why AVM’s, including Zestimates often over or undervalue homes leading to users feeling mislead.

AVM’s have their place as a non-binding general view of the market when you are not considering a transaction.  It’s fun to look.  However, when you are considering a real estate transaction you need to bring in an experienced professional to give you a more accurate comparative market evaluation.  Experienced Reatlor’s like myself can give you the broad information and experience necessary to make decisions around. If you are considering a move I would be happy to come by and give you an individual market analysis.  

To read more about the case go to: http://www.marketwatch.com/story/do-zillow-zestimates-mislead-home-buyers-illinois-lawsuit-claims-yes-2017-05-22

The Steps Of A Home Search

The Steps Of A Home Search

Open RoadIf you have determined that you are ready to buy a house (click here for more information about determining if you are ready) the next question to ask is how do I do it? What is the smartest way to go about buying a home? What are the first steps in a home search? This article will show how to begin the process of buying a home as well as point out some common pitfalls that can be avoided.

Step 1 – Finding a Really Good Realtor

It’s easy enough to start browsing houses on the internet or going to the random open house, but at some point you will want to get more serious about looking at homes.  The first step towards getting more serious about looking for a home is finding a good Realtor who has been through the process time and time again.  Most people end up working with a Realtor, so why not engage one early on in the process?  Realtor’s have tools that will save you time and put you on track to finding the right home more quickly.  A good Realtor is much more than a person who shows you the houses that you have found online, they serve as an information source, an advocate and a guide through the process.  Make sure you are working with a Realtor who is more interested in helping you find a great house for the long term rather than a quick sale for them.  It takes patience and persistence to make sure you end up in the right home.

Note: A Realtor is a member of the National Association of Realtors and is bound to abide by a code of ethics. Not all real estate agents are Realtors.  Make sure your’s is one.

Step 2 – Get Pre-Approved

One of the most important steps in a home search is to find a good lender and get pre-approved.  Your Realtor should be able to recommend a few local lenders who have proven themselves to be responsive and know how to get the job done. Using a local lender is important, not only are they accountable but they are there to solve problems at the closing table if anything comes up at the last minute.  Your earnest money is at stake!  If your lender is delayed at the last minute or their money doesn’t make it to the closing table on time and the seller chooses not to give you an extension, you lose your earnest money.  You cannot go back to your lender and recover those lost funds.  Choosing a lender is more than finding the lowest interest rate, it is finding an advisor who will help you make a sound financial decision given your unique circumstances.  The credit rules change often and it is important to use an experienced lender to help you get the job done in a timely manner.

Step 3 – Looking at Homes Online – The First Showing

Boulder House with FenceThe internet is a great tool when searching for homes.  When you view internet sites such as Zillow.com, Realtor.com, Redfin.com and Coloproperty.com you are able to easily find and view homes for sale by putting in any search criteria. The results are quick and beautiful.  It’s easy to get caught up in the great houses that are available.

But here are the pitfalls of the national home search sites:

  • Many of the popular home search sites don’t have all of the properties listed for sale.  Listing brokers determine who gets to display those listings and some don’t send to all of the available sites.  Many company sites just get feeds from one MLS system so if a listing is listed in another (which is often the case in the Boulder area) those other listings are not displayed.
  • The goal of the big national sites is to get as many views and clicks as possible. So properties show up as “active” until they are sold. Don’t fall in love with an active house on Zillow until you check with your agent to make sure that it isn’t already under contract.
  • The agent who is listed in conjunction with a given property many not be the listing agent.  So if you click on a “more information” button you will most likely be contacted by an agent who has paid for that opportunity and knows nothing about the house.

Now a word about search criteria. When clients tell me their “wish list” I write down every bit of it, but I then explain that it might be better to keep our search wide so that we don’t miss a house that meets 95% of what they want. In a market characterized by low inventory this is especially important.

Note – www.Coloproperty.com is the public site for the local MLS system IRES. This site changes the status of a property (active, under contract, sold) on their display right when it happens. So to get the true scoop go to this site.  Disclaimer – I have served on their Board of Managers for 9 years now.

Step 4 – Viewing Homes In Person

Boulder Tudor HouseHow soon is too soon to start actually looking at houses looking? For example, if your lease is up in July and you don’t want to have rent and mortgage payments for more than 1 month, January is usually too soon.  However, when to start depends upon how particular you are, how many homes are likely to come on the market during a particular time etc.  This is a good conversation to have with your Realtor.

Once you and your agent have identified some properties to view the next step in your home search is that your agent will set the showings with each listing agent (through them, their company or a showing service). Sometimes homes can be viewed immediately but often times the owners require a few hours to 24 hours notice.  Sometimes the listing agent needs to be at the showing and that complicates the timing.

Once you are inside a home you will have already begun to judge the house on these criteria; “could I live here?”, “how does it compare with other homes?”, “is this the one?”.  If you quickly realize that this isn’t “the one” it’s still good to see the rest of the house but in my experience it’s not necessary to see every little thing.  Who cares what the second basement closet looks like! You only have so much memory available and if you fill it up with the tiniest details of a house that you have already determined you won’t buy you end up confusing houses.  Was it the yellow house that had the gold faucets or was it the one next to the park?

Once you find the one that you think you want to pursue you will want to go back for a closer look.  This is the time to “kick the tires” and make sure you know what you’re in for.  Hopefully the second time through will only make the heart grow fonder.

In the next installment in this series I will go through the process of what happens once you find a house that you love.

 

Some Recent Testimonials

Some Recent Testimonials

One of the most satisfying parts of my career is that I get to work with the nicest people in the world!  I get to interact with them consistently over an exciting and emotionally charged and sometimes intense period in their lives.  Selling or buying a home means change, sometimes it’s great (yay! new job, new baby…) and sometimes it’s not a change you look forward to (divorce, change in finances…).  But through it all I love to bring my best to every situation and provide exactly what my clients need at the time.  Sometimes it is a calm voice of reason through the inspection process. Sometimes it’s a cheerleader when your fifth offer just got accepted. Sometimes I’m the one who has to take some bad news and chart a new path to your goal.  Sometimes I’m just there for you providing the expertise you need.  Sometimes I’m the one who gives you the nudge that points you in the direction that turns out to be the “best” move for you.  Regardless of the situation I’m happy to be of service – it’s what has kept me happily going for 25 years now.

So when a client takes the time to write a testimonial for me it’s a much appreciated cherry on top.  Here are a few recent testimonials that my clients have posted on my behalf.  Aw shucks, you guys are the best!

“We could not have a better agent than Neil Kearney. He was very patient, answering all our questions and addressing all our concerns. He provided all the support we needed, as we are living out of the state by the time we decided to put the house in the market. Something very important: The communication was always very good. We strongly recommend Neil to prospective buyers and sellers. The best!”

“Neil was great to work with! He has a comprehensive knowledge of the market, and was committed to our home search with patience and enthusiasm during a difficult buying process. I highly recommend Neil!”

“Neil did a great job helping us find and purchase our new home. He was always quick to respond, and not only guided us through the process but made it really easy. Thanks Neil!”

“If you’re looking for someone who knows the Boulder market inside and out, Neil is the realtor you want. Honest, reliable, Neil was always available to answer questions or arrange a last minute showings. We can’t recommend him enough.”

“Neil is a fantastic realtor. I have used his family business for several real estate transactions over the years and have always been impressed with his professionalism, competence, and diligence. He was always available to answer questions and he explained the nuances of selling property in today’s market extremely patiently! I recommend him to anyone looking to buy or sell. Thanks Neil!”

To see more testimonials go to this page and this site.

Colorado’s Property Tax Rates Near The Lowest

Colorado’s Property Tax Rates Near The Lowest

P.I.T.I.Do you know what PITI is? If you have a loan on your home you probably know that these are the four elements of a mortgage payment. P stands for principal; the first I stands for Interest; T stands for taxes and I stands for insurance.  Together they make up the amount you pay for your home on a monthly basis.  If your PITI payment is comfortable for you, you will have extra funds available to pay for all of your living expenses, be able to save some money on a monthly basis and have some left over for some fun.  But many times as we consider how much of a house we can afford we key in on the price of a home  and the interest rate (these go into determining the ‘P” and first ‘I’) without much considering the ‘T’ and the ‘I’.

Before I get started talking about property taxes I want to make it clear that this is not a comprehensive article on taxation.  There are many elements that go into the discussion of total taxation that include income tax, various sales taxes, car registration fees, use fees, transfer taxes, etc., this article just focuses on one element and is therefore not a comprehensive picture. It doesn’t fairly compare apples to apples across states. However, I think it’s an interesting and relevant topic because it comes up often in my discussions when I am showing property.

Corelogic recently did a study ranking the median property tax rate across the country.  The highest property tax percentage is in Illinois where taxes are 2.67% of the assessed valuation and lowest in Hawaii where the property tax burden is just .31%.  Colorado is ranked 5th from the bottom with .66%, meaning that we have the 5th lowest property tax burden in the United States.  Despite the arguments* that there are too many elements not included in this study I think in general it’s true that the cost of ownership in places like Illinois, New York, New Jersey are much higher than they are in Colorado. In Colorado the “T” portion of our payments is much lower than other states and therefore, all things being equal, we can afford more expensive homes with the same payment.

Local Property Tax Comparison

Now let’s get more granular.  Within my market area buyers need to look closely at property tax rates within the different localities.  Here is a quick comparison of homes currently on the market.  I have tried to choose homes that are similar in price and similar in assessed value.

  • Boulder – 4616 Talbot Dr.  |  List Price $574,000  |  Assessed Value  $423,900  |  2015 Taxes  $2,766  | Tax/Assessed  .648%
  • Louisville – 453 Centennial  |  List Price  $599,900  |  Assessed Value  $450,200  |  2015 Taxes  $2,988  |  Tax/Assessed .664%
  • Lafayette – 369 Caribou Pass  |  List price  $580,000  |  Assessed Value  $464,300  |  2015 Taxes  $3,180  |  Tax/Assessed .685%
  • Longmont – 5712 Clover Basin  |  List Price  $575,000  |  Assessed Value  $409,700  |  2015 Taxes  $2,971  |  Tax/Assessed .725%
  • Superior – 3103 Castle Peak  |  List Price  $599,900  |  Assessed Value  $464,100  |  2015 Taxes  $3,881  |  Tax/Assessed .836%
  • Erie – 1276 Greening  |  List Price  $560,000  |  Assessed Value  $399,950  |  2015 Taxes  $3,483  |  Tax/Assessed .871%
  • Broomfield – 4630 Nelson  |  List Price  $569,000  |  Assessed Value  $466,710  |  2015 Taxes  $4,490  |  Tax/Assessed .962%

The order listed is ranks the local communities for property tax burden as a percentage of the assessed value of the property.  Boulder has the lowest tax rates and Superior, Erie and Broomfield have the highest.  If a buyer were to be comparing homes in Boulder and Broomfield, the taxes make a difference. The differential in the monthly payment is around $100 per month, definitely worth looking at.

*Some of the arguments that invalidate this report are: a) Different states base taxes on different amounts. Assessed value vs. actual value.  b) Some states give a homestead exemption.  c) Some states assessed value doesn’t change until a sale and then it goes to the purchase price. d) The report doesn’t take into account special assessments or the prevalence thereof within states.

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