No Love Letters

No Love Letters

What’s a Love Letter? It’s an emotional appeal that Buyers sometimes make in the form of a letter accompanying their offer to purchase. Here’s an example:

Dear Sellers,

Our names are Diana and Tom Swan. We’ve been married five years now and have one son, Richard, who is 3 1/2 years old. We also have another baby who will join our family in December. We realize our offer may not be as high as other offers, however our first son has some social and behavioral issue so we are hoping to buy our home so we are close to a specialized facility. We hope that you will select us as the next homeowners to raise a family in your home.

(from: Colorado Real Estate Commission)

Why do Buyers do this? Brokers encouraged it. Years ago, when the market began heating up with multiple offers for individual homes, they saw this as a way to give their Buyer a leg up on the competition.

What’s wrong with it? Buyer “Love Letters” can reveal information which identifies a person as a member of a protected class (Fair Housing) and can put seller and the seller’s broker in danger of legal and regulatory action. By potentially identifying protected class status of prospective buyers, it creates a doubt whether that offer is chosen or not chosen based on protected class status, a violation of law.

The Protected Classes (Federal): Race, Religion, Color, Disability, Sex, Familial Status, National Origin, and (State): Sexual Orientation (including Transgender Status), Marital Status, Creed, Ancestry.

Possible violations in our example: 1) Familial status (they have children) 2) Marital status, 3) Disability/Handicap, 4) Highest and best (letter urges seller to select buyers not based on highest/best offer, but based on other considerations that may violate fair housing).

Best Practices regarding Love Letters: Avoid unnecessary risks by focusing on a solid offer instead of an emotional appeal; give your Broker permission NOT to present “Love Letters.”

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Do HOAs Affect Home Values?

Do HOAs Affect Home Values?

Research suggests that HOA’s have an effect on home values – almost always for the better.

“Theory does suggest that  HOAs increase home value. The rights and responsibilities that come with an HOA affect a home’s value, just as do the number of  bedrooms and the quality of the local schools.  A great house in a community with a poorly designed or badly managed HOA is a great house in a bad neighborhood.” – Amanda Agan and Alexander Tabarrok , George Mason University.

The Downside

Since most homes built in America today come with an HOA, the rare negative effect might be where your monthly HOA fees are substantially higher than those for a similar home in another neighborhood.  We sometimes see this where there have not been adequate maintenance reserves collected over the years and they’re having to play “catch up”; or when there has had to be a special assessment (because they didn’t have adequate reserves).  In that case, the price will have to be lower to reflect the additional cost of ownership to the Buyer.  How much lower?  Well, you could take the difference in monthly HOA fees, use that as the payment toward mortgage principal at the prevailing rates, and calculate the amount of mortgage that would pay off over 30 years.  There’s your price difference.

The Upsides

The advantages, although not as clear-cut economically, are

  1. Covenants. Also called Deed Restrictions. These are rules creating standards for quality and appearance of the home and lot. They’re usually enforced by the HOA.  Some people will bristle at the thought of anyone telling them what they can or can’t do with their home, but consider that the characteristic of “conformity” carries only a positive connotation (and value adjustment) in the language of appraisal.  Hence, the fact that neighborhoods where all the homes look nice tend to sell for more.
  2. Local Control.  Part of the premise of having a HOA is that local residents can manage their neighborhood better than the various divisions of city government. That’s why the HOA has control over streets, landscape maintenance, amenities, etc.  In fact, Denver Government even allows non-HOA neighborhoods to be an integral part of planning, development, code enforcement, variances, and other functions through RNOs (Registered Neighborhood Organizations).  In Winston Downs, we really have a RNO which has “HOA” in it’s name.
    Some analysts even point to the rise in “Local Governments” (, noting that HOAs lead the way in providing more individualized, cheaper and better quality services than can be provided by City and State agencies.
  3. Placemaking and Community.  “Placemaking is a quiet movement that reimagines public spaces as the heart of every community, in every city. It’s a transformative approach that inspires people to create and improve their public places. Placemaking strengthens the connection between people and the places they share.”  HOAs are made up of neighbors, neighbors make a community, and communities strengthen and enforce shared values.  Strong communities help drive strong home values.

Winston Downs HOA

With all that said, the HOA (really an RNO) for Winston Downs Neighborhood is entirely voluntary, and at this writing a bargain at $15/year per family. The neighborhood doesn’t carry any deed restrictions, so code enforcement is pretty much up to local government.  But the RNO is an active participant in organizing community activities, weighing in on local issues, schools, development and code variance requests which impact the neighborhood.


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The Appraisal: 10 things your broker should do

The Appraisal:  10 things your broker should do

Appraisals are sometimes a source of confusion for both Buyers and Sellers, but usually for different reasons.

Review:  an appraisal is an opinion of value prepared by an authorized person.  In Colorado, Appraisers are licensed and regulated by the State. There are different levels of licensure, depending on the qualifications of the Appraiser.

Buyers sometimes think that the appraisal will “protect” them from overpaying.  There is a clause in the contract, after all, that says in effect: “if the appraisal doesn’t come in at contract price, you don’t have to buy the house.”  While there may be an element of truth in that kind of protection (today, anyway), you should stop thinking that.  If you need a reason, please Google “the role of appraisals and appraisers in the Global Financial Collapse of 2006-2008” or something similar.  There was nothing protective of Buyers for a long time leading up to the disaster, and you’ll be better off being a little more skeptical.

Sellers sometimes think that the Broker’s price opinion was an appraisal, or that having multiple offers (or even one offer) is some kind of assurance that the appraisal will come back at contract price.  Actually, there is some truth in the latter – competing offers should have a positive effect on value – but it’s not a given.

Why Appraisals are done.  In residential real estate, they are done to protect the lender’s interest in the property (the mortgage).  To learn more about what can go wrong I this scenario, Google  “the role of appraisals and appraisers in the Global Financial Collapse of 2006-2008”. The appraisal is ordered by the lender and paid for by the Buyer.

What can you do to make sure the appraisal goes the best way possible?  Answer: treat the appraisal just like you would a “showing:”  home is spotless, lights on, curtains open, staging in place (if applicable), etc.

Beyond that, there are several things you should expect your agent to do. The following list is advice from an appraiser to your broker; it’s adapted from “10 Things to Guarantee a Perfect Appraisal”, by Kerry Dunn, founder/chief appraiser at Dunn Appraisals,

1)   Show up

Having you, the realtor, at the appraisal really helps everything run better for the appraiser.

2)   Call/Email

If you can’t show up, please make a phone call or send an email of introduction to the appraiser.

3)   Pricing

Show the appraiser the documentation that you were relying on in pricing the property.

4)   Contract

Email or hardcopy contracts are always appreciated as appraisers don’t always get them from the lender. This will ensure that the appraiser has the most recent copy/latest amend-extend of the contract.

5)   Hope for the best, plan for the worst

As with realtors, appraisers come with varied levels of experience. Keep in mind that even the most experienced of appraisers may not be intimate with the market nuances of your property or neighborhood. Educate them with what you know, in 60 seconds or less. If it takes longer than that, put it in writing and give it to the appraiser.

6)   Comps

Don’t assume that the appraiser will identify and consider the same sales/listings as you did. The appraiser may, or may not, consider the same properties in the appraisal, but at least you have disclosed them.

7)   Detail sheet

Give the appraiser a list of all updates and upgrades to the property.

8)   Sketch

If you have a sketch, please share it! Appraisers appreciate confirmation of field measurements.

9)   Just the facts

Share what you need to and let the appraiser do his/her thing. Most appraisers have a rigid property inspection process that needs to be done in silence. There is a LOT of information that needs to be absorbed in a relatively short time span. It’s best to have a conversation at the end of the inspection, not in the middle of it.

 10)  Professionalism

Expect it. Lenders expect their appraisers to look and act like professionals. If they are not, let the lender know about it.

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How to find Buyers for your Home

How to find Buyers for your Home

Casting a Wide Net

While it’s true that “It only takes one . . . ” (a hopeful Seller’s motto, but let’s face it you can only sell to one buyer), you’re better off having broad appeal and broad exposure. 

Website providers and brokers may try to convince you that they have some unique “marketing magic”, but buyers really want complete and accurate information that they can quickly compare with all the other listings out there. Here’s where the action is:

sources of home buyers, Winston Downs homebuyers, sell Denver Home

Almost everybody is using the internet in one way or another.  Buyers browse the net before and during their relationship with a broker.  The majority of buyers 1) see the home on the internet, 2) call their broker, then 3) buy the house.

The next largest group sees the home first with their broker.  How did the broker find it?  Right, the internet (actually MLS, which is a databahase accessed by brokers via internet).

Takeaway:  make sure the home is easy to find on the web.  Have the right information available.

What do Buyers want to see on the Web?

Now that you know where the buyers and brokers are, it’s important to give them what they want.  Here is what Buyers value most on the web:

Denver homebuyers, Winston Downs buyers, Winston Downs brokerAs you can see, you need photos and detailed information (square footage, price, bedrooms, baths, taxes, HOA fees, descriptions, etc.)

Unless you want to “major in minors”, you don’t need a fancy video presentation, open house, magazine ad.  If you give buyers the basic information and plenty of pictures, they’ll drive by, call their broker, see the house and maybe buy it.

So what do you need a broker for?  Fair question.  If it’s that easy to get broad exposure (Zillow had 30 million visitors in May 2013), what DO you need the broker for?  Easy:  mitigation of risk.  Making a mistake (contract, inspection, appraisal, loan approval, closing) can get very expensive very fast.  But that’s a topic for another post.




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How accurate is the Zillow “Zestimate”?

How accurate is the Zillow “Zestimate”?

Have you ever wondered how accurate the Zillow “Zestimate” really is? Many times when I’m working with buyers or sellers I find that they are using Zillow to compare the “Zestimate” with either my opinion of value or with the asking price of a particular home. Perfectly normal: most of my clients are smart people, and this information is free and easily available.

So, just how accurate is the Zillow “Zestimate” anyway? I actually just found out recently how you can determine the accuracy of Zillow in your area. Take a look at this video, prepared by an SRA Appraiser in Birmingham, AL, to learn how:


Zillow has gone back in time to compare their historic Zestimate with what the property actually sold for. They say that their “estimated market value” is not an appraisal, but in reality an estimate of market value is an appraisal, but it’s one that cannot be used by a bank —  and one that you may want to think twice about before using to determine a sales price for your home.

Zestimates provide a range in value which can vary widely. The information is based on public and user-submitted data, both of which can vary in accuracy. County records often do not reflect newly finished areas or additions where a building permit was not used. Zillow explains that the further apart the spread from high to low the less accurate their estimate is. Check out the range of accuracy for the Denver area below. Are you comfortable using data that’s only within 10% accuracy a little more than half the time?

Denver zestimate, Winston Downs zestimate

How Accurate is Your Zestimate?

So is it wrong to use Zillow?  No – just recognize Zillow for what it is and don’t expect much more. Without actually looking inside a property, and using research-based methods of adjusting for sales information, you are only going to attain a certain level of accuracy. Another thing is that computers do not recognize similar market areas or differences in location characteristics.  Examples of this include adjustments for schools, traffic, differences in subdivisions and even streets within sub-areas. The other obvious area where inaccuracies can occur is with property condition. Appraisers and brokers are trained to research this information so that adjustments can be made. If a comparable is in inferior (or superior) condition, an adjustment will be made to reflect this.

The bottom line is that an appraisal (or “Broker Price Opinion) made by a person is going to be much more accurate than the value estimate provided by Zillow or other similar website.

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Why Buyers choose Your Neighborhood

Why Buyers choose Your Neighborhood

Who knows why home buyers pick one neighborhood over another? The National Association of Realtors® (NAR) does, and they answer that questions in their 2012 Survey of Home Buyers and Sellers.

NAR asked a large sample of buyers which characteristics were most important in their home buying process. The chart shows the 8 top-ranked factors.

Neighborhood Characteristics Ranked*
with Children
Quality of Neighborhood 61% 63%
Close to work 43 46
Affordability 39 38
Close to friends/family 35 32
Design of Neighborhood 26 24
Close to Shopping 26 21
Quality of School District 25 46
Convenient to Schools 22 44
*adapted from NAR Profile of Home Buyers and Sellers 2012

Proximity to friends and work is self-explanatory, and it’s easy to see how good schools would be so much more important to Buyers with children, but what do we really mean by “quality” when we’re describing a neighborhood? It’s not really made clear in the NAR study.

Fortunately, others have asked the same questions, including the U.S. Dept. of Housing and Urban Development (HUD). In a 1979 study called The Determinants of Neighborhood Quality they found statistical significance with a number of conditions. Here’s their list of the things most people are concerned about:

Quality Denver Neighborhood

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