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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Interest Rates: When to Buy

When my parents bought a home in Denver back in 1964, they borrowed money at about 7%.

When I was first licensed to sell real estate in the early 1980’s, rates were in the mid-teens and we were seeing the advent of adjustable-rate mortgages.  ARM’s allowed borrowers to qualify at a lower rate while spreading out the risk for the lender.

Historic Interest Rates

Since 1981, after reaching a high of nearly 19%, rates have steadily declined.  Like all trends, it’s not a straight line.  You may have noticed that when rates spike up a little, pundits (mostly lenders and brokers) will say “hurry up and buy/sell before rates go up further!”  Then, when rates go down you hear “buy/sell now before rates go back up!”

I’m writing this now because people in my business are starting to wring their hands again about interest rates, the Fed, etc.  Stuff nobody can do anything about.  And maybe it doesn’t matter that much.

When to Buy or Sell

In over 30 years and hundreds of transactions, here’s what I’ve learned:  almost nobody buys or sells just because interest rates are a certain way.  Buyers will buy and Sellers will sell regardless of where rates may be.  That’s because the financial benefits of home ownership still outweigh the (temporary) costs of higher rates, and the real reasons people move (changes in family, job, age, etc.) don’t usually allow a buyer to wait until interest rates are perfect.  You can always refinance.

Bottom line:  the right time is whenever you need to do it.  

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December Market Trends

Denver market shows signs of slowing, but only slightly:

Winston Downs market

Keep in mind that in an overheated market, a “slowdown” might just make it a good market (for Sellers).

You can calculate an “Absorption Rate” by dividing the Active Inventory (7,530) by the monthly sales (3,732) = 2 months.  Friends, that is still a really good absorption rate (3-6 months is “normal” . . . ).  

Average and Median prices haven’t changed that much, and it could just reflect where the activity is in the marketplace, e.g., fewer high-end properties were sold.  

That increase in Avg Days on Market (6.9%) is only 2 days . . . so no big deal.

Bottom line:  still a Seller’s market; When pricing a home for sale, scrutinize the comps and make honest adjustments for condition and location.  React quickly (30 days) if you decide it’s overpriced.

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Average Home Price

Are we seeing any decline in Denver home prices? 

Not yet.  At this writing, we’re seeing some seasonal slowdown – fewer showings – and that may have a temporary affect on pricing.  

Inventory is up

This could impact prices, too, but if you think about it historically:  remember that Denver had over 20,000 active listings for much of the 1980’s.  

Even if the supply gets all the way back to levels of 5 years ago, there’s still a lot of demand.

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How Mortgage Strategy Differs for Millennials, Gen Xers, and Baby Boomers

Changes in market conditions, mortgage qualifying and changes in the nation’s economy have caused Millenials and Gen-Xers to have some anxiety about whether they will ever enjoy the benefits of homeownership. Some strategy and planning is called for. Here’s a good summary of things to consider:

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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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