Thursday, March 05, 2015

What's an Egress Window?

by Osman Parvez

The other day, I took a buyer to see a house in Boulder. It was listed as a six bedroom house and two of the bedrooms were in the basement.    

Here's what they looked like:




The windows in the basement bedrooms wouldn't comply with code. In other words, two of the six bedrooms in the house are "non-conforming." The listing description doesn't mention it.

Here's the issue. In a fire, basement bedrooms without egress windows are a deathtrap. Boulder uses the International Residential Code which defines an egress window as follows.

IRC egress window requirements (2012)

Opening area of window shall have a minimum opening area of 5.7 sq ft. Unless it is a grade floor window then it can be a minimum of 5 sq ft.

Regardless of opening area the following minimums are required. Minimum opening width 20”. Minimum opening height 24”

Sill height of the window opening may not be more than 44” from the floor. 

Basement window wells shall have a horizontal area of 9 sq ft minimum. With a horizontal projection of 3 feet and allow the window to fully operate.

Window wells deeper than 44” shall be equipped with a permanently affixed ladder.

If the window well has a security grate or cover it must be easily open able from the inside in case emergency exit is required.

This is the sort of thing we caution our clients about. Whether you're an investor or a personal home buyer/seller, not disclosing the fact that basement bedrooms are clearly non conforming is risky. Marketing and staging them to look like bedrooms for small children is even worse. It's something buyers and sellers should know before writing an offer or listing a property for sale.  

Code Source:  Integrity Design Build


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As always, your referrals are deeply appreciated.  

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

The Inventory Shortage Gets Worse [Analyze This]

by Osman Parvez

Time for a quick inventory analysis update. Let's look at the charts. 



The graph above shows House Einstein's inventory tracking for attached and detached dwellings in the city of Boulder. Inventory has been rising since mid January.  

Now let's look at the bad news. 



This chart shows the breakdown between available and under contract houses. Beginning in early February, the number of "tied up" houses spiked upwards.   




The inventory shortage is worse for condos and town homes. Under contract properties (including pending listings) are 41% higher than available homes.   

From The Front Line

We've been writing offers and negotiating deals for our buyers and sellers at a furious pace. Here's what we're seeing on the ground since the beginning of the year: 

1. Inventory and thus selection is increasing, but buyer competition is increasing faster. 

2. Desirable properties are drawing multiple offers, well beyond what appraisals will support. Cash buyers have an advantage in this market. Some of that advantage can be mitigated by drafting intelligent additional provisions into the contract.  

3.  Leftover inventory is largely comprised of grossly overpriced listings or properties with obvious and difficult to fix problems such as structural defects, busy and historically weak locations, and bad floor plans. Your Realtor should be warning you away from the flotsam of the market. If not, get a better Realtor

4. The high-end is treacherous for buyers and sellers. Sellers want to maximize price but comps are few and trailing. Pricing is tricky. If a seller grossly overprices and the listing sits for weeks (or months) without an offer, buyers conclude something is wrong with the property. If the property goes under contract and then returns to market, it's worse. A bad listing history can cost high-end sellers hundreds of thousands of dollars as well as additional carrying costs. This is leading some Realtors to utilize a pre-MLS, private marketing period to test high-end pricing before opening the property to the public. To have access to these listings, buyers need to have a relationship with Realtors who maintain good relationships with their colleagues, increasing the importance of reputation and trust.   Buyers should also be very cautious about overpaying for a property during the private marketing period. Again, choose your adviser carefully.    

When I worked in the securities industry, our regulatory body (the SEC) was deeply concerned with transparent and orderly markets. That's the not the case with real estate. There is no Reg FD and information flows are anything but orderly. Here at House Einstein, we deeply analyze market conditions because it helps us better advise our buyers and sellers.   

Note: We've been writing and analyzing the the inventory shortage since 2012. It's not new, it's just getting worse. When improvement occurs, we expect it will likewise be a gradual process which occurs over several years. 



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You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

Image: Jon Ross 

Wednesday, March 04, 2015

Market Knowledge - Realtors HATE This!

by Osman Parvez

This past weekend, I negotiated on a $2.2 MM deal for an international buyer and held two separate discussions with private sellers in the $1.4 to $2.5MM range.  

Everyone was concerned with the same thing. 


Question: "What about private sales?  Am I missing out on something?"
Answer: Certain brokers would like you to believe that private, off-market sales are a big portion of the Boulder real estate market. This myth gives them undue leverage.  

Don't believe the hype.  

The vast majority of transactions are conducted by professional, full time real estate agents with properties that are publicly listed on the MLS. Private transactions are a tiny fraction of sales. This is particularly true at the high end.  

Yes, even in this seller's market.

Question: How do you know?    
Answer: I obsessively analyze the Boulder real estate market from top to bottom. It's how I advise my buyers and sellers on property selection and due diligence. I don't rely on hand waving and happy talk. I don't rely on Zillow (which admits to an 8% median error rate).   Even the MLS is not enough, by itself. 

To quote my favorite real estate investor, "sophisticated transactions require deep market knowledge." If you want to understand the market, you have to roll up your sleeves and dig deep. There is no shortcut.  
  
Take a look at the following chart: 




  
Fact: 96% of transactions above $1MM were handled by Realtors on the MLS in 2014.  

Yes, private sales are a real thing and you can't ignore them. Just don't base your entire buying or selling strategy on 4% of the market.  

To produce the chart above, I analyzed all sales above $1MM in Boulder during 2014. I removed multi-family income properties, commercial, industrial, churches, land, open space acquisitions, and family transfers (usually divorce or trust).   

In 2014, there were only nine private arms length transactions above $1MM. 

Fact: 10x more homes sold between $1MM and $2MM than sold for $2MM or more.    

If you're shopping for a home in the $1MM to $2MM range, you have lots of options. Nearly 200 sold last year alone. Don't feel pressured to buy a subpar asset.  

If you're shopping above $2MM in Boulder, you're wading into thinly traded, illiquid asset territory. Nearly as many $2MM+ listings failed as sold during 2014. Double down on the your valuation analysis, your marketing plan, and buyers... I strongly recommend caution with transactions that are not on the open market. 

Choose your adviser carefully.   If you'd like to review my bio, CLICK HERE.   You can also reach me at 303.746.6896.

image: Michelle Tribe


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Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

Friday, February 27, 2015

This Week's Fresh Listings [Get 'Em HOT]


Tired of all this snow yet? Us too.  

Too bad.   

If you're shopping for real estate in Boulder, you can't sit around chugging hot cocoa in your PJ's all weekend. 26 new properties hit the market this week. We sorted through the riff raff and only 12 are worth seeing. Our rundown is below. 

To schedule a private showing, which includes a discussion of valuation and price trends, call Osman at 303.746.6896.



Single Family Homes


5323 Aztec Drive | $659,000 | More Details
A nice east Boulder property in Keewaydin. It has some tasteful updates at a reasonable price. Suitable for a family. Expect a bidding war. Due diligence: It backs to a church so check traffic and noise on a Sunday. 

 






2535 Kenwood Drive | $675,000 | More Details
Ranch with a finished walkout basement in Table Mesa. The location gives good access to open space and you're near the best schools in Boulder. Only one of the four bedrooms is in the basement. Due diligence: Check for traffic patterns that feed upper Table Mesa.  

 






712 Locust Avenue | $1,250,000 | More Details
Curb appeal is lacking but you've got open space access and views, two of the most important value anchors for Boulder Real Estate. This house is west of Broadway, Lucky's is nearby and the house has some nice updates. Worth seeing. 

 







480 Oakwood Place | $1,250,000 | More Details
The location is a dead-end street in desirable Wonderland Lake. It's a decent size house on a decent size lot. There are interesting architectural details and some nice updates. Due diligence: Most families don't like split layouts for the bedrooms. Are the lower level bedrooms below grade?

 





1070 Juniper Avenue | $2,490,000 | More Details
This estate is quality. Very private feeling house and looks like it belongs in the English countryside. 1990's construction means better quality and higher energy efficiency. Lots of great updates, a giant lot, and an intelligent layout. Definitely worth seeing.  


 


Attached Dwellings
 
3050 Corona Trail M-307 | $169,900 | More Details
If you're going to buy at Remington Post, south facing on the upper levels is the way to go. Often these units are mispriced. Views and southern exposure sell faster and for more money. My investment clients tell me these units rent quickly. Sadly, no dogs allowed. 

 




2930 Shadow Creek Drive #303 | $212,000 | More Details
Top floor units are the way to go at Gold Run. This would make a decent one bedroom kiddie condo, just keep in mind that in weak markets, two bedroom units are more liquid. Due diligence tip: Gold Run has experienced several fires in recent years. One of the buildings was reconstructed with sprinklers and the HOA has been exploring adding sprinklers to remaining buildings. Check for emergency egress and future special assessments. 

 

2875 Springdale Lane | $439,900 | More Details
Another Gold Run unit, this time with 3 bedrooms. The pros of this development are proximity to CU, retail, and the Boulder Creek path. On a bicycle, you can be downtown or on campus in less than 15 minutes. Due diligence tip: See notes for 2930 Shadow Creek. 

 





1110 Poplar Avenue | $539,000 | More Details
Boulder has a shortage of "adult" condos and townhomes. The majority of our attached dwelling inventory is aimed at students. This is an exception. Older construction with some updates. Lucky's market is a stumble away. Layout is split, with one of the bedrooms in the basement. A decent alternative to an entry level stand alone house and likely lower maintenance. No main floor bedroom, so not ideal for aging Boomers or others with potential knee problems. 

 


1850 Folsom Street #911| $799,000 | More Details
As we know from 1829 Columbine, some flips are worth seeing. This one seems to be banking on Google executives. The location is a mix of residential, commercial, and retail. Worth seeing but at this price point, you have alternatives. Call me for details. 303.746.6896. 






Investment Properties

965 10th Street | $549,900 | More Details
We looked at this property for our clients the last time it was on the market in 2012. It's a great example of how we help our clients select homes. Here's our client preview album with 50+ photos from 2012 and notes.  








1045 9th Street | $875,000 | More Details
9th street has tons of traffic and the lots are narrow, but the students don't care. That's why the majority of homes on this street, particularly close to the University are student rentals. Rapidly rising rent could make this one a solid investment play. A duplex with six bedrooms and five parking spaces. Due diligence: Rental license and cost to comply with Smart Regs should be on your checklist.   






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Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 


You can also like our Facebook page or follow us on Twitter.

Your referrals are deeply appreciated.  

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend rigorous due diligence and professional advice before buying or selling real estate.


image credit:  Teresa Alexander-Arab  

Wednesday, February 25, 2015

This Week in Boulder Real Estate [Tales from the Trenches]

by Osman Parvez

A few quick updates for you. 

1. No Meetup
The Boulder Real Estate Meetup scheduled for tomorrow is cancelled. Unfortunately, I've got a cold. The topic was an in depth review of the bidding wars which have occurred so far this year (all of them). The analysis I prepared for the meetup will go out in next month's research report instead. If you aren't subscribed, sign up here

2. Bidding War Tactics
Sellers - when a listing agent presents you with the Colorado Commission approved Exclusive Right to Sell Contract, read §5.8 carefully.   

It states the following:

"When asked, Broker Will / 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."

In a bidding war, there are only a few legitimate reasons you'd not want your listing agent to disclose the presence and details of other offers. If you check the "will not disclose" box, you're forcing potential bidders of your house to negotiate blind folded and you're leaving money on the table.    

At a minimum, have a candid discussion with your agent about strategy. What's their approach for disclosing the presence and terms of other offers? Why? To what degree shall they share or not share information to help you obtain the strongest possible offer?   

If your listing agent claims that offers are always confidential, pretend you're from Missouri and ask them to show you. Here's the truth. Confidentiality is only mentioned under the mediation section of the Colorado Contract to Buy and Sell Real Estate. It's not even binding language, it's only a desired outcome if the you know what hits the fan.  

There is massive value in disclosing the high water mark in a bidding war. Buyers who have confidence that other legitimate offers are coming in will pay a higher premium for the property or remove contingencies to strengthen their offer. Buyers who feel they aren't getting the facts or are bidding against phantom offers will be less likely to offer their true "highest and best."   

Remember, trust is essential to maximizing value and is the single most important ingredient to successful negotiations. Read, Six Ways to Build Trust. p.s. For those agents playing games with non-disclosure and a lack of transparency to put money in your own pocket, remember your reputation is on the line. The chickens come home to roost when you represent future clients in future negotiations. The majority of transactions in Boulder are done by a minority of full time, professional agents. Treat your negotiation counter parties fairly and with respect. 

3. Looking to Buy or Sell?
I'm representing buyers at all price ranges at the moment in Boulder, Louisville, and Longmont - from affordable housing to +$3MM. Most of my buyers are flexible on terms, including the closing date and they're willing to pay a premium for desirable homes. Call me if you're thinking of selling. 
ph: 303.746.6896.   

I also have knowledge of several Boulder properties that will go on sale this year. If you're shopping for a home, feel free to call me as well. I may have a match for you. 

4. Private Sales, Transaction Brokerage and Integrity 
Private sales have a nasty habit of leaving money on the table but for personal reasons (divorce, job changes, death in the family, etc) an owner may want to quietly market and sell their property.   

If the property is a good fit for a buyer, I'll work with them to finalize the deal with the seller but keep in mind that if I have a existing relationship, I won't work as a Transaction Broker. I take exception to the Real Estate Commission allowing the TB status because there is no such thing as a neutral Realtor. It's an impossible burden and unrealistic of how human relationships work. With rare exception, I'm either representing the buyer or I'm representing the seller, exclusively. It's the only way to manage conflicts of interest and remain in integrity. I care about the deal at hand but I also care about the next hundred negotiations. Integrity and reputation matter, especially in a small real estate market like Boulder.

From HBR's Six Ways to Build Trust


In negotiation, as in all aspects of life, your reputation precedes you. A bad reputation can be a deal killer from the start, while a great one can help transcend an impasse. Effective negotiators realize that their reputation is not just a backdrop, but a tool.

5.  Team Building
Speaking of reputation, last year, we were approached by several agents interested in switching to Realty Unique.  

As you might imagine, we're a little selective. If you're an experienced agent looking to join a great team, have significant professional experience, and feel that your values align with ours, please contact us. We'd love to talk to you. 



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Like this analysis?    Subscribe to our client research report.     
Want to get blog updates via email?  Click HERE.       
Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

Your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

image:  David Runer

Tuesday, February 24, 2015

Best Practices for Negotiation

by Osman Parvez
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After yesterday's post on bad faith negotiation, here's one to point you in a better direction. Remember that sophisticated negotiations are not a yelling match, they're a chess game. 

Best Negotiation Practices for Listing Agents

Step 1: Analysis. This includes a deep review of the most recent and relevant comparable sales. It's not complete without an analysis of appreciation trends for specific property type, price range, and location. There is no short-cut, it requires analytic skills and market knowledge. 

Step 2: Strategy selection. Lay out recommended strategic options for the seller and the most likely results of each approach. There are risks and rewards to several common techniques.  

Step 3: Professional marketing. A sophisticated approach is to target all potential buyers; the internal sphere and external buyers. Professional photography, a well advertised open house, a private and public marketing period are essential components. Agents should personally invite high volume brokers and their clients to see the property. Make sure the property is listed on as available on the MLS for a reasonable period of time.  

Step 4: Communicate key information to interested parties about incoming offers. Provide supporting information (evidence) of the caliber of competitive offers. This dramatically increases buyer confidence and drives the purchase price upward while simultaneously reducing buyer contingencies and increasing the probability of a successful closing. Anything less is short-changing the seller and leaving money on the table.    

The use of selective transparency to increase trust is one essential component of Negotiauctions. Virtually every sophisticated high-end asset transaction is a negotiauction. Shut-down moves, which limits same side competitors to 3-5 parties, is another essential component. There is no benefit to more than 5 offers; it's a smoke screen. 

Step 5: If bidding is particularly active, we strongly advise our sellers to allow us to negotiate a gazumping provision into the contract. This levels the playing field. Otherwise, once sellers have signed the deal, they lose virtually all leverage over the process. If the buyer flakes, the seller eats the cost in the form of lost time on market and a tainted listing.

Step 6: Don't forget the 80/20 rule. A minority of agents in Boulder do the vast majority of transactions. We find ourselves negotiating with the same counter-parties again and again. That's why we provide all bidders with key information, including the high water mark.   This cements our reputation as a negotiator with integrity, not a self interested used car salesman. 

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Note: We had a detailed discussion of buying and selling best practices at the last Boulder Real Estate Meetup. Missed it? Don't miss the next one. Learn more and RSVP.



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Like this analysis?    Subscribe to our client research report.     
Want to get blog updates via email?  Click HERE.       
Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

image credit:  Elias Levy

Monday, February 23, 2015

How to Negotiate in Bad Faith [Tales from the Trenches]

by Osman Parvez


Bad Faith Negotiation 101

Step 1: Set an asking price well below market value in order to lure 100+ people to your open house. Don't put it on the MLS. 

Step 2: At the open house, brag about how the inventory shortage is allowing you to double-end million dollar plus deals. 

Step 3: When asked how your sellers feel knowing they left money on the table by not allowing an open market sale, say "well, that's their choice."

Step 4: Refuse to disclose terms of any offers to agents who submit, including the current high water mark or whether intended offers are competitive. Receive over a dozen blind offers, most of which are not competitive.  

Step 5: Advise your seller that they should choose the offer from your buyer - since you know this buyer the best and you're most confident it will close. Not knowing any better, the seller takes your advice. Neither buyer or seller understand what a Transaction Broker means.

Step 6: Refuse to tell the other agents who submitted offers anything about the winning bid. Hope they forget about it and move on. They won't. 

Step 7: Pocket the double-end. Continue to brag about how many offers you received and your sales commission. Hope nobody files a complaint with the Real Estate Commission.


True story. 


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Like this analysis?    Subscribe to our client research report.     
Want to get blog updates via email?  Click HERE.       
Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

image:  Fabio Di Lupo

Friday, February 20, 2015

What Snow Storm? Go See the Fresh Listings [Get 'Em Hot]

by Osman Parvez


A storm is bearing down on Boulder this weekend, but if you're seriously shopping for real estate - put on your boots. You need to see listings when they're fresh.     

This week, 26 new property listings hit the Boulder real estate market. We culled the bad locations, refreshed listings, and other undesirables. Here are 12 worth seeing.  


Call me to schedule a private showing.  303.746.6896.



Attached Dwellings 




1301 Canyon Blvd 408 | $1,249,000 More Details 

If you're looking for a turn-key, luxury condo, this is a good option. The location doesn't get any closer to downtown. 1500 SF, two garage spaces, lock and leave.






900 Pearl St 207 & 209 | $2,750,000 More Details 

You won't often see a fire sale at the high end, not in this market anyway. The asking price was nearly $4MM last year and the owner paid $2.76MM in 2005. 4 bedrooms, 4 baths, nearly 4,000 SF and nearly 850 SF of rooftop terrace? Jump on it, now. Call me for a private showing at 303.746.6896.



3000 Broadway St 10 & 11| $698,888 More details 



Two units, one great location but probably most appropriate for an investor. Live in the top, rent the bottom or vice-versa. The location offers easy downtown access, the finishes... well, not so fantastic.








2850 E College Ave 309 | $424,900 More Details 


A solid choice for a CU student. Landmark Lofts are adjacent to campus and modern, which means Junior can focus on school instead of maintenance. Student density is very high in this location, but it's not the party side of town. Probably not the right choice for anyone else. 






Single Family Homes 




3674 Chase Ct | $559,000 More Details 

The large lot and updates are great. The basement bedrooms, not so much but it's liveable. You're on a street with little traffic and the house faces north/south, the outdoor spaces look pretty good. Martin Acres has seen a lot of activity this spring. Prepare for a bidding war. 




2485 Dartmouth Ave | $715,000 More Details 

This one is on the less busy, upper part of Dartmouth Ave or it wouldn't have made the cut. Interior isn't entirely dated, but it could use a refresh. The value is in the open space access, views, and schools. 









2715 Iliff St | $839,900 More Details 

We don't know about "coveted" but this is a solid location on Table Mesa. If you have need for 6 bedrooms, this could work for you. Interior is dated. 







4455 Chippewa Dr | $850,000 More Details 


A large ranch without a basement in Frasier meadows. Four bedrooms, three baths, and no stairs. With respect to valuation, we recommend carefully reviewing the comps and past history on the MLS before writing that offer. 





865 13th St | $850,000 More Details 

This was already under contract once and now it's back. The split layout and non conforming bedrooms aren't great, but the location is very desirable. Check for red cups in adjacent recycle bins, this location tends to have a lot of students. Lots of comments in the SPD, read carefully. 



3975 Newport Ln | $925,000 More Details 

Very quiet location in Wonderland Lake. Finishes could use an update. Easy access to open space and west of Broadway. We're not huge fans of a split layouts, most buyers prefer all bedrooms on the main or upper levels but this factor is largely offset by the location.







300 Evergreen Ave | $2,385,000 More Details 


A trophy in one of the best locations in town. Nicely updated and buttoned up. Comparable to Trailhead without the construction risk. We're taking clients to see it this afternoon, so will have more details shortly. Call with questions or to arrange a private showing. 

ph: 303.746.6896





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Like this analysis?    Subscribe to our client research report.     
Want to get blog updates via email?  Click HERE.       
Ready to buy or sell?  Schedule an appointment or call 303.746.6896. 
You can also like our Facebook page or follow us on Twitter.

As always, your referrals are deeply appreciated.  

--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

image: Dave S.