Welcome to Mountain Real Estate. Today we have the pleasure of Steve Smith joining us to talk about his experience in real estate in the mountains.
Welcome, Steve.
I’m happy to be welcomed.
I’m going to give a little background on how Steve and I got connected. And then Steve, I want you to tell us a little bit about your experience of owning a home in the mountains. Steve and I have two mutual friends through different parties. One, Steve is a mentor to my friend Thayer who runs the Knome business that we shared previously on the podcast, and Steve has mentored Thayer, and he mentioned that Steve and I should meet. And then my friend Megan works with Steve in their financial planning business and she mentioned she’s working with this guy Steve. And I said, “oh, is this the same Steve?” We were destined to meet, and it happened around the time Steve was getting ready to sell his house in Frisco. Steve tell us about your house in Frisco and how you got here.
So it sort of started in 1990 when my wife and I were in Maine. We took a three month sabbatical to tour the West. And then we went back to Maine and decided we no longer wanted to live in Maine and decided to move to Colorado. And that was in 1991. We started a business about which neither of us knew anything, which is a retail business. But it happened to be in an industry that I had some contacts, so we opened a store, we rented a condo for a year or so and when the business was looking like it was going to get some traction, we decided to buy a house. That was in 1993 and that was the house in Frisco that we lived in for 30 years until we sold it this past September with the assistance of Candice.
My takeaway from this is that sabbaticals lead to big life changes that are very worthwhile.
I think that’s probably right. I’ve had some clients that have really exploited the ability to take sabbaticals in their lives. And if you can get away with one by all means (or two), yeah, you might end up in Colorado buying a house.
Alright, So why don’t you tell us about your experience with Frisco and what led you to your other house and leading to this next phase of life?
In 2000 Which was, what about 10 years after we moved to Frisco, we decided we wanted to have a second home. And we decided to have that second home in Denver rather than in Arizona or Florida or Mexico or Portugal or whatever. And so that became our vacation home. And it was more or less backward to the way most people around here do things, where they have their primary in Denver or the Front Range someplace and their vacation home in Frisco, which worked out great for many years because we were often driving down to Denver on Friday nights and Saturday mornings seeing the traffic going in the other direction and vice versa on Sundays. And then when COVID hit and things got crazy everywhere, we decided it was less crazy in the city than it was in the mountains, especially at the beginning. And my wife had injured herself and wasn’t able to ski much anyway, so we decided to move the center of gravity of our lives to Denver. Beginning. I would say the first year of COVID for the winters and we hardly spent any time in Frisco in the winters for from 2020 to 2023 when we decided to sell the house. And one of the reasons was is that we weren’t spending winters up there and it was hard to maintain with all the snow and everything. So in in the summer of 2023, we decided to sell our Frisco home of 30 years and move to Denver. We put it on the market the 4th of July and sold it September 15th and I can provide some details of how that evolved because that’s what Candice wants me to talk about.
Yeah. Why didn’t you tell us about that? Here’s my takeaway from this, Steve. When everyone’s running one way, you seem to be running the other way. And I feel like this is a good life lesson to not run with the crowd, but run against the crowd.
Well, it’s an interesting financial strategy too, because I’m a financial planner. And sometimes it’s good to be a contrarian. Like Warren Buffett says, buy when people are selling, and sell when people are buying rather than the opposite. But anyway, I had been a student of the relationship between Realtors and customers for a long time, largely on account of my friendship with a gentleman named Chris Ebby who is a retired realtor in Frisco. He had a practice which was a buyers representation only practice for about 20 years in Frisco, meaning he didn’t take listings, only represented buyers, and had extricated himself from some of, if not most, of the built-in conflicts that can arise in the industry between agents and their customers. He actually referred us to the agent that helped us buy this house in Denver and did a great job for us where I paid him by the hour for his representation and he was going to get paid whether we bought a property or not, which is another interesting aspect of the real estate brokerage industry where for the most part agents only get paid if and when there’s a transaction, and that can create some conflicts too. So anyway, back to summer of 2023. My first call was to Chris. Do you know anybody that wants to buy our house? And his answer was maybe. And then his answer was no. So then I decided to try to For Sale by Owner (FSBO) the property and did a lot of the work myself with photography and staging and getting the word out to local Realtors and putting the property up on Zillow the late summer and fall of 2023. I think it turned out to be one of the worst times to be trying to sell property in recent history. Mostly because interest rates spiked. Over the course of 12 or 18 months, mortgage rates went from in the 3% to the 7%. So that pretty much took a lot of potential buyers out of the market. On the other hand, in the mountain resort areas, there’s a fairly large proportion of cash buyers to begin with, so it turned out not to be that big a deal about halfway through that process. I realized that the pure FSBO wasn’t getting a whole lot of traction, so we hired Candice to help us in the background to do a better job at the FSBO. I was also even as part of the FSBO offering to pay a buyer’s real estate Commission to any realtor that produced a buyer. It was only after like a couple of months of that that a really good prospect emerged. And here’s the ironic part. It happened to be one of Chris’s former customers, and he referred them to another realtor to actually do the representation. And they made an offer and at that time I sat down with Candice and said this is getting serious. We need to switch our relationship from “You’re going to be in the background” and I’m going to pay you for your time to “Let’s have a real listing agreement to try to get this deal consummated and closed” and Candice agreed to do that at a discount from the standard industry commission rate. And over the course of the next month or so, everybody worked really hard. We got a contract. Candice got us through the hard parts, which were Surveys and inspections. Those are the things that a lot of people don’t think about when they first begin a relationship with a realtor, which is, you know, it’s one thing to find a buyer or a seller, but it’s another thing to get a contract and then it’s another thing for the 20 or 30 contingencies in a contract to be checked off so that you can get to a closing. In my view, that’s one of the most valuable components of what a professional real estate agent can supply.
Awesome. And I’m only paying Steve a little bit to say all this . But Steve, I think that that’s a really good point that when you meet your prospective buyer or seller, you see where they’re coming from. And when I met you, you were very sophisticated. You had done your homework, you knew your market rate, you’ve bought and sold houses, you knew what it took and so this is 1 where I was like, well, this guy doesn’t need a lot of help. I’m here to do whatever you need, and as we went along the process we both learned like, “I thought that this part was easy” as you were saying, or “I didn’t have the same expectations of some of these parts”. So I think that’s where in these real estate transactions, it’s more than just “I’m going to sign a piece of paper.” You’re like really working together and building that trust of like I’m going to let you run with this when you want to run with it or I’m going to jump in when I think you need me to jump in. And we don’t really know where that’s going to go because every transaction is different. And thankfully yours was fairly smooth.
And it came down to. I can’t remember the distinction, but there’s two different kinds of surveys. There was the what was it, the ILC and the ISP and the ILC was the easy let’s just do it in a day one and the ISP was we need to bring the surveyors out and those crazy instruments and you can’t even get one done for a few weeks. The buyers in this instance were insisting on the latter, so Candice had to open up her Rolodex and find somebody down in Denver that could do an ISP in a couple of days at a horribly inflated price. But the decision had to be made with the buyers insisting on this and you have a closing date coming up. You’re gonna have to eat this extra $1000, Steve. Yes, and sometimes those little things are worth just getting through to the end. But you have to have a knowledgeable and experienced and well-connected agent on your side to get through. What in the scheme of things is a small matter but it can blow up a deal if if you don’t come to your senses.
I don’t know if I’m allowed to say this, but I’m going to say it. My favorite quote from you during our whole transaction was “This is a mosquito on a hippo’s ass.”
And I appreciate that. I got that from a lawyer colleague of mine back in Maine.
Perfect. Yeah, I’m glad that you brought that forward because I’ve used it moving forward. All right. So, yeah, so you have successfully sold your property. It was a pleasure to work together.
As a financial planner, how did that play into your financial plan and your path forward at this phase in life?
So. That’s an easy question for me to answer, which is that property was really valuable made up a significant portion of our balance sheet. We had no mortgage on it. Only really using it three months of the year rather than 12 and having all that capital tied up in it began to make less and less sense, so we decided to redeploy the capital. And now we have all that capital available to invest in other things that throw off interest and dividends and things like that which we can spend on travel going up to the mountains when we want, where we want without having to own a place. Like I said to one of my clients who is facing a similar dilemma, it’s nice to own a piece of real estate, but if you want to take a trip to Europe, you can’t sell off one of the bathrooms. And so, when you redeploy that capital into a more diversified part of your portfolio, you can spend that money to do something else.
Yes. And you and Sandy are doing all the things you want to be doing and still getting to enjoy Frisco.
I think that’s the case. We’re going to rent a place in Frisco for the summer and see how that goes.
And so my lesson learned here is to buy a house in Frisco and keep it for 30 years and you’ll be set.
Hopefully that’s true. It’s hard to imagine what happens if the growth rate on our 30-year ownership is the same over the next 30 years. Umm. The people that bought my house. If they were young enough to own it for 30 years, they’ll be selling it for $10 million.
Right
Hopefully! And hopefully, you’ll be their agent.
Yeah, exactly.
Hopefully, my house does that appreciation over 30 years.
Just to maybe bring this a little bit full circle regarding the discussion we had about the relationship between customers and agents and the value and the commissions and the different ways you can structure that, the news today is a red letter day in the industry. There was a lawsuit filed by consumers against the National Association of Realtors that wound up in a big money judgment against. It was regarding fixing commissions and the relationship between sellers and buyers brokers, and it’s a little bit complicated but today the case was settled and the big deal going forward is that consumers are going to have to become as sophisticated as I chose to become in developing my relationship with Realtors because the impositions that Realtors had put on their customers have gone away. So, if you’re out there listening get prepared and get educated.
Yes, what is your key takeaway from how do think this is going to change the industry moving forward?
It’s going to change it, I think in two huge respects. One: There’s gonna be a disaggregation of the Commission paid between buyers agents and sellers agents. The traditional model was there would be a let’s say 6% Commission and the seller’s agent would get 3% and the buyer’s agent would get 3%. And it was advertised by the seller’s agent that that’s what would be the structure of any deal, and that’s going to go away. And so that the actual Commission contract between sellers and their customers is going to be more like the 3% and buyers are going to have to figure out how to compensate their agents?
Yeah, I think it’ll be interesting to see how it plays out. I think the important thing is to communicate with your agent and everything is negotiable. So we’ll see. And that’s why I like working with you, Steve. You’re a sophisticated real estate seller in this case, but also a sophisticated buyer and you’ve done your homework, and you know what you’re capable of. And I’m of the mindset that I want to make sure that I’m adding the value that my clients are expecting. So it was a good match in this case and, Steve and I continue to talk about how this settlement is going to impact things moving forward. So if you want a a customer’s perspective who’s very sophisticated and educated on what’s happening, reach out to Steve.
Alright, Steve, any parting words on mountain real estate for our guests?
Stay off I-70 in a snowstorm.
That’s a very good lesson, given that it was closed the entire day yesterday.
Yes. And when you have a house in Denver and you’re driving the opposite direction and you can choose when you want to be up or not be up. It’s it. You can do that.
Steve, thank you so much for taking time to do this. I really appreciate chatting with you always, but appreciate you sharing some of your wisdom with the podcast listeners. So thanks for being here! This is Candice De signing off from Mountain Real Estate.