All aboard! The track is done, but the electric isn’t up yet, so Sound Transit did a test push a few days ago. I sort of wish the Central Link had a dirtier name to complement the Seattle S.L.U.T. (t-shirts here).
Sound Transit test push
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Monthly Archives: June 2008
Join us for a Rain City conversation on Tuesday afternoon!
I’ve been having such a blast with the 4realz Roundtable conversations, that I’m going to bring the conversation to Rain City Guide!
The idea: this Tuesday at 4pm, I’m going to host a conversation with the Rain City Guide community. There are many ways to join the conversation and all of them are easy. All the information you need is located at this website: http://www.talkshoe.com/tc/17904, but here is a summary:
- You can call in to the # provided (724-444-7444), Call ID: 17904, to listen to the conversation.
- You can join the chat by going to the website that TalkShoe provides for a Rain City conversation any time during the scheduled call (4pm to 5pm on Tuesday)
- Getting fancier: You can sign up for a (free) account with TalkShoe and then join the chat (step #2). This will allow me (as the “host” of the show, I’ll be able to know who you are and identify your chats!
- Fanciest: You can sign up for an account (step #3), join the chat (step #2) and call in (step #1).
If you opt for step #4, then I can have you join in the conversation during our podcast!
The way that I’ve been managing the conversations during the 4realz Roundtable is that I invite a few “guests” who are unmuted during the entire show. And then, just to make sure things don’t get too overwhelming, I closely monitor the live “chat” during the show and if someone has a question or wants to make a point, then I “unmute” them. For people simply listening to the show, it sounds like a live radio interview show, but to the people taking waiting to “come on air” they can actively chat with all the others waiting to come on air.
So, for the first episode of a Rain City conversation, I’ve invited EVERY Rain City Guide contributor to be live on the call… The first order of business will be to go around the “virtual” roundtable and let each contributor talk for two minutes about what brought them to Rain City Guide.
Then quickly, I want to open up the mic to your comments, questions, tips, etc.
- Are you moving to the Seattle area and want to ask about great neighborhoods?
- Do you have a specific question for a contributor?
- Want to share your experience with the Seattle real estate market?
My hope is that this first episode will be a lively and educational conversation, but it will only work if you join us! So, please consider taking an hour out of your Tuesday afternoon to take part in a Rain City conversation! I can’t wait to hear from you!
Sunday Night Stats – King County
I’ve been reporting the change in volume and MPPSF. But let’s go back a bit so you can see the change from an historical perspective, and also help put things into focus as we move forward from here. By seeing how we have gotten to where we are, you can better determine if what is happening currently and in the future is “normal” for that time of year, or a change from the normal relationships of quantity and price from quarter to quarter.
Format is Year, Quarter, number of units sold and median price per square foot.
King County Condos
2000 – 1Q x,xxx – $xxx, 2Q 1,574 – $154, 3Q 1,725 – $157, 4Q 1,491 – $162
2001 – 1Q 1,444 – $163, 2Q 1,770 – $165, 3Q 1,816 – $174, 4Q 1,380 – $166
2002 – 1Q 1,464 – $168, 2Q 1,885 – $172, 3Q 1,885 – $172, 4Q 1,642 – $173
2003 – 1Q 1,518 – $168, 2Q 2,011 – $179, 3Q 2,338 – $184, 4Q 1,911 – $183
2004 – 1Q 1,694 – $188, 2Q 2,636 – $199, 3Q 2,540 – $196, 4Q 2,176 – $195
2005 – 1Q 2,066 – $198, 2Q 2,925 – $209, 3Q 2,769 – $226, 4Q 2,266 – $224
2006 – 1Q 1,956 – $242, 2Q 2.748 – $252, 3Q 2,737 – $269, 4Q 2,217 – $278
2007 – 1Q 2,042 – $295, 2Q 2,862 – $302, 3Q 2,676 – $311, 4Q 1,618 – $294
2008 – 1Q 1,258 – $299, 2Q 1,126 – $288 (2Q incomplete data – postings as of 6/16/08)
King Couny Condos
Active Listings: 3,964 – DOWN 22 – median price $325,000 – MPPSF asking $320 – DOM 60
In Escrow: 946 – UP 8 – median price $288,250 – MPPSF asking $288 – DOM – 50
Sold YTD : 2,384 – UP 97 – median list price $294,950 – median sold price $289,000 – median PPSF – $294 DOM 48
King County Residential
2000 – 1Q x,xxx – $xxx, 2Q 6,111 – $130, 3Q 5,994 – $127, 4Q 5,248 – $128
2001 – 1Q 4,662 – $131, 2Q 6,336 – $135, 3Q 6,454 – $133, 4Q 4,963 – $131
2002 – 1Q 4,964 – $134, 2Q 6,740 – $140, 3Q 6,320 – $140, 4Q 5,897 – $138
2003 – 1Q 5,479 – $141, 2Q 7,783 – $143, 3Q 8,683 – $148, 4Q 6,859 – $147
2004 – 1Q 5,650 – $152, 2Q 9,237 – $160, 3Q 8.737 – $163, 4Q 7,467 – $165
2005 – 1Q 6,402 – $173, 2Q 9,093 – $185, 3Q 9,131 – $192, 4Q 7,301 – $195
2006 – 1Q 5,596 – $201, 2Q 8,248 – $214, 3Q 7,771 – $216, 4Q 6,204 – $217
2007 – 1Q 5,304 – $222, 2Q 7,393 – $230, 3Q 7,944 – $229, 4Q 4,301 – $221
2008 – 1Q 3,640 – $219, 2Q 3,471- $220 (2Q incomplete data – postings as of 6/16/08)
Residential King county
In Escrow: 2,987 – UP 80 – median asking price $448,900 – DOM 46 – MPPSF $213
SOLD YTD: 7,112 – UP 306 – median sold price $439,900- DOM 49 – MPPSF $220
Actively for sale 11,817- UP 64 – MPPSF <$800,000 is $220- MPPSF >$800,000 is $337
Stats not compiled or published by NWMLS. (Required disclosure)
Go Ray! Go Ray!!
Go Celtics! You can do it! Because you have OUR Ray Allen!
A+ Mortgage Receives an F from HUD
I spent part of last week at an FHA conference and had a chance to learn all about their upcoming changes which Rhonda blogged about here.
In the past I have been critical about the lack of HUD auditors regulating their laws. Regulation has mostly been left up to state agencies. Personally, I’ve only seen a HUD auditor once in my career and that was back in the mid 1980s during a routine FHA audit. I will now retract my criticism of HUD. They have more than made up for it with this searing audit of mortgage broker A+ Mortgage.
As of June 6, 2008, A+ Mortgage had one main Washington State office and 44 branch offices doing business under trade names such as “Kingdom Consulting,” “Resiliant Mortgage,” “Majestic Mortgage,” and “Extreme Home Lending.” HUD audited A Plus Mortgage to find out whether FHA borrowers were being overcharged and if loan originators were W-2 employees of A Plus, which is an FHA requirement. Here is what HUD found:
“A Plus disregarded HUD FHA requirements and provisions of RESPA and engaged in deceptive lending practices to maximize profits for itself and the independent contractors that used A Plus as a conduit for submission of loans for FHA insurance. Although A+ Mortgage informed borrowers that they could receive a lower interest rate on their loans by paying up-front points and fees, A Plus charged loan discount fees to borrowers without reducing interest rates on the mortgages. This practice allowed A Plus to generate high interest rate loans for which A Plus’s sponsor lenders paid A Plus a yield spread premium when the loans closed escrow. As a result, borrowers paid excessive interest and fees for which they received no benefit. In addition, all 28 FHA-insured A Plus loans reviewed were originated by independent contractors, unapproved branches, or other non-FHA-approved mortgage broker firms…A Plus ignored FHA origination requirements and submitted FHA loans originated by unapproved entities in exchange for a percentage of the loan origination fees, loan discount fees, and YSPs.”
HUD is recommending that A+ returned unearned fees totalling $153,110 to consumers, schedule a review of ALL of their FHA loans, and return all loan origination fees totally $32,026 to consumers on all loans that were originated by independent contractors. Recall that FHA loans must be originated by W-2 employees. I’m often asked why.
FHA says that loans originated under its program must be done by people who are under the lender’s exclusive control and supervision. HUD requires FHA-approved lenders to exercise responsible management supervision over its employees, including regular, ongoing, documented performance reviews of their work. By definition, independent contractors are unsupervised. For the reference, see HUD Handbook, 4060.1, Rev-2, paragraph 2-9(D).
Flat Screen TV – Is it "attached"?
Ardell’s Advice: “When in Doubt – Take it OUT” BEFORE showing your home to prospective buyers!
Over the years the thing that creates the most controversy in a real estate transaction has been something 
that is attached to the home. Different parts of the Country deal with these issues in local custom fashion.
When I started in real estate back in 1990, the primary cause of confusion was the dining room chandelier. Often sellers wanted to take it to their new home, but clearly a light fixture is attached to the home and is sold with the home.
After “the chandelier” the new attachment item became the “sub-zero” refrigerator. Up to that point, washers, dryers and refrigerators were NOT considered to be part of the real estate; dishwashers and stoves were. Rule of thumb being If you can simply unplug an appliance and remove it without any other effort, it goes with the seller. Refrigerators were like your alarm clock. Unplug it and take it with you. Then builders and kitchen remodelers started “building in” the refrigerator with panels that matched the kitchen cabinetry. The expectation became if it is a “built-in refrigerator” it stayed. If it was a standard plug-it-in-and-shove-it-into-an-open-space-for-it refrigerator, it went with the seller. Washer and dryer “hook-ups” were part of the real estate. The washer and dryer were not.
When the market weakened and became a buyer’s market, sellers of lower priced housing that fit into the category of “first time buyer” started to include the washer, dryer and refrigerator. When there were 20 of the same type of condo on market, often the seller who listed it with “all appliances” became the most likely to sell. Higher priced housing was not expected to include the washer, dryer and refrigerator. “First time buyer” housing was expected to leave the washer, dryer and refrigerator.
Then there’s the curtains. Most places where I have worked, the rod that is attached to the wall was sold 
with the home. The curtain that slipped off the rod went with the seller. The window treatment that was attached to the wall (usually a fabric covered boxy wood valance) stayed with the house. Blinds and shutters stay with the house. At one point I said to the seller “if you have to go get a screw driver to remove it…you probably shouldn’t be removing it, so call me first.”
Here in the Seattle area, the curtains DO go with the house, unlike most of the Country where only the blinds and rods go with the house. Here’s what the boilerplate of the contract has to say about this issue:
“Included Items. …built in appliances, wall to wall carpeting, curtains, drapes and other window treatments, Window and door screens, awnings, storm door and windows, installed television antennas, ventilating, air conditioning and heating fixtures, trash compactor, fireplace doors, gas logs and gas log lighters, irrigation fixtures, electric garage door openers and remotes, water heaters, installed electrical fixtures, lighting fixtures, shrubs, plants and trees planted in the ground, all bathroom and other fixtures and all associated operating equipment…”
I don’t even want to tell you how many times a seller drove out of town with the garage door remote in his car by accident. Or how many times there is a two or three car garage, but only one remote control. Most people are surprised that curtains actually stay with the house, when they slip off of the rod quite easily. The one that defies logic is when a buyer expects to get the door knocker with the previous owner’s last name engraved in it, or the sell expects to remove that door knocker without replacing it with a similar one and leaves a hole in the front door.
Over time, contracts and local custom worked through these issues. Today we have the “Wall-mounted Flat Screen TV” to deal with. Might that now fall under the heading of “installed electrical fixtures”? If the TV slips out of the mount and unplugs…then there’s “the mount”. If the flyer and mls said “all appliances included…is the wall mounted TV an “appliance”?
Obviously I just had one of these situations. The wall mounted TV was not simply “plugged in”. The cable for the TV came up through the wall via the crawl space and attached directly to the TV. There was no “cable plate” on the wall. Of course we really can’t see what is behind that TV, can we? The seller removed the TV, the Mount AND the cable that went down through the wall and over to the floor type TV connection.
It all boils down to what does this buyer need and expect. If they don’t have a flat screen TV, well then they probably want the wall to be returned to the condition it was before the TV was there. If they DO have a flat screen TV to be mounted on the wall…well then they want the cable there with a plate and an electrical outlet with a plate at that spot on the wall. Do they want the wall mount? Does their TV fit into that wall mount?
At what point does a wall mounted TV that is hard wired into the wall without outlets become “an installed electrical fixture” per the terms of the contract and included in the sale of the house? I don’t think anyone expects to get someone else’s TV…or do they? What about a Theater Room with a mounted projector and screen? Do you simply remove the projector? What about all of the wiring that makes it function? Speakers? Speaker wires? Satellite dishes?
From my perspective my advice is the same as it has been for the last 18 years…”If you have to go get a screw driver to remove something (or hire someone to “de-install” something)…CALL ME FIRST!” Then we work out a “true meeting of the minds” between the buyer and the seller, before creating a bone of contention over a $20 cable connection.
Will the wall mounted flat screen TVs and hardwired projectors in the ceiling go the way of the built-in refrigerators? How about “under the counter appliances” where you have to unscrew the mounts in the cabinets to get your coffee pot?
Where do YOU draw the line and what exactly is YOUR interpretation of “an installed electrical fixture”? For sellers: “When in Doubt – Take it OUT” BEFORE you put your home on the market. Replace it with what the buyer will actually be getting, before the first buyer steps through the front door and starts believing that “what they SEE is what they GET”.
Not showing a less-than-3% SOC commission? That's unethical and illegal
This is not legal advice. For legal advice, consult an attorney directly, not a blog.
It’s common knowledge (based on those comments, at least) that some buyer’s agents will not show properties with an SOC of less than 3%. Is that a problem? In a word, Yes.
First, the ethics: The term “ethics” in this context refers to the code of conduct by which a professional is expected to perform his or her duties. “Ethics” in this sense usually — but not always — correlates with what a layperson would consider “right” and “wrong.” Generally speaking, “ethics” in the professional sense imposes an obligation to perform a professional duty in a fair and reasonable matter.
Admittedly, I am not up to speed on the rules of ethics that would apply to a real estate agent. Many agents are also Realtors, and I know that they are thus subject to a particular code of ethics. Attorneys are subject by law to the Rules of Professional Conduct, rules of ethics formulated by the State Supreme Court. I am unaware of any similar rules that apply to agents.
With that disclaimer, it certainly seems like this conduct SHOULD be considered unethical. Surely an agent has an ethical duty to diligently work for the client, including the identification and showing of any property that is or may be suitable for the client. From an ethical perspective, I would even argue that this applies to properties with no SOC whatsoever. Admittedly, in that circumstance, the agent has every right to and should discuss this with the client, as the agent need not work for free. Thus, the agent should, either at the initiation of the representation or when the issue arises, discuss with the client whether and how the agent will be compensated if the agent finds a house that does not offer an SOC. The parties may agree that, in that instance, the client does not expect and has no right to receive information from the agent about that property. Regardless, with this conversation, whatever its outcome, the client can knowingly consent to any limited scope of representation, and consent is the key when dealing with an ethical issue.
Now, the legality: This conduct is almost certainly illegal (at least where there is something more than a 0% SOC), but there is very little chance that it will give rise to liability. How is it illegal? RCW 18.86.050 is the relevant statute. It requires a buyer’s agent to “make a good faith and continuous effort to find a property for the buyer,” except that the agent need not “show properties as to which there is no written agreement to pay compensation to the buyer’s agent.” In addition, the agent is relieved of this obligation entirely IF the buyer agrees otherwise in writing after receiving the required “Laws of Agency” pamphlet. So, assuming the property offers a commission in some amount (i.e., greater than zero), I believe the agent has a legal duty to bring that property to the client’s attention.
So why no liability if the agent fails to do so? That turns on general legal principles applicable to wrongful conduct. Where such conduct causes an injury, the wrongdoer is liable for the harm caused. Here, assume an agent fails to show a “dream house” to the client because of a 2% SOC. The client subsequently buys another house for the same price. The client then finds out that he was denied an opportunity to buy his dream house because his agent did not tell him about it. What is the injury? Given that they are the same price, there is no way to quantify the client’s injury. Under those circumstances, it will be difficult to find the agent liable. Note, however, that if the house actually purchased cost MORE than the dream house, the client may be able to recover the difference.
From a practical perspective, too, there is little chance of the agent being held liable. The whole claim turns on what the client did not know. So, in order to even raise the claim, the client has to learn that his agent failed to inform him of his dream house. Needless to say, it is hard to even fathom a situation where the client would learn of this information after the fact.
So, it ends up being one of those unfortunate facts of life where — as of today, given the laws as they exist — there is no real remedy for the injured party. Unethical? Yes. Illegal? Probably? Any way to stop the behavior? Unfortunately, probably not.
Upcoming Changes with FHA Mortgages
Update October 27, 2008: many of the changes mentioned below have all ready changed! Please visit Rain City Guide’s Mortgage Info page for the most current information.
I was just reading Brian Montgomery’s speech from yesterday which reminded me of what’s on the horizon with FHA insured mortgages. He points out that the increased loan limits are temporary–you only have until the end of this year to take advantage of the increased loan limits and then *poof* this coach turns back into a pumpkin! Instead of doing 3% down with a loan amount up to $567,500, if you’re buying in King County, the maximum loan amount for a single family dwelling will be $362,790. This is really a window of opportunity that is closing (this window includes conforming jumbo, too). I suspect that Congress will pass an extension to the loan limits…and IF they do, they may reduce the loan limit to somewhere between what is offered now to what the real loan limit is…this is a big IF. For now, we just know that FHA-Jumbo (and conforming jumbo) are here until December 31, 2008.
Next month, FHA will start their risk based pricing for mortgage insurance. This from Ken Harney’s recent article:
On 30-year mortgages with down payments of 10% or more, applicants with FICO scores above 680 will qualify for the lowest premiums — 1.25% of the loan amount upfront and annual renewal premium payments of 0.5%. Borrowers with down payments of less than 5% and poor credit scores — FICOs ranging from 500 to 559 — will be charged premiums of 2.25% up front and 0.55% annually. All borrowers will continue to receive the same market-based interest rate. Under the current system, borrowers pay uniform 1.5% premiums upfront and 0.5% annually.
The difference in savings is not super significant for borrowers. Using a loan amount of $360,000 and a rate of 6.5%, here’s how it pencils out for the credit scores above 680, 680-560 and 560 and below (who may have a tough time finding a lender regardless of FHA being willing to insure them. Lenders have their own underwriting “over-lays”).
- 680 plus with 10% down = upfront mi of 1.25% = $4,500. $4500 plus $360,000 = $364,500. Principal and interest = $2,303.89. Monthly mortgage insurance @ 0.5% of the base loan amount = $1,800 divided by 12 months = $150. $2,303.89 plus $150 = $2,453.90 (not including taxes and insurance) for the “preferred” FHA borrower.
- Credit scores above 560 with less than 10% down (this is the current model) = upfront mi of 1.5% = $5,400. $5400 plus $360k = $365,400. Principal and interest = $2,309.58. Mortgage insurance is the same rate as above, so the payment (not including taxes and insurance) is $2,459.58. A difference of just over $5 based on this loan amount.
- Credit score below 560 is going to have a different interest rate. In fact, many lenders will not do FHA loans under 580. Assuming a 559 credit score finds a lender, the upfront mi increases to 2.25% of the loan amount: $8,100 based on our example. The rate would be significantly higher in addition to the increased mortgage insurance costs.
So, the moral of the story is that if you have credit scores 680 or better and 10% down, don’t wait until next month to take advantage of the improved mi pricing. It’s not going to pencil out to the consumer as much as it will to FHA. You’ll potentially lose any gain by the rising mortgage interest rates (which have gone up again today).
Watch out for Down Payment Assitance Programs which are on the endangered species list. Even President Bush is on the bandwagon to do way with DAPS. Quite frankly, I’ve never been a huge fan as I’ve witnessed sales prices being jacked up to absorb the cost the seller has to contribute to participate and structure the transaction…who does this impact? The buyer. The practice of increasing a sales price over the list price, like the do-do bird, probably wouldn’t fly in today’s market anyhow. Home buyers utilizing FHA should count on investing 3% into the transaction (which can be a gift) and the seller can contribute up to 6%. I do believe the down payment assistance programs days are numbered.
I do hope that more people take advantage of the FHA Jumbo loans while they’re available for the remainder of this year. As I’ve mentioned, they’re a great resource for people with less than 20% down and with Fannie Mae’s DU 7.0, I’m sure we’re going to be seeing more and more FHA financing. Keep in mind that various lenders may have their own guidelines (3% vs 5% down w/FHA Jumbos, for example) in addition to those of FHA.
Sunday Night Stats – Regular Weekly Post
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In the post below this one I varied from the normal format. Posting this one for readers who are keeping the weekly data on an excel spreadsheet.
King Couny Condos
Active Listings: 3,942 – UP 31 – median price $323,000 – MPPSF $318 – DOM 61
In Escrow: 938 – DOWN 6 – median price $299,900 – MPPSF $299 – DOM 52
Sold YTD : 2,287 – UP 146- median list price $289,950 – median sold price $285,000 – median PPSF $291 – DOM 48
King County Residential
In Escrow: 2,907 – UP 28 – median asking price $445,000 – DOM 46 – MPPSF $211
SOLD YTD: 6,806 – UP 259 – median sold price $440,000 – DOM 49 – MPPSF $220
Actively for sale 11,753- UP 141 – MPPSF <$800,000 is $219.50 – MPPSF >$800,000 is $337.50
Stats not compiled or published by NWMLS. (Required disclosure)
Sunday Night Stats – Patience is a Virtue
My focus tonight is on the expectation of sellers to have an offer quickly after listing their property for sale. I must admit that I am still in a “30 days to offer” mindset as most sellers are. Truth is, that is not a realistic stance, but I didn’t realize until tonight how unrealistic that is.
In the month of May, considered to be a fairly robust month compared to the previous 6 -9 months, only 16% of all condos sold in 98007 sold in 30 days or less. Only 29% of all single family homes sold in Issaquah, sold in 30 days or less. Outperformers such as Redmond had a 45% chance of selling in 30 days or less.
King County has 7.8 months of inventory. Not much distintion between condos and single family homes. yet how many sellers have the patience to wait 7.8 months to sell their home? At best a seller has less than a 50/50 chance of selling their home in less than 30 days. Redmond only has 3.8 months of inventory on market as to single family homes. Issaquah is an outperformer as to condos with 61% selling in 30 days or less and only 3.3 months of inventory on market.
Lots of variations around King County, but be ready to have your home on market for awhile. No running off for the weekend and “looking at all offers on Monday” this year. And those of you who did manage to do that, realize how very, very luck you are.
OK, let’s see if we can find a silver lining out there in the clouds. Seriously, if the sun would come out…things might get a little better in the housing market. It’s been one gray year…and NO ONE believes it is JUNE! (Today is my 54/54 birthday BTW…Born in 54 and turning 54.)
May – King County Stats
516 condos sold compared to 959 last may – Down 46% as to volume
$298 median price per square foot – Down from $303 last May
1/1/08 to 5/31/08 – 2,220 condos sold compared to 3,906 for the same period in 2007
That’s down 43% as to volume, so May is not outpacing the year as a whole unless there are a lot of really late postings. Median price per square foot for the same period is down from $298 to $291.
Single Family Homes – King County
1,499 sold vs. 2,502 last May – Down 40% as to volume
Median price per square foot $220 – Down from $228 last May
1/1/08 to 5/31/08 – 6,634 sold vs. 10,001 in 07 – Down 33% as to volume
Surprises me that May would be underperforming the five month average here. Not a good sign. Lets hope that when we see some better weather around here, we will see some better stats as well. Real Estate can be very weather driven and this year has really been bad.
Median Price per Square foot of single family homes since January is the same as May stats at $220 – down from $226 for 1/1/07 to 05/01/07.
There are 11,753 homes for sale right now selling at a rate of 1,499 a month. There are 3,942 condos for sale selling at a rate of 516 a month. Basically it would take 7.5 months to sell off what is on market IF the rate of selling stayed the same and nothing new came on market.
So where’s that silver lining I promised you? There are 2,907 single family homes in escrow today and 938 condos. Those of you who are off to sign your papers to close escrow, realize how very lucky you are. And those of you getting ready to put your homes on market, have a great big party if you are one of the lucky ones who gets an offer in less than 30 days.
Stats not compiled or published by NWMLS. (Required disclosure)