About Craig Blackmon

I am an attorney in Seattle, where I have practiced real estate law for over a decade. I own and operate my law firm, Seattle Property Lawyer, where I help people buy and sell homes without an agent (as well as handle other legal issues relating to owning a home). I am also a licensed real estate broker and innovator in the real estate industry.

Buying a House in Seattle 2015? Check out Quill’s free Home Buying Class

2015 Home Buyer Class

Free Home Buyer Seminars offered by Alternative Brokerage in Seattle

Are you thinking of buying a house in Seattle in 2015? Or perhaps it’s time to sell your home? Either way, you’ll learn some great information at Quill Realty’s free House Buying Seminars for 2015.  We ‘re offering a free home buyer class – great for sellers too – on the fourth Wednesday of every month through June, from 7p – 9p here at the Quill office in Georgetown. Whether you’re a first time homebuyer or a seasoned veteran looking to “move up,” you’ll learn something valuable at these free real estate classes. Topics will include the current and anticipated future of the real estate market, common real estate legal issues (including from the seller’s perspective), and real estate search tips for finding “the one” (and other good marketing tips for sellers). All from the unique perspective of a consumer-driven, alternative real estate brokerage.   Continue reading

Should you hire a lawyer when buying or selling a home? Depends – do you want to reduce your risk?

[Updated 3/2016]

Buying or selling a home is a legal transaction. Real estate brokers are able to engage in the limited practice of law needed to put together contracts for real property. But brokers certainly aren’t lawyers. And buying or selling a house is usually one of the biggest financial transactions in someone’s life.

So “forward thinking” consumers – both buyers and sellers – might consider using a lawyer instead of a broker. This allows them to save money while getting superior legal services. Other consumers will go the traditional route, but end up wondering whether they should also hire a lawyer to assist them in the transaction. If that describes you…

You should hire a lawyer in a real estate transaction when the legal risk outweighs the cost of a lawyer.

What is “legal risk”? For a seller, it means possible liability for someone else’s financial losses. So there are two parts to “legal risk.” First, what is the possibility of being held liable? And second, what is the probable amount of that liability? A 98% chance of owing $100 is a very different legal risk than a 2% chance of facing a cool $1m liability.

What sorts of issues might create liability? On the seller side, there are two general obligations: disclosure obligations, and title obligations. An attorney will help you to understand these obligations, what you need to do to comply with them, and the possible amount of liability if you fail to do so and are held accountable. In other words, by hiring a lawyer, you’ll be able to identify – and then reduce – legal risks.

On the buyer side, “legal risk” means the possible hassle and costs associated with some condition of the property. In other words, a buyer engages in due diligence specifically to identify the legal risk of completing the purchase and owing the house, usually under the title contingency and the inspection contingency. If there are land use concerns or landlord/tenant issues, an attorney will really help. And regarding title, only an attorney is qualified to analyze a title report. For example, if a neighbor has a driveway easement across the property, you’ll want to know that. Based on what you find, you might have the ability to renegotiate the contract to account for the defect. An attorney can help there too.

And of course you need to know the cost of an attorney. As a general rule, expect to spend $1-2k on an attorney if you need to rope one in for some legal analysis and counsel.

At the end of the day, it simply makes sense to hire both a lawyer and a broker if you are a prudent consumer. Why? Because…

Every transaction has risk. A lawyer reduces it.

Those two statements are simply not debatable.  And as a long-time practicing attorney, I have lots of examples of the risks associated with buying or selling a home, and how a lawyer will reduce those risks. Here is one such example.

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It’s Hard Out There for Buyers, Lesson 2: Make Sure You’re Dealing with the “Agent-in-Charge” (It May Not Be Who You Think)

Here’s another quick tale from the trenches as I continue to work with clients at my new real estate firm, this time from the rough-and-tumble market of South King County.  Yup, it’s tough everywhere…

My client identified a home in Kent for purchase.  It had been on the market for 200 days, with a couple of failed contracts in the meantime (one due to “buyer remorse” and one to failed financing) and nary a price drop. The listing showed an Agent and a Co-agent (both from the same office). I promptly reached out to the Agent, who told me they had no offers and none expected.  Within a day or two we submitted our offer at $10k off list.  Having heard nothing in response, I followed up with a  call two days later.  Her voicemail told me she was the managing broker for the office.  Good, I’m dealing with the boss…

The Agent called back and explained that the sellers were having health issues and thus the delay in responding.  I asked about other offers and was assured there were none.  I noted that our offer amount was predicated on us being the only offer, and if another offer appeared to please let us know.  In that event, obviously we would take a different tack in the negotiations.  I also said that we had no problem at all being patient with the sellers given their health issues, assuming they were indeed acting in good faith and negotiating only with us.  The Agent assured me that was the case. Yeah.  She said that the Co-agent was trying to meet with the sellers and they would get back to us in a day or two.  She said the sellers were likely to counter at $4k off list.  Riiiiiight.

The next day, I got a call from the Co-agent.  With “the bad news.” Sellers had received a full-priced offer, so they accepted it. Another “WTF?!?” moment.  Although signed, it had yet to be returned to the buyers, leaving me a tiny bit of room to maneuver.  So I tried to salvage the situation, and the Co-agent at least pretended to be sympathetic.  I called the client and got authority to draft a new offer at $1k OVER list – thus beating the offer in hand – but the sellers had made their decision and had no interest in giving me or my clients the time of day.

When the smoke cleared, and the rage had subsided, I though about the lesson to be learned.  Always go with full list in this market if it’s within shouting distance of fair?  That seems extreme and not consistent with my professional obligations to my client. Recognize that assurances of “good faith” are rendered meaningless the moment a new offer comes in?  Yeah, but that’s a little obvious, this is after all real estate.  🙂  Then it hit me: Know who is really “the agent.”  You know, the person with the seller’s ear who is actually driving the ship. It may be the “Agent” or it may be the “Co-agent,” assume nothing based on title (even if the “Agent” is also the managing broker!).  Listen for clues.  When the Agent says, “Oh, the Co-agent will be meeting with the sellers tomorrow,” immediately hang up and call the Co-agent.  Don’t waste your breath talking to anyone else.  It is a waste of time that will not be helpful going forward.

Another lesson learned. And confirmation that the Quill model strikes the right balance between protecting the client (by keeping an attorney on board and behind the scenes) and getting a deal done (by allowing the Quill agent to take the lead when negotiating a contract).

“Offers to Be Considered on a Future Date”: Is This Really Fair to Buyers?

As I work my way back into the market following the launch of my real estate firm, I am learning just how difficult it is from a buyer’s perspective.  Specifically, I am trying to get a client into a $400-500k home in West Seattle.  It turns out there are only a few thousand other people looking for the exact same thing, and a few dozen homes that fit the description.  OK, I’m making these numbers up, but you get the drift.  It’s tough out there.

Until this week, I had a high degree of respect for sellers and their agents who noted in the listing that the seller would consider all offers on a particular date in the future.  This allows all interested buyers to really put their best foot forward, particularly by pre-inspecting so that the offer is not contingent on the inspection.  Particularly in older neighborhoods like West Seattle, where homes routinely approach or exceed the century mark in age, sellers appreciate knowing that there will be no renegotiation based on the condition of the home.

So on Wednesday afternoon, I met my client at the “target” home where we were awaiting the arrival of our inspector for a pre-inspection.  The seller was to consider offers on Friday morning.  Buyers and an agent were inside, I assumed simply touring the home.  Suddenly, the owner emerged from the house and announced she had just sold the house to the folks who were inside with her.  As the kids say, WTF???

It turns out that the seller had every right to accept this offer, notwithstanding the “offers to be considered” date as stated in the listing.  NWMLS rules specifically allow a selling agent to present an offer directly to the seller long before the stated “deadline.”  So it turns out my anger and frustration at the seller, the listing agent, and the selling agent who pulled the coup were all misplaced.  (I wouldn’t even rule out an apology, now that I know the rules.)

But it begs the question: Is that fair to buyers?  What if my client had completed the pre-inspection?  He would have been out-of-pocket money specifically in reliance on the seller’s and listing agent’s representation in the listing.  And even without that expense, it seems unfair that a stated “deadline” can be wholly circumscribed by one buyer at the expense of all others.  If it were up to me, the rules would be changed. But all I can do is continue working towards providing buyers with an improved home buying process.

An Open Letter to Glenn Kelman, Redfin CEO, on the “Discount Real Estate Broker” Model

Post Updated 5/20/15:

P.S. Glenn, more than a year has gone by. I’ve busted my you-know-what trying to build a better Redfin-style mousetrap. And a couple of months ago, I said to myself: Wait a sec. I don’t think that sort of mousetrap is EVER going to work. I think technology and modern business practices have rendered that old type of mousetrap obsolete. The world is just waiting for somebody to invent something different entirely. Real estate isn’t immune to evolution. It just takes real change and a new way of doing things before it evolves.

So yesterday, I announced my imminent withdrawal from the NWMLS. A move made possible, in part Glenn, by Redfin’s devotion to solid data quality. Via FSBO platforms, I will be able to list homes for sale on Redfin – exactly where most buyers are looking in Seattle – without having to list on the NWMLS. And thus without having to pay a cooperating broker commission in the first place. But unlike Redfin and every other real estate firm – whether traditional or alternative – I won’t be on the NWMLS.

So this is where we part company – for now! 🙂  I suspect Redfin still has room to evolve…

-CB

The original letter to Glenn dated February 18, 2014:

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Have you ever heard, “Don’t worry, it’s just paperwork” from your Real Estate Agent?

Recently some good friends of mine decided to buy a home.  Such good friends, in fact, that we mutually agreed to keep business and friendship apart so as to not create any problems on either end.  So they didn’t use my services.  Instead, they first used a “discount” agent affiliated with a large, local real estate brokerage, before finally landing on a “traditional” agent.

It ended up being a great opportunity for me as well to learn more about the process through their eyes.  One thing that they mentioned, in particular, caught my attention.  On more than one occasion, they expressed a degree of concern to their agent about the volume of documents that were apparently required.  Being prudent and sophisticated folks, they wondered what all of this “paperwork” really meant, why it was necessary, and how it related to their interests in the transaction.

The response?  “Don’t worry, it’s just paperwork.”  Well, it may be “paperwork,” but that doesn’t mean a buyer shouldn’t worry.  Those are legal documents that impact a buyer’s interests.  It is a disservice to the client to dismiss that concern without addressing it.  Everyone should at least have the opportunity to understand the process and the inherent risks.  If a buyer chooses to keep his head buried in the sand, so be it.  But it shouldn’t be an agent’s job to hold the buyer’s head down in the sand.  If the buyer wants to pull his head up, learn about his environment, and understand what is going on, an agent should encourage, not discourage, it.  If you don’t get that encouragement, think about getting another agent.

This principle underlies my new real estate firm, Quill Realty.  You’ll never, ever hear this expression from a Quill agent.  Instead, Quill will provide its clients with a lawyer, in part so that the client can ask questions about and really understand the “paperwork.”  Just another benefit of using Quill.

To say I am excited about the model would be a gross understatement… 🙂

 

And I thought the NY Times was authoritative…

688newspaperHaving gone to college in NYC, I was indoctrinated at a relatively young age into believing that the New York Times was the “paper of record,” a bastion of journalistic integrity, a font of inestimable wisdom.  Today, I grew up.  I’ve seen the light.  I now recognize the New York Times for what it apparently really is: A shameless, self-promoting spout for an exclusively East Coast world view.

The source of this revelation?  An article in today’s NY Times.  As stated there:

“The sale of The Post by the Graham family, which owned it for 80 years, leaves The Times as the nation’s last major newspaper run by a family.”

Uh, that’s flat-out wrong.  The Seattle Times has been owned and operated by the Blethen family for 117 years.  Indeed, Wikipedia provides perhaps the perfect rebuttal:

“The [Seattle] Times is one of the few remaining major city dailies in the United States independently operated and owned by a local family (the Blethens).”

I guess it’s true, anything west of the Hudson river really isn’t that important in the first place.  Or perhaps Seattle just doesn’t qualify as a “major” city.  Whatever.  But I did make sure to let the Times knows of this rather shocking breakdown, which – conveniently? – promotes the NY Times.  I mean, who doesn’t love the last remaining family-owned anything?

UPDATE: Hmm, I guess my message got through.  Now appearing at the bottom of the article in the NY Times (link above):

Correction: August 8, 2013

An earlier version of this article erroneously attributed a distinction to The Times. Several newspapers serving major American cities are still family-run, including The Seattle Times, which is owned and operated by the Blethen family.  The Times is not “the nation’s last major newspaper run by a family.”

A resounding victory for truth, accuracy, and family-owned businesses everywhere!!

When you buy custom research paper here, all revisions and editing services are provided without additional cost from you.

Real Estate Negotiation Skills: What Are They And Who Has Them?

It’s not hard to find real estate agents who hold themselves out as “expert negotiators.”  There is even a certification – Certified Negotiation Expert, or CNE – that agents can obtain to further enhance their skills and reputation.  But really, what makes for a great negotiator when buying or selling real estate?  And who has those skills?

At it’s most basic level, “negotiation” is a subset of the art of persuasion.  An expert negotiator knows as much about the opposite party as possible, and in particular their motivation for entering into the proposed transaction and their desired result.  For example, when negotiating a purchase, the negotiator should be asking herself, “What is motivating this seller?  What can my buyer do to address the needs of this seller?”  The negotiator uses this knowledge to meet the seller’s needs as much as possible, which of course will help to facilitate the sale.

There are other elements to being a great negotiator.  For example, a negotiator may be able to extract a significant concession by setting up and standing on a bluff.  This is the “poker-face” aspect of negotiations.  Depending on the circumstances, a good negotiator may play it “close to the vest” and not reveal much about the party for whom she is negotiating.  This is, to a certain extent, the flip side of knowing the other party’s motivation.  If you don’t reveal your motivations, the other party will not be able to exploit them (although they won’t be able to address them either).  That said, this is  not a particularly helpful skill in real estate because the negotiations are in writing and not face-to-face.  Plus, there is always risk in bluffing, because if your bluff is called your position will be weaker in the future.

Empathy is also a good negotiation skill, particularly in the context of residential real estate.  Buyers and sellers of their homes have a significant emotional investment in the proposed transaction, and therefore they may not act “rationally.”  For example, a buyer may think he is requesting a modest concession following the inspection, but the seller is highly offended by the effort and the deal craters as a result.  A good negotiator takes this emotional component into account.

Finally, there is the most important negotiation skill (particularly in a highly competitive market like this one): The ability to assist the client in relinquishing some contractual rights and assuming some contractual risks in order to strengthen the offer.  Admittedly, this skill is only relevant, generally speaking, when there are multiple potential buyers and multiple offers.  But in that situation, there will be one winner and a whole bunch of losers, and everyone wants to be that winner.

When drafting an offer, a buyer generally includes several contractual terms that protect the buyer at the seller’s expense.  For example, there is a financing contingency, so if financing fails the buyer gets back his earnest money; there is an inspection contingency, so if the buyer is not satisfied with the condition of the property the buyer gets his earnest money back.  A good negotiator will have an intimate understanding of these potential contractual terms.  That negotiator will explain to the buyer how these terms protect him, and how buyer can forego some or all of those protections (like, for example, by foregoing the protections of the financing contingency).  The buyer can then make an informed decision about which protections, if any, to forego.

The expert negotiator can then specifically structure the offer, such as by using an addendum to alter the  terms, to make the offer much more attractive to the seller (basically eliminating the buyer’s protections so if buyer doesn’t complete the purchase for any reason the buyer must forfeit the earnest money).  In doing so, the negotiator will significantly increase the buyer’s chances of beating out other buyers.

So who has such skills?  Of the four examples above, a good real estate agent should fully understand and be able to apply the first three.  The fourth?  That is the practice of law.  Agents are neither trained nor authorized to apply this skill.  If you rely on a real estate agent for this service, you do so at your peril.  If you want a negotiator who has this skill, you should hire an attorney to assist you in the negotiations.

BofA HAMP Loan Mod Program: A Giant Fraud at Homeowner’s Expense

Earlier this morning, I came across a very interesting statement made by a BofA employee in a lawsuit against the bank regarding its “participation” in the Home Affordable Modification Program (HAMP).  A “declaration” is a statement made under penalty of perjury and is commonly used in litigation to give facts (typically from a witness) to the court prior to trial.  This particular lawsuit was brought by Max Gardner, a well-known consumer attorney in North Carolina, against BofA for its conduct in working with homeowners seeking a HAMP modification. This Declaration of BofA Employee really pulls back the curtain.

HAMP is a federal initiative to encourage lenders to modify mortgages for moderately distressed homeowners.  As anyone who has dealt with BofA knows, the bank is incredibly frustrating and does an exceptionally poor job in working with borrowers who want to modify their mortgage.  It turns out this isn’t because of low-quality employees – or, at least, not at the consumer level.  Management?  “Low quality” would apparently be a giant step up if this employee is to be believed…

How to Strengthen Your Offer when there are Multiple Potential Buyers

This is not legal advice, and you should not rely upon it.  For legal advice, consult an attorney, not a blog.
'Finance' photo (c) 2012, Tax Credits - license: http://creativecommons.org/licenses/by/2.0/In today’s low-interest-rate, low-inventory, recovering-from-the-bubble housing market, there are more buyers than there are sellers.  This leads to routine instances of multiple offers, where only one buyer will get the home under contract and the rest will be disappointed.  So if  you’re looking to buy, you need to be thinking about how to handle this likely scenario when you find “the one.”  You want to be the sole winner, not one of the several losers.

There are many ways to enhance an offer, many of which are discussed in the link above.  However, these are generally “ham-fisted” attempts to strengthen the offer that are routinely employed by real estate agents and that really are not that effective.  For example, putting down a large amount of earnest money certainly doesn’t hurt, but (a) the seller wants to sell, not keep the earnest money, and (b) presumably your competitors will bump up their earnest money as well.  Accordingly, increasing the earnest money is not a particularly effective way of strengthening your offer.

In a recent post, Ardell discussed the relationship between the “must appraise” clause and the recent increase in housing values.  She suggests that buyers are now waiving the “must appraise” clause in order to strengthen their offer.  In reality, removing the “must appraise” clause from the financing contingency is an ineffectual way of strengthening the offer.  [That said, Ardell is absolutely correct in warning buyers about entering into a contract where they will have to make  up the difference between the sale price and appraised value, a caution that fully applies to this post as well.] If a buyer simply eliminates the “must appraise” clause of the financing contingency, the buyer really hasn’t strengthened the offer at all.  In fact, just the opposite.

Per the terms of the financing contingency, the buyer is relieved of the obligation to buy the home, and is entitled to a return of the earnest money, if the buyer’s lender is unable to fund the loan per the terms of the contingency (most commonly the lender will provide 80% of the sale price).  When the financing contingency includes the “must appraise” clause, the buyer does NOT automatically get an “out” if the home appraises for less than the sale price.  Rather, the seller has the contractual right to “massage” the issue and to keep the sale on track.  If there is no “must appraise” clause, the seller loses this contractual right.  So if the property doesn’t appraise, where the contract includes a financing contingency but no “must appraise” clause, the loan simply does not fund and buyer is at least arguably entitled to a return of the earnest money back.

Why “arguably”?  There would be a degree of ambiguity in the contract about whether the buyer “had sufficient funds to close” if there is no “must appraise” clause.  The buyer would argue that the “sufficient funds” refers to the buyer’s portion of the sale price as set by the contract (e.g., if the contract requires 20% down and the sale price is $500k, then buyer must have $100k on hand).  The fact that the property did not appraise does not change the buyer’s obligations.  Rather, it simply means that if the property doesn’t appraise, the loan will not fund, and thus buyer is entitled to the protections of the contingency.  The seller will of course argue otherwise.

But the goal here is to strengthen the offer, not set up a spitting match with the seller.  That being the goal, the best way to strengthen the offer?  Waive financing entirely.  Does this mean that the buyer is barred from financing the purchase?  Of course not.

Well, not “barred,” but not allowed either.  Absent a financing contingency, the buyer represents in the form contract that the buyer is not relying on any contingent source of funds, such as a loan, to complete the purchase.  So if the buyer simply excludes the Form 22A Financing Contingency from the offer, but is planning on getting a loan, the buyer will be in breach of contract as soon as the contract is signed.  This would allow the seller to retain the earnest money and sign a contract with a new buyer.  Unlikely, but very very possible.  So a prudent buyer should include an additional term in the offer noting that buyer will be financing the purchase.  Thus a pre-approval letter will be essential as well.

There is no prohibition in the contract on getting a loan.  But if the buyer can’t get a loan, then buyer will forfeit the earnest money. An offer without a financing contingency is considered a “cash offer” by sellers (and their agents).  This means that the appraisal is irrelevant in regards to buyer’s obligation to complete the purchase.  And Ardell is right, THAT is the seller’s goal, because bidding wars among buyers can elevate the price beyond “market value.”

Sellers don’t want the transaction to derail because of a low appraisal.  But you don’t get there simply by eliminating the “must appraise” clause.  You need to forgo the financing contingency entirely. Which of course increases the risk to the buyer’s earnest money.  If the buyer forgoes the financing contingency but must finance the purchase, and if the financing fails for ANY reason, the buyer loses the earnest money, period.  In other words, the risk of a failure of financing lies on the buyer, not the seller, where there is no financing contingency.

If the property does not appraise for the sale price, the buyer will either have to go out-of-pocket for the difference (as noted by Ardell) or buyer will forfeit the earnest money.  So if you’re thinking of going this route, make sure you understand and accept this risk.

Should you forego the financing contingency, but offer a small amount of earnest money?  This is a good option, in part because “CASH OFFER!” has such an appeal to sellers (and their agents).  There is a good chance that the seller will not even appreciate the need for a large amount of earnest money absent a financing contingency.  If seller does appreciate that issue, then at a minimum you have a good chance of getting a counteroffer from seller.  And if there are multiple buyers, that is about all you can ask for.

So good luck with the offers, and strengthen them in a focused and effective way, as long as you understand the resulting additional risk.