Author Archives: ARDELL

About ARDELL

ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: ardelld@gmail.com cell: 206-910-1000

Home Prices in West Seattle – #justsayin

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Viaduct to lose one lane each way in Sodo starting May 16th.

“The May 16 lane closures mark the start of a long-dreaded, long-lasting traffic slowdown to enable replacement of the 1950s-vintage highway. Conditions will remain congested until early 2016, when a tolled tunnel is to replace the central viaduct section along the waterfront.” Mike Lindblom – Seattle Times

Surprised that I am not seeing more cautionary tales about home prices that will more than likely be impacted by this issue.

Thoughts?

How To Better Use the Internet to Find a Home

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1) Make a “value grid” of the area you are interested in.

2) Overlay an Elementary School ranking grid (whether or not you care about schools).

3) Use steps 1 and 2 to define your “target area” and make a new chart highlighting Market Value’s relationship to Assessed Value in that smaller, defined area.

Before I demonstrate how to apply these techniques, some insight on why I am writing this post today. It is in response to a few comments I read in The Wall Street Journal’s article on Buyer frustration, namely:

“The mood among buyers was ‘nasty’…customers just keep getting outbid on the houses they want.” Glenn Kelman, CEO Redfin

“What’s selling is the Cream of the Crop, and they sell fast. What isn’t The Cream of the Crop is getting hammered.” Real Estate Agent in Florida

“It’s a false buyers market. If you think prices are cheap, wait until you start making offers.” 32 year old home buyer

The main reason you want to start your home search on the internet, is to formulate some strong opinions about what you DON’T want, especially with regard to over-paying for a home, before you step into the arena.

The tug of war in the Internet Home Game is that agents want you to just come OUT and SEE the house, hoping you will fall in love with the house, and not care so much about it being a “good value”. The homebuyer is refusing to GO SEE the houses that indeed might create this scenario, which will work out better and best for the agents and sellers than for the home buyer.

The Mexican Standoff is created by sellers pricing based on their house being somplace where it is NOT, and buyers making offers based on some overall market statistic that may or may not apply to the WHERE they want to live.

To demonstrate this technique I am using the City of Kirkland in the example, because it is one of the easiest to break down into its value segments.

VIP! EVERY area has these VALUE TIERS with sellers in the dark pink area trying to price like the light pink area and sellers in the light blue area trying to price in the dark blue area.

That is what “over-priced” means, to a large degree.

WARNING: Some severe Real Estate Transparency ahead. Agents generally do not convey this information publicly because it can be offensive to buyers and sellers in the lesser value tiers. While all good agents use these methods with their clients, there is good reason why they do not speak of these things publicly.

If you are a homeseller or agent who wants to pretend that the only factors are school DISTRICT and those that relate to the home itself, this is not a good post for you to be reading.

1) A “VALUE GRID” example
kirkland value grid

TO UNDERSTAND AND CREATE A VALUE GRID, YOU HAVE TO UNDERSTAND WHAT THOSE VALUES ARE PULLING TOWARD AND AWAY FROM.

This is likely the main argument for why you need “a good agent” unless you can use these techniques to represent yourself. This is why having “any” agent is not necessarily better than representing yourself. When I ask an agent what “his service area is” and he says “ANYWHERE!”, I know he is not a “good” agent.

It is great to keep up on general market conditions, using sites like Seattle Bubble that tend to speak in terms of COUNTY stats. I read it all the time. BUT if you don’t take all that a step further into your area of interest, you will be the poor schnook who bought the house in the green section at a medium blue price and ended up selling it at a light pink price.

That is something that you need to understand about FORECLOSURES and why agents pay less attention to them being a “market value” setter. Sure, if someone buys a house in the green section and prices it at time of sale in the green range of value and it ends up in foreclosure, we all sit up and take notice! BUT, but, BUT when we see the house that sold for a medium blue price in the green section come back as a foreclosure…we say…”poor schnook, who the heck represented him when he purchased THAT!”

That’s how an agent can sometimes tell that a house is overpriced before seeing the house. That is why you need to know that too…so that you don’t fall in love with it and start ignoring “the obvious” from an emotional standpoint. The same holds true for the opposite, however. MANY BUYERS ARE FRUSTRATED because they keep making pink offers in the blue area…unsuccessfully. To go back on the quotes from The Wall Street Journal article, the “Cream of the Crop” is BLUE in all of its 3 shades and then Green. Getting “hammered” are the greens who bought at blue prices or the pinks who bought at green prices.

This applies to New Construction Foreclosures as well, and the builders who got the land in the green sections, but penciled their profit numbers out on the blue ones, or who bought in medium blue thinking they could get dark blue prices.

A few notes on the Sample Value Grid. I don’t want to get bogged down in the detail of “Kirkland”, but to help you use this principle elsewhere, worth a little more comment. The dark blue section is basically a condensed form of West of Market. Once you know this, you will understand why a lot of the bargains are up at 18th Ave to 20th Ave, especially on the West side of Market Street. The Medium Blue section to the right of the dark blue section is the other side of Market Street known as “The View Corridor” of East of Market which runs from 1st STREET to 3rd STREET (but not ON 3rd) and from Central to 13th Ave. The lighter blue section to the right of The View Corridor is East of Market up to 6th Street (but not ON 6th Street). The green section to the right of that is called “the wrong side of 6th” and can turn pink and green alternately depending on which street. Lots of “bad” decisions on highest priced homes “on the wrong side of 6th”. Same holds true in the lower sections where 6th Street turns into 108th Ave NE. You have to balance the COLOR grids (and school grid) with the “freeway noise” in some of these areas on the southern portion of the grid in the blue and green areas.

The lines are not hard and fast, but understanding some basic valuation principles will help you understand “value” better and well enough to “bend” the lines when appropriate.

AGAIN…EVERY AREA HAS THESE COLOR GRID FACTORS!. They just differ as to where and why in each area.

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2) Overlay the ELEMENTARY SCHOOL GRID

This is a newer value increaser/inhibitor somewhat created by sites like GreatSchools.org and sites like Redfin using those rankings on its property detail pages down near the bottom. People always had a word of mouth “best schools” impact on home values and rankings of School District and High Schools. But the valuation demarcations based on ELEMENTARY school and the exact “borders” of those schools, is a relatively new phenomenon created by more information being available on the internet.

Knowing the school boundaries is great! But are we giving too much credence to sites like GreatSchools.org and SchoolDigger.com? Most real estate industry personnel say yes, and do not lend their seal of approval to these sites as readily as some newcomers to the industry. That said…there is some overlap between the school rankings and the traditional value segments. Most BLUE areas happen to have good schools. Some pink areas do as well. So to do our overlay, we don’t have to decide whether or not the school rankings are 100% accurate any more than we have to decide if green is better than blue.

Remember, if you can’t afford blue…green may be your best option and if you can’t afford green, pink in the best school may be your best option. OR pink with a great school might be better than green with a lesser school. OR…as pink gets darker toward another school district…a better school in the OTHER school district may be a better choice. These are the kind of things you need to consider when choosing an agent or choosing to represent yourself. Recognize these factors as “real” and learn from where the foreclosures exist and why those foreclosures happened.

That’s why you have to know why these areas are “colored” as such, and what they draw their value from. The upper pink section on the left is pulling from Bothell and Northshore School District vs Lake Washington (the lake itself) and Downtown Kirkland, as example. You might want to step over that line…or not.

If you take The School Boundary Map and overlay it on the VALUE GRID you will not be surprised to see the Dark Blue area serviced by a highest ranked school and the lowest ranked school planted firmly in Pink.

Life is not quite that simple and I’m not going to go there with you in this public forum. I give you the tools, you being a “reader” vs “my client”. There are limits to how much credibility I will lend to these ranking sites as a professional, and those limits are only shared with my clients. But hopefully, no matter where you are looking to buy, this shows why EVEN IF YOU DON’T CARE ABOUT SCHOOLS, you should not overlook the secondary value pressure of which elementary school is servicing the home you choose.

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3) Market Value’s Relationship to Assessed Value in the “target market”

This is a little harder as you have to balance some other factors like land value, main floor footprint and home style. It looks something like the chart in the link just below this sentence, that I have used in posts before:

Market Value vs Tax Assessed Value

For a “target area” we will be blending steps 1 and 2 with this 3rd step, using the same color key as in the link above from green to red, which is different from Step #1 and it’s color codings. In this final step, lighter green is best (vs blue), but red is almost always a “stop sign” of some kind. 🙂

I’m going to lose a few more people here, but for those who are seriously needing to understand value of homes in order to pick one and make an offer…try to stay with me here. Be sure to click on that blue link just above marked “Market Value vs Tax Assessed Value” before moving on to the charts below.

COLOR AV CHART

The BLUE background chart relates to point #1 and is a “Blue Value Grid Area”. In a Blue Value Grid Area, your best hope may be a Blue Price as noted in the KEY to the right, that being 1.2ish times Assessed Value. A few may even sell at the RED “bubble prices” if they are near water, have water views AND have been fully remodeled. You might find a green or two, but they will likely be “tear downs” selling at lot value.

If you are making Green offers in the Blue Zone….you may never achieve success UNLESS when you draw YOUR target MV vs TA map, there are some green sales.

The PINK background chart at the bottom also relates to point #1, but most of the sales ARE green and none are red. In this area you DO NOT want to buy in the purple or above zone without VERY good reason.

I’ll try to simplify this. Let’s say most houses assessed at $800,000 sell for $950,000 in the Blue Zone. NONE have sold for less than assessed value except for the tear downs, or busy road, or malfunction of floorplan issues. That means if you keep looking for a GREAT house with no negatives and making offers of less than Assessed Value, then you are going to get frustrated.

BUT if you are in the Pink Zone where homes sell fairly regularly at assessed value or less (you need to do the actual stats to know if that is the case, this is just an example of HOW to do that) then you don’t want to be paying 1.2 or more times assessed value or $470,000 for a home assessed at $390,000.

EACH AREA will have it’s own relationship to Tax Assessed Value. This has ALWAYS been true in the Seattle Area and is a much better valuation tool than Price Per Square Foot, especially in areas with basements.

You need to calculate if your area of interest is a .97 of assessed value area, a 1.13 times assessed value area or a 1.25 times assessed value area. NO “area” will be a 1.5 times assessed value area right now…but a given house may be.

I’m going to stop here as I’m sure I’ve lost quite a few people by now. But THIS is roughly how good agents “work”. They don’t necessarily make little maps that look like alien solar systems as I have here. But this is an attempt to convey to you the process of how an agent generally values homes and the property they sit on.

Feel free to expound on the topic by asking specific questions in the comments. I’ll do the best I can to explain further in direct answer to those questions.

Did you feed your Rhododendron?

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The Rhododendron is The Washington State Flower. To a large degree that means we Preserve and Protect it as a State Symbol. When I see a “sick” Rhododendron it makes me sad…to me it feels like someone is wiping their feet on an American Flag. I tend to be oddly “loyal” that way to “symbols” of honor.

The flower below is a picture I took last year and posted on May 20th, so that should give you a rough I idea of when to expect rhododendron to be in full bloom, though I have seen a few in full bloom recently, but not mine.

I have nursed more than a few “sick” rhododendron back to full health in my time, and have a few tips. If you have not already done so, now is a good time to feed your rhododendron before they bloom.

Think of it like a preganant woman taking more vitamins before they give birth. A budding plant is like a pregnant woman…it needs some extra care at that stage of it’s development.

The Washington State University recommends that you feed the plant when the buds swell and start to get “sticky” in Spring (which is about where mine are today) and again after the plant has flowered. Lots of other tips on rhododendron in that link.

DSCN0022

You may have noticed that Rhododendron tend to “burn up” if the location is too sunny, and seem to thrive best when they are planted near pine trees. You see that a lot in Bridle Trails in Bellevue. Lots of tall pine trees and healthy rhododendron thriving nearby. That is because rhododendron LOVE acid soil, and lots of pine needles falling to the ground seem to provide many of the nutrients these plants thrive on.

Not all rhododendron need to be fed. Those planted in soil with insufficient acid content need an acid based fertilizer. I like to use the Miracle Grow product designated for use with acid loving plants, but there are many ways to provide these nutrients, and frankly for new plants there are some better ways.

I like to do a “foliar feeding” by mixing a light solution and spraying the leaves. After a good but not OVER feeding early in Spring, I still spray the plant with a very light feeding during the flowering season. But you have to be careful to follow package directions and not over feed your plants.

For today…feed your rhododendron! It’s kind of a patriotic “duty”. 🙂 One of my favorite things to do is “deadhead” them when appropriate…but that’s a topic for later in the season.

Word of Warning…NEVER feed into and after July. Wait until you get to late winter early spring. Feed them now and again when they flower…but don’t keep feeding them past June.

If anyone has other tips, please feel free to post them in the comments. I’m far from an expert on rhododedron…I just happen to love them.

Seattle Real Estate Signs – Pending is spelled SOLD

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Photo_4D5E2935-39BB-0D45-E958-A7CEE6069D22

The purpose of this post is twofold:

1) To the Homebuying Public: When a Property is truly SOLD the sign is gone!

2) To “The Industry Insiders”: For those saying transparency is yesterday’s “buzzword”, until we attain full transparency by saying In Escrow or Pending vs. “SOLD” before the property is actually sold, we are not even at square one when it comes to true “transparency”.

When a property is actually SOLD…there is no sign. The sign is usually “ordered down” the day it closes, and is removed the following day or the next day by the company that installed the sign.

So when you see a “Sold Strip” stapled to the post of a home, that means it is In Escrow Pending the actual closing. When it closes…is SOLD…the sign comes down.

The industry struggles to meet the public’s request for “transparency”, and yet doesn’t really know what transparency actually means.

They think transparency means we explain what we do, when in fact transparency means” “Please Just Speak the Truth in the first place, so you don’t have to explain why you didn’t!”

Of course we are not the only ones who do this. After all, how many times does Starbucks have to explain that “Tall” = Small and “GRANDE!” = Medium?

Personally I only use these Sold Strips when it benefits my client for me to do so. I don’t think there will ever come a time when everything we do in this industry is only client oriented.

If we only considered the “parties in interest”, from the seller’s perspective we would not leave the sign up at all once the transaction was solidly heading toward closing with no contingencies remaining. From the buyer’s perspective we would never put up a Sold Strip until and unless it is of benefit to the buyer for us to do so.

How much of what we do is about US vs THEM? Worth thinking about…worth changing.

Curbed and Eater come to Seattle

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curbed seattle

Today I excitedly Welcome Curbed and Eater to Seattle.

Curbed.com and Eater.com are well known for their fast and furious blog postings in NYC, Chicago, DC and their National Site.

I highly recommend that you bookmark both Seattle Curbed and Seattle Eater and make them part of your daily reading. Unlike other local blogs, Curbed generally has a paid staff of blog posters, so you can expect a quick flurry of relevant postings that will continue on a daily basis.

Curbed, always fun and always something new, a welcome addition to the Seattle Blogosphere!

Home Prices Recover in Kirkland 98033

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Many around the Country are asking what a Home Price “Recovery” will look like and what will create it. If you have been home shopping on The Eastside close to the 520 Bridge, you are likely amazed at the strength of that market in recent weeks.

Kirkland 98033 is not the only market experiencing this phenomenon, as I first noticed the activity and price increase in the Cherry Crest neighborhood of Bellevue 98005. But since I recently represented a buyer client who closed on a home in Kirkland 98033 near Downtown in the Lakeview Elementary School area about a block from Google, I am focusing on this area first.

While back in October and for the 4th Quarter of 2010 we were talking about whether home prices in King County overall were running in late 2004 levels or early 2005 levels,

Kirkland 98033 has bounced up to February 2006 levels!

Before you jump to the conclusion that this segment simply had a lower % of Short Sales and Bank Owned Property…not so. A full 42% were “distressed” properties. Even with that drag of an additional 5% to 6% down created by the “distressed property sales”, the prices are running at February 2006 levels.
kirkland 2011

None of us are holding our breath for prices to reach peak levels, and I don’t anticipate that happening for many years. But if you chop off the extreme peak of 2007, home prices in 98033 are clearly recovering nicely.

WHY?

There are several contributing factors.

1) Google – opening in 98033 in late 2009 and hiring a significant number of people in recent times.

2) High Elementary School Rankings – While all of the schools in 98033 don’t enjoy the highest ranking status, those closest to Google and Downtown Kirkland do. Peter Kirk Elementary, Lakeview Elementary and Ben Franklin Elementary, all in 98033, help support and boost home values in these areas. To be fair and balanced, I did not segregate these schools in the stats and included all school areas of 98033, at least one of which ranks fairly low.

3) Anticpated 520 Bridge Toll – The soon to be imposed Toll to cross the 520 Bridge has had an impact on home prices closest to that Bridge. Some have moved from Seattle over to the Eastside to avoid the Toll. Some who work on the Seattle side, but prefer Eastside Schools to Seattle Schools, have moved as close to the Bridge as possible to cut down on fuel costs and time delays to compensate for the negatives of the toll.

Kirkland is clearly one of the best places to live in the Seattle Area, and always has been, especially the area closest to it’s Downtown on the Lake. The reasons for that are many, and the subject of another post.

So yes, the Recovery is clearly “Cherry-Picking”.

A few other amazing facts. Of the 44 homes sold in the First Quarter of 2011 in 98033 that were NOT short sales or bank-owned properties, 18% sold in ONE WEEK or less with 23% selling in two weeks or less and a full 50% selling within 90 days. Clearly though the distressed properties were very high at 42%, they were not creating a huge drag on the non-distressed properties. The median for non-distressed properties was a whopping $646,000. Very close to the full median price of 2006 overall.

This is what a “Recovery” looks like. It doesn’t reach peak…but…it looks pretty darned good to homeowners in 98033.

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(Required disclosure: Stats in this post are not compiled, verified or published by The Northwest Multiple Listing Service.)

Redfin adds “feedback” comments to site features

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Yesterday Redfin announced the launch of a new site feature that introduces the concept of “agent feedback” on a broader and more transparent scale.
AgentCommentRedfin

As with anything new, it will take a bit of time for things to “shake out” on this new feature, as we as an industry continue to balance the obligations to home sellers “IN” an mls system, and the wants and needs of home buyers who do not have any contractual rights within an mls system, the way that sellers do.

I will describe how this new feature appears to function at present, and as I understand it after having tested it.

When you search for property on Redfin and the little house icons appear on the map, some will have a yellow star to denote which properties have been “toured” by a Redfin agent AND the Redfin agent has noted their and/or their buyer client’s thoughts on the property.

If the house has no yellow star, it doesn’t mean it wasn’t EVER “toured” by a Redfin agent, only that the agent did not input a comment to the system after doing so.

RedfinAgentCommentsMap

If you click on the house icon with the yellow star, the address will appear in a link box. If you click on the link, you will get the property detail, but you will not yet SEE the comment made by the “field” agent. (“Field” agent is the term used by Redfin for agents who view property with prospective home buyers. (Agents “out in the field”.) Redfin “partner” agents also have access to posting comments, even though they are not employees of Redfin. Not sure if they can do that for all of the property they show, or only the property they show to a home buyer who was referred to them “by Redfin”. But I do know they have some access to this new feature as to leaving comments.

What you will see above the map of the parcel, and below the home detail specifics, is this: “Notes About (123 main street) from Redfin Agents Toured (X) Times” along with a Button you press that says “Email Notes to Me”.

Again, I don’t think it is accurate yet as to how many “Times” the home was toured by Redfin, but I’m confused on this issue. I have a listing toured by Redfin at least 2 times that does not have a yellow star, nor does it denote in the detail that it was ever toured by a Redfin “field” agent with a buyer (or Redfin “partner” agent). So I’m pretty sure ALL “tours” are not registering. I thought maybe “Toured 2 Times” meant there were 2 comments, but there is only 1 comment, so maybe that one agent toured it 2 times before making the comment.

Perhaps they should say “1 Comment” vs “Toured 2 Times” in the interest of “accuracy”, as “transparency” carries an obligation of a reasonable degree of accuracy as to factual content. As I said earlier, this is a minor point that will “shake out” vs “shake up” as time goes on.

When you click on the “Email Notes to Me” button, you will fairly instantaneously receive an email with the comment(s).

There is also a feature to receive new notes as they are added later on this property. That appears to be automatic, except if you click on the same property that sent you notes and hit that button again, it will give you an option to receive new notes. So not entirely sure on that one.

To receive these notes you DO NOT have to be a Redfin “CLIENT”. You simply have to be a “registered user” of the Redfin site, as I and most of my clients are.

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BENEFITS? PROBLEMS?

1) The most notable problem is that at least two of the comments shown publicly in blog posts contain what we call “inappropriate language”. For example the one in this post from Glenn’s post says “ideal for a family” and one of the two comments posted on 1000Watt Consulting Blog by Brian Boero says “not for families with small children”.

The guideline for agents is we must talk ONLY about property and not make broad statements about who should live IN them. Both of those comments mention people vs home attributes, long considered taboo under HUD guidelines.

There are massive writings on this topic, but a good rule of thumb is:

TALK ABOUT THE HOUSE AND NOT THE PEOPLE:
1) WHO LIVE IN IT
2) WHO “SHOULD” BUY IT
3) WHO LIVE IN THE NEIGHBORHOOD.

Talk about the home and it’s attributes, and not the people.

A long standing “rule” for real estate advertisements, or most any statements made by licensed agents, is talk about the house and not people.

HOWEVER I often will tell a specific client that a home is not right for them “and their small children” if the house has a master bedroom only on the 2nd floor, and the only other bedrooms are IN the basement, especially if we have already discussed that the master bedroom must on the same floor as their children’s bedrooms.

So I think if Redfin notes a specific “deficiency” of the property in that regard, without mentioning people, like “Master up; children’s bedrooms two floors below and in the basement”. That would be OK. But to simply say “not for families with small children”…well, that’s more about HOW you say it than what you say. Not a huge deal. Just another example of “shake out” of this new feature to come, IMO. What you can say TO a buyer client is different than what you can say “publicly”, and this new feature blurs the lines from a “Fair Housing Guidelines” standpoint.

2) That raises another issue. Let’s say Redfin Agents can say anything because they are speaking to Redfin site “registered users” only. Not saying that is the case, but let’s consider that as potentially the case.

Then the issue of Brian Boero, or any other “registered user”, POSTING those private email comments PUBLICLY becomes a problem.

Can he take a private email and display it publicly? I think Brian can, because I don’t think Brian is a licensed agent. I don’t think I can, unless I am linking to a public place (as I did) and it is not an email I personally received from the site.

If the rationale is ONLY “registered users” can see the comments, then shouldn’t there be an agreement with registered users that they will not publicly post those emailed comments? I think so.

3) The benefit generally is that Redfin continues to try to strike a good balance between the rights of buyers and sellers. But, the seller has a contract as to what their conditions are with regard to an mls being able to display their property information via the mls system. Buyers have no rights in that regard, as they have no written contract with “an mls system”.

I think most mls systems will allow the seller to block this feature, and will recommend that sellers do that, given the seller and the seller’s agent have very limited, if any, control or access to the function. That is generally against most any Listing Contract provision signed by a seller to gain access to the mls system. They are many and varied, but most require the Listing Agent and/or Listing Brokerage to have full control over information on “member” sites, which often limits the info to that available via an “mls” feed, with some and often many restrictions.

Time will tell, but that is my expectation. I think we will be seeing some NEW “mls rules” with regard to this new feature.

Single Family Home Reserve Study

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A Reserve Study tells you how much money to set aside monthly so that you won’t have to borrow money when something needs to be replaced in your home. While monies “in reserve” for replacement costs do not currently convey with a home, condos do. It was determined some time ago that that asking people for $10,000 all at once for a new roof did not make any sense for condos, and the time may have come to look at Single Family Homes in the same light.

Yesterday I posted a Reserve Study for a particular client’s home that will be closing next week. I also did a rough sample of a “quickie” Single Family Reserve Study that you can use to modify an offer price when purchasing a home.

In this post I will do a more generic version that you can use to prepare a Reserve Study for the home you currently own, and are not intending to buy or sell.

A Reserve Study is NOT about what you will SPEND ON your home each year, the same way that gas in your car is not counted when saving money toward buying a new car, or to repair your current car.

A Reserve Study is an EARMARKED savings plan to insure that the cost of REPLACEMENT (not repair or maintenance) is available when the item is ready for full replacement. A common rule of thumb for Reserve Studies is that you do not begin to reserve funds until and unless the item is within 35 years of needing to be replaced. Consequently if you have a 50 year item, as example, you may have to spend some money on maintenance during that 50 year period, but you will not begin saving toward it’s replacement until it is 35 years old. the remaining Useful Life is 35 years.

WARNING: DO NOT READ BELOW THIS LINE IF YOU HAVE HEART PROBLEMS.
Single Family Home Reserve Study

While I tend to be fairly analytical, I have to say that chart (which I created) scared the bejeebies out of me! $94,300 for Replacement Costs of ONLY the “MAJOR” Components that have a relatively short “Useful Life”! Holy Caboly!

This is one of the reasons buyers are more and more looking beyond “current defects” when doing a home inspection, and rightly so.

Let’s break this down a bit, as a Reserve Study has a lot of subjectivity vs objectivity. I will give you the benefit of my thinking, so that you can adjust accordingly, if needed.

1) ROOF I used 25 years and $12,000. This assumes a 25 to 30 year composite shingle. This Reserve Study is for a five year old home, but covers most any home with a composite shingle. For the most part 20 year shingles went the way of the dodo bird in the late 1980s or so. Any home with a 5 year old roof, whether the home is new or not, likely used at least a 25 to 30 year shingle. I also don’t expect “lifetime warranty shingle” roofs to last more than 25 years. In the last 5 years, 80% of all homes sold regardless of age had this type of roof and 87% of all homes built in the last 5 years had this type of roof.

Once in awhile you see a 50 year shingle and more often a 35 year shingle. But most are 25 to 30 year shingles. If you have a tile, flat, torch down or shake roof, you will have to adjust the numbers to that style.

I used $12,000 as I have recently seen a very good roof on a large home done for that price, even though the next door neighbor paid $18,000 for his roof. I have also seen an owner put one on using experienced relatives for $4,500. Much depends on the size of the home, the type of roof and the size and configuration of the roof. But $12,000 should be doable for the average home with room to spare as to price.

(NOTE: STOP POWER-WASHING YOUR ROOF EVERY SIX MONTHS! YOU ARE DAMAGING THE SHINGLES AND VOIDING YOUR WARRANTY! There are other and better ways to remove moss from your roof and keep it off.)

$12,000 divided by 25 years divided by 12 months = $40 a month.

2) SIDING Most newer homes use HardiePlank siding, or a reasonable facsimile. This is a cement based product that can last up to 50 years, and normally has a 30 year warranty. If you have a home built in the 90s, especially the early 90s, you may have an inferior pressed wood product that looks similar, but likely has been replaced or needs to be replaced. Wood siding has about the same life expectancy as HardiePlank.

I’ve heard the number of $20,000 used often for Siding replacement to HardiPlank, but that varies based on the size of the home. If you have HardiePlank you may not need new siding at the same time as a new roof, and the siding may even last twice as long as the roof. I’m using $55 a month due to the higher cost of re-siding vs putting on a new roof, but there is some leeway there given I expect HardiePlank to last longer than the 30 year warranty by as much as 10 to 20 years.

3) PAINT EXTERIOR – If you have real wood siding, you likely need to paint it at least every 15 years. If you have HardiePlank siding and like the color, you may not need to paint it at all. Paint usually bonds differently to HardiePlank than wood, and style colors may change every 15 years or so. If you have vinyl siding, you only have to save for replacement cost, and not for painting at all, given you really can’t or shouldn’t paint vinyl siding. Lot’s of subjectivity here. If I were doing a Reserve Study for a newer HardiePlank house, I likely would have ZERO in the monthly here. If you have a brick exterior, you don’t have to paint it, but you do have to “re-point” it, which can be quite costly for large and older brick tudors here in Seattle.

4) WINDOWS Most newer homes have vinyl windows with a life expectancy of 20 years. Often people replace the glass vs the window due to a broken window seal. Some windows are better than others and rarely does someone replace all of their windows at the same time. Wood windows can last indefinitely with repairs vs replacement. Lots of variables here including how many windows do you have? For that reason I’ve skimped on the total amount in reserve for windows to insure that you have enough to do a room or two at any given time, with room to spare. Quality of windows can vary greatly, even when windows “look” about the same. Most homes have a sliding glass door or two as well, so $7,500 cap on reserves is likely about right for most homes and most people who have “newer” windows today.

5)SEWER PIPE You don’t often hear much about Sewer Pipes unless you have an older home. I have no Reserve Amount here given the life expectancy or a sewer pipe, but wanted to mention it because of Root Problems. Tree roots can damage most any sewer pipe, especially on an older home.

Roots in the Sewer Pipe are a significant issue for older homes in Seattle, and sometimes in Bellevue and other Eastside cities as well.

So while I haven’t cautioned to reserve money for replacement cost, this item is worth mentioning because a Home Inspector generally does NOT inspect the sewer pipe, and if you are buying a home you need to have a separate inspection done of the Sewer Line. If there are a lot of trees on the property and the home is 50 years old or more…having a Sewer Scope is pretty much an imperative “additional” inspection.

6) Heater/Furnace/AC The cost I used is for a pretty good furnace without air conditioning. Life expectancy of a gas heater is usually longer. Life expectancy of an electric heatpump that is used for both heating and central air conditioning is usually shorter. Many people buy a house with a $2,500 heater, but spend up to $4,000 (or more) to replace it. That has more to do with air quality in the home than heating it or cooling it.

7) HOT WATER TANK I find there is a huge variance in life expectancy of a cheap electric hot water heater and a glass lined gas hot water heater. Also the cost has skyrocketed recently due to a bunch of added bells and whistles.

WHERE THE HOT WATER TANK SITS IS VERY IMPORTANT!

Consider “resultant damage” from the tank blowing. If the tank is IN the home or in any finished and heated living square footage, just replace it when its time is up. If it is in the garage in an area that would cause little to no damage if it blows, maybe you can push the age to and past its limit. The main issue is what will be damaged if it leaks.

Often if you have an electric tank one of the coils will go before the tank itself. You can’t “see” that, but you will know if you are getting less hot water. Personally I don’t believe in replacing the coil. Just get a new hot water tank if one of the coils goes out. I’d rather see someone skimp on some of the costly bells and whistles than stretch the time to replace the tank by replacing a coil.

8 & 9) FLOORING Lots of variables here. Many homes have lots of wood and little carpet. Others have almost all carpet except in the kitchen and bathrooms. Many people replace carpet with a wood or laminate product instead of carpet. In some homes you can replace the heavily trafficked area, like the steps, without replacing all of the carpet. More people using the home shortens the life expectancy of carpet and fewer people in the home lengthens the life expectancy of carpet.

My biggest concern here is “wood” floors. There was a time when wood floors pretty much NEVER needed to be “replaced” as you just sanded them down and refinished them. More and more even very expensive homes have newer “engineered” wood products, that can’t be sanded at all or can only be sanded lightly a couple of times.

Most people prefer big, thick, wood floors that rarely, if ever, need to be replaced. But many people who THINK they have that type…do not.

10) APPLIANCES I used a fairly low amount here as “appliances” break into two categories. Built-in appliances are part of the home. Usually that is a stove and a dishwasher and a range hood or microwave. Sometimes a cooktop and one or two wall ovens. Then there are appliances that are “personal property” such as your washer, dryer and your refrigerator. Those you can move from house to house…or not…your choice. I am only including the appliances considered to be part of the “real estate” vs “personal property”. Lately people have been paying some insane amounts for Washers and Dryers! Since washers, dryers and refrigerators are personal items, they can vary greatly as to cost. Those are not counted in this Reserve Study.

11) DECKS Another tough one. I’ve seen decks cost as much as $20,000 for a fairly modest sized deck near the ground. Many homes in the Pacific Northwest, even new ones, have extensive decking. Due to rot issues in this climate, we are seeing Trex decking used more and more, but usually only for the flooring and not some of the other components. Once in a while I see a deck that should just be thrown away when it goes, and not replaced at all. I saw a particularly troublesome cantilevered balcony deck like that…just get rid of it! Decks vary to personal taste and lifestyle, and can add considerable maintenance and replacement costs to a home.

12) HOME WARRANTY This is a big catch all that can help with a lot of items not mentioned like ELECTRICAL and PLUMBING. Rarely do you replace ALL of your electrical components or all of your plumbing. Even when you see a home advertised as “all new electrical” or “all new plumbing” that is rarely, if ever, the case. In a new home, you wouldn’t expect to replace either, but a home warranty is likely a good thing to have for both of these and also includes heater, hot water tank and built in appliances. I did not eliminate the other items from the Reserve Study as who knows if warranties will be around in 20 years and rarely does an owner renew that warranty for more than a year or two. Not sure why, but many who get them the year they purchase the home, do not renew them.

As you can see, the total cost to replace these items can often hit during the same 5 year period when the home is 17 to 22 years old!

Preparing in advance, is recommended and warranted. If you are buying a 14 or 15 year old home, knowing what if anything has been replaced since it was built is important, as you likely need to have a lot more in reserves after closing if you are running into that 15 to 25 year period. While buying a 30 year old home might have these things replaced, you may spend as much or more on updating the kitchen and baths. I recently saw a home that needed a new roof that was only 14 years old, but that is rare. But maybe rare in the past tense vs the future tense, depending on the quality of the builder.

If you have any questions, feel free to ask, regarding why I did or did not include certain items. There is really no “guide” for A Single Family Home Reserve Study, as I don’t know anyone else who has done one before.

I think this one is fairly comprehensive and accurate as to the monthly of $400 for a newer home and $700 for an older home with some things already replaced, but that needs more updating in the next 10 years or so.

Real Estate – The #2 Question

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The #2 Question in Real Estate is Why Can’t I Find a Good House at a Fair Price?

The #1 Question we covered was How Much is THIS Home Worth? For those who find a house they want to buy, or may want to buy, the question is how much is it worth or how much should I offer on it?

But there are a fair amount of people having trouble finding a house they may want to buy.

OR they find a house they may want to buy, but not at the price they want to pay.

For those people the main question is Why can’t I find a GOOD home at a FAIR price.

At any given time, in any market, if you are looking for a home to live in vs an investment property, you will be lucky to find THREE good choices no matter how many homes are on market.

Every SELLER needs to BE #1, #2 or #3 and every BUYER needs to FIND #1, #2 and #3.

It really is that simple. The only difference between a Buyer’s Market and a Seller’s Market in that regard is the amount of time you have to find those. In a Seller’s market you may only have hours before #1 hits the market and has offers. In a Buyer’s market you usually have up to a week, unless you are trying to beat out everyone else.

In a hot seller’s market, good houses at a fair price are usually about 1 in a 100. In a buyer’s or balanced market, good houses are more often 2 -5 per 100. The only thing this tells you is you have to kiss more than a few frogs to find “the one”. Luckily most people are able to do that using the internet to narrow down the choices.

If you are thinking you are going to narrow down to 20 good houses and choose from those, you are likely incorrect. The danger in that thinking is that you will continue to lose out on #1, #2 and #3 while you are sorting the 20.

Worth Mentioning Here: #1 may move up to #1 after 650 days on market via a massive price reduction. So we are not talking about grabbing “new on market” necessarily. Very few homes come out of the gate at the right price.

Knowing which ones do and which don’t is what separates the men from the boys, and is likely the hardest part of finding a home to buy.

Last but not least is knowing what you want, and what a “good” house is and is not, and what a “fair” price is and is not. Easier said than done, but not as hard as you might think either. Likely the #1 mistake people make is looking at County-wide stats. As you can see from the charts below, that will likely lead you to overpaying in South King County and missing the opportunities in North King County.

graph (29)

I haven’t been doing condo stats for a couple of years, but threw these in so you can see the variance between Homes and Condos.

Condo and Single Family Home prices are not always moving in the same direction, and clearly never to the same degree.

graph (30)

Back to the Question: Why Can’t I Find a Good House at a Fair Price? You might be pricing incorrectly or you may just be taking too long to make a decision. I’m not talking about taking too long to buy the right one, I’m talking about taking too long to sort the “wrong” ones into two piles. One pile is NO and the other pile is MAYBE, but not at this price.

It’s very, very difficult to find the one that is priced right out the gate. I can usually do that, but it is seriously very difficult, and most people don’t have the heart for that in a Buyer’s market.

If you have been LOOKING for the right house at the right price for a long time, you probably need to change the method of HOW you are doing the LOOKING.

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(Required Disclosure: Stats in this post are not compiled, verified or posted by The Northwest Multiple Listing Service)

Real Estate – From Contract to Close of Escrow

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What happens after the seller has accepted your offer? Often a buyer wants to relax and celebrate after their offer is accepted, especially if there were rounds of counter offers and acceptances. But some things need to happen pretty quickly after the contract is signed by all parties. This is a fairly good example of what actually happens most times. Not all contracts are the same. This is just a rough example of what usually happens in my transactions when I represent the buyer of a home, unless the contract requires us to do things differently than “the norm”.

1) SCHEDULE THE HOME INSPECTION

Usually the very first thing I have my buyer clients do once the contract is “signed around” by all parties, is schedule the home inspection. Often people read the contract to mean that they have 5 to 10 days (every contract is different) to DO the inspection. That is not the case.

During that very limited time frame:

a) You have to “DO” The Inspection
b) You have to review the results of The Inspection
c) You have to think about what you may or may not want to ask of the seller as a result of that Inspection
d) You have to cancel the contract, or accept the inspection, or submit any conditions of accepting the Inspection, in writing, so that it is RECEIVED by the seller or seller’s representative by the end of the time frame.

You don’t want to wait until the last minute to “DO” the inspection.

My recommendation is that you call the inspector ASAP after the contract is finalized and DO the inspection at the first available opportunity after the contract is signed around. By scheduling the inspection ASAP for the first available time, you should have sufficient time to digest what the inspector said at the inspection, and also to subsequently review the written inspection report after the inspector has left the property.

You should allow about 3 to 4 hours for the actual inspection in most cases for an average sized single family home.

2) OPEN ESCROW

By the time the contract is “signed around”, the Agent for the Buyer usually has the Earnest Money check in their possession (some exceptions). Opening Escrow can be as simple as bringing a copy of the contract and the Earnest Money check to escrow, and that is often done on the first business day after the contract is accepted. Sometimes I send the contract to escrow during the weekend, if the contract was accepted on a non-business day. This way escrow has everything they need to “open escrow” when they open for business on the first business day after the weekend. The check usually has to be delivered to escrow by the 2nd business day and this is another one of those ASAP situations. Get the check to escrow as soon as practically convenient vs waiting to the last minute. There is no official time frame as to when escrow must be OPENED, there is only a required time frame for when the EM check must be AT escrow. Most escrow holders will not accept a check for an escrow that has not been “opened”, so escrow is usually opened either in advance of that check needing to be delivered to escrow, or at the same time.

Generally this 2nd step is not done by the buyer or the seller, but by the agents in the transaction.

3) APPLY FOR YOUR MORTGAGE

This step is VERY IMPORTANT and often misunderstood.

Common “misconceptions”.

a) Some people think you don’t need to apply for your mortgage until after you complete the Home Inspection phase. Most contracts require that you apply for your mortgage in a shorter time frame than when the inspection needs to be completed.

b) Some people (usually agents) think that the buyer must apply to the same mortgage company who provided the pre-approval letter at time of offer. Usually a buyer has 5 business days or less to “apply” for their mortgage AFTER the contract is signed around and “chooses” which company to apply to during that time frame. It is near impossible in most cases to actually choose a lender prior to contract, because interest rates change during that time AND the interest rate often cannot be locked until there is a signed contract. So choosing lender by comparing rates and costs is usually best done at a point when that rate can be locked in.

b) Some people (usually buyers) think they already “applied for their mortgage” complying with the terms of their contract when they provided the information to a lender before making an offer so as to get a pre-approval letter.

c) Many people think that their rate is locked, or that their rate is locked indefinitely. Rate locks of 60 days are usually more expensive than rate locks for 30 days or 45 days.

In order to preserve your rights under the Finance Contingency you need to apply for your mortgage within the time frame stated in the addendum vs in the main contract.

To me the clear signal that you have “applied” for your mortgage happens when you give the lender a copy of a fully signed around contract to purchase a home, since that is the one thing you do AFTER the contract is fully signed around that you could not have done in advance.

You may have spoken with a few lenders and even gotten pre-approval letters from more than one, but in most cases you only send a copy of the contract to the lender you intend to use to complete the transaction.

Very important to note here that you may not have the ability to switch lenders once you have applied for your mortgage.

Interest rates change frequently, so calling a lender a day may only be telling you the difference in rates from day to day vs from lender to lender. I generally recommend that people set aside a day and time to compare lenders so they are all dealing with the same rate time frame, and be sure to compare all lender fees when comparing rates.

Should you lock the rate or “float” the rate? A combination of both where you can lock the rate but get at least one “float down” option as well, often works best. That way your rate can’t go up but it can go down.

Many other variables as to which type of loan, etc. But the main point here is no matter how long it is from contract to close, you usually have a very limited time frame to apply for your mortgage under the terms of the Finance Contingency, generally 5 days or less.

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Note: Computation of Time: Sometimes The Home Inspection is Step 3 vs Step 4. That mostly depends on the availability of the inspector you choose. Sometimes you are having the home inspection within a day or two of the contract being signed around. In that case you often do the inspection before you apply for your mortgage.

Every contract is slightly different because of “Computation of Time”. In our standard contracts 5 days or less usually does NOT include weekends and holidays…but 6 days or more does.

So if you have 6 days to do the inspection and 5 days to apply for your mortgage, 5 days can be more than 6 days since the 6 = calendar days and the 5 = business days.
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4) THE HOME INSPECTION

The inspection is paid for by the buyer, usually before the inspection begins. The buyer usually attends the Home Inspection because it is not a PASS/FAIL kind of thing in most cases. It is also not ONLY about what is wrong with the house. A good home inspection gives the buyer a lot of information that is not all about what the buyer may want the seller to do to correct defects.

Generally a Home Inspector will:

a) Inspect the outside of the home first. Roof, siding, gutters, etc. VERY IMPORTANT: Most inspectors are inspecting “the home” and not the fence or the shed and sometimes not even decks, especially if they are not connected to the house.

b) The inspector is usually not looking at cosmetic things that can be readily seen by the buyer prior to making the offer, such as a stain in the carpet.

c) An inspector cannot see through walls, so having an experienced inspector who likely knows what is behind those walls based on the age of the house is very important.

d) Since an inspector is not looking at cosmetic items, he will usually spend more time in bathrooms and kitchens, the attic and under the house, at the heater and electrical panel and hot water tank, than in a dining room or bedroom. In a bedroom he may check the outlets and the windows and make sure the door latches properly. In a kitchen or bathroom he will be checking appliances, looking for leaks under sinks, making sure the outlets in the rooms with water have appropriate and functioning GFCI (ground fault circuit interrupters) at the outlets. Often one GFCI will operate more than one outlet.

e) Generally you do not need to take notes at an inspection, as the inspector will be providing you with a written report. Hopefully the report will have a summary of major problems and a separate summary of minor problems. Today Inspection Reports can be 85 pages long with lots of tips on home maintenance and other topics. So a one page summary of actual defects is helpful.

IMPORTANT: If something is wrong with the property, you usually know it before you get the written report. If something comes up that causes you to not want the house at all, you may not want to complete the full inspection. In fact if you suspect that to be the case, you may ask the inspector to break from his normal routine and look at that item first.

HOUSES ALMOST NEVER “FAIL” ON INSPECTION. Contracts often fail “on inspection” due to other issues, BUT “HOUSES” RARELY “FAIL” ON INSPECTION.

Most often when a contract “fails on inspection” and “falls out of escrow” it is because of an erroneous or not reasonable expectation. The buyer isn’t doing what the seller expected the buyer to do, or the seller is not doing what the buyer expected the seller to do. Rarely does a real “deal-breaker” issue come up with the house, that the buyer and seller could not have known about in advance of the offer being made. Most often the contract fails because the buyer or the seller is not responding “appropriately” to an issue. That is usually an emotional problem, vs an actual “problem” with the house that can’t be rectified.

Good “Rule of Thumb” is no seller should expect the buyer to want absolutely nothing at inspection, and no buyer should expect a seller to address everything the inspector talks about as needing to be done to the house.

Instead of taking general notes during a home inspection, I find using a chart like this to be helpful during the inspection. The inspector says SO many things over a 3 to 4 hour period, so organizing them a bit while the inspector is there can help you raise questions at the end before the inspector leaves the premises.

Inspection Chart

Column One – OWNER SHOULD – There are no hard and fast rules here. Many items the Inspector notes as “needing to be done” are things any owner needs to do periodically. Is “The Owner” the Buyer of the Home? Or is “The Owner” the Seller of the home? While contracts often fail over these issues, they should not as they are things the buyer will need to do during their ownership of the home. These are not “once and done” items. If the gutters are so clogged and dirty because the owner never had them cleaned during their ownership, the buyer may ask the seller to have those professionally cleaned prior to closing. The buyer may put this in the “Seller SHOULD” column. Often this has to do with the number of trees dropping debris into the gutters.

Generally a buyer should not decide they do not want the house after all because the gutters are dirty and the seller won’t have them cleaned prior to closing, or because the seller won’t trim a small branch on a tree.

Just because the Inspector tells the buyer “the gutters need to be cleaned” does not mean the seller needs to DO something. The Inspector may simply be saying that at EVERY inspection so the buyer knows that this is a normal owner maintenance item. That statement alone does not mean there is something currently “wrong” with the gutters.

Column Two – OWNER MUST – These are usually things the seller would have fixed had he known they were not functioning properly. They are usually things that have no aesthetic selection element, so that it doesn’t matter if the buyer does them or the seller does them. They are usually things that can cause a problem or additional damage between inspection and closing.

As example, a leaking sink creates damage every day between the time you discover it and the time it is fixed, so having it fixed without delay is recommended. It is very rare that a seller would not want to fix that leak ASAP.

Column Three – SELLER SHOULD – Many items fall in here and are basically not major things. Often whether or not the seller “should” fix them has to do with the price of the home. If the buyer is paying a good and somewhat high “fair market value” then the buyer often expects these things to be done and the seller, happy with the price he got for the home, often does them. If the buyer is getting a screaming deal and the seller is walking away with nothing or less than nothing, the seller usually expects the buyer to accept the home with these issues not being addressed.

Often these are things the seller did not deem important enough to fix while he lived there, and not something the seller did not know about. A small crack in a window. A broken window seal (this is cosmetic in most cases). A bedroom door doesn’t “latch” properly, which is often fixed by tightening knob or hinge screws or adjusting the latch plate. Basically things that can be fixed with little or no cost and a screw driver.

Column Four – ????? – This is where many sales can fall apart. These are usually large items that are “in working order” and not currently defective, but near or past their “life expectancy”. Roof is not leaking but 23 years old. Hot water tank is working just fine, but is 18 years old. Heater is working just fine, but is 30 years old. Again these items usually hinge on the price negotiated. If the Seller got the better end of the deal at initial price negotiation, the buyer’s expectations may be different than if the buyer is getting the home at a “below market” price. Often the seller and the buyer do not agree on THAT, on whether the price was at, above, or below market price and THAT is why the sale fails over one of these items. Not because of the item itself, but because the parties think one or the other is not being reasonable given the home price.

Does a house need a new roof because it is “old” but is not leaking? Does a hot water tank need to be replaced because of it’s age when it is functioning well?

Often these things are viewed differently in a Seller’s Market vs a Buyer’s Market.

5) PROPERTY APPRAISED

This item usually happens “in due course” meaning the buyer and seller do not order or control the time frame of this item. The Lender orders the appraisal and unless there is a problem with the appraisal, the contract simply proceeds toward closing. The Buyer usually pays for the appraisal in advance OR is responsible to pay for the appraisal even if they do not close escrow for some reason.

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NOTE: MONEY the buyer needs to pay BEFORE closing. Earnest Money Deposit, Inspector Fees and Appraisal Fees. Depending on the size of the house, the inspector fees are usually $500 or so for one inspector/inspection and $450 or so for the appraisal. There could be more than one inspection needed, and if the home is unusually large or small the cost could vary. If you are only paying $199 for a Home Inspection, that is not a good sign. 🙂

6) HOMEOWNER’S/HAZARD INSURANCE

The buyer needs to purchase a full, one year, Hazard/Fire insurance policy AT closing. Once you are finished with the inspection and the lender has everything they need from you to process the loan, you should arrange for your Insurance Policy with your lender and escrow, who both need to coordinate with your insurance provider.

Most often the best rate is obtained by getting this insurance from the same company that does your car insurance, so be sure to get a quote from them.

Note: Title and Title Insurance Issues happen from before the property is listed through to closing. There are Title reviews and Title Insurance Policies and Supplemental updates of Title throughout the entire transaction. Sometimes these issues are critical, but most often they happen “in due course” and are not alarming. Both escrow and your lender are interacting with the Title Company throughout the transaction.

Title Insurance and Reports are usually pre-ordered by the seller before the home is listed for sale. The Buyer’s name is added when the buyer’s name is known. The Owner delivers “clear title” by paying for Owner’s Title and the buyer pays for Lender’s Title as a condition of their mortgage.

IN SUMMARY: MOST EVERYTHING THE BUYER NEEDS TO “DO” IS DONE IN THE FIRST 5 BUSINESS DAYS OR SO AFTER THE CONTRACT IS SIGNED. AT THE END OF THAT PERIOD THE BUYER EITHER CANCELS OR PROCEEDS TO CLOSING.

7) THE CLOSING Loan Documents arrive at escrow. Hopefully at least 3-5 days before the closing date noted in the contract. The buyer signs their closing papers which include the loan documents and the Final Estimated Numbers called the HUD 1 or Buyer’s Closing Statement and some other ancillary escrow forms. The Lender reviews the signed documents and “releases for recording”. Escrow Records the property in the new owner’s name with the County. Keys are available to the buyer after we have County Recording numbers OR on the date of possession noted in the contract.

Closing is a phone call saying “We have Recording Numbers”.

For the most part the buyer is VERY busy for the first 5 business days or so and then again near the end. In between everyone else is working hard. The seller is packing and moving out. Escrow is coordinating with the agents and the lender and the Title Company and the buyer’s insurance company and the County, and getting the seller’s payoffs so liens can be removed as to the seller’s mortgage and utility bills prior to closing.

THE BUYER SHOULD NOT BE PLANNING TO GO IN THE HOME THEY ARE BUYING AFTER THE HOME INSPECTION AND BEFORE CLOSING!

This often comes as a surprise to most home buyers. The seller is packing and usually does not want you IN the home while it is a mess of boxes! That is why you should do EVERYTHING during the inspection phase. Get estimates for new carpet or hardwoods, measure for curtains, measure for a refrigerator or washer and dryer if you plan on buying them before closing. If you don’t do it during inspection, you may have to wait until after closing.

No post like this is “all inclusive”. This one is written from the standpoint of a buyer purchasing a normal tract home on a normal lot with little problems and no HOA.

Here are a few others I wrote about 5 years ago. All good reading for a buyer or a seller after the initial inspection phase and before closing.

Anatomy of a Real Estate Transaction (Some good “extra” notes in the comments on that one.)

– Short Version for the Buyer

– Short Version for the Seller

– The Three Phases of a Real Estate Transaction form Contract to Close