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

Where is the King County Housing Market Going?

Posted on by
80

The graph below shows us how easy it was to spot that the market was going sideways in 2006 and 2007. How credible was it that almost double the amount of people could afford a house for more than $400,000 in 2006 and 2007, than in 2005 and the years prior?

kc400 

I say we can expect the 3,921 homes sold for over $400,000 to increase to about 6,500. That will be the sign that the market has “recovered”. Recovery will be about volume recovering…not prices. If you remove 2006 and 2007 numbers from the chart below, and replace 3,921 with 6,500, that would be a natural progression.

These stats are from 1/1 to 8/15 for the years 2001 through 2009. Earlier today I was looking at the change in the number of homes sold for less than $400,000. In 2001 that segment represented 82% of homes sold. Affordability reduced by 50% by 2007 when only 40% of homes sold, sold for less than $400,000. We are now back up to 50% with more homes sold for $400,000 or less this year than last year.

So where is the market going? If 11,500 people could afford homes priced at $400,000 or less back in 2001 and 2002, it’s safe to assume at least that many people can afford to buy them now.

So recovery will look like 6,500 selling for more than $400,000 and 13,500 or so selling for under $400,000. Again, these numbers are for the period 1/1 to 8/15 to coincide with the numbers we have for the current year. These numbers also tell us that the housing credit went a long way toward bolstering the lower end of the market. Even though volume of sales is down from 10,458 last year to 8.686 this year, homes sold for less than $400,000 increased from 4,292 to 4,765.

I don’t think prices will go up and I don’t think the recovery will happen in terms of home prices. Recovery will be volume based, with over $400,000 improving by 60% to 65% and the under $400,000 market improving by nearly 3X what it is right now.

Required Disclosure: Stats are not posted, compiled or verified by The Northwest Multiple Listing Service.

Sunday Night Stats – Seattle Area Home Prices

Posted on by
6

Earlier tonight I calculated some current results comparing the Spring selling Seasons of 2005 through 2009.  The results are fairly redundant and not much changed from my bottom call back in February. I did some detailed stats for Woodinville and Greenlake-Fremont 98103, and there are not many changes or surprises. My call of 20% under peak pricing unless it is a short sale or bank-owned property, is continuing to hold, and I expect that to stay the same for at least a couple of years.

In 98103 one surprise was as to volume sold between single family homes and townhomes. With the decline in single family home prices, the volume of those sold did not decline from last year, in fact it increased slightly at the expense of townhome sales. (Caption on the graph should be 98103 Median Sold Price) and that excludes the townhomes. Towhomes are running at $338,000 vs. $429,475 for the same period last year.

I would expect prices to fall at some point doing the 4th quarter, as usual, and then next year’s Spring Bounce period to run at about the current levels.

98103

(required disclosure by NWMLS: Stats are not compiled, verified or posted by The Northwest Multiple Listing Service)

My daughter’s shoot for Smashbox Makeup

Posted on by
18

I’ll be heading down to see my three girls and two grandaughters in L.A. on Tuesday. I thought you might like to see Andrea’s recent pics from her photoshoot.  Maybe this time I will actually get over to see her doing tattoo art over in Venice Beach. She moved over to the Boardwalk store, so it should be a fun place to hang out in.

Hey Dustin! Weren’t we supposed to get matching tattoos?

andrea pinup

andrea makeup

andrea ink

Hard to tag this post…I chose the category “diversions” 🙂

Starter homes you can STAY in

Posted on by
30

First Time Buyer Big Red Flag = “I plan to sell in 2 to 3 years”.

Many people are out buying homes right now because of the $8,000 1st time homebuyer credit. Unless the credit is extended, these people have until mid to late October to find a a house and get into escrow, so they can close by the deadline of November 30, 2009 (“before December 1”). My best guess is there will be a 2010 homebuyer credit, but it will be a new one with different parameters, and not merely an extension of the current one. But all we know for sure at the moment, is the homebuyer credit we have at present will expire, if you don’t close by the end of November.

The credit is not the ONLY reason people are out buying homes. The fact that you can more readily buy a “starter home” for $350,000 or less in many areas, is likely a larger part of the reason people are buying. The linked post will show you that in the current market you are almost EIGHT times more likely to find a starter home for $350,000 or less in Kirkland, Bellevue or Redmond, than you were in 2007. In Bothell and Kenmore, homes selling for $350,000 or less represent more than a full third of all homes being sold.

This market is a blessing in disguise…lots of sadness for sellers, but an opportunity for some young families to get into a starter home for less.

My caution is this:  I don’t want to hear “I will probably sell it in….”. In the data sample I used in the link above I did not include any homes with less than three bedrooms or less than 1.5 bathrooms. I’m not saying you can’t or shouldn’t move in less than 5 years, I am saying don’t buy a house that you can’t stay in for more than 5 years. When choosing a home, you should have the option to stay in the home, as many people who are suffering today and must sell their homes, are doing so because they have grown out of them.

The moment I hear someone say “this will hold us for a couple of years”, that is a big red flag! The home below was purchased by one of my clients who already had a small baby. It was purchased in a great school district in Kirkland for about $310,000 and it is not likely they will “grow out of it”…well, maybe ever.

Moral of the story: If you can’t see yourself living in the house five years from now…don’t buy it.

starter home

Moving to Seattle – Bridges and Traffic

Posted on by
13

Feb2006Storm4185

Thinking about moving to Seattle? Wondering what the traffic is like around here? Before you look at homes on the internet, I strongly suggest you study the Transportation Layout of the Seattle Area.

Often where you live, involves which side of “the bridge” you work on. This Seattle Area Traffic map gives you an excellent broad overview of how you get to and from. Study the “black traffic clog points” on that map for a two week period at various times each day during that two week period. That will give you a pretty good idea of normal traffic patterns, except for the few times each year when the bridge is closed.

Take a long hard look at Lake Washington. It’s HUGE and worthy of due consideration as to how you are planning to get over or around it.

My perspective centers more around the 520 bridge, and around the north side of Lake Washington, with occasional travel over the 1-90 bridge. Locals always refer to this bridge as “The 520 Bridge”, but if you are looking for info on it,  you will find it under “Evergreen Point Floating Bridge” in wikipedia, even though the name was officially changed to “The Governor Albert D. Rosselini Bridge-Evergreen Point” in 1988.

Sometimes people will simply say “the 520”, but more often they will say that when referring to the part of that road that is on The Eastside, vs the floating bridge portion of that “road” going over Lake Washington.

One of the reasons I decided to write on this today, is because I was reading updates to the Pontoon Construction Project posted on The Washington State Department of Transportation website. On a good day, travelling back and forth across the 520 Bridge is not a huge deal. On a bad day (when the bridge is closed or partially blocked by a stalled vehicle) one would have been wise to consider the alternative travel options, when deciding where to buy a home.

My general advice is to buy a home on the side of the bridge where you work, unless there is a really good reason not to do that. Very often my first question of someone who calls me about buying a home here in the Seattle Area, especially if they are moving here for a new job, is “Where are you going to be working?”

Seattle – What’s Happening “today”?

Posted on by
20

newsseattleTwitter is fast becoming the best source of “What’s Happening?” in any given area, on any given day. If you are one of those people who thinks it is “silly” to record “What are you doing?”, think about it from the perspective that you might be doing what someone else would consider doing, if they knew it was happening.

You become the “news” source for local events, when you report your whereabouts at a local event. You become the restaurant critic when you tweet from a local restaurant about the food and service.

Like it or not, the collective “we” values real information from people on the street, having the experience and noting that experience in “real time”.

So what IS happening in Seattle? Twitter has a “search box” into which I will now put the word “Seattle” and this is what we learn:

@MyWashingtonSt tells us “The Bite of Seattle” Open til 9pm tonight!! Premier Food Fest FREE ADMISSION www.biteofseattle.com

Now that we know that there is an event today called The Bite of Seattle and that it is open until 9 p.m., we might want to know if it is “worth” going to? What do people who are actually there have to say about their experience?

To dig deeper into real time info on the event, change the words on the search box to the event title. In this case I change “Seattle” to “Bite of Seattle” and find:

@Mr10K: We will be reporting to you live from the bite of seattle today people. The Neema taste tests will show no mercy on any booths today!

Maybe you and Mr10K don’t have the same tastes in food, but at least you know you can get a “merciless” review of the booth offerings by him throughout the day, so you can try to hit the “best” booths when you head out to “Bite of Seattle” later today before 9 p.m.

“Using Twitter” is not simply about telling people what you are doing at any given moment. It’s a huge and growing way for people to get the news THEY want at any given moment in time, and pretty much just about any where.

Using Twitter is not all about “I have an appointment at 2 to show a house in Bellevue” from @ARDELLd 🙂 It’s a way for people to use search terms to help them get a glimpse at what other people are doing, that they themselves might like to join.

Twitter has become my news source. Twitter reported that Michael Jackson passed, before CNN could “confirm” that. Twitter told me that Walter Cronkite passed away. Twitter told me that I could catch a radio show with Jeff Turner @respres, 5 minutes before it aired so I could turn on the audio while continuing to work.

Twitter can make you more productive and keep you on top of everything that is happening. You can control how much or how little “noise” you want, by limiting the people and news sources that you choose to follow, or by using a “sort” application like TweetDeck (just one of many).

The search box opens a door to over 2,700,000 people talking about…and you choose which topics are of interest to you, when you pick a search term.

If you have never, ever been to Twitter and have decided you are not going to…it may be time for you to think about why…and what that says about you vs. Twitter.

Lower Interest Rate – Escrow Timeframe

Posted on by
18

1) How long is Escrow?

The correct answer is it can be as long or short as the buyer and seller want it to be. However a long escrow timeframe can cause an escrow to fail, because it can create a situation where the buyer no longer qualifies for the mortgage. Just because the buyer qualified when the offer was submitted, doesn’t mean the buyer will continue to qualify on the day the lender is supposed to fund the loan so the escrow can close.

A lender assumes a given interest rate when they qualify the buyer. If that interest rate is different for the reasons detailed below, at time of close, the buyer may not qualify at that changed interest rate.

2) Why do most agents write a contract to close in 30 days or less?

Dan Green of The Mortgage Reports wrote a post today explaining why a shorter escrow timeframe equals a lower mortgage interest rate. His post explains that a 60 day lock “costs more” than a 30 day lock, often in terms of higher interest rate vs. higher cash costs to close.

In order for the buyer to get the rate they think they are getting, they have to be able to lock that rate for no longer than 30 days. While the buyer is not required to lock that rate, it should at least be a possibility. If a buyer looks at a rate quote of 5%, they often are not told that assumes a rate lock period of no more than 30 days. So if they sign a contract to close in 60 days, and then try to lock the rate in the first week of their contract, they will find the rate to do that is higher than the rate they were quoted the day they made the offer.

The rate can change in a few hours without the issues noted in this post. But even if the rate does not change at all, the rate will be higher if you try to lock it through a 60 day closing vs. a 30 day closing.

The honest lender who asks “what is your proposed closing date” and gives you a “60 day lock rate quote” will be higher than the lender who assumes a 30 day lock. Be sure the lenders are using the same parameters when quoting you a rate prior to making an offer, so that you are comparing apples to apples. In this scenario the most trustworthy lender could appear to have a higher rate, when they are being most honest about the potential for rate if you lock for 60 vs. 30 days.

3) How does the closing date timeframe, chosen at time of offer AND ACCEPTANCE, impact the buyer and seller in other ways?

Buyer A gets a pre-approval letter the day they are submitting an offer. The lender pre-approves the buyer for a $300,000 mortgage at 5%.

Seller B accepts the buyer’s offer BUT asks for a 90 day closing, as the home they are moving to is new construction, and won’t be completed for 90 days.

Buyer A accepts the seller’s counter-offer as to closing date.

30 days later the buyer sees interest rates rising and wants to lock the rate. The lender quotes the “lock rate” and the buyer is confused. “I see the rate on your website is 5%. Why are you quoting me 5.25%?” Lender explains that a 60 day lock vs. a 30 day lock adds 1/4 of a % point to the mortgage interest rate.

Here’s where it gets REALLY complicated…if the buyer doesn’t qualify to buy the house if the rate is 5.25% vs. 5%, he can’t lock it. If he chooses to wait until the closing is within 30 days before he locks the rate, the rate could be at 5.5% at that time. If the timeframe for the finance contingency protecting the buyer’s Earnest Money expires prior to that time (and almost all do), the buyer is painted into a corner by circumstance.

Moral of the story is often a buyer CAN let the seller have 90 days to close if they are renting month to month. But a buyer must consider the impact of the interest rate floating out for 60 of those 90 days and/or the cost of locking for more than 30 days at time of contract.

Today, it is near impossible for a seller to stay in the property for more than 60 days from time of offer and acceptance. You can close in 30 days and let the seller stay or rent back from the buyer. BUT the buyer’s lender will not allow that seller to rent bank for an extended period. If the buyer is qualifying at an “owner occupied” interest rate, they will impose a maximum number of days that the buyer can rent it to the seller. Beyond that time period the buyer’s lender will consider it an “investment” mortgage, and higher investor interest rate and higher downpayment requirements, vs. an “owner occupied” purchase money loan.

The “ifs, ands or buts” that happen in a split second during negotiations, can change the “assumptions” made at the time the buyer received their preapproval letter. The lender is often not “in the room” while these negotiations take place, or consulted for every tiny change in close date or rent back terms. They most often don’t see those “changes” until the buyer and seller both sign the contract as finally negotiated.

These small changes can put the buyer’s Earnest Money “at risk” of loss. The agent is the “protector of the buyer’s Earnest Money”, as related to changes in contract terms during negotiations. Yet how many realize the changed position the buyer is put in when the seller counters for a longer close date?

We see thousands of articles on “How to choose an agent?” Perhaps asking the agent “what happens if the seller wants to close in 90 days, or wants to rent back for 90 days?”, is a better question than “How many homes have you ‘sold’ this year?” The cost of closing is VERY important to the buyer. Not closing at all, due to changes no one played out to the likely eventual worst case scenario, affects both the buyer AND the seller.

Agents don’t “sell” houses. Agents represent the buyer OR the seller AND the transaction as a whole, as it appears at time of offer…AND as it changes during negotiations and escrow.

Handing a contract to escrow and waiting for a commission check is no longer an option. Changes in lending BACK TO the old tried and true rules of the game, requires agents to be on their toes all the way to the day escrow closes…or doesn’t close.

Why are so many escrows not closing these days? Everyone asks that question. Truth is the skills needed by an agent have changed dramatically back to old school…and agents still think “it’s the lender’s job” vs. theirs.

Price per square foot revisited

Posted on by
78

Are formal dining rooms becoming obsolete? Are huge master suites too “selfish” for today’s changing society? Is “keeping up with the Joneses” turning into “Cutting down with the Joneses”?

In a market projected to be flat at best for the foreseeable future, these questions are fast becoming very important for each home buyer to ask and answer, each in their own way.

In the age of “me”, me being the parents vs. the children, the places where children “go” in their home got smaller and smaller. Families used to spend more time together in the “living” room until the children were banished to the “family room” and the living room became a “formal” living room that most no one ever used. People gathered in the kitchen with friends and family, until the “formal” dining room became a place and space ONLY used once in a while when “guests” came. As if the kitchen was OK for the kids, but the visitors were somehow more important, so much so that we paid big money for a special room just for “guests” vs the family on an everyday basis.

Beyond price per square foot, it is time for home buyers to determine price per square foot of WHAT? Forget about how it currently “works”. It’s time to change how it works.

First Floor = 1,630 sf of which only 534 square feet represent rooms the children enter on a regular basis. The rest is “formal” living room, “formal” dining room, “Dad’s” study, “grand” staircase and foyer. Even if you throw in the 1/2 bath, the space the children live in is smaller than the square footage of the attached 3 car garage at 660 sf.

When did the children become entitled to less space than the cars?

Second Floor = 1,260 sf of which each child’s bedroom is only 130 sf. If you have two children and throw in the bathroom they share at 5 x 8, that gives them 380 sf on the second floor. Let’s be generous and give them an open loft “bonus” room to do their homework in at 15 x 15 and you still have a full HALF of the second floor devoted to master suites and grand staircases.

2,890 sf of home plus 660 sf of garage = 3,550 sf of which only 1,165 sf is space the children enter on a regular basis. The “children’s” place is not even double the amount devoted to housing the cars. Given the “children’s” space includes the kitchen and the family room, that’s just sad.

Let’s put a price tag of $550,000 on this home = $154 per square foot including the garage. 1,165 sf times $154 = $180,500 of that $550,000 devoted to the “family” and places where the children go on a daily basis. That’s about $370,000 for formal areas, master bedrooms and baths, showy staircases and places to put the cars.

Do you really want to spend $380,000 for places your children don’t enjoy?

Put this house on a small lot, as a zero lot line home, and we have to ask ourselves: I know we’ve come a long way, we’re changing day to day. But tell me, where do the children play?

Why Home Inspection Negotiations Fail

Posted on by
83

Properties “falling out of escrow” due to the home inspection negotiation failing, is on the rise. In many cases this is because the buyer is asking for something the seller can’t really say yes to, because what they are asking for just doesn’t make any sense. Consequently the answer often becomes no and the escrow “falls out”. See this example of a recent Extreme Home Inspection to see how difficult it is to say “no” when no is the most appropriate response for all parties, and still keep everything moving forward to a right conclusion.

A home inspection is not the same as the original contract negotiation. The original negotiation is more about price and terms than the house itself. Consequently both parties can decide what to do, and what to do next during the negotiation, in email or by fax. To successfully complete a home inspection negotiation, the negotiations need to start AT the property, and may take a few inspections by experts to complete the inspection negotiations properly.

The example in the link gives a better picture of why this is so, than I can describe here. But let’s look at the three main causes for inspection negotiations going sideways, and how the buyer is often moving in the wrong direction.

1) The new norm of not letting the seller’s agent be present at the inspection is not a good one. I agree that the seller should not be present, as the emotional level can get out of control and unmanageable. But the agent for the seller needs to take the ball and run with it once the buyer starts making a request. The BEST way for the agent for the seller to negotiate to a good conclusion is if they are AT the inspection and heard and saw what the inspector was talking about. Not permitting the agent for the seller to be present can lead to the seller fixing the wrong thing, or fixing it incorrectly. If the paper report were an adequate representation of all facts at hand, the buyer would not need to attend. We all know that is not the case, and to understand the inspection in its entirety, so as to negotiate the appropriate fix, requires that all relevant parties be present.

It is a great disservice to the transaction as a whole for buyers to insist that the agent for the seller not be present. Yes, I’ll agree that a lazy, crappy agent in the room doesn’t help anyone. But the right agent in the room can make everything work out even better than the buyer hoped for. The agent for the seller has the best chance of getting the seller to react appropriately to the “issue at hand”. Give that agent what they need to help you best. Let them be present during the inspection, in fact insist on it. The paper report does not replace being in the space with the inspector as he finds and discusses the issue at much greater length and detail then ends up in the written report.

If you have an agent who sits on the front step reading a book or doing “work they brought to do during the inspection”, and doesn’t stay “engaged in the process”, well…I think you know what I want to say there and can’t say out loud.

2) Successful negotiations require you to put yourself in the other side’s shoes. Often agents who have represented hundreds of buyers and sellers can do this better than any buyer or seller. When a buyer’s agent writes up an inspection response, they then have to read it back to themselves pretending they are the agent for the seller. How would the agent on the other side of the table take this request and run with it? Often the answer is, they can’t. The agent wrote what the buyer asked for, without analyzing whether or not the other side has enough information to respond well.

Example: “Fix everything.” Even if the seller says yes, there are some things you don’t want the seller to fix. Some things need a credit, some things need to be fixed, and most things need a whole lot more detail as to HOW to fix them than “fix everything on this list” explains. RARELY does ANYONE say yes to an unknown cost. Fix everything is just lazy. The buyer’s fix might cost $6,000. The seller’s fix might cost $300. The seller may be saying “yes” to $300 while the buyer is thinking they said yes to $6,000. Then you get to the end after closing and the fix is horribly inadequate. You must be VERY specific if you want a “fix”, and that fix has to have a “work order” attached. The work order dectates WHO will fix it and the cost of that fix, so the seller is saying yes to what the buyer really wants and needs.

3) The request has to make sense. When the inspector says (and they all do) I can’t tell what’s behind the wall, it is NOT usually appropriate for the buyer to ask for the wall to be opened. Sometimes yes (as in the linked example in the first paragraph) sometimes no.

Example: 200 amp panel is of the type that was recalled. The inspector says it needs a new panel (cost approx. $1,000). The inspector suggests the panel be moved from outside the house to inside the house (generally not an appropriate request – it’s like asking for the washer and dryer to be moved from the second floor to the first floor. A home inspection should not include a request to change the home from what it is, when that something is not “a defect” and is a suggestion vs. a needed repair.)

The inspector says “I see no problem besides the panel itself”, but as a CYA he adds, “I can’t trace the lines throughout the home as I can’t see behind walls”. Buyer asks the seller to replace the panel AND move it from outside to inside AND asks them to trace the lines throughout the home…no possible answer to all that besides “no”. The inspector can’t see through walls and neither can the seller or the seller’s electrician. You’re basically asking for someone to rip out every wall and see the wiring behind the wall and check it. Unless the inspector sees a problem in the wiring, and even when they do, there is a limit to what you can expect a seller to do. Handing them a to do with no work order…no cost…no detail as to what they are to do next, is begging for a no response.

RECAP:

1) Make sure both the agent for the buyer and the agent for the seller are in attendance and “engaged” during the inspection.

2) If there is a “potential” but unidentified problem as to specifics CALL FOR A 2ND INSPECTION of that item by a qualified specialist, before making a request.

3) Don’t simply ask for the biggest number you can get. Make sure your request matches the issue at hand.

Example: 35 year roof is 6 year’s old. Inspector sees 3 cracked shingles and flashing issues around the chimney. If you really want to buy the house, don’t ask for “a new roof”. Sure, getting ten grand is nice. But asking for a new roof when it doesn’t need a new roof will likely lead to the seller not trusting anything you want as “real”, and leads to the seller simply saying “NO!” and not wanting to negotiate any further and that equals #FAIL!

Twice as many Open Houses!

Posted on by
20

In case you didn’t know, this weekend [June 28, 2009] is WA Open House Weekend. Net result is if you are in the process of looking at houses to buy, or a seller looking to make comparisons with other homes on market, this Sunday you can double the effectiveness of your Sunday afternoon efforts.

According to my recent conversation on Twitter with @MattGoyer of Redfin, the number of Open Houses is about double the norm for Sunday, June 28th, 2009.

While Redfin site doesn’t have all the Open Houses due to the “block” put on the mls feature by some brokers, any agent can send you a link to hopefully more or even all, as long as the Open House data isn’t blocked agent to agent vs. broker to public sites, which they don’t seem to be. I will put a couple of those links into this post and can do more by request in the comments section. The links will only be good for 30 days, but for Open House purposes, that is more time than we need them to be accurate and working.

Some agents will decide on Sunday Morning (after reading this post) to participate in the event, so expect there to be at least 10% more Open Houses than are currently or eventually “visible”…possibly more.

I cordially invite you to visit me from noon to 5 p.m. on Sunday, June 28th at 519 Federal Avene E (rear unit) in Capitol Hill. I am extending the hours by two additional hours to accommodate those who will be attending the Gay Pride events in Seattle on Sunday, and will stay past five if someone arrives shortly before 5. The sellers also reduced the price by 5% even though we have only been on market a short time, to celebrate the Open House Event.

Here’s the current link for Open Houses around 519 Federal Ave. E. (area 390)directly from the MLS showing 74 Open Houses for Sunday at present.

My partner, Kim Harris, will be our at condo listing at Sundance – Klahanie in Issaquah on Sunday from 1-4 where the seller is offering to buy down the interest rate below 5% in honor of Open House Weekend. Here’s a link to the 26 open houses in Issaquah.

If you like to see houses, this is a good weekend to see more than usual in one trip!