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 34+ 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

Beginning the Home Buying Process – Part 2

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[photopress:MacCommercial.jpg,full,alignright] The next step in the Home Buying Process is determining how much home you can afford and how much you actually want to spend. When buying your very first property, it is important to note that while a lender may tell you that you can afford a property priced at $350,000, lenders do not actually qualify you based on sale price. It has become common practice for the ease of agents and buyers to quote a sale price. But the actual process qualifies you for a monthly payment that includes Principal + Interest + Taxes + Insurance/HOA Dues.

This is VERY important because a Townhome with very high monthly dues can be more expensive, even though it has a lower price, than a Single Family attached townhome.

There are four townhomes on my desk. Let’s look at these as a real life, current example. Let’s calculate the monthly payment based on 20% down and an interest rate of 6.25%. 20% down is clearly not the norm for a first time homebuyer, but the way to finance the amount of loan on the 20% top portion, varies greatly from one individual to the next. So we are eliminating that factor to make the point that taxes and homeowner dues, can impact the price at which you can purchase, even though your “lender letter” says you qualify at $350,000.

1. Price $315,000 – Taxes $1,559 a year – Dues $310 a month (Condo Townhome)

2. Price $359,000 – Taxes $2,986 a year – Dues $282 a month (Condo Townhome)

3. Price $365,000 – Taxes $2,064 a year – Dues $239 a month (Condo Townhome)

4. Price $375,000 – Taxes $2,460 a year – Dues $75 a month (SFR Townhome)

1. Payment $1,550 + $130 taxes + $310 dues = Total Payment of $1,990

2. Payment of $,1765 + $250 taxes + 280 dues = Total Payment of $2,295

3. Payment of $1,800 + $170 taxes + $240 dues = Total Payment of $2,210

4. Payment of $1,850 + $205 taxes + $75 dues = Total Payment of $2,130

The homes in price order do not follow suit with regard to monthly payment order. The second lowest price has the highest monthly payment.

If the lender qualified you at a purchase price of $350,000 with 20% down at 6.25% using $200 as estimated dues and $200 as estimated taxes, that would translate into qualifying you at a payment of $2,125. Using the real life examples above, you would actually qualify better for the townhome priced at $375,000 than the one priced at $359,000, even though the lender said your max affordability was $350,000.

When you and your agent walk off with a lender letter at $350,000 and buy a townhome or condo at $350,000, but the lender used $200 a month for taxes and the real taxes are $300 a month, and the lender used $200 for monthly dues, but the real dues are $325…the sale can fail on financing issues. Many owners and agents get very angry when the financing fails, but it really falls upon the agent to know the estimate of taxes and dues used by the lender, so they can adjust on a case by case basis before submitting an offer.

Moral of the story is, when a lender hands you a letter saying “you qualify at a purchase price of $350,000”, make sure you know the interest rate, downpayment, taxes and ins./hoa dues the lender used to come up with that number. Then you can adjust, if you are liking a townhome with dues of $425 a month!

We all know that one complex in Bellevue that has high dues and more “Sale Fail Releases” than any other complex in the Seattle area. Now you know why that is happening.

Jeez Louise! Web 2.0

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[photopress:2_1.jpg,full,alignright]We just can’t be the only ones not reporting on this. That’s all I can say. It’s a sad day. Click on every word in Greg’s post for the full scoop heard round the world regarding Redfin and Web 2.0.

Maybe they should have closed for holiday during Glenn’s honeymoon. I never called my office once during my honeymoon…hope Glenn is doing the same and shutting out all forms of communication!

Try this one…it’s quicker.

Queen Anne Condos

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Isn’t that photo Awesome! I just got an email announcing the Broker’s Open on Tuesday, September 19th from 12 to 2, but I have an appointment here on the Eastside at 1:30.

First Public Open will be September 23rd and September 24th from 11 a.m. to 6 p.m. An amazing array of styles from studios to townhomes and amazing array of prices to go with.

[photopress:Queen_Anne_HS.jpg,full,alignleft]

More info at www.queenannehigh.com Very cool site. You can visit each floor and scroll around the different units and floor plans. The studios start in the “low” $300,000s. They say “townhomes” start in the mid $700,000s. Not sure how you fit a townhome into a High School. Lots of floor plans and prices in between. I think there are 139 units altogether on five floors, plus a furnished rooftop deck with amazing views.

One of only 37 buildings in Seattle on the National Register of Historic Places. Should be worth the trip! I’ll have to catch it at one of the Public Opens.

Queen Anne High School was built in 1909 and the historic photos on the site are well worth visiting. This is a public service announcement, and not an advertisement of a Coldwell Banker listing 🙂

Changes in Appraisal Standards can affect housing prices

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[photopress:down.jpg,thumb,alignright] Very interesting article by Kenneth Harney in Seattle Times today.

Of specific note is this quote from the article, “Some mortgage lenders and relocation companies now expect appraisers to examine a wide range of data they never emphasized during the boom years.”

Last night I had a nice chat with a seller regarding how the appraisal process can negatively impact the price at which his home can sell for, if the purchase is financed.  This is not true of all homes, but it was for his particular home.

When lenders start getting nervous about the future of home prices, they start putting downward pressure on prices, by  requiring that appraisers to be more careful not to overvalue for mortgage funding purposes.  While the “lenders and relocation companies” may be nervous based on something that is not happening in the marketplace of this given house, that nervousness can result in properties not appraising.

When the lender will only fund 80% of what THEY think the property might sell for in the future, the buyer will have to make up the difference in cash, in order for the seller to get the agreed upon price.  If the buyer is not willing to pay that difference in cash, then the house may not be able to sell for “what the market will bear”.

Buyer Agency Agreements

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[photopress:dog.jpg,full,alignright] Is there a difference between dogs and cats? When you take out a leash, a dog usually gets all happy because he knows he is going to go outside. When a cat sees a leash he usually has the opposite reaction (some exceptions, of course) and says, no way I am going to be LED anywhere!

So what do dogs and cats and leashes have to do with consumers signing contracts?

For many years, agents have insisted that the seller sign a contract for their services, and by and large sellers have been happy to do so. I have never had a seller say, “Can’t you just do what you do, without my needing to sign a contract?”.

A seller is more like a dog than a cat, and a contract is somewhat like a leash. Most dogs are more than happy to be on a leash, as long as the guy at the other end of the leash, keeps pace with WHAT THE DOG wants to do.

The reason it is not possible to represent a seller client without a contract, is because of the “3rd party” promise to pay. The seller via that contract and the seller’s broker, agree to pay the agents who show the property. Say I list a house at $500,000 and the “seller” offers 3% “in the mls” to the Buyer’s Agent. That’s $15,000. While it may appear on the outside that the seller is offering that money to the Buyer Agent in the MLS, he isn’t. The buyer agent is an unknown person and the buyer is an unknown person, at the time the property is entered into the mls. The seller is not putting anything in the mls, the seller’s agent is putting it in the mls and promising to pay the buyer’s agent. The agent would actually have to cough up that $15,000 from his own personal funds, if he didn’t have a contract signed by the seller at the time he put the “offering” in the mls. That’s a little too much to ask of anyone on a handshake, so a contract is required from the seller.

Back to sellers are dogs and buyers are cats. The seller has a known address to the “product”/the house. It is easy to get a list of “services and metres” specific to that house. Does it need some staging? Is it photo ready? Can we get 15 photos quickly after it is staged and edit and upload them…on and on. Specific defined things after viewing the product/house, based on that house’s strengths and weakneses. Pretty simple stuff to calculate from day one, for the most part.

Buyers on the other hand are cats. They do not know “the address” of the property at the outset. They sometimes do not know for certain whether they will be buying a brand new townhome (not as much work for the agent) or a single family home built in 1910 (lots more work for the agent). They sometimes don’t know if they are going to buy in Renton or in Juanita or in Greenwood. Sometimes they need to see some property before making some of these decisions.

So a buyer needs to roam freely a bit, without a leash, more like a cat, to gather the information needed to come to an informed decision regarding type of property, general location of property and ballpark price of property. A buyer may need to see property with an agent in Renton, a different agent in Juanita and a third agent in Greenwood, before having enough information to hire the right agent for their needs. Anyone who has been in this business for awhile, knows that they are sometimes a stepping stone, in a buyer’s journey to an informed choice.

The absolute worst thing that can happen in this country, IMNSHO, is for buyers to be required to sign a contract, just to SEE a house. First of all it is demeaning, and lacks the respect and understanding of the industry, and its differences. It’s trying to put a leash on a cat, and pretending the cat is a dog.

Top Down – Bottom Up

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I was helping an agent with a listing that hasn’t sold yet, and one of the simple, yet dramatically effective things I did was rearrange the blind openings. This is particularly important for view property and any property where cars or the street show when you raise the blinds from the bottom up.

If you see two sets of strings, one on the right and one on the left, this usually means they are “Top Down-Bottom Up” blinds. This type of window treatment allows you to cover the low portion of cars going by, but let in light and sky and sometimes tree tops from the top view.

They are great for view property if the windows are low and tall, because they allow you to enjoy the view from the inside without the neighbors seeing you in your boxers 🙂

No Bubbles Bursting – It was only August

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[photopress:august.jpg,full,alignright]I can’t give an official report with stats until September’s sales are closed, but based on my experience out there in the trenches…It was only August! aka “The Dog days of Summer”

Even the Open House I held on Sunday was sold to a fella who walked in and said, “I was looking before, but I took August off!” August has long been known as “Agent Takes Vacation Month”. At one point in August, 4 of the 5 things I was trying to put together had the other agent “leaving for vacation tomorrow”, “calling you from Canada”, “calling all weekend from some road trip”, and other such voice messages. “Leaving for vacation tomorrow” did come together and closed by month end 🙂

This last week, begininning Tuesday after the holiday, has been gangbusters with some very surprising bidding wars going on. Of course the ink isn’t dry on that one, but it’s a great story when it’s over. Some record high prices.

So NO BUBBLES BURSTING. It was only August…again, here in the Seattle area.

A Two Week Moratorium for Redfin Critics

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[photopress:wedding_1.png,full,alignright] You are cordially invited to a two week Moratorium on “Sticking it to the Man”. I know Greg and others have been having a lot of fun poking at Redfin, but I would like to announce that Glenn Kelman of Redfin is getting married this weekend.

Glenn and I discussed not discussing anything we discussed at our little tete-a-tete. But I would be remiss if I did not publicly congratulate him on his upcoming nuptials. Let’s give him the gift of being able to focus on his Once in a Lifetime Event, by applying the old adage, “If you don’t have something NICE to say, don’t say anything at all”.

I remember the first time I heard about Redfin. I was at a listing appointment and a young couple thinking about selling their condo in Issaquah said, “Did you see this really cool site?” They pulled up Redfin on their computer and showed me how they could “fly around” looking at property. They LOVED it. You can hardly run into a buyer, especially younger ones, here in the Seattle area who have not heard about Redfin. That is a fabulous accomplishment and it is time to give credit where credit is due.

So if you have something really NICE to say about Redfin, say it here! If you don’t have something nice to say, then let’s keep it zipped for a couple of weeks, and cut the guy some slack, so he can enjoy his pre and post wedding time.

Congratulations Glenn!

Beginning the Home Buying Process – Part 1

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[photopress:matt.jpg,thumb,alignright]My friend “Matt” is a first time buyer beginning his home search/buying process. That is not his picture, or his real name, of course. By giving him anonimity, I can take him through the steps here on RCG, so that others can follow along with us. Think of it like a board game. The “Matt” game. This will be a series that will run up until “Matt” closes escrow, and possibly beyond into his first month or two as a homeowner, and the surprises that may come up after he moves in.

Given a “blog” is a web log, it seems appropriate for a real estate blog to offer a log of real people in the home buying process. So lets log and blog the adventures of “Matt” and his home buying process. I’d love for someone to turn it into a board game at the same time. We can give it to potential homebuyers. Maybe Galen or Robbie. It could be like the game of “Life” and people who are thinking about buying a home, can buy the game and “play” before stepping out into unknown territory.

START: “I’m thinking to buy a home this fall. Likely an (x area) townhome just outside the (x) growth zone. Any advice on what I should be reading/doing to get up to speed for home-hunting?”

Now I am going to make this as transparent as I possibly can, without giving away the identity of “Matt” or the location of the home search, for obvious reasons.

STEP 1: The first step is the most extensive one, as it combines many factors. Home Price, which is determined by monthly payment affordability, cash needed to close, and commission to be paid to the Buyer’s Agent. This is all one big first step, as the Commission Negotiation affects the “cash to close” issue. So let’s do that first.

The target purchase price, as already pre-conceived by the word “townhome”, and specified area in the email, is $295,000 to $495,000. For the purpose of this Step, let’s assume that “Matt” has in mind to purchase something for around $375,000, that he is thinking his monthly payment is going to be about $2,200 and that he has saved $20,000 toward the home purchase. This may or may not be the case, but let’s start with that assumption for now.

The ball is in my court. Since I know that “Matt” works in the Technology Industry, and I believe he is a first time buyer, I have already picked up the phone and called Jennifer Chi at First Tech Credit Union. The number one issue is, do they still have that fabulous first time buyer program that I have not used for awhile, and if so, what is the current interest rate, downpayment requirement, and cost for that program. I am waiting for a call back. Left a message. My expectation is that they require little or no money down, have total lender costs of about $600, and the rate is about 5.75 %. Let’s see how close I am, if in fact that program is even still available.

Some people think the first step is for the buyer to go to “the lender”, without consulting the agent. Not so. As the agent I first want to determine who might be the “best” lender for this particular client, as I have already done. Of course the client can do whatever they want over there on the side, and check out all kinds of lenders and loan programs. But that does not relieve me of the responsibility to seek out the best and special programs, especially when I am already aware of their existince, and the likelihood that he probably qualifies for it.

Next on my “To Do” list is to Negotiate the Commission. Since I already know “Matt”, I don’t have to stick him in my car and interview him to determine the fee. Based on a sale price of $375,000, I would not normally negotiate the fee up front, as in that price range, I need to reserve monies for repairs and other issues. But since we will likely be looking at newer townhomes and he gets that “special friend” treatment, let’s establish a flat fee of $6,000, which should give him an extra $5,250.00 to spend, and still leave me enough to fix a few things and get him a nice housewarming gift 🙂

This is an important first step because if any sellers are offering less than 3%, it becomes “Matt’s problem” and not mine. Everyone makes such a huge big deal about Negotiating Buyer Agent Fees. Look. It is that simple. Matt didn’t even have to put in his $.02. LOL. Of course Matt has other options, but that is my offer and he can take it or leave it or negotiate it back at me. We’ll see what he does.

That’s all we can do until we get that call back from First Tech Credit Union, as we cannot determine the price of property to look for, until we know the monthly payment he can afford, which we cannot know until we know the interest rate and cash requirements for that particular loan, which is the best, if they have it and he can qualify for it. More to come…

Should You Pay More For THIS House?

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[photopress:polly.jpg,thumb,alignright]When determining how to structure an offer on a property, one of the key considerations is, “How scarce a commodity is this home?” How scarce it is to you, depends on the parameters you have set, and why you like this particular home, which varies from person to person.

If the property is unique because it has the largest lot in the area, then the seller is correct in putting a premium on this feature of the home. But, if why you are buying it is NOT because it has a large lot, then maybe you should not be the one to pay the “justifiable premium”. A justifiable premium for the seller, is not necessarily a justifiable premium for the buyer.

Often the seller will dramatically highlight their “premium” feature, such as a large lot, when they should not. I remember showing a home, with the owner in the home, and they kept raving about how huge their lot was. I could tell that the buyer had totally tuned out and had no interest in the property, but we couldn’t leave because the owner was going on and on about the size of the lot. When we got outside the buyer said, “Not me! I’m not spending my life maintaining the biggest lot in town!” I asked if he would have been worried about that just by viewing the property, without the seller’s influence. He said no, but now that I have this picture in my head of spending all of my weekends mowing the grass and maintaining the landscaping, AND paying MORE for the house for the “privelege” of it sucking up all of my free time, I just can’t see myself in that home. Otherwise, I may have bought it, but let’s just get out of here.

So the seller may indeed “deserve” more money for his house than anyone else in town, because he has the largest lot. But that does not mean that every buyer should offer that premium, in fact some will discount it, for the very reason the seller is raising the price. The buyer may deduct for the extra maintenance of the larger lot, while at the same time the seller is adding a premium for the extra land.

The photo above is in reference to “our Polly” who had the best question in the month of August. Before responding to a counter offer from the seller she asked, “What is the likelihood that you could find us a similar home within the next 60 days?” I was knocked out by this fabulous question! If only two of those have sold in the last year, then the liklihood is slim to none. If 40 of them have sold in the last six months, then you can play hardball with the seller. Excellent question to ask while in the middle of negotiations.