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

Negotiating Fees with the Buyer Client

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I was quite encouraged by a phone call I received yesterday from an agent wanting to discuss how to approach fee negotiations with a buyer. Not how to object to the subject. Not how to respond if a buyer raises the topic. But how to introduce the concept of negotiating the fee to a buyer, without the buyer being the one to first broach the subject.

Clearly, the Buyer Agent truly treating the buyer as a client, is the key to the future of our industry. As long as agents continue to think that the seller is paying their commission, when they are representing a buyer, they will continue to treat the buyer as a second class citizen in the real estate transaction. I am very hopeful that people will start to see that there are two sides to this $coin$ and that the buyer clearly pays their fair share, if not more, for their representation.

Given the huge increases lately in Buyer Agent offerings from sellers, it is obvious that 98% of the industry still does not “get it”, nor do they want to “get it”.

Looking for guesses on that album cover. Prize to be determined by location of the winner who guesses the band and the One Hit Wonder on that album.

If wishes were horses, beggars would ride

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if-wishes-were-horsesIt’s much easier to “stick it to the man” when you’ve never met the man.

“If” the beginning of every residential real estate transaction were the buyers and the sellers and their agents meeting and chatting, maybe having dinner together and a drink or two for an hour. Then everyone walks through the house together while the seller tells the buyer the story of their life in the house and the buyer and agents ask questions. Then the offer is written, and proceeds through the inspections to find things the seller just truly doesn’t know about. At the end of the transaction when all items and terms are fully negotiated, the buyer comes into the room with a check in his hand. The seller comes into the room with the keys to all doors and garage door openers and manuals on appliances. The agents review the final numbers and nod to the closing agent.

Everyone smiles and shakes hands after the seller gets his check from the closing agent, and the seller hands over the keys to the new owner and wishes them much luck in the home they have lived in, and now pass forward to the new owners.

Believe it or not, that is how many of my original real estate transactions transpired, once we achieved balanced market conditions. For the past several years, more often than not, the buyers and sellers never even meet each other. The Seller’s Agent never meets the buyer and the Buyer’s Agent never meets the seller. The playing field seems to get nastier when it becomes a true buyer’s market or seller’s market. For the first time in many years, I am starting to see transactions that are more civil and fair to both parties.

I’ve been in this business long enough to see both buyer markets and seller markets. I’m still happiest when the market is balanced and all parties have met each other and treated one another with dignity and respect. I wish it were always so, but then, “if wishes were horses, beggars would ride…and there’d be no work for tinkers.”

What is a .25 bathroom?

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[photopress:9t.jpg,thumb,alignright]Nine times out of ten when someone asks me this question, the house does not actually have a .25 bath. The mls here in the Seattle area requires us to count bathrooms in a specific, and somewhat outdated manner, causing many homes to appear to have a .25 bath that do not. 

[photopress:5t.jpg,thumb,alignright]I will shortly be listing a two bedroom condo in Kirkland at the north end of Lake Washington for about $200,000 that has 1.25 baths. While many homes show 2.25 baths or 3.25 baths, these homes do not actually have a .25 bath at all. A .25 “bath” is one extra fixture, usually not housed in a separate room at all. The 1.25 bath condo I will be listing has a sink and vanity area located in the master bedroom between the full bath (with jacuzzi) and the walk in closet. You enter this dressing area from inside the master bedroom. This is the best example of a real .25 bath. It is an area inside the master bedroom, just outside the full bathroom, where one can shave or put on their make up while the other is in the bathroom taking a shower.

Most homes that show 2.25 baths actually have 3 “bathrooms” involved that total this configuration. The most common setup is one “full bath” plus one “3/4 bath” plus one “1/2” bath, that totals 1 + .75 + .50 = 2.25 total baths. The 3/4 bath is most often attached to the master bedroom and has a shower stall and no tub, making it a toilet + sink + shower stall = 3/4 bath (3 fixtures – no tub). The full bath is usually located off the main hall and is used by the persons in the “other” bedrooms and has a tub (with shower in it) + toilet + sink equalling one “full” bath. A 1 3/4 bath home would normally be a rambler style on a single level, with the full hall bath doubling as the “guest bath”.

A 2.25 bath home would normally be a two story home with a 3/4 in the master, a full bath in the hall and a half bath on the main level, with a toilet and a sink only, so that one does not have to go up to the second floor to go to the bathroom. On the East Coast this is called a “powder room” from the old days when women pretended to be “powdering their nose” as opposed to relieving themselves 🙂 A 3.25 bath home would be similar, but might have four bedrooms rather than 3 with both a hall bath and a “Jack and Jill bath”. A “Jack and Jill bath” is a term used to describe a bathroom set between two bedrooms that can be accessed from either bedroom, but not from the hallway. I had one once, though in my case it would have been more aptly called a “Jill and Jill bath”, but I do not recommend it. The occupant of the bathroom enters from their bedroom and locks the door to the other bedroom from inside the bathroom while bathing. They are supposed to remember to unlock that door when they leave, but often don’t, causing the occupant of the other bedroom to be locked out from their side of the bathroom.

Another example of a .25 bath seen in some very old homes with basements, is a “below grade” toilet only, usually in the basement and sometimes called a “service toilet”. It is a stand alone toilet or a toilet in the washer and dryer area near the “utility sink”. It is often just sitting out in the open in an unfinished basement area used by a guy who is working on his car or in his workshop area in the basement, saving him a trip up the steps to the main bath.

I say this system is “antiquated” because housing trends have expanded, but the mls method of counting fixtures has not expanded with the times. For example, my master bathroom has a separate enclosure for the toilet area, a jacuzzi tub, two separate and distinct sink areas, and a large two headed shower stall. Technically that equals six “pieces” 2 sinks plus 2 showers plus jacuzzi tub plus toilet equals 6. But the mls makes no distinction between that type of elaborate master bath and a “full” bath. That is why you will often see the term “five piece bath” in the marketing remarks of a home, meaning there is a single head shower stall and a separate tub and double sinks. The “uitility sink” located in the washer and dryer area is never counted as a “fixture” when totalling up the bathroom fixture count.

So when you see a home listed as having 2.25 baths or 3.25 baths, stop looking for the .25 bath. It generally does not exist inside that home. Instead, expect to have a 3/4 bath with no tub in the master and a .50 bath on the main level with a toilet and sink only.

Is it a Buyer’s Market or a Seller’s Market?

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We are, for the most part, in a “normal market”, meaning that in some segments, it is a Seller’s Market, while in another segment, in the same city and price range, it is a balanced to Buyer’s Market. I used this sample to show how, in a small geographic area and price range, you can have two types of markets going on simultaneously.

What does that mean to you as a buyer? If you find one in the charted area that shows 0 available and 24 sold in six months, you need to act quickly and be less picky about condition and location. If you find one in the area that has 15 available and 149 sold in the last six months (same City and same Price Range, different Zip Code) then you can take your time, be more picky and even wait for a better one.

What does that mean to you as a seller? If you are putting your property on market in the first graph area and price, you can likely push the price based on supply and demand and still sell quickly at full price. If you are a seller in the second market segment noted by the second graph, you will have more competition and should price competitively and put the property in the best showing condition possible.

I have not highlighted the true “Buyer’s Market” segment, which is one where only 3-5 of every 10 homes for sale, will sell at all, meaning the ratio is 10 sellers for every 3-5 buyers. That is occuring in higher price ranges (over $1,500,000) and harder to define market segments, and not necessarily as relevant to the average RCG reader.

Perhaps other agents who work further out, like Sultan, Monroe, Des Moines, etc… can do some stats in those areas for us. Anyone seeing the ratio of buyers to sellers such that there are not enough buyers in the marketplace to absorb current inventory in a reasonable timeframe?

Agents and Consumers – A Perplexing Business Model

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Seems to me that misinformation fuels many of the conversations regarding relationships between agents and consumers in today’s real estate marketplace. So let’s take a crack at one of Craig’s comments in #48 of Dustin’s post.

“If the mls were “open” – i.e. anyone could list – then agents will have an even harder time justifying the 3%/3% commission.”

Last I looked, every option known to man was available to sellers, with very few “having to pay” 3% to their listing agent, at least in the Seattle area. Many if not most agents do not charge 3% on the listing side, if the seller buys their next home from the same agent. There are many flat fee options available for limited service. High end often pays 1% for full service, especially on new construction homes. 2% is fast becoming the norm for the average Joe. 3% is more typical in the lowest of price ranges where 3% doesn’t amount to much and is a bargain for full service on a $120,000 condo. I have to wonder why people keep pretending that sellers by and large pay 3% to the listing agent? As this figure is not published, there must be some “hidden agenda” to the purveying of misinformation, I think.

As to why sellers offer 3% to convince more and many agents to come and show their home, I guess because it must make sense for them to do that, or they wouldn’t be doing it. That doesn’t mean the Buyer’s Agent GETS 3%, that only means that there is an allowance in the List Price, up to that amount, as far as the SELLER is concerned. Then it is up to the buyer and his agent to determine the actual fee, as they negotiate it within the target amount set by the seller.

Clearly all commissions are negotiable and always have been. Anyone who believes an agent, or attorney in this case, who pretends otherwise is mistaken. All commissions are and always have been negotiable. You just have to understand the structure, and the reasons for it, to maneuver within the system to your best advantage. If you don’t understand the system in place, you leave yourself open for someone to take advantage of your lack of knowledge, by exploiting that weakness. Know that you can, for sure, and in fact, negotiate any fee you want AND participate in the mls system in place while doing so. This is true for both buyers and for sellers, as long as the seller negotiates his side, and the buyer negotiates the other side. There is absolutely nothing in the system, as it exists, that prevents you from negotiating commissions, other than the misinformation which is keeping you from understanding the system.

As to using an attorney instead of an agent in a real estate transaction, it’s apples and oranges. No attorney purports to do, or even tries to do, what an agent does in a transaction. A great attorney is no replacement for a good agent in a real estate transaction. A monkey is a sufficient replacement to both, if they are not good, and monkeys may be more pleasant to deal with 🙂

“Man in the Bushes” Listing

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[photopress:man_in_the_bushes.jpg,thumb,alignright]This article is in response to a reader’s request yesterday, that I describe what a “man in the bushes” listing means.

Over the years, I have used the term “man in the bushes” most often in response to the question, “Can I sell my home myself as a For Sale by Owner”. If they are ready, willing and able to do that, I tell them to try it for up to 30 days, even two weeks, to see if they have a “man in the bushes”. I once sold a home with 23 men in the bushes.

A “Man in the Bushes” property is usually a unique home that has something that no other house has, and is also one people have suspected may at some time be sold. In this case a stand out corner property in Mount Baker built at or before the turn of the last century in the late 1800’s with some Lake view. It also has an owner who for some reason, actually many reasons, never got around to moving into it. So it has been vacant on and off for some forty years.

There’s usually someone, or several someones, who drive by it on a regular basis (in this case visiting his brother who lives nearby) who has said to himself a skazillion times, “If that house ever goes up for sale, I’d like to have it”. Of course they don’t know for sure until it does go on market and they go in it. But they are already 70% sure they want it. That’s a “man in the bushes”. Not just someone who is the first one to view it when it is listed, but someone who has been waiting for that opportunity to arise for a long time.

A seller can either try a FSBO on that, or get a deeply discounted rate if the “man in the bushes” comes forward very quickly. Another option is to list it in the mls and “exclude” the man in the bushes from the listing with a timeframe. “If Mr. X arrives and makes an offer on the property within 7 days, the listing is null and void”. To do it that way, you need to know who Mr. X is in advance and put him in the contract by name.

Sometimes the Man in the Bushes is a relative who has indicated an interest in buying it over the years, but may be “all talk” and “no ability to do so”. You give them 7 days to “put up or shut up”. This way the family doesn’t have to hear for the rest of their lives that this guy would have bought it, but no one gave him the opportunity to do so. There should never be a fee connected, other than maybe a handling fee, for people to sell their home to a relative. So if you think you have a “Man in the Bushes” in your family, give them 7 – 10 days to at least put that interest on paper, with no or little fee paid if a family member buys the property in the early part of the listing.

Lame MLS Data Again!

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[photopress:mea_culpa.jpg,thumb,alignright]Looks like I need to get down on bended knee and beg Robbie’s forgiveness, pounding my chest and saying “Mea Culpa!” Robbie, I try and try to give you accurate data, honestly I do. But it just is not always within my power to do so. I am totally stumped on this one.

If anyone out there can help me get the accurate data for Robbie, PLEASE point me in the right direction.

I listed a property in Mount Baker. Checked the tax record and it said “Year built 1900”, so I entered that “data”. This is a “man in the bushes” listing, so I already know who is likely going to buy it. But still, for Robbie’s sake, I would like the data to be accurate. Out of curiosity, I wondered if there were any houses older than this “Grand Olde Dame” of Mount Baker.[photopress:mt_baker.jpg,thumb,alignleft] I did a General Query in the tax database for homes built between 1800 and 1900, and guess what?! Anything OLDER than 1900, shows AS 1900 in the tax records!

So here I am realizing that I put “Year Built 1900” in the mls, and maybe it is really older than that. Of course my first thought is about Robbie and his “Cries Against Lame Data”. Tell me please, what’s a girl to do when the tax records won’t take me back further? So I contact the Title Company and they say they can only do what I did, giving them 1900 also. They then go a step further, and now do know that “the original plat declaration” for that section of Seattle was in 1888. So maybe that tells us that the house was built in that 12 year window, between 1888 and 1900.

Could “the original plat declaration of 1888” be filed AFTER the house was built there? Enquiring minds want to know! Sorry Robbie, I aim to please; and yet again disappoint. MLS has no way to put a “date range” for year built, or “older than” 1900. So 1900 it stays. Though I did try to account for that in the remarks section.

Am I forgiven, or do I end up on “Robbie’s Lame List” with a “lazy agent” dunce cap on my head? Oh well, “Wednesday’s Child is full of Woe”, as the Nursery Rhyme goes. Some days I wish I were born on a Sunday.

Where do the kids sleep?!?

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[photopress:dig_deep.jpg,thumb,alignright]Whether you are a buyer or a seller, you really need to dig a little deeper when determining the value of a home. One thing I noticed when I first started practicing real estate in the Seattle area, is that almost no one digs deep enough when determining value based on “buyer profile”. This is an old fashioned concept, I guess, that I learned many, many years ago when I was the Certified Corporate Property Specialist (CCPS) for a large real estate company on the East Coast. That’s a fancy name for someone who must quickly sell the vacant inventory homes of relocated executives whose homes were “acquired” via a “buyout” corporate perk. The very first question I had to ask myself when I went to the property before putting it on market was, “Who is likely to buy this house?” I needed to know if I had an expanded or diminished buyer “pool”.

Remember, the market is shifting from a “baby boomer” market to a “Generation X” market, and we have to change our thinking and valuing with the trends that are affected by this shift. “We” meaning anyone interested in the “value” of property, whether that be buyers, sellers or real estate professionals.

Here’s a simple scenario. Four houses. Each 2,600 hundred square feet per mls. Let’s say everything is comparable in terms of neighborhood, lot size, view considerations (all have a view) and improvements. The ONLY difference being the placement of the square footage, each being 2,600 square feet not including the garage.

House #1 – 1,400 square feet on the main level and 1,200 square feet on the second floor. 2,600 above ground square feet with 4 bedrooms on the second floor and none on the first floor. View from all “main” rooms, (kitchen, living room, entertainment spaces and master bedroom).

House #2 – EXACTLY the same house as House #1, but with views out the front door, not visible from main rooms and views from all children’s bedrooms only, when inside the home. In other words on opposite side of the street so front door faces the view instead of the rear of the house facing the view.

House #3 – 2,000 square feet on the main level with 3 bedrooms on main level and 600 finished square feet in basement level with one bedroom in the basement. All views from main areas on main “entertaining” level.

House #4 – 1,300 square feet on the main level with only the master bedroom on the main level and 1,300 on the basement level with three “children’s bedrooms” down in the basement. Another variation would be two bedrooms up and two bedrooms down.

What really concerns me, is I see people getting info from the internet regarding total square footage, and doing comps based on this total square footage. “The house across the street sold for $800,000, so this one is worth X on a “price per square foot” basis. Even if it is the house next door, PLEASE stop valuing property based on price per square foot based on TOTAL square footage. Clearly you can see that those four houses, all 2,600 square feet, have considerable differences with regard to value.

When a pregnant woman and her two year old walk into house #4, they have to walk right back out. Do you really think she is going to love her master bedroom with view, if her newborn baby and two year old are sleeping “in the basement”? Now, personally I love my kids being “in the basement”, as mine are grown. But I wouldn’t pay as much for the house with a huge master suite on the second floor and all other bedrooms in the basement, as I would for one with more bedrooms “up”, even though that suits MY “buyer profile“.

Diminished buyer pool means that the average family buying a home cannot live with that floor plan, and that affects value, even if that floor plan suits YOUR needs. If the answer to the question, “Where do the kids sleep?!?” is down in the basement, on a separate floor from “Mommy”….hmmmmm.

Investors be very aware of this concept, as what you are thinking is a “bargain” in the neighborhood, and buying as a flip project, may be the ones with this “floor plan flow” problem. You sink a ton of money into granite counters, etc. only to find the low price was based on these types of differences in square footage placement, and you get nailed on resale of the improved flip house.

If a house is not selling and the price is reduced below the prices of the neighboring properties, make sure you know WHY that is happening. Likewise, if a real estate agent prices a house with 3 bedrooms on the main level and views from main rooms like house #3, based on the price “per square foot” of the house next door like house #4 with the kids in the basement…THAT house may be a TRUE bargain.

New Construction Closing Dates

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Further to this string of three posts, I think we need to talk about new construction closing dates. I received a call about ten days ago from a former client whose brother was pulling his hair out regarding a new construction purchase. He was TOLD that the home would be ready in July or August, or at least that is what he heard. All of a sudden he got a call telling him that closing was in 2 days.

It was a very large, well known builder of moderate priced homes in this area whose contract stated they had about 60 days to build it and then the buyer had 2 days after that to close it. The buyer’s first language was not English and relied more on what he was told and did not read the contract specifics. I jumped in and resolved the problem for him. All worked out and I won’t give the details of how I did that, as that is not the point of this post.

The point is that buyers of new construction must know that builders ALMOST ALWAYS have a condition in the contract that the buyer must close within X days after the home is completed. Unless the builder takes a contingency on the sale of your home AND a contingency on the fact that the sale CLOSES, you are required to close within 10 days or less usually of the time the home is completed. Builders often do not put close dates unless it is a spec house already built. They do not want to carry that house after it is completed, they want to close. Read your contract carefully with regard to when you will be required to close and do not rely on “proposed completion dates” or verbal representations by the sales people.

Usually there is NO PENALTY to the builder if the home is built later than expected and there is a per diem charge to the buyer if the buyer does not close within the X days of the completion date. Also the builder does not have to extend the close date, so paying the per diem may not even be a viable option for the buyer. If you cannot buy unless you sell, you need to be sure you understand the complexity of meeting these builder contract requirements. Matching a sale to a new construction purchase is extremely challenging and ridden with potential pitfalls.