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

The “starter price” condo market

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Many years ago, I did a study of the “starter price” condo market and received some very surprising results. Based on Dustin’s post, I re-did the research and obtained the exact same results as I did back in Bucks County, PA some 13-16 years ago! Interesting…

The two highest months for people making decisions to buy a condo in what we might call a “starter” price range are March and July. March because first time buyers are often urged by their accountants, or simply by their tax return on their own, to own instead of rent. July due to downsizing of empty nesters or now single, divorced persons selling their single family homes in June and July and moving to a condo. Of course, every month has a mix of reasons to buy, but I find these two reasons account for the fact that these two months tend to be the highest in a yearly cycle.

Sales in June and August are not too far behind and on a quarterly basis, sales are more fairly consistent year round for condos than single family homes, with a slight drop in the last quarter. Again we are not talking about million dollar condos, we are talking about the lowest rung of the price chain.

Actual statistics of 2 bedroom condos under $300,000 (most about $250,000) within a short distance of Sundance in Klahanie.

2005 – Jan. – 10, Feb. – 14, March – Twenty eight – Sold in the 1st quarter – 52

April – 18, May – 19, June – 24 – Sold in the 2nd quarter – 61

July – Thirty, Aug. – 24, Sept. – 13 – Sold in the 3rd quarter – 67

Oct. – 13, Nov. – 9, Dec. – 15 – Sold in the 4th quarter – 37

Inventory in 2006 is way down with only 39 sold in the first quarter compared to 52 in 2005. This does not appear to be because there are fewer buyers, but because fewer people are putting their properties up for sale. However this low inventory in the resale market should not necessarily lead you to believe that demand will be high as supply is low. There is a lot of pressure on the resale markets from New construction and Condo Conversion Projects, generally. Even if the new construction or condo conversion is not in your back yard, people will drive an extra mile or two for brand new.

I have to admit that I almost fell off my chair to find the results almost identical in this scenario, to the study I did some 3,000 miles away back in the early to mid nineties.

Going, Going…GONE!

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[photopress:gavel.jpg,full,alignright]A few days ago a property came on market just after noon at 12:48:39. The property was emailed to me through the mls, so I saw it fairly quickly after it was listed. I emailed it to a client of mine, even though it was not in the area he requested, but it was in the price range.

I don’t know why I sent it to him, except that I knew it was an exceptional property in an exceptional location and priced to sell. There are hundreds of properties on market in his price range, but this one caught my attention. This one above all others. Sometimes I wonder how we can just instinctively know that as we are emailed listings, while we are in the midst of doing other things. Now there’s a REALLY good one.

The property was apparently viewed, an offer received and accepted and the property changed from ACTIVE to STI by 9:58:46 the same evening. No, my client didn’t see it or buy it. But he did change his instructions to me and asked that I, rather than following his instructions, send him anything in his price range that I felt was not only appropriate to his needs, but a good property. Sometimes just knowing “how to pick ’em” is what sets you apart.

I do see some weaknesses in the marketplace. In fact, I don’t like most or many properties that are for sale. But we are, as always, waiting like cats to pounce on the next good one coming out the gate.

Buyer Agent Bonuses

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[photopress:50_50_1.jpg,thumb,alignright]For the purposes of this discussion, let’s assume that in normal market conditions, the division of the total commission agreed to by the seller in the listing contract is divided evenly between the agent for the seller and the agent for the buyer. In the diagram, the blue portion represents the listing agent’s compensation and only the yellow portion will be the subject of this discussion.

When a seller or seller’s agent is having difficulty “moving the product”, that being the house, sometimes they will raise the “offering” to the Buyer Agent as an incentive. For instance, if the price of the house is $350,000, each percent of price equals $3,500. So the seller could offer the Buyer Agent a bonus of 1% or 2% above the area norm, and spend less than a price reduction. Let’s say that it would take a price reduction from $350,000 down to $325,000 to get the property sold. That would “cost” the seller $25,000. Instead, the seller might increase the “offering” to the buyer agent in the mls by 2%, which would only cost him $7,000 in this $350,000 example. Even if the seller doubled the “offered fee”, it would cost him less than the price reduction, as doubling the compensation to the buyer agent might cost him $10,500, and dropping the price to the point where it would sell would cost him $25,000. So increasing the offering makes total sense from the seller’s side of the fence.

OK, now for the tricky part. Click here and read this before considering the rest of this post.

[photopress:33_66_1.jpg,thumb,alignright] The seller is increasing the fee to persuade “YOUR” agent to “SELL you” his house. By doing so, “your” agent can double his money. The idea that increasing the buyer agent fee will be effective in selling the house, is a holdover from the days before buyer agency existed. As the agent for the seller, I would still use this strategy when advising the seller, as it is a more cost effective method of selling a home that isn’t “moving”. However, as a buyer agent, the concept that I might be motivated by a higher fee to me, is insulting. While I generally do not believe in buyers signing buyer agency agreements, this scenario points out one of the advantages to the buyer for doing so. Even if the buyer cannot negotiate the buyer agent fee below the area norm, the buyer can stipulate that any Buyer Agent Bonuses would go to the buyer, and not to the agent. However, a more appropriate strategy might be to ignore them entirely, and simply focus on the attributes and value of the house, without regard to these incentives.

The yellow portion of the fee is the amount that the seller offers “to the person who brings buyers to his home”. It is also, and simultaneously, the amount that the buyer perceives that he is paying to the agent for representing him, the buyer, in the transaction. Until we all agree that it is the latter and not the former, buyers will never truly have equal representation in the real estate marketplace.

This duality of purpose for the same monies, continues to be a problem in the industry. One that should be talked about a whole lot more than it is. So let’s talk. What do you think? While you can comment anonymously, please note if you are responding from the point of view of a seller, a buyer, an agent, or a giraffe.

This odd duplicity of purpose regarding the yellow portion of the fee (the mls offering/buyer agent fee) has been going on for about 15 years. It’s time we began the process of coming to terms with it, by discussing it openly. There are NO easy answers to this one, but engaging in a dialogue might help move the topic out of it’s current “holding pattern”. Until and unless agents all agree that they are in the business of representing people and not in the business of SELLING anything, we can’t get to the appropriate answer. And then the consumers would have to likewise view what is happening accordingly, and not hire an agent “to sell” their house, but to “represent them in the sale of the house”.

But we can, at least, open up Pandora’s Box in the hope that the discussions will begin moving things in the right direction.

What is a view worth?

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[photopress:lake.jpg,thumb,alignright] The higest value attributable to the view component of a property, would be “an unobstructable panoramic view”. The lowest, would be a potentially obstructable “peek”, or a “winter view” meaning the view is totally blocked by deciduous trees, and the view only appears when the trees shed their leaves in winter.

The value of a view is built in layers. The value of the lot, with no house on it at all, contains the first layer of view value. Some people are amazed when they see a property with no view at all, that is practically falling down, valued at $800,000. Who would pay that? If the answer is that no one except a builder would pay $800,000 for that “house”, then the house becomes a “tear down”, as the “value is in the lot”.

How a house is constructed, and the positioning of the rooms, and the windows in those rooms, is ultra important to its value. Especially here in the Seattle area. If the best views are from outside on a deck, then the value is diminished to the number of days in a year you can be outside to enjoy that view. If the best view is from “all main rooms”, meaning those rooms where you spend most of your time and do most of your entertaining with guests, the value will be higher than if the best view is from a little “cozy art studio” perched high above the main living areas. If the view is only from a bedroom, the house will be worth more if the builder puts the master bedroom in that view corner, rather than one or two, or even all, of the “odd” bedrooms.

Then you have the “bad” side of the street and the “good” side of the street. For instance here in Kirkland, the Market Street side of 1st Street will have a lesser value than the opposite side of the Street, particularly in those blocks where the opposite side is higher…much higher. The noise factor from Market Street and the ability to see traffic going by at a steady pace, detracts from the value of the view, even if the long distance view is pretty much the same from both sides of the street. The house on the “bad” side of the street, blocks the view of Market Street from the “good” side of the street, so that house being there, adds to the value of the property across the street.

If all of the properties in your view have already been built out to max height, the value is more likely to be retained long term, than if all of the houses, between your house and the view, are older ramblers that could potentially be built up to max height. So when you look out the window, don’t just look at the view. Look to see if most of the homes, between you and the view, are newer construction at “max height”, or “tear downs”.

What is “max height”? You can do a quick and fairly accurate determination, by spotting the newest houses in each level of slope between you and the view. Construct a “view viewer” with your hands (thumbs together and palms up, the way movie directors used to do to construct a facsimile “frame”), and move your hands from the height of the newest house, scanning over the entire landscape in your vision. This is one of the cases when Zillow can’t value a property for you, because Zillow has no hands! LOL

When it comes to view…do not make the mistake of basing what you will pay, on “what you see is what you get”. You have to determine the long term probabilities of view retention. Don’t expect to be told by anyone that the view “may” at some point in the future, be obstructed. You are pretty much on your own in that regard, as what “might” happen to your view is usually not a disclosure item, unless the neighbors have already pulled permits to build. Even then, I have yet to see a property flyer say, “This great view is going to be obstructed by a condo complex going up sometime next year”.

All that being said, for a view-oriented person like me, a home with a view is indeed “priceless”. Waking up each morning to see the Seattle Skyline across Lake Washington, AND Mt. Rainier to the left, brings a joy to my life that is hard to place a “value” on. But being a real estate agent, I can place that value, and for my house it was $50,000 when I bought it, and hopefully will be $250,000, after I finish enhancing certain features to capture more of the view’s value.

So to Mr. Freakonomics, who asks “Why do agents get more for their homes than other people”? Maybe it is because we tend to choose homes where a seller “left money on the table”, and then make those minor changes that capture value, before we sell. Always choose an agent that helps you make the same kinds of decisions that they would make, if they were buying or selling the property themselves.

“Where are da blogs?”

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Richard Nacht of Real Blogging asks “Where are da blogs?” in his discussion regarding internet lead generation.

I thank him for the segway to a post I was preparing to write today.

Back in February I wrote three posts: Bottom Feeder Sites, Using the Internet to Buy Your New Home and Redfin-Something to Thing About. Since January, when I began “writing for” Rain City Guide, I have been running an experiment based primarily on these three posts.

A) Bottom Feeder Sites – My contention was/is that if an agent didn’t pay for leads to a Bottom Feeder Site, there would be more monies at play into the transaction for the benefit of the consumer. I am pleased to report that at present, the consumer direct benefit, so far, is running at 3.43 times what I would have paid to House Values during that same period of time. That is with only 4 closed transactions of participants in the experiment. Clearly the consumer is winning as of this date.

Bottom Feeder Sites $0 – Consumer $3.43 X total 5 mo. cost of HouseValues (plus $29,500 in direct seller to buyer concessions.)

B) Using the Internet to Buy Your New Home – In a stellar example, see As Good As It Gets post, the consumer hit a trifecta!

1. Using the “STI method” noted in that post, I found the house within hours, using the STI as the bogey and going one stroke over par.

2. Using the “peek over the price” method noted in that post, I found a house he had missed using the internet as a home search tool, and he saved $25,000 at the same time, at least $10,000 of which was money “the seller left on the table”. Clearly a rarity in this market.

3. He also participated in the $3.43 x the 5 month cost of HouseValues benefits noted in A) above, his single cash to close benefits exceeding the entire cost of 5 months of House Values alone.

C) Redfin-Something to Think About – for me this was the most exciting of all, in that it accomplished something I have been working on since 1998. A meeting with a buyer that replicates meetings agents have been having with sellers since the beginning of time. This one is hard to explain, since it is still “playing out”. The meeting I had yesterday with a buyer consumer, was as close to being the same as “a listing appointment” as I have ever had. Buyers and Sellers having equal footing in the marketplace, has been my “Crusade” for so long, I can barely contain my elation!

So to Inman, and our nomination for “Most Innovative Blog”, I would like to point out my contribution to the Innovation of Rain City Guide. That is to utilize the zero cost (in dollars) component of blogging, to directly benefit the consumer and promote TRUE buyer empowerment as opposed to PERCEIVED buyer empowerment.

Clearly breakthrough stuff going on here at Rain City Guide…the experiment continues.

Passing the keys to the new owner

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[photopress:DesiArnez_LucilleBall.jpg,thumb,alignright] An obtuse suggestion.

Ardell says, “I’ll meet you at the house with the key the evening the property records!”. I’m all excited.

Buyer: “Ardell we love you, truly we do”. BUT, uh…sometimes three’s a crowd”.

Duh, what was I thinking?!

Whether I am the agent for the buyer or the agent for the seller, I generally like to “pass through” the property after the seller is gone and before the buyer enters it for the first time. You would be amazed at what we find there sometimes! Most recent worst story I heard from an agent was that she had to hire TWO DUMPSTERS to remove junk from inside, but mostly outside, the property on the day of closing.

Most unusual request I have personally had, was a seller who called me after closing and said, “I forgot my gun that I have hidden on the ledge just inside the attic crawl hatch.” I escorted him back into the property, but I didn’t touch the gun.

On several occasions I have arrived at the property to find the seller, in a terrible state, trying to get everything out of the property. Mover was late. Friends that “promised” to help never arrived. I’ve carried mountains of clothes from the upstairs closet down into my car, and made several trips from the seller’s “old” house to their “new house”. I’ve rolled up my sleeves and carried mattresses down a flight of steps and out to the truck. I’ve sent handymen back after closing to fix scrapes or holes made, particularly in the staircase wall, when sellers were moving out.

It is the buyer agent’s responsibility to get the keys from the seller’s agent and get them to the buyer. My favorite method is to have the seller put all keys and garage door openers in a kitchen drawer along with any warranties and appliance manuals. I ask the agent to leave the lockbox with the key to the front door there for an extra day. I pull the key from the lockbox, walk through the property, address any issues. I make arrangements to pass that one key to the front door to the buyer, everything else he needs being inside the kitchen drawer.

Often the buyer prefers to pick the key up from me, away from the property, so that first step through the doorway is NOT with agent in tow.

Which Home Inspection Addendum to Use?

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Here in the Seattle area, the buyer of a property gets to choose which Home Inspection Addendum to use, when making an offer to purchase. The primary difference between the two, lies in who has the “unilateral” POWER to keep the contract in-force or not, after the inspection.

The seller can counter by replacing the full inspection addendum with the other variety, but that is rare. I recently had an agent ask if “we wanted” to change the inspection addendum to the one that favored the seller, under the guise that another offer was coming. We decided to call her bluff, and our offer was accepted as written, there being no other offer in hand by the time ours required a response by the seller. Though she was quite surprised that we called her bluff in that regard.

The decision regarding which inspection clause to use, often has very little, if anything, to do with the inspection. It has more to do with whether or not the buyer retains the right to cancel based on the inspection.

I currently have two contracts in escrow for the same party, one on the sale of their property and one on the purchase of their next property. On their sale we have a 35B “Seller’s Opportunity to Repair” inspection addendum, giving them the power to keep their contract in force regarding the sale of their property, at least with regard to the inspection. On their purchase, we have a 35A “Buyer’s Satisfaction” inspection addendum, giving them the right to cancel based on their inspection, to counteract the “resale certificate” out, on their sale contract, since they are buying a home and selling a condo.

To understand the difference between these two addendums, you should review both inspection forms, 35A and 35B AND ALSO the followup forms 35AR and 35BR. The striking difference between the two is more noticeable on the followup form 35BR, with regard to the seller’s power given him by the buyer. If the seller checks the box on the follow up form saying he is going to repair the items, the inspection contingency is satisfied. It becomes a unilateral decision of the seller to satisfy the inspection contingency, whereas the 35A is a unilateral decision of the buyer to cancel.

Simply put, a buyer who makes an offer using a 35A “Buyer’s Satisfaction” inspection addendum, retains the right to cancel based on the inspection. On a 35B, the seller can simply check a little box, agreeing to repair the items in the report, causing the inspection addendum to be satisfied. The buyer cannot disagree with the seller’s choice and walk from the transaction, without risking the loss of their Earnest Money Deposit.

So which should you use? If their are multiple offers, you might be able to avoid a bidding war by using a 35B, which favors the seller, so you can win on terms vs. price. 35B trumps 35A and “no inspection contingency” trumps them all. I don’t recommend no inspection contingency in a blog, though often do in “real life” where I have the opportunity to view the property and ascertain my clients true needs and sensibilities.

It would be interesting to hear from anyone out there in the Seattle area who recently completed a sale, either as a buyer or seller. Which inspection contingency did you use and why? What factors led you to the decision to use a 35B vs. a 35A, or none at all?

The Earnest Money Check

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[photopress:check.jpg,thumb,alignright]The times they are a changing.

Personally, I don’t see any reason why anyone except the closing agent, should view my buyer client’s personal check.  A “qualified reperesentative” from the escrow company, picks up the check and gives me a receipt for it.  When they deposit the check at escrow, I get a second receipt showing the funds were deposited. 

When the seller’s agent wants “a copy of the Earnest Money check”, I give them a copy of the “Deposit Receipt” instead.  In my mind this is proof enough that the Earnest Money is on deposit where it needs to be, with the closing agent.  I received a fax last week from a seller’s agent saying “My company needs the buyer’s account number from the bottom of the Earnest Money check”.  Isn’t this an outdated policy?  Why do they need my client’s personal checking account number?  And why do I care about the internal policies of a company I am not associated with? 

When I represent the buyer, I don’t really care what the “policy” of the seller’s agent’s company is.  When I represent the seller, I don’t really care what the “policy” of the buyer agent’s company is.  If a “deposit receipt” that contains NO personal information of the buyer’s account is good enough for the DOL, and it is, then it should be good enough for all of the real estate companies.

Protecting my client’s information against identity theft and fraud, is my only concern, once complying with the State’s requirements.  Multiple copies of the personal check of the buyer floating around in everyone’s files, is a policy to be changed…not complied with for the sake of making someone’s little checklist, designed in the dark ages, complete.

$3,578,671,984 Homes with Granite Countertops!

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[photopress:granite.jpg,thumb,alignright]*

How many granite countertops does King Couny need?

*

In 2005 alone, 6,428 properties, valuing $3,578,671,984.00 sold with granite countertops according to the mls, using “granite” as a search word in the marketing remarks section.

  • 2006 Year to Date – King County – 4,730 homes for sale, in escrow or sold with granite counters
  • 2005 – 6,428 homes sold with granite counters
  • 2004 – 5,027 homes sold with granite counters
  • 2003 – 3,614 homes sold with granite counters

Of course that doesn’t count all of the people who remodeled their kitchens using granite countertops, who did not sell their homes.

So what’s your guess? What comes after granite? Anyone seeing new homes with something OTHER THAN Granite countertops?

Negotiating the Offer Part 2 – The “Contingent” Seller

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[photopress:startinggate.jpg,thumb,alignright]The “Contingent” seller knows exactly where he is going if and when his house sells. He is stuck at the starting gate until he gets an acceptable offer on his home. Every day he faces the possibility that someone else will come along and snatch his new home from him; someone who can make an offer without a home sale contingency.

Contingent offers have a limited time frame, and can potentially leave a seller at the starting gate, if his home is not sold within that timeframe.

Presenting an offer from a buyer to a “contingent” seller is one of my favorite scenarios. It is one of the few true win-win set ups. The seller is more focused on being able to get out of the starting gate and to the finish line. He’s chomping at the bit for the race to start and is genuinely happy to have received an offer on his home. The buyer usually doesn’t have to leap over as many hurdles, to get his offer accepted with a fair price and fair terms.

One of the tell-tale signs that you are dealing with a contingent seller is that the seller’s agent is from far away. When you see a Seattle condo listed by a Lynnwood agent, you get the hint that maybe this seller is buying new construction in Lynnwood. When you see an agent whose inventory generally consists of $700,000 homes in Lakemont, list a home in Kenmore for $450,000, you get the idea that maybe this seller has a contingent offer on a house in Lakemont.

Often buyers make the mistake of looking the seller right in the eye and asking “Why are you moving?”, the normal reaction being a look on their face that resembles that of a deer in headlights. As with all fact finding endeavors in the residential real estate market, it is better to surmise and test, than to point blank ask. When I suspect that I am dealing with a “contingent” seller, I call the agent and say I MAY be writing an offer and would like to know if the seller needs a specific closing date. Most often the seller’s agent will respond that the seller needs “closing plus 3”, so that the funds from his sale can get to his next transaction, and so the seller doesn’t have to move his things out of his house until that next transaction closes. This way I can quickly find out that there is a next transaction identified and that the seller cannot close unless he sells this house.

“Closing plus 3” is often identified in the mls, but it is by no means a sure sign that the seller is in a contingent contract. Closing plus 3 is used in divorce situations and almost any scenario where the seller is going to a rental, so you can’t rely on that fact alone to determine seller motivation.

Negotiating price and terms is generally a piece of cake when dealing with the “contingent” seller. The sticky point in negotiations with a contingent seller often becomes the washer, dryer and refrigerator, if they did not negotiate to receive those in their contingent sale contract, minor detail. When preparing and negotiating offers with “contingent” sellers, we are more likely to be looking over our shoulders for another buyer, than to be worrying about reaching a fair agreement with the seller.

Anytime you take too long getting from offer stage to signed around, you leave the door open for another buyer to swoop in and stop your negotiations in their tracks. Move forward with smarts and speed and wrap it up when the issues in dispute become minor and not worth losing the house over.