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

Appraisal Question

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While the buyer is paying for the appraisal, they are paying for it as part of their loan costs. The appraiser is hired by the lender and works for the lender and his/her purpose is to inform the lender. I just saw an appraisal of a property I know would sell at about $950,000, come in at $750,000. The appraisal was for divorce purposes and it was a unique, difficult to value property. Appraising is an artform, not a science. There is no one absolute number pointing to what a home is “worth”.

The reason there is an appraisal is in case you do not make your payments and the bank has to foreclose. If you are buying a house for $500,000 and you are putting $200,000 down, frankly, the appraiser doesn’t have to agonize over the process. The bank is clearly going to be able to sell it for the $300,000 they lent you to buy it. Now if you are putting zero down, the appraiser is on the line in the event you foreclose and the bank can only sell it for $450,000.

You need to determine what the home is worth. It’s great when it appraises and everyone loves those few times when it appraises for more than the sale price (except the seller). But if it appraises “right on”, don’t take that as some great feat. Different appraisers will get different answers. Appraising for different purposes, like to value for an estate or divorce when the house is not being SOLD, will often produce different results than when the appraisal is for a home purchase.

Spring has sprung!!

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It is the first day of Spring!  Also my first born’s 22nd Birthday!  Does it get any better than this!  The attached photo is the view from my window today.

I would love some digital view photo tips from our in-house photo expert contributor.  I can never get a photo of a view that matches the breathtaking reality.

Happy first day of Spring everyone! 

Cancelling the purchase contract of a condo based on the resale certificate

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When you purchase a condo (which can be a townhome) in the re-sale market (as opposed to new construction), there is a very important event that takes place during escrow. Line 19 of our “Condominium Purchase and Sale Agreement” Form 29 provides that the seller will deliver the “resale certificate” to the buyer within (blank) days from mutual acceptance. You have a limited period of time to cancel the contract based on the resale certificate and when that timeframe runs out, you lose that right. The period is normally 5 days.

I want to talk more about the practical aspects of this event, rather than the legalese, so the above is short and not all inclusive and simply an introduction. In the past several weeks I have cancelled two escrows based on the resale certificate, or more accurately the buyers cancelled escrow based on the resale certificate, and so I think this topic is timely and worth noting. I will give a real life example as an anecdotal story to raise some of the issues involved, keeping this post short(er), and will go into more detail on my blog, where I can be as prolific as I want 🙂

I showed a condo at night. We went up the elevator and into the unit and we at that point were more concerned with getting the property into escrow than examining all aspects thoroughly. It was a one of a kind condo. I knew that if the buyer lost the opportunity to make an offer, I could not easily find them another like this one. And so the offer was prepared and accepted rather quickly. We had two timeframes to further examine that choice, one was the home inspection and the other was the resale certificate info and timeframe.

During the home inspection which was in the light of day, we walked all over the complex and found two alarming issues. The inspection itself was fine. The alarming issues were part of the common area and HOA responsibility. Neither of the issues we viewed were addressed in any way in the Seller’s Disclosure “Form 17”. I asked the listing agent to go look at the problems we viewed and respond, he would not do so and said the seller had no knowledge regarding what we could readily see. I believe that was true as they did not go where we went, which was everywhere. When the resale certificate arrived, there was almost no information regarding the issue, the minutes in the resale certificate being from 2002 through 2004 were not any help. There was a minor, yet bold notation, regarding one of the issues with an estimate of a very large cost. I am being vague as this is a real life current situation and you need to know the steps to take more than the actual detail. It was obvious that the total actual cost was not yet known and that the repairs would not be completed until several months out. The buyer cancelled the escrow based on the resale certificate. The seller did offer to pay the amount the HOA expected the total cost to be, but we deemed that to be insufficient. Another buyer may be willing and able to work something out acceptable to both parties, and that is OK. We returned the resale certificate so that the seller could use it to raise this issue to the next buyer in a more timely manner, should they choose to do that.

When you purchase a condo, be sure to walk all over the complex and view everything there is to view. Make notes of anything that is worth noting. The seller’s disclosure is normally about the unit itself, and not all issues of the complex. Likewise, the inspection is normally an inspection of the unit itself and not the roof or siding or other issues deemed to be HOA responsibility. When you receive the resale certificate, read the minutes thoroughly. Look at the Rules and Regulations, CC&R’s and By-Laws and make sure you understand and have no problem with these. Even if the mls says you can have pets and you see pets when you view the condo, that does not mean that pets are allowed. Look specifically at the pet rules and make sure you can comply with the written rules. Look at the amount in reserves and make sure that the amount is sufficient for the needs of the complex. Most importantly know that you have a very limited time to note a lot of things when you get the resale certificate.

All too often people take this big stack of “stuff” and do not even look at it. I do review it with and for my clients. There is no way I could put “Everything you need to know about the Resale Certificate” into a blog post. Hopefully this is enough to start a conversation via comments that is increasingly helpful and to red flag the issue. Again, I will try to add to my existing posts on this topic on my blog as well.

What do real estate industry people talk about?

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My 10-12 weeks of “blogging” have been quite interesting for me, in that for 15 years I mostly have talked about the real estate industry with other industry people, and talked about local real estate with my own clients and local agents. Blogging opens up talking to consumers generally about the industry, which is in and of itself, quite a revelation.

Given I will be attending the MIT dinner event tomorrow, I am contrasting the speakers of that event with the participant theories of my normal industry discussions. Tomorrow’s event will be “the newbies” Zillow and Redfin plus HouseValues, whom I wouldn’t call a “newbie”.

I am “lifting” this discussion of the past few days from the forum that has been around since 1995 or so, and I have participated in since 1998. I thought this particular discussion was a huge complement to whatever I may hear tomorrow night. For the benefit of those attending tomorrow night, you might want to read this beforehand for “balance”. I have removed the names, except mine, since I am “lifting” it out. I think at least Robbie’s interest will be peaked by that part of the discussion that suggests that the MLS may cease to exist as an end result to all of this.

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Agent A says:

I would guess that there is not a large brokerage in the country that doesn’t have plans to withdraw from MLS depending on the outcome of the DOJ suit. I believe that many large brokers are considering withdrawing from MLS REGARDLESS of the outcome of the DOJ suit…

All across America, in every major city there are 3 or 4 large brokers who control around 80% of the inventory. If COURT mandated MLS rules don’t make competitive sense to those brokers MLS will END.

Even if you and Attorney Barry and the rest of the majority of the NAEBA are victorious your victory will be pyrrhic– MLS will be run YOUR way but it won’t contain enough listings to be a market force.

“Ardell” wrote:

What I am asking everyone one to focus in on is what “should be” as opposed to what “has been” since before buyer agency existed.

and

My major beef with the industry is that buyer agency was set into a system, parts of which should have been revised accordingly, and still need to be revised.

Agent B says…

Could it be that buyer agency will be given as the justification for the large brokers pulling out of the MLS? As Ardell notes, the whole system is a carry-over from a time before buyer agency. Does it really make sense to “cooperate” with other brokers in an adversarial relationship in the same way as when it was a subagency relationship?

One could argue that a listing agent is not truly acting in their seller’s best interest by making the property available to buyers working with their own agents until they have made every effort to find a buyer themselves. If a buyer agent is really going to save their buyer money, help them get more concessions, etc, isn’t it in the seller’s best interests for their agent to find an unrepresented buyer?

Consider this hypothetical situation:

Large brokerage with a state-of-the-art website and large advertising budget decides that they will take all of their listings as exclusive, non-MLS, non-cooperating listings for 45 days. No lockbox, the listing agency will conduct every showing, and there will be no showings to buyers who have not gotten a mortgage pre-approval. During this period, they will not do dual agency, and will attempt to find buyer customers for their listings. If they do not sell in 45 days, the listing will then be entered into the MLS. Their justification for this is that they believe that this maximizes the chances that the seller will get an offer that is in their best interests. Is there anything that would be illegal or unethical about this?

I think it is very easy to come up with scenarios in which the MLS becomes the dumping ground for the bottom of the barrel properties and over-priced dogs. It’s also easy to see scenarios in which MLS entries are very bare bones affairs with just enough info to generate a lead from Realtor.com, but not enough to be useful for other agents anymore. I find it very hard, though, to picture a scenario in which the large brokerages will just happily keep providing data-rich, picture-laden MLS entries for all of their listings, if they lose control over how and where these listings will be used and displayed.

I thought this might be food for thought for those who have not considered how the industry might change in order to counteract the events currently taking place with regard to mls access.

Finding the "right" house to buy

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[photopress:Atticus_1_2.jpg,full,alignright]I was watching the Oscars the other night. There was a brief clip of “To Kill a Mockingbird” where Atticus is telling Scout that you have to step into another man’s shoes/skin and walk around in them a bit, before you can know…(paraphrased). It reminded me of the many people I have helped find the “right” home over the years. I try to remember when I stopped “showing” houses and started “finding” them.

I remember sitting in my office one day noticing all of the agents who were listing homes of people whom they sold the same homes to a short time before, and wondering why my clients were content with the homes I sold to them. My sister is still in the same house I sold to her in 1992. My sister-in-law and brother-in-law are still in the same home I sold to them around the same time. Every once in a while I do an owner search and find that the people are still there, living in that same house I sold to them, many years later.

Finding the “right” house to buy has a whole lot more to do with “where” than “which house”. People buy a “lifestyle”. The absolutely perfect house in the wrong place for you, does not seem to make someone as happy as finding the right house in the right place.

I was meeting a man last night in a dark parking lot to show him a property that is “not for sale”. I met him back in May or June of last year. Since that time I have told him not to buy several properties and last night I took him to “the” property he should buy. It was what is known as a “pocket” listing and involved two other agents and no written agreements to pay any of us. For him it was more about the right property and the right circumstances. The right property for him unfortunately is the kind that gets multiple offers. His demeanor and need to process the info, just doesn’t lend itself to a competitive environment, so I had to find something that wasn’t for sale. No other buyers vying for the same property.

I have three or four buyer clients right now in the same price range, but they all have different profiles. My partner brings me properties for sale and says “How about this one for X & X?” I say no…wrong lifestyle. They need a newer house built in 1995 or 1998 in this neighborhood and that elementary school… He checks with the buyer. They agree with me. He comes back with a condo and says this one is perfect for X! I look at him and wonder why he thinks that, it is obvious to me that X does NOT want to live there. He checks with X and X doesn’t even respond.

The X and X couple needs a house in a newer neighborhood where a large percentage of the neighborhood has younger children. Where there are pavements to walk all over with a stroller and maybe a tot lot. A remodeled home in an older neighborhood with no sidewalks and mostly “empty-nesters” for neighbors, won’t do. I have pinpointed the exact neighborhood and am sending letters to all of the homes that would likely sell in their price range. I target the homes based on year built and assessed value using the tax records.

Mr. X needs a condo in a lively area, not too close to work. He is a workaholic and needs to go “home”. If his “home” is too close to work he will be tempted to drop by the office nights and weekends. He has to look out of his window and see something relaxing. He needs a territorial view or a lake view and not a lot of business and traffic and yet at the same time, he needs to be able to walk out of his front door and window shop or stop by the coffee house and mingle with people.

Ms. X works from home and needs to be close to downtown Kirkland, but also needs enough space not to be “confined” while working from home. She needs to be close to her friends and church and yet her price range and space needs predict that she needs to be just outside of where she would most like to be.

I first take people to property to get into their skin…not to find a property. I look into their eyes and watch their body language like a profiler. I take them to properties I pick that are not alike at all. It’s like the optometrist who keeps putting lenses with slight differences and saying “is this better than that?” “How about this?” Once I find what they like and don’t like, usually after showing them 3-6 properties. I go out and get “that”. Usually it’s not for sale, yet. I watch for it to come on market or I actively seek it out by writing people who own “it”. I don’t tell people they can’t have what they want because it is not for sale, but I do tell them they can’t have it if it doesn’t exist or is not in their price range. Agents have in their brains and via the tax records, a fairly good handle on the “realm of possibilities”. Getting access to the mls does not empower the consumer, it limits them to what is for sale.

Don’t sit at a computer screen looking at property until you have first identified “where” you will be happy. Think more about what makes you happy. I like to walk down a street with lots of houses and look at the architecture and flowers in people’s gardens and say “hey” to the neighbors. Put me in a great house on an acre lot out in the middle of nowhere, and I may love my house, but hate my lifestyle. Conversely, some people hate to walk outside of their home and have someone look over at them and say “hey, neighbor!” They are like, “Oh God, I just want to read my morning paper in peace!”

So spend at least as much time knowing where you will be happy as you do calculating monthly payments and number of bedrooms and “to thine own self be true”. First find your lifestyle match and then your house. You will be much happier in the long run if you do.

"Flip This House" is looking for YOU

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I received an email today from the casting firm of A&E’s “Flip This House” requesting my assistance in locating persons who have flipped at least ten properties in a year. I know a few people who might be qualified and interested.

I haven’t seen the show. I expect that each week there may be a different host from a different area.

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I doubt that it is a “Seattle Area” only request, so if anyone knows of anyone who has done at least 10 flips in 2005, or 10 a year for a few years, shoot me an email.

Thanks. Have no clue what “tag” to put on this one!

Closing Today

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There are a thousand stories in the Naked City….this is just one of them.

I was working on my computer one day when I saw some emails coming from Realtor.com

I stopped what I was doing and opened the emails. The emails were from clients of mine whose son purchased a condo from me several months ago. The emails had no messages, just property. Vacant lots out on the coast in Washington that were really cheap $25,000 to $90,000.

I called the clients and arranged for an agent on the coast to take them out to look at those lots and others. They returned here having found a fabulous lot that backed to a canal, one house from the ocean, with an easement access to the ocean directly across the street. It already had septic, water and electric hooked up.

The owners were a couple who owned it for many years and enjoyed it and needed to sell it because the wife was dying of cancer. To make a long story short, the woman left her hospital bed and her husband drove her two hours and the listing agent drove two hours and they met at midnight under the bridge to sign the offer. The woman felt a huge weight lifitng knowing that her husband would have this money toward her hospital bills. She died before it closed with that peace of mind.

It is closing today and I received this message from the listing agent “Mr (XXX) says he hopes they find as much happiness there as he and his wife had throughout the years…”

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This area was never on the mls, and so not on the internet, until they joined NWMLS this summer. Had the area not joined the mls, my clients would never have seen the lots on Realtor.com and emailed me. A chain of events started and ends today when it closes.

We are in a business of people. Buyer people and Seller people. We do not sell property, we help people buy and sell property. The people are important. Let’s not forget that.

What exactly IS a townhome?

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First, let’s all agree that a townhome usually has at least two stories, but you can have a “ranch style townhome” or “rambler style townhome”. Usually there is no one over or under you in a townhome, except sometimes, like in Sixty-01, they occasionally stuff a condo under the two story townhome. In the Seattle area a townhome usually has a garage on the first level, main living areas on the second level and bedrooms on the third level. When there is a view involved, especially a water view, it is better to but the main living areas at the top and the bedrooms on the lower levels.

But why is a townhome sometimes a condominium, and sometimes a single family dwelling? Why is it sometimes a single family dwelling when it is attached to other townhomes, and sometimes a condominium when it is not attached at all?

The phrase townhome was coined by the real estate industry to “upgrade” the term rowhome. Many major cities, like my Philadelphia, have had rowhomes for over a hundred years. As many as twenty five all attached together with no break until you get to the “end of row” or “breezeway”. When builders started building attached dwellings out in the suburbs, they didn’t want to call them “rowhomes” and so came up with the term “townhomes”. Very upscale areas started calling their rowhomes, townhomes, and so the term was created and expanded.

Very simply, if you own the land under the townhome all by yourself, meaning the lots are subdivided at every shared wall from the front of the lot to the back of the lot, then it is a single family townhome or “single family attached”, much like the original “rowhome”.

[photopress:townhomes.jpg,thumb,alignright]If the lot is not subdivided and you build two or more separately owned structures on one lot, whether they are attached or not, they are condominiums. As far as I know, condominiums are always built on land that is shared and not subdivided per each individual owner. So if you put two separate houses on one lot and sell them to two different people, they are condominium townhomes. If you attach 25 homes in a row, but subdivide the lots so that they own their front yard and back yard and the land under their house, they are single family dwellings.

I always say, when you are sitting in your house, if you own the land under your butt all by yourself, it is a single family dwelling. If the land under your butt is jointly owned with other people, then it is a condominium 🙂

Is Your Earnest Money Protected By The Finance Contingency?

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While the purpose of the Finance Contingency is to protect the buyer in the event they are not able to obtain a mortgage, more and more the buyer is not covered all the way to the day of closing.

In a perfect world, the buyer submits an offer with a Finance Contingency that runs through the day of closing.  If the buyer’s loan is rejected, the sale becomes null and void and the Earnest Money is returned to the buyer.  The seller puts his property back on the market and finds a different buyer.

Finance Contingency addendums are two pages long and much more complicated than the simple explanation above, and much more dangerous to the buyer than they often expect.  I have not met a buyer in 15 years who did not expect to get their Earnest Money returned if their loan is not approved.  I also have not had a buyer client in 15 years whose loan was not approved 🙂  

It is becoming common practice in the last few years for the seller to counter the offer by shortening the timeframe on the Finance Contingency.  Often this is deemed a minor date change, when in fact it is a major change for the buyer.  I have even seen buyer’s agents write offers with a 30 day escrow and a 15 day finance contingency because that is “common practice” :0 

If you have a 30 day escrow and a finance contingency that expires in 15 days, you are not likely covered if the loan is rejected on the 23rd day.  You are also not covered if you did not apply for your loan on time or if you did not submit the documents to the lender in a timely manner.

VERY IMPORTANT, you are also not covered if you do not have enough cash to close. 

I am hoping the attorneys here will have something to add, or will have something on their blog explaining this further.  In the meantime, suffice it to say that just because you have a Finance Contingency, that does not mean that you will automatically get your Earnest Money returned, if you can not close due to financing issues.

Escalation Clauses – Downtown Kirkland Condo Market

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I wrote an offer yesterday with an escalation clause on a Downtown Kirkland Condo that has been on market for 2-3 days. As I have said before, while there appear to be many things “on market”, most agents are waiting in the wings for something better than what is for sale at present. This is what causes properties to be on market, as opposed to being sold.

When that special property at the right price appears, it is likely to have multiple offers, as happened yesterday. Just before we write an offer, we call and speak with the listing agent to determine how best to write the offer. As soon as we hear there is another offer being presented in a few hours, we know we need to add an escalation clause. Problem is that everyone knows this, so you have multiple escalation clauses in play.

socAn escalation clause has an increment of increase and a cap. Example: Asking price $450,000. Offer might be $450,000 plus $1,000 more than any other offer in hand before this offer expires, up to a total price of $475,000. You need a cap value, as the reason everyone wants it is because of the location, condition and price. If the price bids up too high, you might as well have bought something else on market that was overpriced by offering a lower bid. So you have to be careful not to place your cap at a point where you wouldn’t have bought it in the first place.

It is amazing to me at times that no matter where I work in the Country, everyone seems to want the same thing. They all want the thing that is not for sale, especially this time of year. So as soon as something comes on market that fits the profile of what everyone REALLY wants…multiple offers. There can be 150 properties on market, but everyone is waiting for that one that is not for sale yet 🙂