Made it over 11,000!!! Can it sustain the level by the end of the week? Keep watching!
Thar she blows!! The DOW JONES!
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Author Archives: ARDELL
Happy Valentine's Day
I’m feeling a little guilty that I have not participated in the “Romancing the Home” theme as requested by Dustin.
My Valentine is Kim Harris. I do not need to ask him to be my Valentine as I know every minute of every day that he loves me with all of his heart. For those of you who think he looks familiar, prior to being in Real Estate, he was the founder and long time owner of Easy Street Records, a Seattle mainstay. The two remaining stores in West Seattle and Queen Anne currently owned by his stepson, Matt. He also “founded” Queensryche from some Redmond High School kids who hung out at this store on Bel-Red Road and managed bands for many years including Econoline Crush popular in Canada.
My “home” is in his heart.
Dear Mr. Barton,
As you may or may not know, I emailed you guys a couple of weeks before you unveiled your product to suggest that you consult at least one real estate expert, before going public. I further suggested that since I have sold real estate in five states from coast to coast, that I might be able to help you tweak your product before its unveiling. I feel very badly that some are poking fun at your great real estate adventure, by coining the phrase “You’ve been ZILLOWED!”
Here are a couple of tips for you, (or for Dustin and Galen and Robbie) If you modify your application of data according to these guidelines, you will likely increase the reliability of your online Zestimate by as much as 50%.
Seattle area: Yes, you can value property fairly accurately using the tax data in the Seattle area. But the first step is to determine the appropriate factor. Many will value out at between 1.2 and 1.4 times the assessed value. Hot areas, like downtown Kirkland or parts of Queen Anne, etc will value at 1.5 to 1.6 times assessed value. Don’t take the comps out too far, keep your radius small. Stay as close to the subject property as possible and STOP when you have 5-8 comps after throwing out the High and the Low. DON’T average the sale price of the comps one to another to determine the value of the subject property. DON’T use price per square foot as a guide. Take each sale price and divide by THAT SAME PROPERTY’S assessed value to come up with the factor. If all of the properties in that neighborhood sold at 1.44 times assessed value, then your ZESTIMATE should be 1.44 times the assessed value of the subject property. You can average the factor, but not the price. Then use a range. Chuck the high and the low, the way I learned in grade school from the good Catholic sisters who taught me well.
Example: Data equals 1.8, 1.4, 1.42, 1.43, 1.44, 1.44, 1.45, 1.47, 1.1
Throw out 1.8 and 1.1. as the high is a massive remodel and the low is a fixer. Factor becomes 1.4357142. Assessed value of subject property is $313,000. Zestimate is $449,378.54 or between $438,200 and $460,110.
When inputting tax data, do not overlook the “effective year built”. Currently your program is not noticing that very important date, and reverting to the original year built, throwing the numbers way off on 80% remodels. You can use the 1.8 and 1.1 in the sample above by saying “Your home is valued at between $438,200 and $460,110. If you have just remodeled the interior, the price might be as high as $563,400 (1.8 X $313,000). If it is a fixer it may be as low as $344,300 (1.1 X $313,000).
For Seattle area, always use the assessed value of the subject property against the neighborhood factor.
Briefly, for Los Angeles beach areas: DO use price per square foot, as by and large that area does not have underground basements and the tax assessment increases to sale price every time a property sells (unlike Seattle and many other areas)
Florida: Do use price per square foot and keep the comps apples to apples. Watch the lakes. Price properties on lakes against other property on the lake and interior against interior. You are already OK in FL for the most part, so you can leave that alone.
PA, NJ and most of the Northeast of the country, keep the radius short and use price per square foot. Then find and apply the neighborhood factor and average the two answers.
Hope that helps you, Mr. Barton. Or maybe it will help Robbie and Galen come up with their own “Better than Zillow!”
Have a great sunny day in Seattle!
How do you get a bargain?
How do you get a bargain when purchasing a home in a hot market, without getting a lemon?
I have thought about the many times over the years that I have helped people purchase property at less than fair market value in all kinds of markets. Up markets, down markets, buyer’s markets and seller’s markets. I have used several different means to accomplish this goal for my clients. Today I will talk about one of the most recent transactions where a buyer achieved a true bargain price.
My partner, Kim, and I recently helped a buyer purchase a property so undervalued, that appraisers have called asking how we were able to acquire the property at that price. Answer was terms. A property came on the market in North Seattle at such a low cost that agents swooped on it like vultures. The seller’s agent was from out of the area, and the property was difficult to value, and so it came on market at a low price. But it would have bid up to “fair market value” or beyond, if we didn’t stop the other bidders in their tracks. We offered terms, or as we Italians like to say “I made dem an offer dey couldn’t refuse!”
One of the things agents do is “pre-negotiate” before they write an offer. I called the listing agent and let her blab on and on about anything and everything. I gleaned a few gems of significant data. The seller was buying new construction out of the area and they were scared about having to leave their current home before their new home was completed. Bingo!
We wrote an offer that did not compete as to price, but allowed them to stay up to a month after closing. This way the sellers had the comfort of knowing their property was sold, they had their equity in the bank three weeks before they needed to close on their new home.That gave them a whole lot of peace of mind.
The sellers did not consider any other offers and accepted ours hands down before several agents even had time to write an offer. Complaints from the trenches? “Why did the seller accept an offer without waiting for us to submit an offer? My buyer would have offered more!” The answer. Terms! Never presume when it comes to terms. Fast closings are not always better, if it forces the seller to pack and move before they are ready. Always base terms on what you know this particular seller wants and needs. Not on what you presume all sellers should want and need.
New trend for small Condos
One of the newest trends for opening up small condos is to take out the wall between the living room and the bedroom and put in a wall of sliding glass doors. Brings in the light and views, but you have to make your bed!
Condo Conversion vs. New Construction
Given the popularity of condo conversion communities in the Seattle area, I think it is worth noting what these are, and what these are not.
I have heard both buyers and escrow companies refer to condo conversion communities as “new construction”. Please know that these are not new construction, but remodels, for the most part asthetic remodels, of older, rental communities. While you are buying the interior, and the interior is remodeled, you are also buying a fractional interest in the exterior. If there are 100 units, you are taking on a 1/100th responsibility for the new roof or exterior paint and all of the major components shown in the reserve study.
If you are buying into a condo building or community that has always been a condo community, the monthly dues for the last 15 to 20 years should have provided for an accumulation of “reserve funds” to replace the roof. If you are buying into a condo conversion, make sure the developer has “contributed” enough monies into reserves, to compensate for the fact that there were never before “unit owners” putting monies into the reserve account toward future replacement needs.
The roof may be OK today. But if it is a 20 year shingle and a 15 year old complex, there should be 15 years worth of accumulated monies set aside by the developer before he turns over the complex to the Home Owner Association. This is to insure that when the roof needs to be replaced in 3 to 8 years, there will be sufficient funds in reserve to buy the new roof. Also make sure that the monthly dues set by the developer include a sufficient amount for reserves. In five years when you need a new roof, you will need five years of owner contributions, plus the 15 years worth of reserves set aside by the developer, so that the roof can be replaced without a special assessment.
Understand that if a condo community or building functions as it should, there should never need to be a special assessment. Every owner, via their monthly dues, should be paying their fair share of future repair and replacement costs each year. It’s a simple calculation which assures that the monies will be in the reserve fund at the time the Major Component item needs to be replaced.
So I leave you with this warning. Find those things that are not new when buying into a condo conversion, and make sure the developer is contributing an amount into reserves reflecting that portion of “useful life”, used to date.
Who is the "BEST" lender?
There are three separate and distinct functions of a lender in the home buying process.
1. Determining the cash needs and monthly payment in advance of house hunting.
a) Dollar amount of Closing Costs
b) Montly payment including estimated taxes, insurance and codo fees
2. Providing a “Pre-Approval” letter to submit with an offer to purchase.
3. Providing the actual loan to be used in the home purchase.
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The “BEST” lender to use for Step 1. will be the lender
that most accurately predicts your eventual closing costs
(and monthly payment) BEFORE you make an offer.
*************************************************************************************************Variances Inaccurate predictions can be costly, and even cause the escrow to “fail”. If you do not have enough money to close escrow, you can lose your Earnest Money, as the Finance Contingency only covers loan approval. It does not cover “not having enough cash to close”. I have not in 15 years personally had the experience where my buyer client has needed to find money at the last minute to close, but I have seen many who have had that experience when working with other agents.
If you do not have a lot of cash to play with, or if it is your goal to close escrow spending as little of your own money as possible, you should try to narrow down your choice of lender in Step 1. to the one you will likely be using by Step 3. Very important if you are planning to fold your closing costs into your offer. If the lender you speak with at Step 1. says your closing costs will be $4,000 and by Step 3. you choose a lender with actual closing costs of $8,000, you will need to dig up an extra $4,000 if you only wrote “$4,000 toward closing costs” into the contract. Lender costs are sometimes “credit score driven”, same as rate, so the lower your credit score, the more important this will be for you. Costs can also change dramatically from one lender to another and from one loan program to another.
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The “BEST” lender you can use in Step 2.
is the lender that the SELLER, will value the highest.
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To determine who will be the “BEST” lender to use in Step 2., you need to understand the TRUE purpose of the “Pre-Approval” letter. The quality and credibility of the pre-approval letter often plays a major role in the negotiating process. The seller and the seller’s agent read a lot of things into that letter, especially in multiple offer situations. Even when there is only one offer on the table, the seller will sometimes accept a lower price from a “highly qualified buyer” who is using a lender that the seller’s agent is certain will close on time.
Often the Buyer Agent sells the lender and the buyer’s credentials when presenting the offer. And many, many times I have seen a seller switch to a lower offer with a better “letter” and sales pitch by the Buyer’s Agent, regarding the buyer’s ability to close and to close on time.
Consequently, if you use a lender that the listing agent does not believe in or has had a previous bad experience with, it could cost you the house, or at the very least, raise the price the seller is willing to take from you, using that lender. I have seen one too many pre-approval letters faxed crookedly on the paper, written with poor English and grammar, with many mis-spellings and two paragraphs of disclaimers. The phrase I commonly use for that type of letter is “it might as well be written on toilet paper”. Sorry if that offends someone, it’s that Philly.NY “in your face” honesty, I refuse to shed 🙂
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The “BEST” lender to use for Step 3.
is the one who has the very best rate and program for you
within the first five days after you are “signed around”
and can LOCK you there with a “float down”.
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None of the rate quotes or program evaluations that you acquired prior to house hunting, is a true indicator of what exists in the marketplace the day you are ready to apply for your loan. Generally, you do not truly apply for your loan, until after you have a Contract to Purchase a home. Most lenders will not permit you to lock in the rate, until you have a contract in play. You can with some lenders apply for a loan with a locked in rate “subject to house”, a tool used when interest rates are expected to rise during the house hunting process.
One might say that the “moral” of the story is that you can “use” any lender you want to process your loan, without regard to whom you “used” in Step 1. or Step 2. But, hopefully, by seeing in advance the three separate and distinct functions of the lender in the home buying process, you will be better able to choose the “BEST” lender from the beginning. A lender that will excel at meeting all three of your lender needs in the home buying process.
Redfin – Something to think about.
One of the “big stories” in yesterday’s Seattle Times, was the piece on Redfin written by Elizabeth Rhodes.
My response is this:
According to the article, Redfin has the ability to reduce the Buyer Agent Fee to 1% of the purchase price. They have an “agent” who never goes to see the property “write up” an offer online, and Redfin gets paid 1% to do that. That assumes that the Buyer Agent fee offered by the seller and the listing company exceeds 1%, which is at present generally the case.
If the buyer only wants to “pay” 1% for Buyer Agent services, if that is the trend, then why wouldn’t I just go out and list property with a 1% Buyer Agent offering in the first place? Why shouldn’t the seller offer 1% and pay only 2% or 3% total fees when he lists the property, with 1% or 2% to the listing agent and 1% to the buyer’s agent?
If the “agent” in Redfin’s backroom is writing an offer without seeing the property for 1%, why wouldn’t the buyer just have the Open House Agent or listing agent write it up for 1% while in the house? At least that agent has seen the house and will know what amenities to write in that might be unique to this property, even if not offered in the mls, like bar stools that match the decor.
Clearly a buyer who can pick a property off the internet, who needs no assistance other than writing an offer and following escrow to closing, can get a real live agent for 1% or even less. Why not use one you can talk with in person inside of the house? If you remove the “responsibility” to assist in property selection from the agent. If you further remove the “responsibility” of the agent to “take care of you” because you are a savvy and informed consumer and don’t need “hand holding”. Then clearly you can negotiate those terms with anyone and still retain the right to “upgrade” the service if needed during the transaction.
The public’s perception that all fees are carved in stone is erroneous. I am concerned that buyers go to less than full service companies, when they can clearly negotiate less than full services with any licensee. Pick the best agent for the job and negotiate the terms. This way if you need greater assistance during the transaction than you thought you might need at the beginning, you have the option to upgrade to what you need, no more and no less.
Sun for the Seahawks!
IT’S ALMOST GAME TIME!
THE SUN IS SHINING !!
IT’S A GREAT DAY IN SEATTLE!!!
Renovations – Return on Investment
Over the years I have had many people ask me the question, “Should I renovate the house that I have, or should I move?”. We have all seen the numerous charts that show the return on investment of various renovations. I just checked a few of those charts and found the following results: Remodel your kitchen anywhere from 70% to 103% return, depending on who wrote the article. Add a bedroom, 80% vs. adding a master suite: 73%.
Every time I see these charts showing the percentage of return, I put them down thinking that none of them actually answer the question and none of them are the least bit accurate. One house might achieve a 200% return on investment, while another might return 25% with the exact same renovations.
The first consideration is the location of the house. Let’s take two identical houses. In one of them you can see cars going by at a steady pace and you are considering in your list of renovations new, triple pane, sound proof windows to block out the traffic noise. The other is an “interior lot” in a quiet neighborhood. Clearly the return on investment in renovating the house in the quiet location will be much greater than the return in the noisy traffic location, even if the two homes are identical both before and after the renovations.
The second consideration is the functional obsolescence of the style or “flow” of the house. I don’t like to disparage a certain style of home, so let’s let the builders do that for me. If you currently own a style of home that is no longer built. If no or very, very few homes are being built in the exact style of your current home anywhere in the country, then you likely live in a functionally obsolescent style that will be discounted below the value of other styles in your neighborhood. You can spend thousands and thousands of dollars renovating that home and return only $.25 on every dollar that you put into it. This would be particularly true if the style and flow are not in tune to the needs and desires of today’s home buyers and it is also in a noisy location.
The highest return will involve correcting a specific type of functional obsolescence. The charts may tell you that adding a bedroom may return 70% and adding a bathroom may return 85%. In truth, adding a 6th bedroom to a 5 bedroom house and a 4th bathroom to a 3 bath house, may return you next to nothing, especially if that extra bedroom and bath is in the underground basement. But adding a 3rd bedroom and a bath in the form of a master suite to a 2 bedroom, 1 bath rambler on a great lot in a great location, can easily return double your investment dollars.
Worth mentioning is the question, “Should I add a second story?”. Not if the footprint of the main level is too small. Again we are back to the issue of functional obsolescence. If the footprint of the home is 790 square feet, adding a second story would not irradicate the functional obsolescence of the small size of the main living areas. My opinion is that the main floor should be about 1,200 square feet for one to consider adding a second story, unless you can expand the square footage of the main level at the same time.
So back to the question. Should I stay (and renovate) or should I go (sell and buy a different house).
If your current house is not a style that you would build today, and if your lot is not located in a place where you would build a new house today, then you should sell it. Limit your investment dollars only to those things that will produce the highest return, like painting it inside and out and beefing up the curb appeal and making what you have better. My limit for this type of improvement is no more than 1% of the current value of the home. If you could sell it today for $450,000, then only put $4,500 into it and put all of that $4,500 into material and do the labor yourself. Same as getting a house ready for market, even if you are staying.
If you have a perfect location but an obsolete style, then you should consider building a new home on your existing lot. If you have a great house on a great lot that just needs to be updated, then by all means you should stay and renovate the house.
If you and your husband or wife don’t agree on what you should or shouldn’t do to your existing home, invite me to dinner and I’ll make you a list 🙂