The Question Your Real Estate Agent Doesn’t Want You to Ask

Posted on August 5, 2011 by ARDELL

What is the question you need to ask your Real Estate Agent…that no one ever asks? Buyer Clients-1

Will you help another of your buyer clients buy a home…

that is perfect for me and my family?

MORE IMPORTANTLY…will you even take on a new client…

who has the same ojective as mine?

People often ask me if I am “taking on new clients” and the answer is yes…as long as you do not have the same objective as one of my existing clients. I have been wanting to write a post on this issue ever since an Agent stood up in a class I was teaching here in Seattle and said “I showed the house to NINE of my “Buyer Clients”…

What??? NINE of your Buyer Clients??? How the heck can you take on NINE clients…who all want the same thing, in the same place at the same price???

There’s a lot of talk about Agent Commissions being less, when the truth of the matter is that what we should be striving for is getting back to the reason WHY “we make the big bucks”. It is because we can only devote ourselves to the objective of a few clients at the same time, in order to eradicate any potential conflict of interest or dilution of our efforts on the client’s behalf.

I have a client who wants a condo in Downtown Kirkland for about $350,000…possibly a townhome in Redmond for the same price…but more likely a condo in Downtown Kirkland.

I have a client who wants to buy a condo 2nd residence/investment condo for about $125,000 in Kirkland, Redmond or Bellevue.

I have a client who wants to buy a primary residence for about $600,000 in the prime areas of Kirkland near Downtown.

I have a client who wants to buy a primary single family residence for $400,000 give or take (depending on condition of property) in Redmond…possibly Kirkland.

I have a client who wants to buy a primary residence in Seattle between the U-District and Green Lake for $500,000 give or take.

So the answer to “Am I taking on any new clients” is yes…as long as you don’t want the same thing as one of my existing clients as listed above.

When I speak with other agents…they wouldn’t dream of turning a client away…EVER. Which is why some of the lower cost “agent services” do not list “assistance with property selection” as one of their offered Buyer Agent services.

Most all websites say “CALL ME IF YOU WANT TO SEE THIS PROPERTY” without regard to whether NINE people will all call to see

the SAME property.

It’s really as simple as this. IF your agent will show the SAME house to more than one of their clients OR if they will even “take on” a 2nd client who has the same objective as you do, then they are a SALESMAN and not a true representative of your goals and best interests.

Ask the question. If you find anyone else who says “NO, I will not take on a new client who also wants the same kind of property, in the same place, at the same price as you do”…let me know.

It will do my heart good.

Why there is no “LATE” in Real Estate

Posted on July 20, 2011 by ARDELL

We all remember Tom Hanks in “A League of Their Own” and that great line “There’s no CRYING in Baseball!” That doesn’t mean it NEVER happens, that means it is not SUPPOSED to happen.

When it DOES happen it is usually a Joe Biden sized BFD!

Same goes for a Late Closing in Residential Real Estate transactions…with some exceptions. In a normal Residential Real Estate Contract, you put down Earnest Money WHICH YOU ARE SUPPOSED TO LOSE under certain conditions. People often don’t know this OR they forget this.

Most often agents probably don’t say “Oh, by the way you may lose that $10,000” while the buyer is writing the check. They just “assume” the buyer knows what Earnest Money is. Telling people they may lose $10,000 is just not something most agents like to say when someone is making an offer on a house. BUT if the day the buyer may lose it, is the first time they’ve heard of that possibility, the *chocolate* is going to hit the fan…and often does!

Earnest Money is the amount you ARE WILLING to lose if…

If you COULD NOT LOSE YOUR EARNEST MONEY we would not require Earnest Money as a “BINDER” in most Residential Real Estate Transactions. Still the minute the “you might lose your Earnest Money if…” situation comes up, people act like no one should ever utter those words. Odd…but true.

Buyers write those big, fat Earnest Money Checks without much thought to LOSING that money…until faced with the words “Your Earnest Money is NOW in Jeopardy”. Late closings enter that realm of possibility. Often that can turn into a “Let’s SHOOT the Messenger” knee-jerk reaction. But the reality is…someone, sometimes, has to be the bearer of that bad news.

So why IS the main rule “No LATE in Real Estate

Do you need a “fancy” Flyer to SELL a house?

Posted on July 18, 2011 by ARDELL

Real Estate, cost of doing business, is often blamed for why “we” need higher and highest Real Estate Commission levels. As a follow up to my previous post I will tell you what I am NOT “good at”. That should make Craig happy. 🙂

I am not good at Bullshit! I seriously am just not good at “flowery language” to describe homes I list for sale. Never was, and will never be, my forte. If you have ever seen over the top flowery language on one of my listings in 21 years…the seller of the house must have written it, because I am sorely lacking in that “talent”.

I am very good at making “the product” the best it can be before it hits the market. I am better at “staging it to sell” than a stager, because I use staging to highlight the home’s best features. I am not “decorating” the home. I am putting up signals to the home’s features. BIG DIFFERENCE that I can’t seem to explain to “home stagers”.

The staging follows the Home Flyer pattern as to Best Features of the home.

When Making a Flyer I start with a list of why someone would or should buy THIS house vs the others that are for sale of like-kind home style. This home happens to be a “split entry”. So I look at it in relation to other Split Entry homes for sale within a half mile or so. Distance is not the key as much as having enough comparison product. If I can get that within .25 miles…that may be all I need. If I have to go out a full mile, then that is what I need. I want at least 3 to 5 On Market similar homes to use as a benchmark.

Here is the list of my “competition” for this particular home and product. Since it is now listed, the 2nd one on the list is actually this property. There were two others on market when I was preparing the listing and working through this process that are now pending. One was listed at $254,000 and the other for $267,000, leaving mine positioned as 2nd in “the pack” with the bank-owned as 1st, as it should be. We are “ahead of the pack” but not as low as the bank-owned home. That is “correct placement”.

Here is The Home Flyer:

Todd Flyer Picture of

As you can see from the flyer, I totally suck at “flowery language”. No words like “oasis” or “vista” or “exceptional” or “stellar”…just the facts. I’m very Jack “just the Facts M’am” Webb in that regard. A shortcoming, yes…but just how it is.

I had to re-design as in “downgrade” this flyer template to a one page, one sided, Flyer. I was using that fancy 11 X 17 folder over 4 page $3.00 apiece style flyer for awhile…and reverted back to this simple flyer as has been my long time custom. They cost $.39 apiece to print over at MinuteMan Press. They don’t bleed and sweat and run as to the ink like the ones I might print myself on an inkjet printer.

I pay for the “upgraded never ending flyer box” so one can be in the box at all times, even if people take them all, as one sits in the plastic cover in the front so people can see it even if the flyers are “out”. I think that costs an extra $2.00 for the life of the listing. 🙂 The sign up and down costs about $60 or so. One fee up front for both sign up and sign down. I paid a little extra for the Open Sunday 1-4 Rider to go up with the sign, vs my placing it there myself, so that it was an immediate announcement.

I do two Open Houses two Sundays in a row, back to back, and put it on the flyer.

Often the picture of the front of the house is NOT on the flyer, as noted above, as the person holding the flyer from the flyer box is usually standing IN FRONT of the house. He can SEE the front of the house and nothing else. So if I have room for 6 pictures, I want him to see the key selling points that he can not see from where he is standing.

The #1 feature of this house vs the newer homes in the area is the lot size, the big yard, the privacy trees, and the outdoor deck. These are the things WE have that the new, slightly pricier, zero lot line houses do not have. So I have devoted HALF of the photos to that aspect of the home that they cannot see when standing out front.

Back to staging for a second.

That is also why I removed some of the curtains, most all on the back of the house, and decorated “sparingly” so the eye would be drawn OUT to our best feature

vs IN to some overly nice furniture.

I am drawing the eye to the best feature when staging…NOT “decorating” a house.

Next of note as to FEATURES we have that the others in the lower price range and some in the higher price range in the list in the link above do not have is a NEWER ROOF and all NEWER WINDOWS. Pricey improvements for a buyer to make after purchase if they buy the other house that needs all new windows and a new roof.

So THAT is the number one item (both included) on the flyer below the price.

Back to Staging. I have NO curtains so you can see the full framing of the newer windows and sliding glass door as curtains are “prettier” but curtains cost ten bucks and new windows and sliding doors cost $4,000 bucks or so. So I want you to see the windows…NOT the “pretty curtains”.

You see how “staging” follows the Flyer as to Key Selling Points of the home. The staging highlights those features…it does not “decorate” the home. It UNVEILS the best Real Estate FEATURES of that home. You are not buying “the pretty furniture”.

Yes a cute rug would be pretty in the living room, but I am selling the hardwood floor, not a pretty area rug.

So there’s my weakness…I can’t talk about “Welcome home to your OASIS close to Freeway Access”. I don’t know if this should be YOUR home or not and I don’t know if you need an “OASIS” to run off to after work. I don’t know you at all. You are someone holding a flyer whom I will likely never meet.

I don’t want to tell you WHY YOU should or should not buy this house. I just want to talk about the house and it’s features, and make it easy to SEE those features if you come inside the home.

It’s my shortcoming…and I really don’t know what to do about it. But most of my listings sell in less than 90 days when I do this well, so I’m going back to doing THIS as I do it best. Blunt…straightforward, no flowery language.

Do Fancy Flyers with Flowery Language sell homes? I don’t know. You tell me.

Something EVERY home buyer needs to know BEFORE they step on an Owner’s Property.

Posted on July 6, 2011 by ARDELL

Before you look at even ONE house, from IN or even ON an owner’s property, you need to understand the basic framework put into place before the home was listed for sale.

A “For Sale” sign is not a “license to trespass” on someone else’s property.

You are basically walking into the middle of a commission structure AND instruction for your being able “to see it” structure, that is already in place. This arrangement was set BEFORE it was listed for sale by the owner of the property, and that owner’s agreement with “the mls system” and his agent, before the For Sale sign was put in front of the house.

It is something you must comply with, and so something you need to FULLY understand BEFORE you step on or in someone’s private property.

This is true when you walk into any home that is for sale AND listed via an mls system. You do not have permission to go on or in an owner’s private property, except via the owner’s permission or via an agent who is a member of the mls system. That includes opening the owner’s gate and going in their yard and peeking in their windows. There is no entitlement to trespass on an owner’s property just because it is “for sale”. Some think if a property is vacant and there is a For Sale sign out front, that gives them the “right” to trespass on the property and peek in the windows. It does not.

Without permission from someone with the authority to give you that permission…that is called trespassing. Those with the authority to give you that permission to step ON or IN an owner’s property, do not do that “for free”. You should not be going in or on someone’s property without understanding that you are paying for that privelege by doing so, as the structure to pay someone to let you on or in is already in place via the seller so that you CAN see it. You can’t ask to be on the owner’s property and then try to DICTATE that the seller CAN’T pay the person who provided that access for you.

That is not a FREE “service” and the seller has already promised to pay someone to afford you the opportunity to be on and in his property.

Below is a comment I made on Craig’s post to assist him in knowing what he can and cannot “promise” to give away.

If and when a Buyer includes a portion of “Do It Yourself – DIY” into the scenario to “save money”, they must do so without the “use” of agents…be that the Seller’s Agent or a Buyer’s Agent. Doing some of it YOURSELF…must be YOURSELF and not yourself in the room with an agent whom you do not plan to use to represent you in a real estate transaction.

IF you plan to use an Alternative Business Model or Traditional Agent who will PAY you for the portion you choose to handle “by yourself”, you need to hire them in advance of seeing any home. You also need to be certain that the portion of “rebate” you are looking to get is for work that YOU did with no agent contact whatsoever, outside of the agent you hire to represent you.

Below is the reason WHY, and also my response to Craig who asked the question in the Rain City Guide post previous to this one. Below is my comment, in response to his quandary, in its entirety.

“Let’s assume for a minute that there is a 6% commission set by the seller to his purpose of selling his home, of which the original referring agent (the Listing Agent) and the “Procuring Cause

Why are so many Pending Sales failing?

Posted on June 15, 2011 by ARDELL

There is a rumor that they are all failing because the buyer cannot finance the purchase. The reality is that is RARELY the actual reason, but sellers and seller’s agents DO like to blame the buyer’s ability to finance, even when that is not the case. Always better for it to be “the other guy’s fault” when asked:

“Why did the sale fail?”

The reality is it may have been the way the OFFER was structured, that caused it to fail.

Some offers are doomed to fail from the getgo.

Relying entirely on the Home Inspection, without adequately addressing the likely outcome in advance at time of offer, often causes a sale to fail. Some like to think “writing an offer” is only about “filling in the blanks”. HOW you fill in those blanks requires some skills of prediction and anticipation of outcome.

It’s important to make your offer with a rough expectation as to major repairs needed, as rarely can a home inspection resolve items costing in excess of 1% to 2% of the value of the home.

IF you have already taken the max credit toward your closings costs in your offer…

the Home Inspection negotiation becomes near impossible.

The Roof is often the “deal breaker” in many home inspection negotiations, because it has a known life expectancy and is one of the most expensive “fixes” that might be needed at time of sale.

Notice I did not say “one of the most expensive fixes that might be needed”
AS A RESULT OF THE HOME INSPECTION.

A “good” offer anticipates outcome. RARELY is the fact that the home needs a new roof something that can’t be anticipated at time of offer. Whether or not you allow for a new roof to be part of the asking price, depends on a few things.

Photo_5209ABAA-4E9F-5257-CD5D-AA7B15D000E7
It’s pretty darned obvious that the house in the photo above needs a new roof. You shouldn’t need a Home Inspector to tell you that.

BEFORE making an offer on this house, you need to anticipate the cost of a new roof,

so you can prepare your offer with a known and reasonable outcome in mind.

Photo_5209ABAA-4E9F-5257-CD5D-AA7B15D000E7

As you can see from the Zoomed In photo above, the cost of the new roof needs to include some pretty hefty repairs. The support for the roof is splitting and the roof is sagging.

Just sticking on some new shingles is NOT the only remedy for this roof.

You can guesstimate the cost of the shingle job by knowing the largest floor footprint from the County Records. It may be a 2,500 sf house in the mls. But the main floor footprint usually determines the outer corners of the roof. Is it 980 or 1,200 or 1,750? Once you have the main floor footprint (unless you can see that there is a larger 2nd floor foot print, in which case you would use that) you can show these two photos along with the sf coverage area to most any roofer and get a rough bid. You can email that info to three roofers and ask for a “ballpark” cost. The roofer needs to see the “the pitch” of the roof to determine cost. A higher pitch will need more shingles. Almost NO pitch may mean a shingle roof replacement is not the recommended “fix”.

Before addressing how the offer may be structured,

let’s look at a 2nd example that might have the same cost,

but a completely different remedy and offer process.

Unless you have the hope of turning your home into A Redroof Inn

a buyer of the home above MAY want to put on a shingle roof,

even though the roof may NEVER need to be replaced.

That roof will probably last longer than the house!

BUT…is that a positive?

Given where this house sits, on a quaint tree-lined street In-City where NO other roofs look like this, it’s possible that this “upgrade” may be seen as a “sore-thumb” and a negative…vs a positive.

For House #1 above, let’s say the roof will cost $20,000 to repair and replace. That’s a bit on the high side, but we have to go with the high estimate because of the deferred maintenance issues and things we can’t see, but can reasonably predict with regard to repairs needed beyond the actual roof shingles.

Now let’s talk about SALE FAIL due to BAD OFFER STRATEGY.

IF the buyer has an extra $20,000 to put on a new roof after purchase, AND deducts that amount from the offer price with the intention of putting on a new roof after purchase, the sale can “Fail Due To Financing”. The buyer MAY in fact be willing to buy the house for $20,000 less, and put a 20% downpayment still having the $20,000 needed for the repairs. BUT how likely is it that the Buyer’s LENDER will lend 80% of the cost to purchase after seeing that roof?

So…back to “Sale Failed Due To Buyer Financing Problems”. Was the cause really the fact that the buyer’s lending failed? Or the roof failed to meet the lender’s standard? Was it the buyer…or the house?

The sale failed because the agents failed to anticipate the lender’s response. There are many ways to resolve this type of issue in a real estate transaction. But ignoring the problem or thinking the seller is going to cough up $20,000 to fix the roof at time of inspection, is not realistic.

If the seller HAD $20,000, he likely would have fixed the roof before it got that bad.

The lender usually won’t let you escrow money for repairs to be done after closing. Sometimes, but not often. The best known remedy is to leave the cost of the roof fix in the price at time of offer and calling for a new roof to be put on prior to closing. Usually you can get a roofer to agree to do that and get paid at closing. BUT if it is a bank-owned property or a short sale, it gets a little tricker. Not impossible. But trickier.

In the 2nd example, the roof is perfectly fine. But you would be surprised how many buyers want to discount for what they don’t like or what they want to change, whether there is something wrong with it or not. Leaving THAT to time of inspection is a SALE FAIL. Sometimes the buyer wants the house because of many things and wants the seller to resolve “the roof issue”. Of course the seller paid a pretty penny for that roof and would be furious. So you have to build the offer around the buyer’s desires without involving the seller in the reasoning.

Buyers and sellers do not always agree on what IS a “defect” or what the seller should be expected to do about it.

Setting up a good “end strategy” at the time the offer is written,

is often the best remedy,

and one that will result in a closed transaction vs a Pending Sale failing.

Money Talks; Bullshit Walks

Posted on June 2, 2011 by ARDELL

TWENTY ONE years in the Real Estate Biz today.

I’ve gotten quite a few calls from people this year who don’t seem to have any “Street Smarts” about the value of money. Odd but true.

1) Had a buyer from out of state call me to complain that he made an offer on a house and a few days later he called the seller who told him he took an offer from someone else. The buyer was furious! I asked him how much Earnest Money he put down. He said NONE. He didn’t see why he should have to put up any money until closing.

Do you HAVE TO put down Earnest Money UP FRONT? No…no law says you “have to”.

BUT…Money Talks; Bullshit walks. An offer with NO EARNEST MONEY is…well, pretty darned easy to BEAT, don’t you think???

2) Was talking to an agent whining about POOR SERVICE from an escrow company. Asked him if it was the BUYER’S CHOICE of escrow. He said no, it was the bank-seller’s choice of escrow.

Did it close? YES! Was the service poor? YES! Why do you think the bank insisted on THAT escrow company? You don’ think they are paying the same as the average buyer or seller pays for escrow, do you?

Discounted Fee = “We will close it.”and they DID close it. They did what they were paid to do.

Money Talks; Bullshit Walks – WHY would you EXPECT to get the same service you “normally” get, if you agreed to the discounted service??? Pay less; get less. It CLOSED! You agreed to the discounted service and then what??? Wanted the better one? Get REAL!

3) Other people’s buyer clients are calling me. Had at least a dozen buyers call me in the middle of Real Estate Transactions this year.

ALL of them were having second thoughts about the value of the house they were buying. Worse…several others called me about a house they just bought!

a) They wanted my opinion of the price and value.

b) They ALSO wanted to know if I thought they were making a mistake buying that particular house.

c) They wanted advice regarding how to proceed in a negotiation of the home inspection. This relates to a) as they were trying to recoup at inspection mostly due to their 2nd thoughts about paying too much up front.

These are reasonable questions that my clients don’t even need to ask me. Why are OTHER PEOPLE’s clients calling to ask me these questions???

THERE IS SUCH A THING AS PAYING TOO LITTLE FOR A SERVICE!

NOTHING…IS TOO LITTLE. Seriously, having no one to second guess you is too little. You want someone who is going to say “Are you out of your freaking MIND? Do you know there are 75 sex offenders living within a mile of that house you “chose” to buy?”

I know how much is TOO LITTLE…because their clients are calling ME! Often when it is pretty much too late to do anything about it.

Saving Money is GREAT! I will often cut my price to the bone, because saving money is fabulous! But what I will not do is cut it to the point where you are going to get less than you need.

Lots of experiments with fees out there, and there is a LOT of room for lower fees. especially when the home price is over $500,000. But TOO LITTLE is usually not a good thing.

If you wake up in a cold sweat after your contract is accepted and want an opinion from someone you trust…and that person is NOT the person you hired. Well, then you paid too little.

Do I help the people who call me after hiring the wrong person? I think that’s against some rule or some law for me to do that…so I’m not telling. 🙂

Anyway…21 years in the biz. Didn’t want it to pass without saying a few words about some of the bullshit.

A special thank you to all of the many people who have hired me over the last 21 years. I appreciate the fact that you picked me, when there were so very many to choose from.

Real Estate – What’s Hot; What’s Not

Posted on May 9, 2011 by ARDELL

Style Trends in Kitchen Cabinetry, Exterior Paint Colors, Interior Paint Colors and other choices for your home, based on recent sold homes in The Seattle Area.

Kitchen Cabinets Shaker Style with recessed flat center panel and hidden hinges.
shaker

Definitely one of the most popular styles in various colors and NO hinges showing.

What’s not Hot? Hinges showing and/or a heavy OAK grain pattern in the wood.

Paint Colors While true neturals like Manchester Tan continue to be the best if the home has one overall color, I am seeing quite a few green and green/gray tones in homes sold recently. White ceilings with the Hillside Green paint seems to be the most popular right now.

Two good choices from Sherman Williams Pottery Barn Spring colors are Hillside Green and Urban Nature.

What’s NOT hot in paint colors? The deep red and blue colors that were popular a few years back, with every room a different brash color.

Counter Tops Still no real consensus on what color of granite..but granite is still the best choice vs tile countertops. Though for some unknown reason people don’t seem to care much if it is slab granite or granite tile squares, if it is a quality job. Having a granite bullnose edge vs a wood frame edge seems to be the deciding factor. granite

One of the reasons I’m reviewing Style Choices today is I am meeting a client at the Show Room tomorrow to select granite and tile. Will be interesting to see what she chooses. The lighter color on the right is usually the safer choice. but it depends on the cabinet color.

Tile Size, Color and Shapes Often tile is the hardest choice as there are so many different options and uses for floors, back splashes and tub surround accents. While granite is definitely the counter top of choice and hardwood is the definite preference for flooring in the kitchen and the entire main floor, tile is still used abundantly. Except for the main floor 1/2 bath “powder room”, hardwood is rarely used in other bathrooms. Tile still the #1 choice for bathrooms and laundry rooms. Tile is also the #1 choice for showers (vs one piece fiberglass units) and for tub surrounds.

I’m still seeing some subway tile, but it’s a very limited choice that I don’t think is going to withstand the test of time well. That could be from my many years standing in real subways, which are generally not the most happy and attractive places to be.

Glass tile still popular, but only when mixed in with stone tile. Oblong textured tile is awesome, but also limited use given it’s contemporary feel. Solid, neutral 12″ stone tile still a favorite for tub surrounds and flooring. Below are some of the most popular current choices as seen in both new homes and remodeled older homes sold recently.

tile

What’s NOT hot in tile in The Seattle Area? Travertine, Terra Cotta and other ornate styles that work elsewhere, but not here.

How To Better Use the Internet to Find a Home

Posted on April 25, 2011 by ARDELL

1) Make a “value grid” of the area you are interested in.

2) Overlay an Elementary School ranking grid (whether or not you care about schools).

3) Use steps 1 and 2 to define your “target area” and make a new chart highlighting Market Value’s relationship to Assessed Value in that smaller, defined area.

Before I demonstrate how to apply these techniques, some insight on why I am writing this post today. It is in response to a few comments I read in The Wall Street Journal’s article on Buyer frustration, namely:

“The mood among buyers was ‘nasty’…customers just keep getting outbid on the houses they want.” Glenn Kelman, CEO Redfin

“What’s selling is the Cream of the Crop, and they sell fast. What isn’t The Cream of the Crop is getting hammered.” Real Estate Agent in Florida

“It’s a false buyers market. If you think prices are cheap, wait until you start making offers.” 32 year old home buyer

The main reason you want to start your home search on the internet, is to formulate some strong opinions about what you DON’T want, especially with regard to over-paying for a home, before you step into the arena.

The tug of war in the Internet Home Game is that agents want you to just come OUT and SEE the house, hoping you will fall in love with the house, and not care so much about it being a “good value”. The homebuyer is refusing to GO SEE the houses that indeed might create this scenario, which will work out better and best for the agents and sellers than for the home buyer.

The Mexican Standoff is created by sellers pricing based on their house being somplace where it is NOT, and buyers making offers based on some overall market statistic that may or may not apply to the WHERE they want to live.

To demonstrate this technique I am using the City of Kirkland in the example, because it is one of the easiest to break down into its value segments.

VIP! EVERY area has these VALUE TIERS with sellers in the dark pink area trying to price like the light pink area and sellers in the light blue area trying to price in the dark blue area.

That is what “over-priced” means, to a large degree.

WARNING: Some severe Real Estate Transparency ahead. Agents generally do not convey this information publicly because it can be offensive to buyers and sellers in the lesser value tiers. While all good agents use these methods with their clients, there is good reason why they do not speak of these things publicly.

If you are a homeseller or agent who wants to pretend that the only factors are school DISTRICT and those that relate to the home itself, this is not a good post for you to be reading.

1) A “VALUE GRID” example
kirkland value grid

TO UNDERSTAND AND CREATE A VALUE GRID, YOU HAVE TO UNDERSTAND WHAT THOSE VALUES ARE PULLING TOWARD AND AWAY FROM.

This is likely the main argument for why you need “a good agent” unless you can use these techniques to represent yourself. This is why having “any” agent is not necessarily better than representing yourself. When I ask an agent what “his service area is” and he says “ANYWHERE!”, I know he is not a “good” agent.

It is great to keep up on general market conditions, using sites like Seattle Bubble that tend to speak in terms of COUNTY stats. I read it all the time. BUT if you don’t take all that a step further into your area of interest, you will be the poor schnook who bought the house in the green section at a medium blue price and ended up selling it at a light pink price.

That is something that you need to understand about FORECLOSURES and why agents pay less attention to them being a “market value” setter. Sure, if someone buys a house in the green section and prices it at time of sale in the green range of value and it ends up in foreclosure, we all sit up and take notice! BUT, but, BUT when we see the house that sold for a medium blue price in the green section come back as a foreclosure…we say…”poor schnook, who the heck represented him when he purchased THAT!”

That’s how an agent can sometimes tell that a house is overpriced before seeing the house. That is why you need to know that too…so that you don’t fall in love with it and start ignoring “the obvious” from an emotional standpoint. The same holds true for the opposite, however. MANY BUYERS ARE FRUSTRATED because they keep making pink offers in the blue area…unsuccessfully. To go back on the quotes from The Wall Street Journal article, the “Cream of the Crop” is BLUE in all of its 3 shades and then Green. Getting “hammered” are the greens who bought at blue prices or the pinks who bought at green prices.

This applies to New Construction Foreclosures as well, and the builders who got the land in the green sections, but penciled their profit numbers out on the blue ones, or who bought in medium blue thinking they could get dark blue prices.

A few notes on the Sample Value Grid. I don’t want to get bogged down in the detail of “Kirkland”, but to help you use this principle elsewhere, worth a little more comment. The dark blue section is basically a condensed form of West of Market. Once you know this, you will understand why a lot of the bargains are up at 18th Ave to 20th Ave, especially on the West side of Market Street. The Medium Blue section to the right of the dark blue section is the other side of Market Street known as “The View Corridor” of East of Market which runs from 1st STREET to 3rd STREET (but not ON 3rd) and from Central to 13th Ave. The lighter blue section to the right of The View Corridor is East of Market up to 6th Street (but not ON 6th Street). The green section to the right of that is called “the wrong side of 6th” and can turn pink and green alternately depending on which street. Lots of “bad” decisions on highest priced homes “on the wrong side of 6th”. Same holds true in the lower sections where 6th Street turns into 108th Ave NE. You have to balance the COLOR grids (and school grid) with the “freeway noise” in some of these areas on the southern portion of the grid in the blue and green areas.

The lines are not hard and fast, but understanding some basic valuation principles will help you understand “value” better and well enough to “bend” the lines when appropriate.

AGAIN…EVERY AREA HAS THESE COLOR GRID FACTORS!. They just differ as to where and why in each area.

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2) Overlay the ELEMENTARY SCHOOL GRID

This is a newer value increaser/inhibitor somewhat created by sites like GreatSchools.org and sites like Redfin using those rankings on its property detail pages down near the bottom. People always had a word of mouth “best schools” impact on home values and rankings of School District and High Schools. But the valuation demarcations based on ELEMENTARY school and the exact “borders” of those schools, is a relatively new phenomenon created by more information being available on the internet.

Knowing the school boundaries is great! But are we giving too much credence to sites like GreatSchools.org and SchoolDigger.com? Most real estate industry personnel say yes, and do not lend their seal of approval to these sites as readily as some newcomers to the industry. That said…there is some overlap between the school rankings and the traditional value segments. Most BLUE areas happen to have good schools. Some pink areas do as well. So to do our overlay, we don’t have to decide whether or not the school rankings are 100% accurate any more than we have to decide if green is better than blue.

Remember, if you can’t afford blue…green may be your best option and if you can’t afford green, pink in the best school may be your best option. OR pink with a great school might be better than green with a lesser school. OR…as pink gets darker toward another school district…a better school in the OTHER school district may be a better choice. These are the kind of things you need to consider when choosing an agent or choosing to represent yourself. Recognize these factors as “real” and learn from where the foreclosures exist and why those foreclosures happened.

That’s why you have to know why these areas are “colored” as such, and what they draw their value from. The upper pink section on the left is pulling from Bothell and Northshore School District vs Lake Washington (the lake itself) and Downtown Kirkland, as example. You might want to step over that line…or not.

If you take The School Boundary Map and overlay it on the VALUE GRID you will not be surprised to see the Dark Blue area serviced by a highest ranked school and the lowest ranked school planted firmly in Pink.

Life is not quite that simple and I’m not going to go there with you in this public forum. I give you the tools, you being a “reader” vs “my client”. There are limits to how much credibility I will lend to these ranking sites as a professional, and those limits are only shared with my clients. But hopefully, no matter where you are looking to buy, this shows why EVEN IF YOU DON’T CARE ABOUT SCHOOLS, you should not overlook the secondary value pressure of which elementary school is servicing the home you choose.

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3) Market Value’s Relationship to Assessed Value in the “target market”

This is a little harder as you have to balance some other factors like land value, main floor footprint and home style. It looks something like the chart in the link just below this sentence, that I have used in posts before:

Market Value vs Tax Assessed Value

For a “target area” we will be blending steps 1 and 2 with this 3rd step, using the same color key as in the link above from green to red, which is different from Step #1 and it’s color codings. In this final step, lighter green is best (vs blue), but red is almost always a “stop sign” of some kind. 🙂

I’m going to lose a few more people here, but for those who are seriously needing to understand value of homes in order to pick one and make an offer…try to stay with me here. Be sure to click on that blue link just above marked “Market Value vs Tax Assessed Value” before moving on to the charts below.

COLOR AV CHART

The BLUE background chart relates to point #1 and is a “Blue Value Grid Area”. In a Blue Value Grid Area, your best hope may be a Blue Price as noted in the KEY to the right, that being 1.2ish times Assessed Value. A few may even sell at the RED “bubble prices” if they are near water, have water views AND have been fully remodeled. You might find a green or two, but they will likely be “tear downs” selling at lot value.

If you are making Green offers in the Blue Zone….you may never achieve success UNLESS when you draw YOUR target MV vs TA map, there are some green sales.

The PINK background chart at the bottom also relates to point #1, but most of the sales ARE green and none are red. In this area you DO NOT want to buy in the purple or above zone without VERY good reason.

I’ll try to simplify this. Let’s say most houses assessed at $800,000 sell for $950,000 in the Blue Zone. NONE have sold for less than assessed value except for the tear downs, or busy road, or malfunction of floorplan issues. That means if you keep looking for a GREAT house with no negatives and making offers of less than Assessed Value, then you are going to get frustrated.

BUT if you are in the Pink Zone where homes sell fairly regularly at assessed value or less (you need to do the actual stats to know if that is the case, this is just an example of HOW to do that) then you don’t want to be paying 1.2 or more times assessed value or $470,000 for a home assessed at $390,000.

EACH AREA will have it’s own relationship to Tax Assessed Value. This has ALWAYS been true in the Seattle Area and is a much better valuation tool than Price Per Square Foot, especially in areas with basements.

You need to calculate if your area of interest is a .97 of assessed value area, a 1.13 times assessed value area or a 1.25 times assessed value area. NO “area” will be a 1.5 times assessed value area right now…but a given house may be.

I’m going to stop here as I’m sure I’ve lost quite a few people by now. But THIS is roughly how good agents “work”. They don’t necessarily make little maps that look like alien solar systems as I have here. But this is an attempt to convey to you the process of how an agent generally values homes and the property they sit on.

Feel free to expound on the topic by asking specific questions in the comments. I’ll do the best I can to explain further in direct answer to those questions.

Seattle Real Estate Signs – Pending is spelled SOLD

Posted on April 22, 2011 by ARDELL

The purpose of this post is twofold:

1) To the Homebuying Public: When a Property is truly SOLD the sign is gone!

2) To “The Industry Insiders”: For those saying transparency is yesterday’s “buzzword”, until we attain full transparency by saying In Escrow or Pending vs. “SOLD” before the property is actually sold, we are not even at square one when it comes to true “transparency”.

When a property is actually SOLD…there is no sign. The sign is usually “ordered down” the day it closes, and is removed the following day or the next day by the company that installed the sign.

So when you see a “Sold Strip” stapled to the post of a home, that means it is In Escrow Pending the actual closing. When it closes…is SOLD…the sign comes down.

The industry struggles to meet the public’s request for “transparency”, and yet doesn’t really know what transparency actually means.

They think transparency means we explain what we do, when in fact transparency means” “Please Just Speak the Truth in the first place, so you don’t have to explain why you didn’t!”

Of course we are not the only ones who do this. After all, how many times does Starbucks have to explain that “Tall” = Small and “GRANDE!” = Medium?

Personally I only use these Sold Strips when it benefits my client for me to do so. I don’t think there will ever come a time when everything we do in this industry is only client oriented.

If we only considered the “parties in interest”, from the seller’s perspective we would not leave the sign up at all once the transaction was solidly heading toward closing with no contingencies remaining. From the buyer’s perspective we would never put up a Sold Strip until and unless it is of benefit to the buyer for us to do so.

How much of what we do is about US vs THEM? Worth thinking about…worth changing.

Real Estate – The #1 Question

Posted on February 12, 2011 by ARDELL

The #1 Question in Real Estate is “How Much is THIS Home Worth?”

Every single person who is buying a home or selling a home is going to ask that question. Most people doing a refinance need the answer to that question as well.

1) A home seller needs to know the highest possible price they can sell for.

2) A home buyer needs to know the lowest possible number than can “get it” for…BUT they also need to know the maximum amount they SHOULD pay for it. The answer is often not one in the same.

3) A person planning to refinance, needs to know how much an appraisal will say it is worth, which isn’t necessarily the same method of valuation used by home buyers and home sellers.

Why do you need to know that Home Prices in King County are at early 2005 levels? Because that fact should lead you to some generally true conclusions.

1) If you are a seller thinking about selling your home, and you bought it between 6/2005 and 12/2008, you would be starting from the assumption that you CAN’T GET WHAT YOU PAID FOR IT”. If you bought it in 2001 and never refinanced it, then you should be able to sell it and walk away with positive net proceeds.

2) If you are a buyer wondering what to offer against the seller’s asking price, and he is asking more than he paid for it in 2007…well…you probably need to walk away. Maybe not see that home in the first place.

3) If you are thinking about refinancing and you bought the home in 2007 with zero down, you likely can’t. So save yourself the cost of trying.

Are there exceptions? Well, only a fool says never or always. But if you think you ARE the exception, you better have a really, really good reason why.

I know…your house is different. Your neighborhood is better. REALLY? Usually not as much as you think.

A good example of the dangers of applying Home Sale Statistics improperly, is in Redmond.

The Median Home Price in Redmond is up 66% from 2001 to Present, but not THAT house. That’s why you need to know when an area is running much higher or lower than the overall County market stats, and WHY.

Overall median price in Redmond is up 66% from 2001. Based on that true fact”:

1) A seller (erroneously) lists his home at 66% more than he paid for it in 2001. The house was built in 1985. He paid $350,000 + 66% + “negotiating room” = $599,950. He lists it at the highest possible price he can “reasonably” get for it. And he wants at least $575,000. This based on an article he reads saying Median Home Price in Redmond is up 66%, which is true…but not for HIM.

2) A buyer who reads my blog sees that 66% only applies if you include homes built in or after 1990. He sees that the % increase for homes built in Redmond prior to 1990 carry a median price of 42% more than 2001, vs 66% more. So while the “lowest price” the seller will accept is $575,000, the highest price he might be willing to pay is $500,000. We’d need to test homes built in the 80’s vs ALL homes built prior to 1990 to know for sure what a “reasonable” price for that home would be.

3) A person refinancing may expect it to appraise at $580,000, using the same logic as the seller in 1) BUT the appraiser may come up with $550,000 based on “3 comps”. This assuming the “average buyer” will pay closer to what the seller wants, than what the property is actually “worth”. An appraiser only looks at what people paid recently, not whether or not those few buyers were correct in determining “price to pay”.

There’s Good Reason why The #1 Question in Real Estate is what is THIS home WORTH?”

It’s one of the hardest questions to answer correctly. Keeping up on where home prices are generally (early 2005 levels) gives you a leg up on simply “What is the seller willing to take?”. But local stats can be misleading, if you don’t take the time to take it down to Apples to Apples.

Information is of Great Value! Knowing how to apply that information…is PRICELESS.

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