Category Archives: Seattle Real Estate Guide

Seattle has many wonderful communities and on the blog posts below you can out stories that talk about some of these communities. If you’re looking for more information about communities then considering checking out our post on relocating to Seattle.

Is it possible we are at the bottom?

Posted on by
56

***Updated/Revised 4:30pm 02/08/2009 PST:  Here is the link to the “Memorandum” (.pdf document) showing how this mortgage broker, in his own words, fraudulently originated millions in loans and how the fallout will plague our economy.  Big thanks goes to blogger “Scotsman” for the getting the document to me.

——————————————-

This is how is it possible………..we may not be at the bottom.

Ardell, I share your hope.   My hope for change is that real estate and lending industry comes to grips with how out of control the core players were that led us to the crisis we are in.   If we all point incriminating fingers to other people in our industry from escrow people to mortgage brokers to agents to Wall Street, pretty soon there’s nobody else to point to.  It circles back to all the players who participated.  Too simple of an explanation of a complex problem?  Maybe.  But, it’s fix has got to start with people in the trenches who are transacting the sales and arranging the financing.

But my hope and Country fight an uphill battle because of people such as Christopher Warren, the mortgage fraudster who wrote the above missive, “how is it possible”. Christopher Warren skipped out of the country on a private plane this past Monday.

See his incredibly clear picture of what is facing our markets by his “memorandum.” (.pdf document).

If one man’s expose of what went on in lending by one person does not make you pale, then I don’t know what will.

An excerpt from Christopher Warren’s  “how it is possible:”

  • That CITI Mortgage didn’t catch correspondents Mortgage Bank of California and Bondcorp Realty Services over-financing over $30,000,000 in bad mortgages with cash-back purchases for straw buyer groups?   How many of these loans are already now owned by our government, tax-payer subsidized, FNMA and Freddie Mac?
  • That GMAC Mortgage LLC., bought over $3,000,000 in mortgages secured in the Orlando Academy Cay Club aka “The Greens

RCG's Ardell and Rhonda Win Three of the Magnificent Seven Awards for 2008

Posted on by
6

Larry Cragun compiles a long list of consumer centric blog articles throughout the year and just released his 2008 picks for the Magnificent Seven Awards.  RCG’s Rhonda Porter and Ardell DellaLoggia made it to the top.  Here are the winning RCG entries:

Flat Screen TV: Is it Attached?
by Ardell DellaLoggia
“At what point does a wall mounted TV that is hard wired into the wall without outlets become “an installed electrical fixture

Short Sale Listings: Leaving Out Key Details Is Like Telling A Lie..

Posted on by
118

[Editors note: It’s always exciting to introduce a new author to RCG… and today I’m especially excited to introduce Courtney Cooper of Cooper Jacobs as the newest RCG contributor!  Far from a newbie, she’s been running an entertaining blog on ActiveRain for over a year now (and racked up tens of thousands of points in the process!), so I’m pretty sure she’ll have no problem making her impact on the RCG community.   Welcome Courtney!   ~Dustin]

Hello RCG!

Thanks Dustin and ARDELL for the encouragement! I am a huge fan of RCG and look forward to what lies ahead!

Pushing openness with short sale listings…

A lot has been written on Rain City Guide and elsewhere about short sales in the Seattle area, but 2008 had me working with far more buyers than sellers and one sentence kept popping up: “that house is a short sale

Should builders and banks receive an excise tax exemption as WA State faces a budget deficit?

Posted on by
36

House Bill 1495 has been introduced into the legislature and is now in committee.  In these times filled with hope, I am hoping this bill dies or at least comes out looking substantially different.  Let’s take a look.

AN ACT Relating to real estate excise tax exemptions to stabilize neighborhoods…

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
The legislature finds that there is a substantial inventory of unsold or foreclosed vacant homes on the market that is driving property values down and destabilizing neighborhoods. These homes also present an opportunity to provide affordable homes to low-income families, addressing some of the unmet need for affordable housing in the state of Washington. The legislature also finds that providing targeted incentives to housing developers will stimulate the sale of these vacant homes to low-income buyers now and stabilize neighborhoods affected by this growing inventory. The legislature intends to provide such incentives through excise tax relief on sales of homes to low-income first-time homebuyers.

I’ve been asking Realtors in all my classes to begin watching the percentage of financially distressed sellers with homes for sale in their market area.  Agents can do an MLS keyword search using terms such as “short sale,

Is Excise Tax Payable on Short Sale Debt Forgiveness?

Posted on by
42

The Washington State Department of Revenue (DOR) seems to think so.  Background: At an Escrow Association of Washington (EAW) meeting on Nov 13, 2008, Mel Kirpes and Steve Bren from  WA DOR spoke at a regional dinner meeting where it was announced that when there is a short sale, the DOR considers the debt forgiven as additional consideration above the contracted sales price between the parties and that the DOR will be pursuing the home seller for payment of the excise tax. (Reference is a EAW letter dated Nov 25, 2008 from EAW Director Cindi L. Holstrom)
Naturally this had a chilling effect amongst escrow officers.  The DOR responded on Dec 12, 2008 in a letter from Gilbert Brewer, Assnt Director of the DOR:

RCW 82.45 imposes an excise tax on the sale of real estate unless specifically exempt from statute. “The measure of the tax is based on the total selling price of the property conveyed. The incidence of the tax is usually on the seller.  However, if the tax is not paid in full, the tax (together with any interest and penalties) becomes a lien on the real property. This is mandated by RCW 82.45.030 …which defines “selling price” as the “true and fair value of the property conveyed.” If a property has been conveyed in an arm’s length transaction between unrelated persons for a valuable consideration, a rebuttable presumption exists that the selling price is equal to the total consideration paid or contracted to be paid to the transferor, or to another for the transferor’s benefit….”total consideration paid or contracted” to be paid as including “money or anything of value, paid or delivered or contracted to be paid or delivered in return for the sale, and shall include the amount of any lien, mortgage, contrat, indebtedness, or other incumbrance, either given to secure the purchase price, or any part thereof, or remaining unpaid on such property at the time of the sale.”

Since there is an exemption from real estate excise tax in the event of foreclosure or a deed in lieu of foreclosure (see WAC 458-61A-208) this DOR opinion may unfortunately motivate homeowners to consider foreclosure a more viable option. Perhaps the home seller’s Realtor can negotiate with the lender to pay for the additional excise tax lien as well.  However, then that extra amount paid by the lender may also be subject to excise tax.
The Seattle King Co Assoc of Realtors and Washington Realtors believes DOR’s position is incorrect and problematic.  On Jan 8, 2009, The Northwest Multiple Listing Association posted a notice to their real estate agent members as follows:

“RCW 18.86 requires agents to advise their clients to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise.  This duty exists in every transaction but is particularly important in short sale transactions where unique legal and tax issues exist.”

We’ve been saying the same on RCG for many years now. Short sales are way more complex for real estate agents than the average transaction and homeowners are best served when they have retained their own legal counsel to help them understand the lender paperwork as well as this current DOR trainwreck. You may be thinking, “homeowners in financial distress can’t afford an attorney.” However, some attorneys offer low cost options for homeowners facing foreclosure.

UPDATE
January 13, 2009
Department of Revenue: “After receiving extensive input from interested stakeholders and industry representatives about the nature of these transactions, we have carefully reconsidered how real estate excise tax statutes apply to these unique transactions [short sales]….we now see that these short sales are distinguishable from other transactions involving the forgiveness of debt because the seller negotiates separately with the lender for any debt reduction/forgiveness, apart from the actual purchase and sale of the property.  As a result, the loan forgiveness is not “paid or delivered in return for the sale” of the property, as required by RCW 82.45.030.”   Margaret J. Partlow, Senior Policy Counsel, Dept of Revenue. 

(Hat tip Rhonda Porter and Kary Krismer.)

Translation: We are not going to require sellers to pay excise tax on the debt forgiveness  with a short sale.

40 representatives from escrow, title, real estate, attorney, and short sale faciliator companies showed up in Olympia to help educate the Dept of Revenue. Thank you, Escrow Association of Washington, for bringing this to our attention and taking on the state head to head.

It's Official: New Conventional Guidelines for Ordering Appraisals

Posted on by
62

Fannie and Freddie have finally announced (I’m sure to no one’s surprise) the acceptance of OFHEO’s Home Valuation Code of Conduct which bans communication between a loan originator/mortgage broker and the appraiser for conventional 1-4 single-unit family homes.   Appraisals must be ordered through a third party clearing-house of sorts.   I picture this being similar to ordering a VA appraisal, which is not a pleasant process.  

Here’s an example from the Home Valuation Code of Conduct of what will no longer be allowed:

  • requesting that an appraiser provide an estimated…valuation in an appraisal report prior to the completion of the appraisal report or requesting that an appraiser provide estimated values any any time….
  • providing to an appraiser an…estimated…value for a subject property or a proposed or target amount to be loaned to the borrower, except for a copy of purchase and sale agreement.
  • ordering…a second appraisal…in connection with a mortgage financing transaction unless there is reasonable basis to believe the initial appraisal was flawed….

Lack of competition is generally bad for the consumer.  And I see this slowing the process down and possible increasing costs…where is the incentive to be effecient or competitive?  Who will pay the third party clearing house?

This is technincally effective on May 1, 2009; however, lenders are all ready implementing the new code.   This is still very new and we’ll have to see in the weeks ahead how this all works out.

Lending Woes: A Deeper Consumer Analysis

Posted on by
112

This may seem like an odd analogy, but I remember this story about my Mom when she was having her 7th baby.  She was in “a ward” with only curtains drawn around each bed.  She overheard some people telling the lady in the bed next to her that she should have “her tubes tied”.  They were explaining the procedure to her.  My Mom jumped out of bed, ripped open the curtain of the woman next to her and yelled  “I want one of those!!!”  The people were embarassed and said, “I’m sorry but we’re only allowed to offer these to single women on welfare having their third child.  You weren’t supposed to hear that.”

Yes…I’m suggesting that to some extent The Information Age is in part responsible for the Subprime Crisis.   Subprime loans did not come into being in late 2003.  2003 is the year more people said “I want one of those!!!”

Couple that with the fact that the World as it IS has come to the conclusion that spinning words (like Death Tax vs. Estate Tax) is a persuasion tool. We used to say, “You can’t get a good loan, but we can find you a BAD loan, if that’s what you want.”  Most people said, “No, thank you…we’ll wait.”  Loans had letters that were easy to understand.  A Paper  = most lenders.  B through D Paper was a different lender for buyers with one or a few correctable issues over the short term.  Z Paper was basically the Mob with a license to lend.

People understood the alphabet, and they knew that a C-Mortgage was not as good as an A-Mortgage.  Life was more Transparent back then.  The need for Transparency today is largely due to the fact that professionals hide truth behind more persuasive language.  Don’t get me started on Listing Agent vs. Agent for the Seller.  Everytime I hear a buyer say “The listing agent was MY agent, looking out for me (and I heard it twice in the last 4 days) I want to scream. How the heck can you believe that “the agent for the seller” is looking out for you, the buyer? Maybe because they use the words “listing agent” for that reason. But that’s a different, though related, subject.

Couple that with small businesses (who only offered Sub-Prime loans) getting gobbled up by larger “one stop shops”.  All of a sudden the lender could give you an A Paper loan or a C Paper loan without a loan denial in between. When there was a loan denial in between, the buyer had a legal out with the Finance Contingency.  When the approval came…but it was for “a bad loan”, the buyer was locked into the transaction with no legal out.

Couple that with Real Estate Agents only caring if the buyer could get a loan, period…without caring on what basis.  Couple all of THAT with the fact that many Finance Contingencies did not give a buyer “a legal out” if they could not get a conservative “A Paper” loan, but could qualify for a SubPrime loan.

There are many factors that contributed to this mess.  Perhaps a fuller understanding of how the world changing in many and small ways led do the catostrophic consequence, will help all people who played a small part in the Country’s demise, change their small part in The Crime of the Decade.  In the end it was mostly No victims; no villains, just a lot of small tweaks and changes that snowballed into a Crisis Situation.

Let’s go back to the world as it was for a minute. 

1) Conventional Loan = 20% downpayment, 28% of gross income for housing payment, 36% of gross income for total recurring debt including the housing payment.  An 8% spread for debt payments.  If debt payments equalled 10%, then the housing portion was reduced to 26%.  There were no Credit Scores.  All credit issues were underwritten by hand and each and every negative item was explained by the buyer, in writing.  A separate letter for each negative item.

2) FHA Loan = slightly more lenient terms and dramatically reduced downpayment requirement.  The biggest reason to use FHA vs. Convential being the downpayment requirement, not the looser standards as to ratio and credit issues.  Almost no downpayment – 3% vs. 20% at the time. 

The first change was a long time ago! It started as a quiet whisper, like the people talking behind the curtain in the next bed from my Mom.  Some people were getting loans with only 5% downpayment, conventional.  When I started in real estate in 1990, most people’s perception was that they needed 20% downpayment or FHA.  Few knew that they could get a 5% down conventional.

The beginning of all of these problems goes all the way back to there.  Conventional lending guidelines made FHA less desirable.  The primary purpose of FHA was low downpayment…no longer a big spread between the two.

THEN in the early 90s, the lenders started stretching ratios from 28% to 33% of gross income on “the front end”  BUT the back end was only stretched to 38%, at first.  Stretched ratios entered the scene ONLY for people with little or no debt payments (just like tubal ligations being only for single women on welfare).  It had a stated and targeted “appropriate” audience.

When cars started costing more, lenders had to start figuring out a way for people to buy a house who already owned a car.  In many cases in the early nineties (before car leasing became popular, and probably why car leasing became popular) most young couples who each owned a car, could not buy a house.  The two car payments sucked up their whole back end ratio and subtracted from their front end ratio.  “I thought we could get a mortgage for 28% of our gross income or 33% of our gross income?”  “Well, yes…but the combined value of your two new cars is almost as much as the house you are trying to purchase!”

Everyone agreed that people needed both cars and houses…so ratios grew and grew and grew.  So, Sniglet, the changes in FHA are NOT fascinating at all. In fact FHA hasn’t changed all that much.  What’s happening is that lending standards on the Conventional side are creeping back to “The Way We Were”, putting the spotlight back on FHA, which is closer to the way IT was IF you cut out “automated” approvals.

Before you even think about buying a house, get your “other debt” issues down to no more than 10% of your gross income.  If you make $45,000 a year and your wife makes $25,000 a year, and you each have a car with a $400 monthly payment, you are spending 14% of your gross income on car payments!

Of course this Rise and Fall story would clearly fill a book.  But until everyone understands that a bailout or bandaid in ONE area only (or two) is not going to fix what ails this Country, we cannot have HOPE…and HOPE is what we need more than bailouts and fixes.

As I said in one of my previous posts: “2009 will not be a year of great change.  It will be a year of Great Hope for Change, one small step at a time, via you and me acting the best we can in each moment.”  Falsely creating hope with “Talking Points” and “Good News” articles is NOT the solution.  Expecting any one source to be the Messiah, is NOT the solution.  Every single person doing their part to improve the situation…is the only long term solution.  That means YOU!

Stop looking for someone else to come up with an answer.  Get out your teacup, and start emptying out your own little piece of the ocean.

I kissed a girl once. I was almost 50 years old and was in the middle of a divorce from a 20 year marriage.  I just wanted to make sure before I started over again, that I wasn’t starting out on a faulty premise that had been “fed” to me.  2009 is the year to test your foundations…so that when “The Rocovery” does come…it isn’t the old mess wrapped up in a bright shiny red bow.

Historic Snohomish Homes glow in winter wonder.

Posted on by
10

Some of the many  Historic Snohomish Homes are oriented on wide tree-lined streets and remind me of growing up in the Capitol Hill neighborhoods very near St. Joe’s school, Stevens Elementary School and Holy Names Academy.   Some of the larger historic homes of Snohomish share similar architecture, classic lines and warmth that is accentuated when under the soft blanket of our local snowy weather.

I brought the camera to work this morning to hopefully capture some scenery (or crazy drivers) while coming to work and on my way home.  These are very amateur photos, but I tried.  Enjoy.

This photo above does not show it well, but there is a large wooden placard hanging under the front porch gable that reads, “Merry Christmas.”  It must be about 8 ft wide.  If you click the photos you might see it better.

Classic.  Gorgeous wrap-around radius deck and historical colors, probably from the Benjamin Moore palette paint line.   A wonderful treat to see a full Christmas Tree in the upper 2nd floor porch/deck.  Tremendous detail on this historic home, much of the 2nd floor shows wonderful wood work, pillars and dentil molding.  (Boy, I wish Snohomish had a lumber store similar to Seattle’s old Blackstock Lumber.   I’d probably be broke buying up all that clear VG Fir moldings)  Much is blocked from the trees, but who’s complaining?  Not me.

These homes are a lot to take care of and maintain, but there is nothing like them.

Snohomish river looking from park in downtown Snohomish towards the east.  Just weeks ago, this river was raging and near flood stage.   In years past, the flooding of this river would rise to levels above the bank, which is several feet high and cover those bolted down picnic benches.