Category Archives: General

Romancing Ballard

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Before being interrupted, the contributors of Rain City Guide were having a nice little series on Romacing Our Homes. Seeing how tomorrow is Valentine’s Day, I thought I’d sum up things and add one more article on my neighborhood! So what type of romance did rain city guide contributor’s share?

On to Ballard…

ballard rr crossing

Anna and I simply love living in Ballard. We’ve both lived in different parts of the country (and the world!), but we’ve never lived in a place quite like Ballard. It offers a great mix of urban features (walkable neighborhoods with lots of coffeeshops, bakeries, art houses, farmer’s markets, etc.) without feeling too urban. For a relatively young family, it offered us a wonderful opportunity to own a home with a big yard and great neighbors! Thank you Ballard!

In addition to the year-round Farmer’s market in Downtown, Ballard hosts three festivals that are a lot of fun:

If you’re looking for more on Ballard, check out the post I wrote last march on the Ballard Community as well as this post Anna put together on the history of Golden Gardens! (Interesting stuff!)

Dear Mr. Barton,

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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?

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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.

Condo Conversion vs. New Construction

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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.

Climbing into bed with the competition

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I caught an investigative bug tonight, and I feel a strong need to post this speculation…

  • Fact 1 — Rob over at Your Seattle’ Neighborhood Specialist had some great commentary on Zillow in the months leading up to their beta release
  • Fact 2 — Rob has been silent since the release of Zillow
  • Fact 3 — Marlow Harris also noticed this, so I’m not the only one wondering what happened to Rob
  • Fact 4 — A reader pointed out to me that hourlyagents.com service is no longer available.
  • Fact 5 — Rob used to heavily promote the Hourly Agents site and his blog still has a link to it
  • Fact 6 — The hourly agents site now says “This Domain is For Sale — Please contact info@hourlyagents.com for details. — In the meantime, please join me at Redfin”

So when Marlow asks:

Where are you? Where are all your editorials and opinions? You were writing up a storm before, but now that Zillow has revealed itself, you’re silent.

Did you get that job there, after all? Did you sign some sort of oath of silence?

WHAT DO YOU THINK???”

I think the answer is worse than an oath of silence… I don’t think he’s working for Zillow (those people have definitely woken up to the idea of communicating!), but rather, I think he must have climbed into bed with the competition!

UPDATE 1: I just found out that Redfin started blogging one day before Zillow, but… it slipped past me as they haven’t shared any link love (yet!).

Update 2: Redfin added Rain City Guide to their sidepanel! Thanks you guys! Now all I need is for the HouseValues blog to add a link to Rain City Guide and I’ll have completed a Seattle Real Estate Technology Trifecta! 😉

Update 3: The Trifecta is complete!

Updates – NAR and Zillovania

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I suggested a while back that the National Association of Realtors start a PR campaign because they were looking so bad. Well, the $25 million campaign has begun.

As for Zillow (a company with $25 million in investment thus far), my take is this: predicting real estate values is a clever and successful (and expensive!) starting point for them. When they say that their model will be entirely based on advertisements (zads?), I predict a very broad interpretation of advertisement. You could say that homevalues is all advertisements, right? What if Zillow charged $10 (initially) to list a home and $200 to make it a “featured home” – those would be advertisements, right? Same goes for advertising agents (a la this very promising site). All they’re saying is, for now, they aren’t going to take on RedFin for the 0.5% of the market that wants to buy a house entirely unaided.

It’s a clever model because consumers will go to the site to check the value of their home before they sell and to check the estimated value of a home when they buy (even for a laugh if it’s wrong) – this was money very well spent and is worth 10 times more than advertising. If (when) Zillow starts showing listings on their site, that seller will go to an agent to list it (until they find one through Zillow) and they’ll say “lets list it on Zillow for $10,” or, “I’ll list it on Zillow for $10 if you don’t want to.” Zillow will not make it in the long run without houses that are for sale on the site. According to Rich Barton, CEO and founder, working with the approximately 900 MLS in the United States would be “a Herculean task” that they’re not willing to take on. So they get the eyeballs that every MLS-alternative has been clamoring for now, and they get the revenues in the future. See? Clever.

I think Keith Castonguay (perhaps melodramatically) hit the nail on the head, but he was wrong about the eyeballs: they will come from features and word of mouth, not primarily advertising. He’s also wrong about the absolute nature of Zillow; just as there are competitors for online travel booking, there will be competitors for this. Don’t think Zillow’s undertaking is without risk; they have to get a lot of listings (and features) on there before someone with an alternate model gets computer generated house values next to MLS listings. It’s a pain to search for property when only half of what’s available shows up. If Zillow prices listings too high or people just don’t sign up fast enough, other giants will stomp on it.

I also expect Zillow to make money from other ventures too – mortgage ads, home staging recommendations, what-have-you.

Galen
ShackPrices.com

Who Benefits from a Buyer's Agreement?

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(Editor’s Note: I’m happy to introduce Russ Cofano as a new contributor on Rain City Guide. He is a practicing real estate lawyer in Seattle with a tremendous amount of legal and business experience. Among his many roles and accomplishments, Russ is the former retained General Counsel for the Washington Assn of REALTORS (“WAR”), Seattle-King County Assn of REALTORS and Tacoma-Pierce County Assn of REALTORS; he was a key contributor/drafter of important real estate legislation in the State of Washington such as the Real Estate Brokerage Relationships Act and the Residential Transfer Disclosure Act; and he is an expert on MLS and Intellectual Property issues having been invited to speak at national real estate conferences including Inman’s Connect in San Francisco and MLS Connection. Russ can be reached at Russ@cofanolaw.com)

In the 90’s (sounds so long ago, doesn’t it), the concept of buyer agency entered the real estate brokerage world. For years, buyers working with agents were always surprised to find out that the agent typically was a sub-agent of the listing agent and legally represented the seller, not the buyer. This was true even though that agent almost never had any contact with the seller and usually had a much more significant relationship with the buyer. For a variety of reason (mostly because it made sense), the historical concept of sub-agency went away and agents working with buyers actually started representing those buyers.

As this concept took hold, folks like me would tour around far and wide and talk about the virtues of getting an agreement in place with buyers. This seemed to make sense because, heck, listing agents got sellers to sign listing agreements so why wouldn’t a buyer sign something similar. Well, if it wasn’t for my quick feet and years on the basketball court, I would have had many a projectile hit me in the head when I would suggest to agents this new way of dealing with buyers. The response was usually based on the fact that most agents felt that buyer’s would never be willing to commit themselves to a single agent like seller’s do in the listing agreement. In the same breath, those same agents would curse about those cheating buyers who would use them for days, weeks and months and then leave them at the last minute to work with someone else or (egads!) work without representation.

Fast forward to 2006. In Washington (as well as many states around the country), we have agency laws that define both seller and buyer agency roles. In Washington, if an agent is working with a buyer and is not the listing agent on the property that buyer wants to purchase, that agent will be the buyer’s agent (unless they have an agreement otherwise).

So what do buyers legally get from buyer agents. Well, look behind door number 2, and you will see the following duties:

  1. To be loyal to the buyer by taking no action that is adverse or detrimental to the buyer’s interest in a transaction;
  2. To timely disclose to the buyer any conflicts of interest;
  3. To advise the buyer to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise;
  4. Not to disclose any confidential information from or about the buyer, except under subpoena or court order, even after termination of the agency relationship; and
  5. Unless otherwise agreed to in writing after the buyer’s agent has delivered the Agency Law Pamphlet, to make a good faith and continuous effort to find a property for the buyer; except that a buyer’s agent is not obligated to: (i) Seek additional properties to purchase while the buyer is a party to an existing contract to purchase; or (ii) show properties as to which there is no written agreement to pay compensation to the buyer’s agent.

My question is this: Doesn’t a good buyer’s agent deliver significantly more value to a buyer than those measly duties outlined above? If so, why would a buyer not be willing to sign an agreement that requires the agent to deliver all those “extras

Zillow's Impact On Day 1

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Despite the fact that the Zillow site spent most of the day gasping and sighing, a ton of digital ink was spilled discussing their service (or lack thereof). Here are the articles I found most interesting from Day 1:

By the way, if you scrol through this Technorati search, you’ll notice that not only was I the first blogger to break the story, but I announced Zillowblog an hour before it went live!)