Category Archives: General

STOP TAKING MONEY FOR REFERRALS!!!

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I could start and end this post at, ” Just STOP taking money for referrals…unless you are providing an equivolent equivalent value.” But this practice is such a hold over from the olden days, that many will say WA??? As in what the heck are you guys smokin’ in WA?

The added “equivolent equivalent value” has to be TO THE CONSUMER by the way, and not to YOU!

‘frinstance: Had a 3 plus hour meeting with some people yesterday.

Them: How can we get referrals from you?

Me: Be on top of your game and the best source of your service for my client. And that changes from time to time and client to client.

Them: Maybe you could get an insurance license?

Me: Why?

Them: So we can legally pay you for referrals.

Me: (after going to bathroom to puke up my lunch) You repay me by giving the clients I referred to you PRIMO attention to their needs. Do the first one or two for free to give me a chance to evaluate your services and talent level.

Them: Scratching their heads, but willing to learn the new way of life I have introduced.

I don’t expect all agents to “get” this. Agents paying referral fees is as old, if not older, than the mls itself. But at least scratch your head and be willing to learn “the new way of life” and society’s elevated stance on this matter.

You refer to someone:

1) Because your client needs that service. They more and more DO NOT and can choose their own.

2) Research and give them a few GOOD and valued options that you have taken the time to investigate. DO NOT STOP AT THE FIRST AGENT WILLING TO PAY YOU A REFERRAL FEE…Yes, sad but true, the way it “was”.

3) Do not simply send them to any office in your Company’s list of other offices. If the BEST agent for them is at RE/MAX and you work at Coldwell Banker, as example, then refer them to the RE/MAX Agent. OR, give them the agent with your Company plus two others and let them choose.

Agents ask me all the time why I am or am not willing to pay or not pay or receive referral fees. Most times I don’t and sometimes I do.

1) I am willing to pay them to Galen, I think, because Estately.com is a valued service that the client has already utilized. Jury’s still a little out on that one.

2) I take a “referral fee” when the client is here and buying there, as I am the one who meets with the client at this end to do the paperwork. So I am “sharing the commission” with the referred to agent on the Coast or wherever, as the client is here in my office going over the offer. Technically a “referral fee”, but actually a fee for “added equivolent equivalent value”.

We are mostly talking about legal, agent to agent referrals here. But quid pro quo, I’ll scratch your back if you scratch mine good old boy networks are so old fashioned and yesterday’s news. As I said, I don’t expect you to “get” this to the degree that I do. I don’t expect you to go puke up your lunch, like I do when the offer comes around.

But at least start to scratch your head and say WA?? Cause Seattle has it ALL OVER most of the country when it comes to using new technologies to change the world. Your client uses the internet. They can find their own referral. “The times they are a changin'” and you don’t want to “endorse your epitaph” with underhanded, yet legal, practices. AT BEST at least say to your client “can I get you a referral who will pay me 25% of the commission you are paying them?” At MINIMUM please apply full disclosure to the practice.

Thank you.

For those who never heard this song, it’s worth a listen and I still remember every word from when it came out back when I was an impressionable youth and goes with the “endorse your epitaph” line in the post.

It’s always been one of my Favorite Songs. Mr. Business Man by Ray Stevens. Maybe Dustin will turn it into a YouTube insert for me. For now, here’s the link:

So many favorite lines in there. “Do you qualify to be alive, or is the limit of your senses so as only to survive?!?” Love that song.

I told my daughter not to buy real estate

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I think the public deserves to know what we tell those nearest and dearest to us.  My girls are 20, 22 and 24.  My 24 year old has a 3 year old.  My 22 year old is pregnant.  I don’t recommend that either of them buy real estate right now.

Tina, my 24 year old, will finish school in November or so.  Then she’ll get a job in her chosen field.  Where will that be?  Anyone’s guess really.

Jacquie, my 22 year old is the one who wanted to buy a condo or townhouse with Peter here in Kirkland or somewhere on the Eastside.  Even though she will likely continue work in Seattle, she prefers living on the Eastside.  They can well afford to purchase, but I recommended against it.  Told her to rent for 6 – 12 months first.  Jacquie equals “Jacquie and Peter”.  To the best of my knowledge, Peter has only visited Seattle and has never lived here.  He has at least a year of school left in CA and is coming to spend the summer here with Jacquie, either in a rental or a place that they purchase.  Where is Peter going to work when he is finished school? 

If you don’t know where you are going to work, if you don’t have a good year at your current job so as to know if you are likely to stay working there, if you aren’t confident at the job you have right now and are thinking about leaving that job…don’t buy real estate.  Not unless you are prepared to hold it as a rental if you decide to move on.

Would I have counseled them differently in 2004 or even 2005?  Yes, I think I would have.

What Are Negotiating Rights After Inspection of House?

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The Title of this post are the exact words of a Google Search for those keywords that I found in my blog stats today.  When seeing it I thought it would make a good topic for a post.  Hope you agree.

To some extent the words “Rights” and “Negotiating” are contradictory.  If you have an actual “right” to something, you don’t NEED to negotiate it.  So suffice it to say that you have no “negotiating rights” in the strict sense.  You likely have a “right” to cancel the contract based on the inspection, but not a right to repairs.

If you have included an inspection contingency in your contract, then you have some rights.  You have the right to hire an inspector.  You have the right to gain access to the home for inspection.  Personally I think you should STOP the inspection the minute you find something that causes you to not want the house.  You save money usually (some inspectors; not all) and you really shouldn’t be nosing around someone’s house once you have decided not to buy it.  That’s my personal opinion.

I often hear “Doesn’t the seller have to fix…?”  The seller doesn’t HAVE to anything, nor does the buyer for that matter.  So the buyer has the right to ASK.  To answer the question literally, “what are (the) negotiating rights after Inspection…”  You have the right to ASK would probably be the closest accurate response.

Most and virtually all inspections that fail, fail due to poor communication.

1) Don’t just point out a problem without being specific about the remedy requested

2) Try to give a variety of remedies, so the seller can choose one

Examples:

Inspector says: “Hot Water Tank is 14 years old and should be replaced as life expectancy of this hot water tank is 10-12 years”  Remember, from the seller’s perspective there is nothing wrong with it.  It heats up the water just fine, they never run out of hot water and it’s not leaking or knocking or causing any problem whatsoever.  It’s just old.

Yes my friends, there is assisted suicide and genocide involving old hot water tanks.  It’s age descrimination, and some are put to rest before their time has come.

Let’s use some common sense here.  What is around this tank often suggests the appropriate remedy.

1) Hot water tank is in a condo on the third floor.

My suggested remedy?  “Hot water tank to be replaced by seller prior to closing.”

2) Hot water tank is in the garage and much of the owners valuable belongings are stored there prior to moving.  Very valuable things that used to be in the house but ended up in the garage when decluttering the house for it to go on market.

My suggested remedy? “Hot water tank to be replaced as soon as possible by seller.”  Once you are aware of a potentially dangerous situation, one that could cost thousands of dollars if the tank blew and the water damaged the seller’s things, you should pass that info on to the seller.  How would you feel if you asked for a credit or didn’t ask for a new tank at all, and the tank blew 3 days before closing and the seller’s stuff got ruined?  Might you be liable in some way for not passing that info on to the seller?

3) Hot water tank is in garage and nothing that could be damaged by water is anywhere in the garage and the water couldn’t get into the house if the tank blew.

In this instance you can take a credit for the repair.  You can ask for a 1 year home warranty just in case it goes bad in the first year.  You can ask for any of the remedies above as well.

No, the seller doesn’t HAVE TO.  But those are reasonable requests in my opinion, though #3 is not a given for sure.

You have the right to ASK.  The seller has the right to say NO.  If people would be honest and only ask for legitimate items and appropriate remedies, no one would feel like someone is trying to club them over the head.  A home inspection is NOT a chance to take advantage of someone.  There are reasonable requests and unreasonable requests.

Ask yourself this?  Would YOU replace a 14 year old tank in that location if you bought the house 8 years ago, just because it is “past its life expectancy”.  If yes, then it is reasonable for YOU to ask.  If no, then maybe not.  Apply that Golden Rule to all items and you will be negotiating fairly.  If you are reasonable, you likely will get everything you should.  Maybe not everthing you WANT, but everything you SHOULD want.

EnergyStar means more than just appliances… that little blue insignia means "green"

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Last week my assistant, Nina, and I attended a class put on by Northwest Energy Star that frankly I was initially concerned would only cover the basics of knowing the benefits of energy efficient appliances.  Thankfully, my concerns were immediately put to rest as the class began and we heard what we’d really be covering – what it means to have a truly energy efficient home and the construction methods that get you there.   WHEW!!!!

A short tutorial about energy prices and how they’re impacting the sales and construction of homes was part of the beginning of the course and underscored information I’ve been reading about for years.  I was pleased to see for many people that they “got it

Get Preapproved before Memorial Day Weekend: More Changes with Fannie Mae

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Fannie Mae will be releasing a new guidelines for their AUS over the Memorial Day weekend of May 31, 2008: Version 7.0.    Loans submitted prior to Memorial Day with an approval via Fannie Mae’s Version 5.7 will be honored.   Fannie Mae is saying that there will be more Expanded Approvals (higher rates) than what we have experienced.   I’m not saying that’s good or bad…just that if you’re considering a mortgage, getting approved before the Memorial Day weekend could be to your advantage.  Here are just some of the changes:

Loan to values greater than 85%.  Private mortgage insurance is no longer considered a “mitigating” factor for higher loan to values.   The more equity in the property, the more Fannie Mae smiles upon you (this is a not a change, the pmi factor is).

“Authorized Users” on credit cards will no longer be considered.   It was not uncommon for parents to add their child to their credit accounts as an “authorized user”.   This may have been done so that the child could have credit available in the event of an emergency (picture a college student away from home).   Once people figured out that the timely payments made by the parent (or credit payer) was benefiting the “authorized user”, it didn’t take long for some people to actually sell their credit history on that account by allowing strangers to become “authorized users”.   

Debt to income ratios tighter.  “In general, the updates to the maximum allowable total expense ration in DU (Desktop Underwriter aka Fannie Mae) Version 7.0 will be more conservative…”  

Loan Type/Level of Risk.   With Version 7.0, Fannie Mae is associating levels of risk with varios products (from lowest to highest):

  • Fully amortized fixed rate mortgages
  • Fully amortized 5, 7 and 10 year ARMs
  • 6 month, 1 and 3 year ARMs and Fixed Rate Interest Only Mortgages
  • Interest Only ARMs and balloon mortgages

Version 5.7 viewed fully amortized fixed rate, fixed period (3-10 year) ARMs as having the least amount of risk with balloon and interest only mortgages having moderate additional risk.   Negative amortized mortgages were considered the riskiest…now they’re off the charts.

Condos are now considered a higher risk than single family detached.  Version 7.0 views one-unit properties that are not “attached condominiums” as less risk than attached condominiums and two-unit properties.  Three- and four-unit properties have a higher level of risk associated than condo and duplex properties. 

Bankruptcy, mortgage delinquencies and foreclosures.   A bankruptcy needs to be fully discharged and 24 months since the date filed.

If a borrowers credit report shows a mortgage that was reported 60 or more days delinquent in the last 6 months, they will receive a “refer”.  

If the borrower has had a foreclosure reported within the last 5 years, they will also receive a “refer”.    If the date of the foreclosure cannot be determined, if the foreclosure was filed within the last five years and has not been satisfied, the loan will be declined.

Self-employed borrowers will no longer be considered “an additional layer of risk”!   Hey…I have to end this on a positive note!  🙂

Expanded Approval is being pumped up.   Fannie Mae is anticipating more EA approvals.  An EA approval means that the borrower’s scenario is “less than perfect” or some prefer to say “A Minus”.  There are different levels of EA approvals (such as EA-1, EA-2, etc.).   Expanded approval also come with higher rates than a typical conventional mortgage as it’s risk based pricing. 

As Jillayne stated, guidelines will continue to tighten for a while with Fannie/Freddie and the private mortgage companies.  This is again, another reason for people, professionals and consumers alike, to learn all they can about FHA which may be an option to consider over an Expanded Approval and tougher underwriting standards with conventional mortgages. 

Buying a condo with a pending lawsuit

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This Old CondoI just received a call from an agent from another company regarding a complex with a pending lawsuit.  It is one of many calls I have received regarding the same complex.  The developer of the condo conversion project, now two years old, has been asked/forced to come back and make improvements (to the roof, I believe) and agents are scrambling to find a foothold.

One might think that the builder being made to come back and make improvements is a plus for present and future owners.  Whether the builder is coming back as a result of a lawsuit won, or the settlement of a lawsuit brought, isn’t the fact that the property is going to be improved a positive factor?

Not necessarily, at least not during the suit and during the improvement phase.  Why?  Because lenders do not like to finance condos in the midst of pending litigation.  The listed properties are stacking up.  The pending sales are not closing.  The agents being called by owners to list properties are calling everyone to see if the properties can in fact be sold at all during the lawsuit and improvement phase, before they agree to list them.

Buying condos during a period of pending litigation can be a wise investment for investors seeking to buy at rock bottom prices, holding them as rentals during the improvement phase, and then selling them when the “dust settles”.  But the investor buyer may have to buy them with cash, as lenders may not be wiling to lend. 

Sorry, no, I’m not going to tell you which complex I am speaking about here.  First because it’s irrelevant to the post, as the one I am discussing is just one of many in this situation from time to time.  Second, because I am going to call a few of my investor clients and suggest that they buy the best of these while they are going cheap.  If I tell you where this place is, it would not be in the best interest of my clients. If I blog about this compex by name, other investors who are not my clients may compete with my clients as a result of this post, driving the prices up for my clients.  I blog “transparently”, but never without first determining the positive and negative impact a post may have on my own clients.

I have always said that the best investment is buying into a condo complex that has received moneys from the builder to make improvements.  I have purchased a condo in the past on this basis myself.  BUT you have to be sure that the improvements will be paid for by the builder IN FULL!  The BEST improvements during your HOLD period…are the ones paid for by the builder or developer, and not the home owners, IN FULL, not in part. Even if the seller is going to pay the special assessment, that is not good. If the net result after improvements is a huge special assessment that will be paid out over a 15 year timeframe, increasing the dues substantially, then it is NOT a good investment.

A few recent examples from The Eastside.

One complex had substantial improvements paid for by the builder.  During the lawsuit phase, the units sold at a 16.8% discount.  During the repair phase they sold at a 10.1% discunt.  This is not considering the substantial appreciation during those years, so the discount was more like 25%. There was NO special assessment incurred.  The dues did not increase as a result of the repairs.  The builder was forced to improve the property at no cost to the existing homeowners.

Prior to the suit, the units were selling for $345,000. (Downtown Kirkland).

During the lawsuit phase they sold for $287,000. 

During the repair phase, when they were financeable (suit settled) but cosmetically VERY unappealing, the units sold for $310,00

When the improvements were completed, the units sold for $525,000 partly due to appreciation during the lawsuit and repair phase that took many, many months, and partly due to the increased comsmetic appeal and other resale certificate improved factors.

In 2008, in a weaker market, the units are down from $525,000 to $495,000, but the investors who purchased during the lawsuit phase at $287,000 still have appreciable gains even during a weak market phase.

I wanted to include another example where the property value goes DOWN after improvements instead of up.  That happens when the builder doesn’t pay all of the amount for the improvements, or the lawyer keeps 1/3 of that money, causing a long term special assessment after repairs.  But I have an appointment at 1:00 to present offers on one of my listings.

Just know that the values CAN go down instead of UP after improvements, the key being the shortfall between builder provided repairs or monies, and the cost of the improvements. 

Sellers and Agents: Don't Rule Out FHA Buyers

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I was just working on a finance flyer for a listing agent…something I haven’t done in years!   Anyhow, the home is priced at $442,000 and she requested a 30 year and 5/1 ARM both with 20% down for scenarios…I added FHA at 3% down.  The property is in King County and would qualify under the FHA Jumbo program.   Until the end of the year (I suspect the “economic stimulus” loan limits will be extended beyond) Sellers have an opportunity to expose their homes to buyers beyond the normal “jumbo” or conforming market.  

Here’s a comparison:

30 Year Fixed with 20% down at 5.75% (APR 5.902%).   Principal and interest payment = $2,064.  Cash needed to close = $88,400 plus closing costs of approx. $6,000 (the rate is priced with 1 origintation/discount point) plus prepaids.    This rate requires a mid credit score of 720 or higher. 

5/1 ARM-LIBOR with 20% down at 5.25% (APR 6.810%).  Principal and interest payment = $1,953.   Cash needed to close = $88,400 plus closing cost of approx. $2,350 (the rate is priced with zero discount/origination points) plus prepaids.   This rate also requires a mid credit score of 720 or better.

FHA-JUMBO 30 Year Fixed with 3% down at 6.25% (APR 7.030%).   Principal, interest and mortgage insurance = $2,850.64.   Amount needed to close factoring down payment and closing costs is $20,350 plus prepaids.   FHA is not credit score sensitive (yet) and buyers who are truly FHA approved have done so via a “fully documented” loan.   They’re pretty darn serious!

When you compare 20% down conforming to the 3% minimum down required for FHA; it’s the difference of having approx. $100k for your down payment and closing costs to having a quarter of that.   Some folks have the income (they still have to qualify with FHA) but they’re shy on that kind of savings.   Maybe it’s their first house or perhaps their savings is tied into their retirement or children’s college fund.   These are buyers you don’t want to rule out.

FHA Jumbos allow buyers to have a loan amount of $567,500 in King, Pierce and Snohomish Counties with as little as 3% down payment (some lenders require 5% down).    With second mortgage’s evaporating and fewer “piggy back” options available, buyers who have less than 20% down where their loan amount will be over $417,000 will be considering FHA as an option.    For example, sales price of $625,000 with 10% down (loan amount $562,500) would be an excellent FHA JUMBO candidate…only offering cash or conforming products will pretty much limit your buyers to those with 20% down.   FHA buyers do not have to be minimum down…they can be less than 20% down or have a credit score or perhaps one of the borrowers has a mid score of 679.

I’ve written before about why Sellers should consider FHA…however with the temporary expanded loan amounts…now it’s even more compelling.   

Sunday Night Stats – Just the Facts

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King County Condos

Active Listings: 3,917 UP 37 – median price $324,900 – MPPSF $321 – DOM 55

In Escrow: 930 – DOWN 10 – median price $299,900 – MPPSF $304 – DOM 48

Sold YTD : 1,886 – UP 110 – median list price $289,625 – median sold price $282,642 – median PPSF $288 – DOM 47

Sharing this breakdown info I needed to do for my own business.  Condos in parts of Kirkland, Bellevue and Redmond

Condos Sold YTD:

98033: median sales price $479,500 – DOM 59 – MPPSF $334

98034: median sales price $250,000 – DOM 49 – MPPSF $263

98007: median sales price $269,500 – DOM 37 – MPPSF $286

98052: median sales price $320,500 – DOM 56 – MPPSF $285

Issaquah: median sales price $294,950 – DOM 30 – MPPSF $288

King County Residential

In Escrow: 2,704 DOWN 109 – median asking price $431,850 – DOM 41 – MPPSF $207

SOLD YTD: 5,736 UP 322 – median sold price $440,000 – DOM 51 – MPPSF $221

Both of those median price per square foot numbers are down from last week.

Actively for sale 11,453 UP 222 – MPPSF <$800,000 is $220 – MPPSF >$800,000 is $337

So inventory is up 222 and in escrow and closed combined are up 213, so still not selling faster than they are coming on market.  I’m thinking at some point that balance has to tip in the other direction.  Running pretty close this week.

Stats not compiled or published by NWMLS. (Required disclosure) 

Here comes the sun!!!

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“Little Darling…it’s been a long, cold-lonely winter.  Little Darling, it seems like years since it’s been clear.  Here comes the sun,”

…so “they”: say.  I’m delayng this listing one day from Wednesday to Thursday, hoping for a bit of blue sky and sunshine.  My iPhone tells me it will be sunny from Thursday until past Sunday!  Do I dare believe it!?!?  Oh well, I’ll have some backup gray sky photos just in case.

Planning to run around taking as many sunny photos of other listings on Thursday and Friday too.  Anyone with snow photos ought to do the same.  Thursday is Picture Day..with Friday as a backup.

This morning I was singing Sesame Street’s “Sunny day, everything’s A-OK” but it was driving Kim nuts…so I switched to the Beatles.

*****UPDATE******** yes the sun came out!  Replacing the gray day photo with sunny photos!

That’s pretty much the identical photo that I had, but with a BLUE sky.  YAY!!!

This one that the owner took is awesome.  He climbed on a log in the creek.