Category Archives: General

A year later – A DUI case gets its day in court and the victims get their day in the paper

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As an American, I am happy in general that we have the kind of legal system that starts out with the belief that a person is innocent until proven guilty. However, there are some parts of our system that drive me crazy – such as how we deal with drunk drivers. Many of the readers and writers here on RCG know that last year my parents were hit and almost killed by a drunk. A chronic drunk as we found out throughout the course of the year. My parent’s accident was this guy’s 6th DUI and he’s received another one since then – yes, his 7th, while on a suspended license from this case.

As a reminder, here is the aftermath of my parent’s car, so you can imagine the damage inside to them.

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I started writing a lot of articles focused on insurance, durable powers of attorney, and estate planning partly due to the issues we were dealing with as the result of this accident.

Well, April 9th is the sentencing hearing for the guy that hit my folks. As long as they don’t extend it again like last time. So, I’ll be leaving Seattle yet again to attend the hearing and to get a chance along with the rest of my family to voice my opinion on the topic and how it has affected my life. But all of this will be held in a room that no one from the outside will ever see or hear.

My brother, Mark, has been instrumental in doggedly searching for a way to bring the results of the case to the public’s attention. Not because our family is hungry for “our 15 minutes” – far be it. This is an ugly and painful subject and the goal is to bring to light the changes needed in “the system” so to speak. For those of you who have asked about how my parents are faring after the accident – take a look at the article that came out today in the Wichita Eagle. The online version has more content than the printed paper and will show you a video of my parents, letters they’ve written to the judge, and more. I hope some of our RCG readers will take the time to view these items and learn a few lessons and perhaps pass them on to others.

In Tribute to Charlton Heston

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Ben HurI remember the night my whole family went to see Charlton Heston in Ben Hur at the drive-in theater. I have often wondered why this memory has clung to me given I was barely 4 years old at the time. I often can’t remember a movie I saw last week. Why does Charlton Heston and Ben Hur remain as one of my earliest childhood memories?

Today as we remember the life and times of an actor most of us have known our entire lives, I would like to take a moment to bow my head in tribute to Charlton Heston. It just dawned on me why this memory is so important to me. We loaded up the car with our own home made snacks, Mom and Dad, five children at the time. There would later be 7 children, but no more trips to the drive-in theater.

Shortly after our family saw Ben Hur, my sister was stricken with spinal menengitis. She was paralyzed for awhile, and my mother’s life became one of constantly caring for Mindy, which she does to this day. Our family would never be the same as that night. Perhaps that is why I remember the scene shown. Charlton Heston in the galley working up a sweat vs. some of his more magnificent achievements in the movie.

I think it is time for me to rent Ben Hur and go back to that time and remember Charlton Heston, Ben Hur and my family. Bow my head and say “thanks for the memories” to a man whom I have known most of my life, though he knew me not. Had he not starred in one of the greatest movies of all time back in 1959, my family might not have loaded up that beat up chevy station wagon, and had our first and last trip as a family out for some fun.

Charlton Heston: October 4, 1924 to April 5, 2008

Geekier than Geek Estate & Sweeter than Sweet Digs

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Sometimes, you find something in your own back yard that’s an unexpected & pleasant surprise. Like that hole in the wall teriyaki restaurant right by the office, I recently stumbled upon Redfin Developer’s Blog. And since that day of first discovery, I’ve come back often yearning for more.

I just wanted to thank the engineers at Redfin for blogging about their day to day life as web software engineers. As a fellow software engineer, I always like knowing “how they did it that”, “what are they up to now”, or even “WTF were they thinking” (just kidding on that last one guys).

Even though I tend to prefer SQL Server for my RE.net apps (I freely admit that I am biased), I really enjoyed their MySQL to Postgress & Elephant vs Dolphin posts (perhaps I have a database fetish?). I also learned something new & valuable from their CSS Sprites + Firefox Content Preferences = Site Go Boom post. Even the folks without software engineering degrees would probably enjoy their How to search Redfin directly from IE and Firefox & Syndicate Redfin Listings in WordPress posts.

Anyway, if you’re developing a RE.net web site, (or even if you aren’t), I think their developers blog feed belongs in your feed reader. Then again, I’m biased.

PS – I can’t believe you guys don’t have Coding Horror on your blogs you like list yet.

Don't Sign That Listing Contract!

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The contract that an owner signs to put their home on the market is much simpler than the scads of paperwork that come around later when there is an offer on your home.

Here in the Seattle Area, you want to pay close attention to one tiny little portion of the contract before you sign it. It’s very simple to clarify for you, your agent, the buyer and the buyer’s agent, exactly what the commission arrangement is.

Here’s how VERY easy it is. On the main agreement, one page, there is a line of about one inch in length. Let’s say you are agreeing to pay your listing agent 2% and offer 3% in the mls to the Buyer’s Agent. Instead of writing in 5% on that line, just write in what it actually is “2% + 3% to the buyer’s agent”. Pretty simple. Takes about 20 seconds.

That extra 20 seconds will make it clear to you, your agent, the buyer and the buyer’s agent, that the listing agent is NOT to get that +3% in the event there is no buyer’s agent. If the listing agent is agreeing to charge 2% to represent the seller, then there’s no reason why that amount should increase to 5% if at the end of the day they only represent the seller.

There’s plenty of time when the buyer is actually “at the door “to decide who will get that +3% if the buyer has no agent. Maybe the agent should get some of it…maybe the buyer should get all of it…maybe the seller and the buyer will split it 50/50, maybe the buyer and the seller and the agent will split it into three pieces. Lots of options depending on the circumstances at hand at time of offer and acceptance.

But DO NOT write the commission % in as a TOTAL of both your agent’s fee and the unknown, absent buyer agent’s fee. Just write in 2% to XYX listing company and 3% to the company who is REPRESENTING the buyer. This way, if no one is representing the buyer, the extra 3% doesn’t become a windfall profit, without your say so.

Date My House – Saturday on TLC

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date my house 1Yesterday I had the opportunity to interview Bob Guiney and Nadia Geller about the upcoming premier of “Date My House” airing this Saturday, April 5th at 8:30 p.m. on TLC.

Bachelor BobSome of you may remember Bob as “Bachelor Bob” who after not getting a rose from Trista on The Bachelorette, went on to star in the 4th episode of the 1st season of The Bachelor. I expect “Date My House” to be a fun watch.

I’m a little disappointed that the thrust of the show seems to come from the standpoint of helping poor, Desperate Sellers get someone to buy their house. Seems this was a great opportunity for the focus to turn more on buyers of homes being able to check out their future home more thoroughly. During the hot real estate market, too many people bought homes so quickly that they really didn’t have a chance to get to know the home they were buying. As consequence, we are starting to see some lawsuits popping up about the REALTOR Owner/Seller’s lack of disclosure about the Obscenity Screaming; Potato Throwing Neighbors, and buyer remorse suits blaming their agents for having paid too much for their home.

Instead the show appears to be built around a homeowner being so desperate to sell, that they are inviting people in for a longer “first date” to get to know the house better and “fall in love” with it. Did the buyers get to spend the night? Bob and I had a chuckle over the chances of the 12 buyers getting to sleep over by end of season filming being about the same as the odds of a guy getting to sleep over on a first date. A few did…but most didn’t.

As a buyer, would you appreciate an owner inviting you to hang out at their home for a long period of time? Would you appreciate the opportunity to have a party there for your friends to get their opinion? Have a sleepover? Spend a week maybe? Or would you view that as an act of desperation and say, I don’t want to buy a house where the owner is that desperate. Does a car salesman offer you a test drive in the hope you won’t want to get out from behind the wheel and back into your beat up Chevy? Would you be afraid to spend the night at a home for sale for fear that going back home afterward would be such a let down, that you would be tempted to buy the house?

Maybe you want to see the show first. But let us know. Do you see dating a house as a viable option for buyers and sellers in the future?

Buying without an Agent: How to get that 3%

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[Updated 3/2016]

This post is not legal advice. For legal advice, consult an attorney in person and do not rely on a blog.

I’ve written elsewhere about the practical steps in buying without an agent. The Big Question, of course, is this: Will that save me any money? If it does, then every buyer should at least consider using a real estate attorney rather than a real estate agent to buy a home.

As an initial matter, you must understand where the money starts and where it goes in a typical transaction. It starts, of course, with you, the Buyer. It’s not uncommon to hear someone say, “Oh, sure I used an agent to buy my house — he was free! I didn’t pay him anything!” As a practical matter, that is just not true .

Remember that, of all the parties involved in the transaction (seller, buyer, listing agent, buyer’s agent, title insurance, escrow, lender, mortgage broker, etc.) only one brings money — you, the Buyer. Everyone else gets paid from the Buyer’s money. So while you may not pay your agent directly, you most certainly do pay him out of your pocket (or, more accurately, out of the money you have borrowed from the bank, and which you must repay, with interest).

And exactly how does your agent get paid with your money? Well, the seller previously signed a contract with the listing agent where the seller promised to pay a certain percentage in exchange for the agent finding a buyer. The “typical” percentage paid is 6%, although there is some degree of variability with figure. Per the rules of the MLS, that commission is then shared with the buyer’s agent when the house is sold (or, more accurately, with the buyer’s broker, but I won’t get into that for simplicity’s sake). Most sellers and listing agents agree to give 3% to the buyer’s agent, on the theory that anything less will attract less interest from buyer’s agents (I’ll get into the ethical issues of that dilemma in a future post).

The listing agent has a contractual right to the full commission. If you go without an agent (e.g., drafting the offer yourself (discouraged) or using an attorney), then the listing agent will not need to share any portion of the commission. While the agent has no legal obligation to accept anything less than the full commission as set by the listing agreement, the agent is free to accept less than full payment if he is so inclined. So, the buyer can structure the offer such that, if the listing agent cooperates, the selling price is reduced by 3% (or whatever percentage was to be shared with a buyer’s agent). The seller will presumably lean on the listing agent to reduce the commission, as everyone gets what they expected out of the transaction.

All that said, clearly the seller and not the buyer pays for the buyer’s agent – suggesting otherwise is simply a helpful analytical approach. But equally true, the buyer can benefit by reducing the seller’s anticipated and already-accounted-for costs. When the buyer does so, the seller is likely to pass most if not all of those savings back to the buyer in the form of a reduced price.

So regardless of the perspective, in the final analysis a buyer can pay less by reducing the fee paid to the buyer’s agent. So smart buyers do so by skipping an agent and reducing their offer by the 3% to be saved by the seller.

Finally, what about all of the extra work for the listing agent? Yes, there may be a more work, such as being there for the inspection since there is no buyer’s agent. But don’t forget that, in any one transaction, a listing agent makes a very fair fee. What is the average amount of time a good listing agent invests in a listing? And, assuming a 1.5% commission to the agent (after the broker’s cut), what is the average fee? Given a median home price of $400k, the agent will make $6k. Assuming 50 hours of time, that’s $200 per hour. A little “extra” work (it is, after all, all part of the job) is not unreasonable if necessary to secure that amount of compensation.

So, if you’re thinking of buying a house, consider ALL of your options and figure out what is best for you. If you want to save a lot of money (we’re not talking pennies here), consider using an attorney instead of an agent (you should absolutely use a professional given the value of the transaction, and realistically these are your two options).

Zillow Launches On-Line Mortgage Rate Quotes

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Earlier this month I wrote about Zillow stepping into the mortgage rate quote arena…well tonight’s the big night. They are scheduled to launch at 9 p.m. PST. I’m honored to have been included as one the mortgage professionals to review their product and it will be interesting to see how it develops.

Zillow is not creating a mortgage company; they are attempting to create an online tool consumers can use to shop lenders. Once I get past my first objection of rate shopping, here are some of the two features I like the most:

The consumers privacy is protected while shopping–the Loan Originator will not see their names and they do not provide their social security number. This is unlike other online rate-comparison tools where a consumers private information is resold to calling centers all over the world.

Consumers will have the ability to shop lenders by rate, cost and the Loan Originator’s Zillow reputation. Zillow has a rating system from 1 (bad) to 5 (great) that consumers can use to grade the LO. So let’s say LO Sally has an incredible rate and low costs but she’s rated a 1 vs. LO Joe who has a competitive rate and cost with a 5 rating: the consumer can make a choice between the two (or however many LO’s have submitted a rate quote). The consumer will be able to review the LOs lined up in an easy to read column format with this information easily viewed.

My only real concern, as I’ve voiced many times is that shopping for rate will not always land you the correct mortgage. The wrong mortgage with what appears to be a low rate/payment may be a very expensive mistake. Especially in this volatile market where mortgage rates can change 3-5 times per day. Any rate quote may be invalid the moment it’s sent to the consumer if the rate is not locked…this is true with Good Faith Estimates as well. Speaking of GFE’s, Zillow Mortgage quotes are not the same as a GFE–I do recommend that consumers who are seriously considering working with any of the Loan Originators participating on Zillow Mortgage obtain a Good Faith Estimate with the Federal Truth in Lending.

I’ll still stick to my guns and say that referrals from the people you trust and respect are the best way to select a Mortgage Professional…however for those of you that have a need to shop rates on line, Zillow’s mortgage tool could be the ticket.

FHA Jumbo

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Update 10/18/2008: This post was written in April 2008 and since then, many FHA guidelines have changed.  This post has been updated, however it’s very important to not rely 100% on mortgage information from what you read on the web.  Our guidelines are changing too quickly these days!  FHA Jumbo loan limits mentioned in this post are effective through 12/31/2008 and will be reduced to 115% of the median home value 1/1/2009 (estimated at $522,000).  Click here for an update on FHA guidelines.

Update 2/27/2009:  Lenders are applying a minimum credit score of 620 for FHA loans and the 2008 loan limits are returning.  Is it possible for me to chop up this post any more?

I thought it might be helpful to provide some information for you to use for when I quote rates on Friday for the FHA Jumbo mortgage. There are other criteria to be considered beyond looking at the rate. You may not have considered FHA before due to loan limits, now it’s more attractive: how else can you buy a home priced at $584,000 with 3% down and credit scores below 720?

FHA Mortgage Insurance

FHA charges both upfront and monthly mortgage insurance regardless of how much money you’re putting down. Seriously, if you’re putting 50% down and using an FHA insured mortgage, you’re paying mortgage insurance. FHA mortgage insurance does not cancel out automatically when your home has an 80% loan to value. You will pay the FHA mortgage insurance for a minimum of 5 years and 78% of the original value (lesser of sales price or appraised value) of the home.

Upfront Mortgage Insurance

Upfront mortgage insurance for a FHA insured mortgage is 1.5% 1.75% of the loan amount for a purchase. With an FHA mortgage, you have a base loan amount and the adjusted loan amount (after you add in the upfront mortgage insurance). For example, if your base loan amount is at the current King, Snohomish and Pierce County level of $567,500, your adjusted loan amount will be $576,012 $577,431 (567,500 plus 1.5% or 8,512 1.75% or 9,931) . Once upon a time, FHA upfront mortgage insurance could be refunded if the mortgage was terminated early with a balance of the mortgage insurance premium remaining, this is no longer the case for new FHA mortgages (which I believe is part of the reason FHA fell from favor during the subprime boom). The adjusted loan amount is what your principal and interest payment is based on. So if the rate going for a FHA Jumbo was 6.500% (this is not a rate quote; this is for example only), the principal and interest payment would be $3,640.79 $3,649.76 (576012 577,431 amortized for 30 years at 6.5%).

Monthly Mortgage Insurance

Yes…as if paying that 1.5% 1.75% upfront MI wasn’t enough…FHA has monthly mortgage insurance as well…the good news is that it is at a low rate compared to traditional private mortgage insurance (especially factoring in a jumbo loan amount, higher loan to value and credit scores below 720). The rate for FHA mortgage insurance is 0.5% 0.55% (for a purchase) of the base loan amount. Using our current example, your monthly mortgage insurance would be $236.46 $260.10 (base loan amount = 567,500 x 0.5% 0.55% divided by 12).

FHA is a fully documented mortgage loan. You will need to provide 2 years of W2s (tax returns if self employed) and your most recent paystubs covering 30 days of income. Any gaps of employment during the past 24 months will need to be explained. There are no income limitations and the DTI is roughly 43%.

Low Down Payment

FHA Jumbos allow for as little as a 3% 3.5% down payment. This means you could be a home priced around $585,000 with the base loan amount of $567,500. Your down payment must be fully sourced and seasoned. Be prepared to hand over your last 2-3 months of bank statements and any asset accounts (all pages) and to explain any large deposits that are not from your source of income.    The Seller may contribute up to 6% towards closing costs however the buyer has a minimum investment required of 3% 3.5%. Family members can gift funds towards closing costs as well which counts towards the buyer’s required 3% 3.5%.

Update: Effective January 1, 2009, the minimum down payment will be increased to 3.5%.

Speaking of documentation…

I’ve covered FHA before…and the guidelines for traditional FHA are pretty true for the temporary Jumbo FHA mortgages as well. Here are a few more pointers for our current market:

* FHA does not have price or loan to value limits for geographical areas determined to be soft or declining.

 * FHA does not have credit score risked based pricing for credit scores above 620. (Lenders may have their own risk based pricing for credit scores under 620).

Sellers with homes priced around the new FHA jumbo loan limits should consider buyers utilizing FHA financing. A sales price of $584,000 would allow for a minimum down FHA insured mortgage. However a home buyer could always use more towards down payment and opt for a FHA mortgage meaning that if your home is priced higher, you may still want to consider allowing FHA buyers as they may be considering FHA over the price hits conforming has if their score is below 720.

Condo’s are acceptable for FHA financing as well. They may not be on the FHA approved list, however, if the condo meets the requirements for a “spot approval”, they can still qualify for FHA financing.

Act fast…FHA Jumbo is only here until December 31, 2008.  loan limits will be slightly reduced on January 1, 2009.

There's No Fool Like An April Fool

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If your home has been on market for more than 100 days, it may be a good day to take a hard look at why that may be. Being wrong from April 1st until June 30 is a whole lot worse than being wrong from January 1st through the end of March.

1) Write down the 5 best things about your house and the 5 worst things about your house. If you can think of 20 things that are good about your house and can’t come up with 5 things that are bad about your house, you likely are in the wrong mental space to sell your home. In my experience, owners who can’t get themselves to say one bad thing about their house, out loud, take a much longer time to sell their home.

2) If you are priced at anything 09 or 59 change that to 00 or 50 right now. $259,000? Make it $250,000. $309,000? Make it $300,000. $459,000? Make it $450,000. Someone who didn’t pick your house to go and see in the $450,000 to $500,000 category, may have picked it if it were in the $400,000 to $450,000 category. Don’t miss the boat by being in the wrong price tier.

3) Remove all words from your public remarks section that are negative. Don’t be unique or unusual. Don’t be cute or cozy. Don’t tell them the chandelier does not stay.

4) If you have had no showings in the last 20 days, stop waiting for “just the right person”. No showings equals wrong price.

5) If you have had 30 people come to see your house and no offers, your price and mls presentation are probably right and what is wrong is at your house after they get there. Smell? Smell is a big one, especially if you have pets. Dark? Turn the lights on…Yes, ALL of them. Did they say “you have a lovely home” as they were leaving? That usually means your home is too personalized and they visited you. They couldn’t picture anyone there but you. Remove the personal photos and your “treasures”. Give them a blanker canvass to picture themselves in.

If you have been on market for 100 days, don’t just say “Oh goodie! It’s April 1. NOW someone will buy my house because it’s Springtime. Change something…today.

Buyer Agency – Don't pay someone to "open a door"!!!

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Don t pay for door openersYesteday I received an emailed flyer with this subject line:

“PRICE REDUCED 450K MUST SELL”

While that was a 26% price reduction, looks like someone had bought it for the higher price but that sale was cancelled and the property is back on market at 26% less. What can you say besides thank God that sale didn’t go through?

The day before yesterday, on Saturday, I was showing 6 properties. Virtually all of the properties I chose to show were overpriced by $100,000 to $150,000. 4 of 6 were also $100,000 or more higher than my buyer client’s price range. But I showed them because I am pretty sure most if not all of them will sell for less than my buyer client’s cap price.

Just 7 or so houses from the first property we looked at there is a house priced at twice as much that has been reduced by $350,000 since the first of the year, and another nearby just reduced by $150,000.

Technically speaking there are 75 properties on market in my client’s price range in the area where he wants to live. Only 6 properties were worth showing, and 4 of those were priced over the price range, but believed by me to be in his price range as to what it will sell for and what it is consequently “worth” vs. what the sellers are asking. Two were for sure…too were iffy.

Client’s often ask if what a Buyer’s Agent does is “negotiate”. NO! It does you no good to get $100,000 off of a property that is going to sell at $400,000 less. In that same price range from my Saturday and Sunday experiences, all homes sold in the last six months sold at 98.9% of ASKING price. Relying on a buyer’s agent is NOT about getting a house at 98.9% of asking price, or even at 90% of asking price. It’s about knowing that 73 of the 75 properties on market are overpriced and by how much.

Do NOT pay anyone 3% of the sales price to open the door. If all you need is someone to open the door, hire an agent with a license and a keybox and duct tape on their mouth and pay them by the hour, and do not listen to their advices as to “how to negotiate a great deal”.

If an agent can’t tell you what the house is worth, but instead promises to be “a great negotiator”…run away as fast as you can.