Should You Pay More For THIS House?

[photopress:polly.jpg,thumb,alignright]When determining how to structure an offer on a property, one of the key considerations is, “How scarce a commodity is this home?” How scarce it is to you, depends on the parameters you have set, and why you like this particular home, which varies from person to person.

If the property is unique because it has the largest lot in the area, then the seller is correct in putting a premium on this feature of the home. But, if why you are buying it is NOT because it has a large lot, then maybe you should not be the one to pay the “justifiable premium”. A justifiable premium for the seller, is not necessarily a justifiable premium for the buyer.

Often the seller will dramatically highlight their “premium” feature, such as a large lot, when they should not. I remember showing a home, with the owner in the home, and they kept raving about how huge their lot was. I could tell that the buyer had totally tuned out and had no interest in the property, but we couldn’t leave because the owner was going on and on about the size of the lot. When we got outside the buyer said, “Not me! I’m not spending my life maintaining the biggest lot in town!” I asked if he would have been worried about that just by viewing the property, without the seller’s influence. He said no, but now that I have this picture in my head of spending all of my weekends mowing the grass and maintaining the landscaping, AND paying MORE for the house for the “privelege” of it sucking up all of my free time, I just can’t see myself in that home. Otherwise, I may have bought it, but let’s just get out of here.

So the seller may indeed “deserve” more money for his house than anyone else in town, because he has the largest lot. But that does not mean that every buyer should offer that premium, in fact some will discount it, for the very reason the seller is raising the price. The buyer may deduct for the extra maintenance of the larger lot, while at the same time the seller is adding a premium for the extra land.

The photo above is in reference to “our Polly” who had the best question in the month of August. Before responding to a counter offer from the seller she asked, “What is the likelihood that you could find us a similar home within the next 60 days?” I was knocked out by this fabulous question! If only two of those have sold in the last year, then the liklihood is slim to none. If 40 of them have sold in the last six months, then you can play hardball with the seller. Excellent question to ask while in the middle of negotiations.

More Bed Hopping with the Competition

  1. Matt Goyer, of Urbnlivn fame, just accepted a position at Redfin. I wonder if he’ll keep up urbnlivn, or quit in favor of the Redfin blog like Rob. Just reading that article about Rob reminds me how much things have changed in the past six months…
  2. Anthony Allan put together a nice post on five steps to Realtor nirvana.
  3. Tim shows the Seattle Bubble is more popular than Rain City Guide! And wants a front-page link from RCG in the same post! I like Merv’s approach to giving site stats better (i.e. keep me out of it!) 🙂
  4. Meanwhile, the classic over-achiever (who happens to be a damn good writer) follows Tim’s lead today and shows me up by taking my idea (list of 10) and doing it better
  5. Niki let me know about the massive updates that he just unrolled at HomeThinking. He’s got a pretty comprehensive database of sold listings and my understanding is that he is attempting to get people to review agents for as many transactions as possible. It might sound unintuitive for agents to support a site that allows users to comment on them, but Nike (and Mike of Altos Research) seem convinced. Niki also mentioned a bunch of interesting features including a GeoRSS feed of his data so that it can be syndicated far and wide.
  6. I also noticed that HomeThinking is syndicating Real Time Pricing Trends from Altos Research in selected markets. Here’s their chart for Seattle:
  7. Prices for SEATTLE

  8. Osman writes about an interesting “green” development in Aurora, CO that would “encompass nearly 3,000 housing units, 1.7 million SQFT of retail, and 2.8 million SQFT of office space” if fully built out!
  9. Remembering Katrina.
  10. Google now allows you to download and print out old books that they’ve scanned from some of the nations largest libraries. Very cool. Not only that, but they recently introduced a news archive search that has scanned 200 years worth of news. Wow!
  11. Not only is Noah is off enjoying a trip in Europe at this moment, but he should be officially mawwied by now. Congratulations!

Agents & Loan Officers to communicate regarding seller-paid closing costs

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(Editor’s note, Tim jumped the gun and posted this article by his wife, Lynlee, before I had a chance to set her up as an author. As soon as I have it set-up, I’ll give her the proper introduction.)

I’m writing this because of numerous problems I have encountered in regards to seller paid closing costs. It has been a trend for buyers to increase the purchase price in exchange for sellers paying buyers’ closing costs by the amount of the price increase. For example, we commonly have transactions where the buyer offers $10,000 more than the listing price and the seller will pay up to $10,000 of the buyer’s closing costs.The financing addendums used in our area specifically indicate that the seller credit may be applied only towards actual closing costs/pre-paids (interest,taxes, HO Dues, etc). The problems that we have encountered occur when the closing costs are less than the amount the seller agreed to contribute.For example, if the seller agreed to pay up to $10K, and the closing costs only come to $8K, then the buyer is looking to get the difference in some manner. Buyers get extremely upset at their agents when they have increased the purchase price by $10K and they are only receiving a credit of $8K. Again, the seller can only pay the actual closing costs.

Suggestions to avoid this problem and reduce obvious tension created by having escrow call the parties involved at the very last minute (which by the way, is usually the day or two before closing):

  • Have the buyer get a good faith estimate from their loan officer BEFORE determining what the seller credit should be.
  • Agents, MAKE CERTAIN that the loan officer knows the amount of the seller credit. If the seller credit will exceed the closing costs, have the difference applied towards a loan discount fee to buy down the interest rate. THIS SHOULD BE DONE WELL IN ADVANCE OF CLOSING DOCS SENT TO ESCROW. (I know many escrow folks may thank us for saying this) 🙂
  • The difference CANNOT be used to reduce the purchase price. This would require the loan to go through underwriting again.
  • Agents need to understand the ramifications of increasing the sales price and having the seller pay for buyer closing costs that may not meet the intent of the parties.

When this problem occurs the common knee-jerk response by the agents to escrow is “why didn’t I hear about this sooner.” Escrow’s response is typically, “we agree.” 🙂

It is always better to “anticipate” problems that can occur and work through issues including being receptive to suggestions by your loan officers and other real estate professionals rather than being “reactionary” when one is in a pickle that is entirely avoidable.

Note: This is general in context and is written primarily for Washington State

Sharing the spam – Is Zillow going to China?

[photopress:spam.jpg,full,alignright]I got an interesting piece of investor spam yesterday. This one was so interesting, I figured I share it and give somebody a good laugh or chuckle. Apparently they are talking up a company in China that has “pilfered every costly lesson learned by Rich Barton and pals… plus every breakthrough technology Microsoft gladly spent $100 million to develop their own business with optimized Rich Barton’s billion-dollar baby.”

I had lunch with some of the folks from Zillow today. Even though they know Rich Barton better than I do, they didn’t even know about this opprotunity! They also said, they wanted in on the action… 🙂

Anyway, here’s my spam for your reading enjoyment…

Rich Barton Spam

And if you figure out what exactly they’re talking about, let me know. 😉

10 things I learned from my stats tonight

It’s been a long while since I posted about traffic on RCG. Two reasons come to mind… One, I’ve been swamped in starting my new job and never got around to updating my excel sheet and two, I knew we weren’t seeing much growth, so what’s the point 🙂

However, I took a little time out tonight to play around with RCG stats and I was actually surprised (in a good way!).

First I’ll give two charts and then I’ll explain what I learned from my research. The first chart looks at visitors and the search engines that they are coming from, while the second chart compares the growth in unique visitors to the total visitors to give an idea of how many people are returning to the site on a regular basis…

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  1. While traffic may not be growing exponentially any more, we’re still gaining new unique visitors at a relatively healthy clip. (If you take out all the Zillow-hype related traffic in February of this year, then the chart would look a lot more like exponential growth! 🙂 )
  2. Google provides a majority of our unique visitors (almost 15K hits last month alone) and far outweighs any other traffic source (it is all organic traffic as I don’t spend any money on AdSense).
  3. MSN and Yahoo still have not figured out how to parse through the glut of Seattle real estate content in order to drive more traffic to RCG! 🙂
  4. The ratio of total visitors to unique visitors has always hovered between 3.0 and 4.0. This tells me a fair number of people continue to return to RCG and it increases as we attract more unique visitors. It also tells me we haven’t found the viral “secret sauce” that causes either a ton of unique visitors (who could care less about a majority of our content) or a super sticky feature that causes new visitors to come back at a higher rate.
  5. 61% are using Internet Explorer, 23% are using Firefox. The rest go using “Unknown” (8%), Safari (4%), and others…
  6. The top 10 search phrases (like [Seattle Real Estate] and [real estate blog] account for a combined 7.2 of all search engine traffic. The other 92.8% of search engine traffic comes from more obscure phrases. (Think Long Tail!)
  7. Traffic is highest around lunch (between 11am and 2pm).
  8. Mondays get hit the hardest while Saturdays are the slowest days on RCG.
  9. Seattle Bubble (404 hits), Ardell (399), and Bloodhound (384) are the three blogs that sent the most traffic to RCG in August!
  10. Google analytics tells me that of all the unique visitors in August, 1,333 had been to RCG more than 200 times!!! (4,710 unique visitors have been to the site over 25 times).

Negotiating the Buyer Agent Fee

[photopress:swan.gif,thumb,alignright] Greg Swann over at Bloodhoundblog wrote a lengthy piece on his feelings with regard to changes that are needed in the real estate industry.

I happen to be writing an offer as I write this, actually waiting for a buyer client to come over and sign it, who was the first client with whom I negotiated the fee at first contact over coffee. That is not my normal scenario of negotiating the buyer agent fee, as I generally like to see at least three homes, of my choice, with the buyer before having the discussion regarding commissions.

I like to see how they look at property, what types of things bother them, how many and what kinds of questions they ask, etc… Just as I need to see a house before I know what I would charge the seller, I have to have some idea of the level of difficulty involved with the buyer attaining his objectives, before I can establish a reliable fee base.

So while I do not totally agree with Greg that a buyer should, or even can, negotiate a fee before seeing any homes, his article is well worth reading. I plan to read it again more thoroughly after this contract is signed 🙂

I will mention, that this particular client and I renogotiated the intital fee we came up with over coffee. So breaking my rule of not looking at houses first, was not a good thing. Having some experience with the agent and vice versa, is the best way to establish a fee that will work for all involved.

When is it appropriate to use environmentalism to stop developments?

Editor’s note: Today, I’d like to welcome Jon Ribary as the newest contributor to RCG. With one of our other contributors, Eileen, he owns LTD Properties in Seattle. When I first started blogging, Jon was an early follower of RCG and began developing an online mapping tool around the first time I started gHomes. Jon’s take on real estate is from a slightly different perspective in that, first and foremost, he is a developer of land as oppose to an agent. In a constant effort to explore new areas of real estate, I look forward to seeing where Jon takes us!

A recent article from the Snohomish County’s Herald Newspaper got me thinking about the fine line between “preserving the environment” and NIMBYism (Not in my back yard!). I find that rather than really caring about preserving the environment, people use environmentalism as a hammer to slow down or stop projects that will “ruin” their view or preserve some favorite local property from being developed.

In the case of the Lake Stickney, the county says that the proposed development meets all applicable environmental laws, and yet one local, Chris Lloyd says “This is all about salmon habitat.” I’m not convinced.

To bring it to a personal level, if the house I live in has a sweeping view of the sound. Between me and my view was a 1940s rambler that just sold. The buyer, a builder who is planning to demo the house to build a 3 story home that would block my view. Do I have a right to stop that development, just to save my view, or is it an individual’s (or company’s) right to do what they wish on the property as long as they are abiding by development standards? If I wanted to keep the property from being developed, is my only right to buy the property to ensure it is not changed (or negotiate a view easement)?

If environmentalist’s #1 goal is to make sure projects are being developed properly, then I am on board. With land use and building codes where they are today, my past experiences tells me the proper precautions are being taken. If the opposition are anti-development and are using this tactic as a way to slow down or trump the development of the land, then I think environmentalism is simply being used as a ‘Trojan Horse’ to stop developments…

EAL vs. ESL

[photopress:it.jpg,thumb,alignright] This comes under the category of “You learn something new every day.” Over the years I have found that I generally have a much higher percentage of clients who moved here from other countries, or whose parents moved here from other countries, than some of my peers. I was at a client’s house over the weekend (helping to strip wallpaper, which I am very good at doing) and everyone at the house was speaking both English and Romanian, except me of course 🙂

One of the guests taught me a new term, that was more politically correct, and I was at once converted! I asked if ESL, English Second Language, was an appropriate term or offensive in any way. My sister had taught me ESL, since she has a fairly high percentage of students that are ESL the same as I have a fairly high percentage in my field. Prior to that I was using “The English is not my first language crowd”, so ESL was definitely an upgrade.

A lovely young lady advised that her husband preferred EAL, and that it was more politically correct. Of course! How American of me to suggest that English was someone’s SECOND language, when in fact, it could be their FIFTH language. My friends from Bulgaria speak at least six languages. So EAL, English ADDITIONAL Language, is clearly more appropriate for most people from other countries.

I am a 2nd generation American, which may be the reason why I have a high percentage of clients that are Indian, Filipino, Romanian, Italian, Korean, Chinese, and others over the years. Not because I speak their language, which I do not, but because I understand that different cultures have different ideas with regard to home ownership.

I remember back to 1990, my very first year in the business. I had a client who was a young man from Russia. It was apparent to me, though he did not come right out and say it, that he didn’t have an accurate perception of what was included in the sale, and what was not included. Now many of my clients have some questions in that regard, but for this client the entire idea of owning a property was somewhat “foreign” to him.

I literally walked around and touched practically every item. He was in fact quite pleased to learn that the kitchen cabinets would be staying as well as the stove. He was a little confused about why the wall to wall carpeting was going to stay, but the area rug would not be there after the owner moved out. And when it came down to the mirror in the living room leaving because it was hanging like a picture, but the “mirror” in the bathroom WAS staying because it was a recessed, built-in, medicine cabinet, he just shook his head and took my word for it 🙂

This brings up a point that a recent commenter raised. He said he sometimes has to read my writings twice to “get” what I am talking about. In almost every real estate transaction a client has to trust that the agent is correct, rather than totally understand everything involved in the transaction. For persons who speak English as an additional language, who have not been involved in home ownership issues for most of their lives, being able to trust the judgment of the agent is even more important than almost anything else. Trust becomes the all important factor in the relationship.

Even if they do not understand all of the details and the “whys”, if they trust the person at the helm, life becomes a whole lot easier for them. Being able to focus primarily on which home they want, as opposed to each and every detail of the process, can be quite a relief for anyone, but especially for EAL clients.

Seattle Beaches Offer Unique Views

Today’s theme? Fun with real estate!

  1. Marlow provides a list of entertaining stories about hijacks (along with some good-natured teasing about the high PubSub ranking or her PI blog!)…
  2. Glenn thinks that we should change the title of Seattle Eric’s post because we’re not being fair. “The original post should be corrected out of fairness to make it clear that we use the same feed as every other Internet site…” Considering his praying mantis reference (and his defense of the reference), his comment makes today’s list because it gave me the best laugh of the day.
  3. Realtor.com, Jan 1997: “If you’re ready to find a home, browse through more than 517,000 homes presented by 112 participating REALTOR® Multiple Listing Services in 41 States.” (Lots more early corporate websites…)
  4. I had a blast at MindCamp2.0 and am thinking of flying up for 3.0.
  5. Is there room for two dog-related real estate blogs?
  6. Glenn Roberts points us to a great story about the Yes Men. These guys convinced conference organizers that they were legitimate HUD officials who wanted to make an announcement about the future of New Orleans’ public housing. Following a speech by Gov. Kathleen Blanco and Mayor Ray Nagin, the HUD official announced a complete reversal of policy. Ali G would be proud.
  7. Promoting a real estate blog is tough stuff. Luckily Hanan is constantly throwing ideas our way… (includes an informative link on why no one is reading your blog!)
  8. Seattle beaches make the news! It’s not news, it’s fark!
  9. A great sense of humor make Maureen’s blog a lot of fun to read… (Her subtitle being a great example: “This is not the best blog in Columbus Ohio! This is a blog about what is best in Columbus…”). Her latest article letting us know that Columbus, Ohio is rainier than Seattle is much appreciated!
  10. Made me think of of the insufferable bastard:

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Redfin is missing 20% of Listings?

I’ve heard a rumor, and I can’t figure out how to verify this using custom searches on Locator, but is it true that 20% of residential properties don’t appear on the MLS feeds to the Redfins and Homevalues of the world (as well as Windermere, John L. Scott, etc.). I was told that a good 1 out of 5 properties don’t have that checkbox selected that gives the MLS permission to ‘advertise on the public web’. First off, I’m surprised that so many agents would bypass the exposure; however, if they are doing it either making individual decisions, or by encouragement from their brokers, the net effect is chilling on the disintermediation plays. Consumers searching for properties using these discounters (or any of the major brokerages web sites), and not having the services of an agent to find the best properties using Locator, are shortchanging themselves.

Can anyone confirm or otherwise clarify this information? If true, it’s a dirty little secret.