Category Archives: Seattle Real Estate Stats

Is King County at 2001 or 2005 price levels?

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Was reading the questions in the comments over on The_Tim’s post about “The Bottom Falling Out on the Low Tier”. That prompted me to run some numbers on two cities in King County. One of which is moving more solidly back into the low tier…and quickly. Another that has been in the high tier since before prices started increasing dramatically in the credit boom years.

Before I post the data, I think we should strike the tiers of 2001 and 2011 based on all Single Family Home sales in King County only, since Case-Shiller tiers are based on a different set of criteria. For this purpose I remove single and double wides, houseboats and townhomes and deal only with detached single family homes. I am using the first 5,000- homes sold in each of those years to set the tier values, since my home calculator stops at 5,000 homes. For 2001 that is the 1st quarter sales. For 2011 that is through the end of April.

2001

Low Tier – < $216,000
Mid Tier – $217,000 – $310,000
High Tier – $311,000+

with median of high tier at $400,000

2011

Low Tier – < $274,000
Mid Tier – $274,000 – $447,000
High Tier – $447,000+

with median of high tier at $614,000

For those wondering why these Tier Pricings are so very different from Case-Shiller numbers, it’s because Case-Shiller combines King, Pierce and Snohomish Counties. These are for King County only. ALSO, I’m pretty sure Case-Shiller uses resale (matched pairs) and pretty much excludes New Construction entirely, and a lot of Redmond’s story and the high price tier story is in that New Construction.

The dramatic change in the median price of the high tier tells us A LOT!

Obviously based on median prices, King County is no where near 2001 levels, BUT the following data is a bit startling.

graph (16)

Redmond running a hair under 2005 median home price, but no where near 2004 median pricing. Federal Way on the other hand quickly degenerating toward 2001-2002 pricing.

Of course once you have some more information…you have to keep going to determine the why of it. “Why” never has ONE standout answer…but the mix of foreclosures is clearly a BIG part of the story.

2011 fwr

I remember reading a question on a general forum asking why a person can’t find a foreclosure home to buy in their area of preference, when all the news stories are pointing to the DELUGE of foreclosures? Well, ZOMG! that snapshot of the market above “tells a story…don’t it?” to quote Rod Stewart.

Now compare that to 2010 and you will quickly see why the Bottom Tier is pulling away…and getting HAMMERED!

2010fwr

The % of Foreclosures and Pre-Foreclosures (short-sales) in Redmond has barely changed. Federal Way? Well…maybe they have no place to go but up? Certainly hope so.

Now let’s look at the HUGE decline in Price of Bank Owned Property 2010 to 2011. This is going to knock your socks off.

Sorry…have to throw this in as a link over. The chart won’t load.

The short of it for people who don’t like to click on links is that the Bank Owned Solds in Federal Way not only jumped UP from 28% of total sales to 47% of total sales, but the median price of those Bank Owned sales declined from $191,000 to $156,000. WAY below 2001 pricing, and with the volume of them, they dragged the median overall sold price down from $246,000 in 2010 to $199,000 YTD 2011. Maybe it will swing back a bit by year end. But Holy Caboley!

As you will also see in that link, Redmond Bank Owned solds did not change much at all as a % of total sales, BUT the median price of those dropped from $475,000 to $330,000. Still…not enough of them to impact the overall median sold price much in Redmond.

Redmond is easier for me to explain, since I don’t work in Federal Way. Let’s see if I can get another graph to load up. WordPress is liking graphs better than Raw Data Charts.

age

I combined these two so you can see the dramatic difference. Homes Sales in Redmond are being bolstered by the fact that a LOT of new and newer homes are being sold. You may see that change dramatically in 2012 as the builders seem to be shifting over to Sammamish due to the fact that they have used up a lot of the available land in Redmond.

To some extent the shift will move from 98052 to 98053, 98074 and 98075. But will the buyers shift with them? Probably yes, unless there are a lot more newer homes on resale in 98052 to compete with the travelling builders. You may say there are still plenty of newer resale homes in 98052, but track that against school rankings, and you will see what is happening there with regard to Elementary Schools.

So the drastic decline in Redmond Bank Owned Sold Price from 2010 to 2011 has a lot to do with the % of homes that are, or more aptly said WERE, newer homes. It looks like the glut of spec home leftovers here and there were pretty much sucked up in 2010 when 80% of the Bank Owned Sales were NEW…built since 2005…and most never lived in. Those empty new homes, some completely finished…some not so much especially as to landscaping, are pretty much gone.

Scanning at my notes here (my desk looks like the whacky professor after doing all of these stats on scribbles before processing them into charts and graphs) I’m seeing that the total # of foreclosed properties in Redmond 2011 that were built prior to 1980 are equal to the total # of foreclosures in 2010 of which 80% were built after 2005.

So the decline in price of foreclosed homes in Redmond (as noted in the link above) has more to do with the AGE of those homes, than a drop in prices.

Why the big drop in price in Federal Way? Age of homes does not seem to account for that. I don’t work in Federal Way…so it’s not as easy for me to read reality into the data there, as it is for me in Redmond. My best guess is that it is a degenerating market…like a cancer growing…each new set of foreclosures running off a discount of the current median price. Each new wave of foreclosures dragging that median price down due to sheer volume…and the downward spiral is feeding on itself.

Will be interesting to see if any of this swings back into place by year end. My gut tells me 2012 is going to be a wild ride. Looks like Federal Way has no place to go but up, let’s hope so.

Redmond on the other hand is likely going to lose a lot of that huge support from the new construction homes over to Sammamish, unless we start seeing a whole lot more newer home resales coming on market. That may also be good news for people in Redmond who have been trying to sell their built prior to 2000 homes. I have a feeling it will.

I just don’t see all of the Redmond buyers running over to 98074. Some, yes. Relocation Buyers, yes. But for the most part, either sales volume is going to plummet…or people are going to starting getting a whole lot more interested in some of those older homes that have been languishing on market during the new construction surge up on Education Hill. Probably a little of each.

More graphs and data on the above HERE, HERE and HERE. The last one helps you track the median price for these two cities in each year since 2001, so you can see the rise and fall to and from peak.

(Required Disclosure – Stats in this post and it’s graphs and charts are not compiled, verified or published by The Northwest Multiple Listing Service.)

King County Assessments Wins National Award

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“The King County Department of Assessment this week won the National Distinguished Jurisdiction Award from the International Association of Assessment Officials (IAAO) for innovative use of technology to map and locate properties to be assessed for local tax rolls.”

WooHoo!!! I love the King County Assessor’s Office, as most people know, since my color-coded valuation system is strongly linked to Assessed Values in King County. In fact one of my favorite mantras is “Trust Your Tax Assessor”. A lot of people don’t understand what I mean by that, as mostly it has to do with footprint per floor and relationship of land to house percentages, vs using Assessed Value as “market value”. but that’s OK. I love and appreciate them!

Kudos! Well deserved Kudos!

FULL PRESS RELEASE BELOW

King County Assessments Wins National “Distinguished Jurisdiction

Should the Washer, Dryer and Refrigerator go with the house?

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french door frigThe Washer, Dryer and Refrigerator are generally NOT Real Estate items that go with a house. They are considered to be Personal Property. That is why sometimes you will see a spot where these things go…but no appliance there. That will pretty much NEVER happen with a stove or oven or dishwasher.

A house comes with a stove and oven…pretty much always. It either comes with a dishwasher or it doesn’t, but if it doesn’t have one, it’s not because the seller took it with him. It’s because he never had one. More typical in very old homes, of course, than newer ones.

Because they are personal property, even when the washer, dryer and refrigerator ARE included, they are not usually inspected by the home inspector, nor are they covered appliances in a normal home warranty basic package. Yes-Stove. No-Refrigerator. Yes-Dishwasher. No-clothes washer.

Now let’s look at the odds of your getting a washer, dryer and/or refrigerator in your home or condo purchase.

72% of the sellers of homes sold that were not bank owned or short sales, offered the refrigerator as included in the asking price.

47% of the sellers of homes sold that were not bank owned or short sales, offered the washer and dryer as included in the asking price.

90% of the sellers of condos sold that were not bank owned or short sales, offered the refrigerator as included in the asking price.

70% of the sellers of condos sold that were not bank owned or short sales, offered the washer and dryer as included in the asking price.

52% of the short sale sellers of homes offered the refrigerator as included in the asking price.

29% of the short sale sellers of homes offered the washer & dryer as included in the asking price.

Before I post the stats for Bank Owned Property Sales, note that a bank generally makes “no representations” or guarantees. So there may BE a refrigerator or washer and dryer in that bank sold home, but they are not warranting that it will still be there at closing. If it’s there; it’s there. If it’s not; it’s not. In other words, you can’t refuse to close because the refrigerator took a walk during escrow. Nor can you demand that the bank seller buy you a new washer, dryer or refrigerator if that happens. It’s treated like any other Personal Property left in the home by the previous owner before it foreclosed. It just may happen to be there.

That said, some REO property listing agents did note the following as included.

Only 4% of REO homes sold noted the washer, dryer AND refrigerator as included.

17% noted the Refrigerator as included.

6% noted the washer and dryer as included.

So you are more likely to get a refrigerator in that home purchase

than a washer and dryer

by all accounts.

By no means is it a “given” that the washer, dryer and refrigerator will be included. On the other hand if there is a stove, an oven, a dishwasher and a garbage disposal, it would be rare indeed if any of those appliances were not included and those are usually all covered in the home warranty basic plan.

Microwaves? Most always yes if they are built in like a range hood…and not if they are sitting on the kitchen counter like the toaster and the coffee pot.

********

(Required Disclosure) Stats are not compiled, verified or published by The Northwest Multiple Listing Service.) Seems odd to have to disclose that, given I’ve never seen an mls do stats about appliances…but just to be safe, including the required disclosure.

Should you buy a New home or an Old one?

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Education Hill RedmondLots of people want a NEW Construction home, the same way they want a new car vs a used car. However starting the home buying process at “I want NEW” is just as wrong as starting the home buying process at “I want a foreclosure”.

As I have said many times, in my experience more people HATE their “home”, and want to move to a different one, because of WHERE it is vs WHAT it is.

“…and underneath all is the land…” and land is a limited commodity. So where is that NEW home going to be built? Maybe…just maybe…on the wrong piece of land. The lot no one built on prior to 2011…for good reason. Even NEW(er) home will raise this issue. So if you have your heart set on a NEW home…the number one question you need to ask is:

WHY DIDN’T ANYONE BUILD A HOUSE ON THIS PIECE OF LAND BEFORE TODAY?

So many people limit their looking to the obvious and the house itself. If you are looking at new or newer construction…begin your investigations at the land that home is sitting on. Looked at one yesterday…without going to it…via Google Maps and the Stormwater Management Comprehensive Plan for that area, and the house was built on a lot IN “The Wetlands”.

Think about that for a minute. What are the various reasons a lot might be available for someone to build homes on today…that is close in to work and good schools and shopping? It’s common sense really. Especially today…after a huge building surge from 2004 to 2008…was there really a piece of land the builders didn’t find and build on during that time? Yes…a few…but not many.

IF wanting a NEW house is your goal…you would be wise to first examine the land of it…and why no one built on it before (unless it is a tear-down lot). Oddly, the one I checked that was “in the wetlands”, well…really, you have to ask yourself. How DID it get built there? Basically one is not allowed to build a house in Wetlands. Why does it not require flood insurance with drainage basins to the north, east AND south of the house?

Think you can “see” all that? Well what about too close to underground gas pipelines? Can’t see that.

My point is you are better off listing all the things you want from a neighborhood, a location and a home, without regard to AGE of home. Then…if none that have the best location are new…well, maybe NEW Construction should not be the FIRST item on your “wish list”.

Prioritize that wish list by the where…before the what in that where. It’s common sense really, isn’t it?

If it has been a Best Place to Live for 10 to 100 years…it was likely built on before yesterday.

The Seattle Condo Market: Are Sellers in La-La Land?

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Having looked at several downtown condo listings lately (we have a client shopping for one right now), it seems to me that there is a real disconnect between comp values and listing prices. Based on my purely anecdotal investigation, condos are selling for less than $500/sf; many if not most condos on the market are listed at more than $500/sf. My client was interested in one listed well north of $600/sf, with two recent sales in the same small building (about 20 units), one just above $300/sf and one in the $430’s.

The listing agent and I exchanged emails. I expressed my concerns about the property appraising at a price that would be acceptable to the seller given the list price (and the agent’s admonition that the sellers are “motivated but not desperate”). In response I got this:

I have never in my long real estate career, had a problem with an appraisal–even in today’s market. One yesterday came in at 10% over list. I promise to justify the pricing if we can come to mutual acceptance with the appraiser. I have a way of doing it that seems to work well.

My client just forward me a link to this blog piece about this very topic, which includes this passage:

For just about every condo appraisal, the most suitable comparables are sales from the same building. That can lead to some appraised values that may disappoint some sellers/owners. The biggest item condo owners need to understand is that the appraised value of their unit will be determined by the most recent similar sales available to the appraiser.

So I’m curious to hear the experiences or insight of others: Does there seem to be a disconnect between list prices and “market value”? Or, more directly, has anyone had a problem with a downtown condo appraising for a sale price?

Please note: I am NOT calling ANYONE out…

Do “discount” Commissions = More Failed Pendings?

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Everyone has been asking why there are many more failed pending sales these days.

One of the answers is that historically, a portion of “high” commissions has often been spent to keep the sale together through closing.

Let’s use a $450,000 house as the example.

In today’s market conditions, the seller may have “wanted” $500,000 for his house, and is “forced” by market conditions to sell it for $450,000.

In today’s market conditions, the buyer is fearful of future loss of value, and may have agreed to paying $450,000…but the buyer really wanted to pay $400,000.

A sale #FAILs over small things when the contract is on the low side as far as the seller is concerned, and on the high side as far as the buyer is concerned. That describes almost every pending escrow these days., except for short sales and bank owned property.

SO…let’s say that the agent for the seller is going to charge 2% at a 1% discount…and the agent for the buyer is going to charge 2%…at a 1% discount. That frees up $8,000 to handle “stuff”. BUT if the commission is simply discounted from the getgo…well, it may be setting the transaction up to FAIL.

IF EACH AGENT held 1% (2% total) as a “reserve for negotiation disputes”

vs reducing the commission on day one…

less transactions would fail.

The seller and buyer would pay less to get SUCCESS

vs paying less to get FAILURE!

1) ALSO the seller is often OK with giving $3,000 for “this” but not for “that”…so holding a reserve removes the emotion from the equation.

2) ALSO sometimes the seller is OK with giving the buyer a credit for that repair…BUT the buyer’s lender will not allow the credit. So you need to do a bit of juggling, often involving commission dollars vs “seller credits”.

You have to be creative in a weak market…and often juggling commission dollars is what makes the difference between “sale FAIL” and “sale CLOSED”.

This post is in response to a request I got from an agent in my email:

Agent asked me this: “I am a relatively new Agent (less than 1 year) in (X)  I was very interested in your input on Redfin regarding working with using a bit of the commission for payment of inspection repairs.  Any chance you have a moment to give me specifics on how this is accomplished? Uncertain on how, and when, this would be setup?  I still struggle a bit with staying exactly within the MLS formats.”

In response, in addition to the post, I will give a few recent examples.

1) I listed a home for $399,950. In this case I was going to charge a $10,000 flat fee for me and a 3% offering to the Agent for the Buyer. Instead I did a 6% contract, knowing I would not charge the seller more than $10,000.

Everything went fine…got an offer…went into escrow…we told the buyer 3 things that were broken. During inspection negotiations, oddly, the buyer asked for $1,300 for 5 things…but not for any of the things that were broken. The seller would want to argue the point of “for what??”.

By reserving $2,000 for inspection repairs there was NO dispute…The buyers got the $1,300 that they asked for and by agreeing to the buyer’s request…the seller got $700 change. Win-Win by using commission dollars vs letting the buyer and seller negotiate it to the point of “Sale Fail”.

2) I listed a much older house than the one above for $600,000. Same scenario. I was charging the seller a $10,000 flat fee…but stated that as 3% with $8,000 as a reserve from commission for repairs.

At time of inspection the buyer wanted the roots in the sewer drain fixed and $6,000+ for repairs, including the things we told the buyer were in need of repair. In a hot market…that repair was not needed or requested. In a WEAK market…there are more things “broken” to cause a #FAIL. Market conditions will change a “no problem” item into a $5,700 “fix”, as it did in this particular case.

The front porch of an old house leaning a bit in a hot market is a “no-nevermind” with multiple offers. In a WEAK market the buyer wants money to fix the slight tilt of the front porch. Same house…same problem…different markets = different inspection request.

Long story short…with no commission dollars to fix the problems…the sale would have failed. By reserving $8,000 toward repairs…the client was successful. IF I had listed it for a $10,000 flat fee…on day one…the sale would have failed.

So giving that discount up front would have caused the sale to fail.

3) The house I sold in about 20 days that was the subject of my “Why Agent’s Are Better than Lawyers” post. Sold at Full Price with Max Credits from seller to buyer. Lender would not allow any more seller credits. As I noted in the post, I charged $5,000 BUT what I don’t say in the post is I reserved the $2,500 in a 3% charge toward repairs.

At time of inspection, buyer wanted several things. Neither I NOR the seller could give a credit for them. The buyer’s lender would not allow the credit. At least one of the things was not needed at all…and pretty costly.

The sale would clearly have failed over that item without the reserve from commissions. No question about it.

By doing the repairs prior to closing and paying for the repairs from my commission at closing…the seller and buyer had a successful closing with all repairs DONE! Awesome result. Quick sale..everyone happy.

Moral of the Story?

Saving Money…and losing the “successful closing”

by discounting UP FRONT

vs when needed MOST…

may be a Lose-Lose for everyone.

Do you want a “full service” real estate agent?

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Do you WANT a “full service” real estate agent?

Many will say “NO, I don’t want my agent 2nd guessing ME!” Then don’t pay the price for one. Don’t hire one in the first place. Instead, find a lower cost “service provider” who would not presume “to tell YOU, the customer, that you are wrong”. Hire “less for less”.

But if you want someone 2nd guessing you, every step of the way from start to finish, so that you do not make even a tiny mis-step, without knowing it, when buying or selling something that costs hundreds of thousands of dollars…then you may not want to save those dollars by choosing “less for less”.

The reason we need many and varied “models” in real estate, more than are currently available, is because not everyone wants or needs a “full service” agent. If you need “less”, then “less” is full to you! Let’s explore the “full service” model so that you know when “full” is paying too much for what you may need.

The key is knowing which model suits YOUR needs best.

Full Service-1

The FULL service agent is represented by the blue person in the middle

who is managing and 2nd guessing ALL of the people

who will be involved on your behalf.

ONE of those people is YOU!

A “full service agent” is not a service provider who is giving you what you ask for and doing what you tell them to do. A “full service agent” is helping you get the right answers to the RIGHT questions…not merely those you happen to ask.

A “full service agent” also does not fully delegate the other services like lender and escrow and home inspector and does not keep their nose out of those valued roles in the transaction.

A “full service agent” does not merely help you buy a house that is for sale. A “full service agent” tells you when all of the best houses have just been sold off, and you are picking from an inadequate selection, and should wait for the next better home to come on market.

If you go to the market an hour before the next bread shipment comes in, and the only bread on the shelf is day old bread, do you buy that bread? No! You ask when the next shipment of bread is coming, and if they say in 20 minutes..you do the rest of your shopping and come back to the bread aisle when the fresh bread is available. When you choose from only those that happen to be “for sale” at the time you are looking, you are not doing “it” right. You may be buying “the day old bread” at a GREAT price!

You should not be looking at homes with your agent to pick one to buy.

You should be looking at homes with your agent to determine what it is,

that may not be for sale today,

that you should buy.

IF you are looking for a hot commodity…one that the majority of home buyers want…then the one you are standing in with your agent is NOT likely “it”.

The odds are not in favor of it being for sale…and OMG! no one else found it in 72 days.

Let’s get the wrong “it” for less, because it is stale on market, is NOT how you buy a home for your family

to live in for 10 years or more.

Homes value on a relative basis. YES you can pick a lesser location or lower valued home style and pretty much anything you want. BUT a full service agent will make you think VERY HARD about your choices, and how they will impact you on resale…some day…in the future. A full service agent will tell you what price that “what you want” SHOULD BE…not what price you can get it for based on negotiations with the seller.

If the Seller is asking $700,000 and the “fair” price for that is $550,000, you need to know that. That is not a ludicrous example…I just ran into that the other day with a client. Do you want an agent who tells you that you can get it for $650,000 if it is only worth $550,000? Will you feel great that you saved $50,000…but paid $100,000 too much?

Most importantly…will you resent the fact that the agent pointed out it is only worth $550,000?

Will you hate the agent who is giving you a headache by forcing you to see all of the important things you need to consider before spending hundreds of thousands of dollars?

The NUMBER ONE feature of a lower cost service

that says they are FULL service…

is they do not 2nd guess YOU…the client.


Examples:

1) Seller wants to price his house at $700,000. There is no way a buyer should pay more than $550,000 for it. $500,000 would be a screaming deal for a buyer. Anything OVER $550,000 would be great for the seller.

A FULL service agent will help the seller do what it will take to get $575,000 or $585,000 before it is listed for sale, and price it at $599,950.

A “service provider” will list it at whatever the seller wants to list it for and stick a sign out front and a lockbox on the door…and charge LESS for that and CALL IT FULL SERVICE for less. What it IS is “less for less”.

2) Future home buyer wants what 65% of all home buyers want. A new(er) home (or older one that needs NO repairs or upgrades) in the BEST schools in a quiet location that is near parks, playgrounds, stores and work…AND he wants it for $100,000 LESS than what it costs to get one of those. (Pretty standard scenario, BTW.)

A FULL service agent will show the buyer where they can shave off that $100,000 by compromising on the “correctable” deficiencies vs the NOT correctable deficiencies. OR, at mininum, HIGHLIGHT the deficiencies that come with that $100,000 “less” price. Often the buyer will put their head in the sand as to the weaknesses that cause the price to be $100,000 less than it should be. Some buyers want the agent to not mention those deficiencies. They want to pretend they don’t exist. A FULL service agent will make sure they are buying with “informed consent” regarding those deficiencies.

A “service provider” will help them buy the home they want and say “who am I do say “that” is a “deficiency”. If the buyer likes it…and is willing to pay for it…a “service privider” is there to help them get what they want. If they are happier not knowing…then it is the “service provider’s job” to make them happy and not point out the negatives. If the husband knows about the deficiency, but says “don’t let the wife know about that”…then that is the “instruction” a “service provider” will follow. That is “LESS for less.”

When is “less for less” FULL to you?

1) IF you don’t want your “agent” to 2nd guess YOU…less is FULL.

2) If you don’t want your agent treating both spouses as equal clients. If you want to keep things from “The Mrs.” because she over-reacts to negatives…less is FULL.

3) If you don’t want an Agent telling you that you are asking TOO MUCH for your home, or telling you what you need to DO to the house to maybe make it worth THAT much by creating a lot of “extra” work…less is FULL.

4) If you want your Agent to do what you say…

never tell you that you are wrong…

even when you are wrong…

less is FULL.

Do YOU want a “full service” real estate agent?

There is no ONE “right” answer to that question.

The CLUE Report: Is it Col. Mustard in the Library with the Rope?

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I’ll admit, at this point I’m pretty much mystified by the frequently-discussed yet rarely-seen “CLUE Report.” For those of you even more in the dark than me, “CLUE” is an acronym for “Comprehensive Loss Underwriting Exchange.” Basically its a national database maintained cooperatively by insurers to track claims made on particular properties, as well as claims made by particular persons. Before an insurer will write a policy on a particular property, it will check this database to confirm that the risk assumed by the insurer is reasonable. The insurer will not write a policy for a property with an existing and extensive claim history because the property is a “lemon” on which the insurer will lose money.

To date, I have typically counseled my buyer clients to call their insurance agent to obtain a copy of the CLUE report for the property. Lately it seems that my clients are unable to do so. Some insurers (Geico) have indicated that they don’t even know what a CLUE report is, apparently because some insurers are not members of the Exchange (the “E” in CLUE). Some insurers (most recently Allstate) have told the client to purchase the report at LexisNexis, but apparently you can only purchase a report for the home you currently own.

So my question to the RCG community: How do other agents address this issue? Do you invest the time and energy speaking with the buyer’s selected insurer to eventually obtain a CLUE report? Do you not even tell your clients about CLUE reports because they are of little or no value? Something in between? And are any sellers taking the advice of LexisNexis (which of course sells the reports) and obtaining a CLUE report to be given to poential buyers? Thanks in advance for any insight you care to provide.

Ardell, I look forward to your insightful and informative response; David, I look forward to a tangential point that illuminates some as-yet-unappreciated aspect of the Real Estates; Ray, I look forward to more rank bashing of my brokerage business model.

Are you a Customer or a Client?

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If you are buying a home, it is important to know if your agent views you as a Customer or a Client. You may ask “What’s the difference?” until you read a post like this one written by an agent titled “Are you a Customer or a Client? Do you know the difference?” and the many comments by agents that follow.

Here is a quote from that post, written by a Real Estate Agent in Idaho, in case it is later removed by the writer from public view:

“As a Realtor, I work with both customers and clients.  Do you know the difference? I am a real estate agent when I’m working for my clients.  I am a non-agent when working with my customers.  The difference is whether or not you and I have entered into a written agreement for agency representation.”

I personally don’t agree that is the case in the State of Washington. Below is my comment on the above linked post:

“As Nathan said…in his State of Florida the default is NO representation. In my State of WA Buyer Representation IS the default.

NAR cannot legistlate this nationally …and this post is NOT true in the State of WA where all buyers are granted full representation by our Agency Laws, unless they are dealing directly with the listing AGENT not the listing Company.

There is only ONE person in this State of Washington who does not represent the buyer by Law vs by Contract, and that is the Listing AGENT.

Unfortunately, many agents here read posts like this and think it applies to them. Even the ABR class is taught that way here…that buyer is customer without a written contract…even though that is NOT TRUE here. Drives me bananas.

IF you work in the State of Washington…read that pamphlet on The Law of Agency that you hand to buyers. It says that you REPRESENT that buyer…by Law…without the need for a buyer signing a written contract to be a “CLIENT” vs a “customer”.

We have no buyer “customers” here unless the buyer signs a NO AGENCY agreement. You have to waive the representation by contract here…not get representation by contract. It is the opposite of most States, unless the buyer chooses to work with The Agent for the Seller aka The Listing Agent. All other agents, including every other agent in the Listing Brokerage…represents the buyer, by Law.

But likely 95% of agents don’t “get” that…because of writings like this one. There is NO national standard on this. State Laws apply.”

I run into agents all the time who do not understand that in the State of Washington ALL buyers are represented as CLIENTS, unless they choose to work with The Agent for the Seller or sign a NO AGENCY agreement. Agents read posts like the one I linked to…or take National Courses noting the distinction between Buyer as Client vs Buyer as Customer, and think they can treat a buyer as a customer they SELL something TO vs a Client that they represent in all facets of home selection and purchase.

Drives me absolutely bananas!

Ask your agent how you can become a Client vs a Customer. If they say you must sign a Buyer Agency Agreement to be a client…or if they say there is no difference…then they are likely treating you as a “customer” vs a client…and there IS a difference.

Seattle Eastside Housing – Buy or Wait?

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Seattle Eastside Housing – Buy or Wait? is a Google Query that directed someone from Bellevue over to my blog about ten minutes ago, looking for an answer to that question.

Often people get confused by the big price tags and unfamiliarity of housing, so let’s use a simple every day analogy to explore “buy or wait”. The other day I decided I had nothing to wear. I don’t know how that happens all of a sudden…usually it’s because I gained weight. First the answer to “Should I buy now or wait?” in that scenario is you wait thinking you can lose that extra weight. Then one day you just say…this isn’t working…I need to go buy some bigger clothes.

Often people need to buy a house because they have “outgrown” their current home the same way that I outgrow my clothes. Every day that you live with something substandard to your needs, is really a day wasted, isn’t it? If you are having another child, and you are uncomfortable with the size of where you live without that new person…well, you can’t wait until the child is born and moves out really. So it’s time to go look for that bigger place. Not necessarily buy it…but yes, time to go looking for something you may buy.

I use having a child as an analogy, and it is very common for people to need a bigger place because the woman is with child, or because a couple decides it’s time to start having children. But the need for a bigger place can be because of other every day needs that just don’t fit where you are.

If you already own a home, waiting is almost never the answer. The value of what you have will often move to the same degree as what you are going to buy. If prices go down 5% in the interim and you own a $450,000 home and plan to buy a $600,000 home, you will lose $22,500 while waiting to save $30,000. For the move up buyer, waiting is almost never the answer unless the family is willing to sell…rent…wait…then buy, which is not the usual scenario. Happens…but not often. Usually because what is available to rent is substandard to what they already have…so they might as well bite the bullet…or wait. The extra move in between is rarely worth it. Sometimes…yes. Often…no.

The decision for the First Time Buyer is not as difficult as people may think. One of my favorite lines from my son-in-law Mike is “Mom, if THIS is what I can afford to buy…I’d rather rent for the rest of my life.” Gotta love that Mike. Straight forward, common sense decision.

The first stage of “Buy or Wait?” is to go find out what you CAN buy for what you can afford…THEN…take a step back and say “should I buy or wait?”

I’m revisiting a decision of one of my clients from 18 months ago. I know there are many news stories saying prices have changed a lot since my bottom call of February 2009…but really, that’s not the case. Not for good homes in prime neighborhoods on The Eastside. Maybe not at all, given Aubrey Cohen’s most recent article, the title of which is pretty much a direct quote from his article on me in early 2009. So it apparently still applies today.

Back to my clients who first approached me…sorting back through 260 emails to find the first one…here it is:

3/18/2010″ “My wife and I are looking at purchasing our first house, and we’d like you to be our agent…do you think now would be a reasonable time for us to buy? I saw in your latest post that you expect the prices to drop. How much do you expect them to drop? ”

Given I don’t think this year is really any different than last year, let’s check that against reality.

1) We looked at houses priced at around $450,000. There were a few that “would do”…but based on those particular houses, I saw no reason to buy now vs wait, unless they were willing to consider as far out as Issaquah vs Kirkland, Redmond or Bellevue near Microsoft.

We looked at homes for as long as it took to gather enough information to answer the question “Buy or Wait?” That takes shorter or longer for different people…and is largely dependent on the available inventory during the period of time.

2) On 4/23/2010 We had a breakfast meeting at the Brown Bag. Basically we looked at all of the options for about 30 days and then had a “Buy or Wait” meeting. One thing about real estate that people often miss as to Why You May Need An Agent is the perspective of my TWO clients was not the same. I remember the wife…due to have her baby in July…saying ideally she would like to be in a home by June. The husband finished her sentence with “…or July, or August…or next year…”

3) Given the husband and wife were not necessarily in total agreement there, not arguing…but not necessarily “on the same page” either, I asked to visit them where they were currently living. I don’t often do that when someone is in a rental…but I needed to test “by June” against “…or July, or August…or next year…”.

When I visited them in their small apartment and they showed me the dresser drawer where the baby would go IF they Waited…vs Buying now…the answer to “Buy or Wait” became CRYSTAL CLEAR!

So with renewed motivation and a price of $550,000 vs $450,000 we found “the home” for them to buy and made the offer on 4/26…only THREE DAYS from our “Buy or Wait” meeting. They closed on 6/10 as it was a somewhat difficult Bank Owned property.

Now…let’s revisit my client’s Buy or Wait decision and second guess it based on what has happened since.

They paid $550,000, 1.1 X Assessed Value (a green price in a blue area). They paid $215 per square foot. Now let’s look at what has sold there since they purchased a little over a year ago.

First, the other one on market at the time they purchased: Closed 5/29/2010 – just before their closing – sold for $587,000 – just over their max of $550,000. Multiple offers…they couldn’t make an offer on it due to price. It was assessed for slightly less (only $4,000) was smaller at 2,460 sf vs 2,550 sf. So even though the bank owned sale was troublesome…worth the effort. Not a huge savings…no “deep” discount for the bank owned home they purchased…but enough of a discount to make it a good “Buy Now vs Wait” option for them.

Recent Sale in Same Neighborhood: Sold in 9 days for $602,000 on June 8,2011 – assessed for $8,000 less than the one my clients bought last year – Sold for $244 per square foot vs the $215 per square foot my clients paid last year. It didn’t have anything better than the one my clients bought. It needs a new roof, does not have granite counters, needs the carpet replaced with hardwood floors in the living room and dining room…nothing more for that $244 per square foot vs the $215 per square foot my clients paid in June of 2010.

One house did recently sell for $540,000…but it backed up to Avondale Road…so…the relationship to assessed value and price per square foot is a non-issue, given backing up to Avondale Road is not “a comp”. Given they paid only $10,000 more for a house last year that is NOT backing up to Avondale Road…I’d say the Buy vs Wait decision has withstood the test of time.

One might say they could have waited 3 years or 5 years…well, we’ll look back on that in 3 years or 5 years…but the reality for most people is “Buy vs Wait” is usually a question with a max timeframe of a year to 18 months…not wait for 3 to 5 years.

Buy now or wait until next year…in Jan of 2008 = wait until next year. But since Feb of 2009…wait is not likely the answer…but buy WHAT is a huge question? Follow the process I have outlined in my 1), 2) & 3) up there…and you will find your best answer to that question for your family.