Category Archives: Seattle Real Estate Stats

Neighborhood round-up serves up with Salmon…

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One tough salmon on Ballard Avenue ….and Salmon days over at Issaquah Undressed is wet for everyone!

Help with “personality” wanted at Ballard’s Nervous Nellie’s as “advertised” by At Large In Ballard , and Mid Beacon Hill waves “buy-buy” to the Boeing Store that will soon take off on it’s final flight.

West Seattle Blog and a trip to West Seattle Farmer’s Market.  Missing on Beach Drive Blog…the mysterious Sunset Bagpiper….

Broadway Seattle on Capitol Hill is soliciting for a “hip” and “fun” neighborhood name.  CHS on Capitol Hill proposes a “brilliant” new revenue generating scheme…umm, idea.  

Northwest Film Forum festivities over on Capitol Hill , and ABC’s Extreme Makeover works its magic for a Kirkland family over at Kirkland Weblog.

Controversy over at High Point Blog in the “Tale of Two Cities” and some political incorrectness brouhaha.

Week 41 over at Kirkland 52 highlights Fall’s fallen, and a yummy Fall treat…sippin’ spice returns on SammaMishmash.

 

 

ZOLVE.com – Another RE Network

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[photopress:et.jpg,thumb,alignright]On Sunday I had the opportunity to interview Brian Wilson who is today launching yet another Real Estate “Social” Networking platform, ZOLVE.com

The press release states it is “the industry’s first and only”:

COLORADO SPRINGS, COLO. – October 9, 2007 – Zolve today announced the launch of the first online network for real estate professionals. Zolve is the industry’s first and only online real estate network designed to help real estate professionals streamline the client referral process and expand their spheres of influence in order to do more business.”

We all know it isn’t the first, but it may be the first to charge for the privilege of being a participant.

“Zolve offers a 30-day, risk free trial. During the first year of operation, Zolve membership is $395, a discount of $600 from the list price of $995 per year or $99 per month.”

The interesting part of this story is that Brian dreamed up the idea after being deployed and while serving in Baghdad.

The more I spoke with Brian, the less I got the impression that it was like Facebook or Linkedin, the two names he mentioned the most during the call. I said, Brian, it sounds more like a network that would have been started based on a designation like CRS. A place where agents with a CRS designation could find other CRS designated agents.

He said, well ARDELL you kind of “nailed it” in that I DID start with fellow CRS designees. I asked how many of the 2,200 pre-signed members were CRS designees. Brian replied ALL 2,200 of them hold the CRS designation.

Given that fact, one might sign up now in case the current participants assume that all are CRS designees. Just sit quietly in the closet like ET, hoping to blend in and be chosen by association. Though I think it might have been more valuable if holding the CRS Designation was a requirement of membership long term. With all of the Social Networking platforms springing up everywhere, perhaps an exclusive group would have more appeal.

The referral fees are exchanged broker to broker in the selection process, and not shared in any way by the ZOLVE owners. While it is being touted as a place for agents to find other agents, I think its value will lie in buyers and sellers being able to view the members directly.

Everyone can find most agents online all by themselves. Shouldn’t the process of an agent getting 25% or more of the commission for telling another agent about someone who is interested in buying or selling a home just go away? Shouldn’t companies like Microsoft let their new hirees from around the Country go to one of these sites and pick their own agent, instead of charging the agent 35% or more so that the Company can choose an agent for them, to help defray the relocation costs?

Still the question begs to be answered. When will technology benefit the buyers and sellers directly? When will the machine that keeps the commission high so it can be split up into various slices, fall by the wayside? When will the buyers and sellers be able to take that same 25% – 35% or more for themselves, by entering into sites like ZOLVE and choosing their own agent.

Why can’t they “refer themselves” and take the same money an agent is more than willing to pay to another agent, but not to their client direct?

Until new and more sites evolve that create better and cheaper options for consumers, these sites like ZOLVE are just another way to perpetuate same old, same old. All the commission dollars being kept high to support the good old boy agent to agent palm greasing.

So a real estate broker, this one sitting in Baghdad, dreamed up yet another way to profit off agents paying each other for an introduction to a buyer or seller of real estate, adding yet another layer of cost for the consumer.

Better to have used that “think time” to find a way for buyers and sellers to pay a small fee to enter the site, choose their own agent, and take 25% of the commission into their corner.

Referral fees should go away. Yet another site to perpetuate referral fees is using Web 2.0 for the wrong reason.

Are you really preapproved or just prequalifed for a mortgage? Part 1

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There’s quite a difference between being prequalifed for a mortgage and preapproved.   The letters that Loan Originators provide when requested for a prequal or preapproval may appear very similar.  In fact, I’ve talked to borrowers on the phone who thought they were actually preapproved, when all they really had was a Good Faith Estimate from a lender.  A Good Faith Estimate is just a rate and fee quote–an estimate is not a commitment to lend and does not indicate that someone has been prequalified.

Getting prequalifed is the stage just before becoming preapproved with a lender.   It’s a good start.  This is a great way to learn about a Loan Originator and to help you determine which Mortgage Professional you’re going to select to assist you with financing one of your largest investments.   There’s no strings attached yet to the lender, you’re investing a little of your time and perhaps a few bones for a credit report.   

The prequalification process help you determine:

  • What your mortgage payment will be
  • Available mortgage programs
  • How much home you can afford
  • How much money you will need for the down payment and closing costs
  • Your opinion of the Loan Originator (what is their skill level, knowledge, experience, available programs, etc.)

Once a prequalification is complete, you or your Real Estate Agent can request a Prequalification Letter that may be used for presenting an offer on a home.   A preapproval letter is stronger, however, a prequal can help buy you some time until a true preapproval is possible.  

When a buyer is prequalifed, this should mean at the very least, the LO has obtained their income, assets (down payment and additional savings) and credit information.   This can just be verbal—over the phone.   The information that you have provided is not necessarily verified (if you have not provided your W2s, paystubs, asset accounts to your LO, you’re definitely not preapproved).  If your information has not been ran through underwriting, you are not preapproved.  It’s possible that you have provided your supporting documentation and that the LO has submitted your information to underwriting and you may still not be preapproved, or you may be “preapproved with conditions”.

Sometimes home buyers need a little elbow grease or significant documents are still required and you don’t want to disclose it on a preapproval letter.   In this case, a prequal letter may better serve the client to buy them some time (if the listing agent will accept a prequal letter).

At the minimum, a prequal letter from a Loan Originator is simply confirming that an interview has taken place between a potential buyer and the LO.    When I write a prequal letter, it will state something along the lines of:

“Dear Agent, This letter is to certify that based upon preliminary information,   Ima Buyer has been prequalifed for conventional financing from Mortgage Master Service Corporation to purchase a home with a sales price of $375,000.   A full approval is expected after receipt of the Purchase and Sale Agreement and other documentation.  

This prequalification is based upon final verification of information supplied by borrower.  A satisfactory property appraisal & clear title must also be furnished to the lender prior to closing this loan.

Should Loan Originators Retract Preapproval Letters?

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Someone interested in buying a home interviews a couple of Loan Originators and selects one to become preapproved with. The Loan Originator meets with the buyers and takes a complete loan application, reviews their credit and obtains all of their documentation. The LO provides the buyers with all of the possible mortgage scenarios and they select which program is best suited for their financial goals. The LO then submits that loan scenario to their processor and/or underwriter for loan approval. (With our current market, I am submitting all supporting documentation to the underwriter to sign off on before issuing a preapproval. Before August, I would review the findings with the borrower’s supporting documentation and a majority of the time, I would issue the preapproval letter without underwriter review. I’m not taking any chances).

The Buyers are very excited and write an offer on a home with a real estate agent that the LO has not worked with before. The real estate agent uses the LO’s preapproval letter when submitting the offer to the Listing Agent and Sellers. The offer is accepted.

A few days later, the Buyer emails the Loan Originator and says, “Gee thanks…we’ve decided to go with the real estate agent’s preferred loan officer

Are YOU a Contractor?

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Based on recent changes in Washington law, you might be if you own real estate and either work on it yourself or hire others to work on it.

Without great fanfare, the Washington legislature recently made subtle, yet significant, changes to Washington’s Contractor Registration laws (RCW 18.27 et seq.). Generally, the Contractor Registration laws deal with the regulation, registration, and licensing of contractors. Historically, a contractor’s failure to comply with the registration requirements could lead to civil fines and criminal prosecution. The legislature, acting under pressure to better protect consumers, expanded the definition of contractor; stiffened the consequences for violations and strengthened the Department of Labor and Industries’ enforcement powers against unlicensed contractors.

The biggest change occurred in defining who is required to be licensed. RCW 18.27.010(1) now defines a contractor as:

. . . any person, firm, corporation, or other entity who or which, in the pursuit of an independent business undertakes to, or offers to undertake, or submits a bid to, construct, alter, repair, add to, subtract from, improve, develop, move, wreck, or demolish any building, highway, road, railroad, excavation or other structure, project, development, or improvement attached to real estate or to do any part thereof including the installation of carpeting or other floor covering, the erection of scaffolding or other structures or works in connection therewith, the installation or repair of roofing or siding, performing tree removal services, or cabinet or similar installation; or, who, to do similar work upon his or her own property, employs members of more than one trade upon a single job or project or under a single building permit except as otherwise provided in this chapter. “Contractor” also includes a consultant acting as a general contractor. “Contractor” also includes any person, firm, corporation, or other entity covered by this subsection, whether or not registered as required under this chapter or who are otherwise required to be registered or licensed by law, who offer to sell their property without occupying or using the structures, projects, developments, or improvements for more than one year from the date the structure, project, development, or improvement was substantially completed or abandoned. (emphasis added)

These changes now make it clear that businesses engaged in real estate development activities, even on their own property, must now register. For example, under the old law, a developer who subdivided their own property and made required plat improvements would have previously fallen outside this definition. Now, that same developer fits squarely within this definition, especially if the developer does not “occupy or use

FHA: A Siren Who Just Might Break Your Heart

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It’s an FHA love fest! We have national trade organizations smiling and shaking hands with members of the House and Senate over proposed legislation to modernize FHA.  The House approved the bill, suspiciously titled “The Expanding American Homeownership Act of 2007” (I guess “FHA Reform” might have hurt FHA employee’s feelings). This bill will provide some nice upgrades such as increasing conforming loan limits, reducing downpayment requirements, simplifying approval requirements for condos and co-ops, and allowing people with little credit history to use, for example, utility bill records to establish a credit history.  Now we’re waiting on the Senate where opinions differ.

I don’t mean to spoil the FHA happy party, but FHA loans ranked as “seriously delinquent” are higher than subprime ARM loans right now in Washington state as well as overall in the U.S.

See page 13 of this PDF, released last week at the Wash Assoc of Mtg Brokers state convention in Bellevue:

So what do rising FHA delinquencies mean for real estate agents?

Lenders must fully underwrite FHA loans.  If a loan goes into delinquency, the lenders must take a look at what happened:  Lenders and FHA-approved underwriters are held accountable for their bad underwriting decisions. 

What the industry use to do: sell that homebuyer a subprime ARM underwritten on the initial teaser payment rate, which made their debt-to-income ratio look great.

Worse, the industry might have shoved that person into a stated income loan where the borrower “magically” comes up with an income figure that comports with a decent debt-to-income ratio.

This transferred the risk away from the lender and onto the borrower “if” the borrower is unlucky enough to get prosecuted for mortgage fraud.  Stated income subprime high LTV loans are now gone. We’re now living through the painfully obvious proof that borrowers make lousy underwriters.

That risk now falls back on the lender. If the loan defaults, bank auditors and examiners call into question the decisions made by the underwriters.  Recall that with a stated income loan, the borrower inflated the income so the debt-to-income ratio looks great to auditors. With fully-underwritten FHA loans, the bank can go back and examine the decision. Speaking as a former underwriter, banks and their underwriters are not thrilled about re-living their underwriting decisions. If FHA delinquencies continue to rise, banks are going to tighten FHA underwriting policies, as they well should. 

[photopress:FHAsiren.jpg,thumb,alignright]Realtors following this thread ought to continue to be reminded that the “anyone can get a loan” party is OVER and FHA ought not be thought of as an easy and fast way to inject corpses with an FHA drug to bring them to life as first time homebuyers.  Said another way: just because anyone, even zombies, could have received a subprime loan in 2006 doesn’t necessarily translate into FHA-approvable borrowers in 2007 and 2008.

Realtors, add some time to the “loan approval” section in the purchase and sales agreement and please make sure that the FHA borrower is working with 1) a federally chartered bank with current FHA approval (state chartered banks may or may not have this in place); or, 2) a mortgage broker that ALREADY HAS FHA loan approval.  This would mean a medium to large sized mortgage brokerage firm, preferably with an FHA-approved underwriter on staff locally.

If your client is working with a mortgage broker, Realtors: query the LO to see how much experience the LO has with originating FHA loans.  Why let an LO practice on your file? Also, some mortgage brokers might have rules in place that direct the loan originator your client is working with to transfer your borrower’s FHA loan file to a main office. Check on this ahead of time.

Redfin on Guy Kawaski's Blog

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[photopress:guy2_0_1.jpg,thumb,alignright]Over on Guy Kawasaki’s Blog “How to Change the World – A Practical Blog for Impractical People”, Glenn Kelman of Redfin posts their Actual Numbers against “The Redfin Model” figures in a post titled “Financial Models for Underachievers – Two Years of the Real Numbers of a Startup”

Seems the model is based on worst case scenario, to increase the odds of repeated rounds of funding.  Glenn says: “…we heeded Guy’s advice that ‘the three most powerful words you can utter at a board meeting are, We beat projections’. This convinced us to develop the worst possible financial model that could still be used to raise money.”

Hmmmm.  So you set your sights artificially low, so you can say you beat projections when asking for more money.  Had the sights not been intentionally low, maybe there wouldn’t be a new round of funding.  I guess that’s a strategy.  But it sounds a bit deceptive, doesn’t it? 

Surely people spending lots of money, aren’t totally awed when someone says “We beat projections!”.  One would hope that they would first ascertain if those projections were intentionally placed at worst case scenario, just so they could say “we beat projections!” to get more money.  One would think investors on a grand scale are a little smarter than that…or at least we hope they are.  But looks like Guy and Glenn know for fact that they are not, and are capitalizing on that fact.

It really is a great article, and Glenn is offering sanitized versions of the model for others to follow.  But if people looking for money can read this and use that model, wouldn’t the people handing out venture capital also be reading this?  Wouldn’t they in turn learn to scoff when someone says the magic words: “We beat projections!” again and again?

Yup, it’s “A Practical Blog for Impractical People” alright.  Sounds like the practical people are the ones asking for money, and the impractical ones are the people giving the money.

Other blog posts commenting on Guy Kawasaki’s post:

Sneak a Peak Inside Redfin by Joel Burslem on FoREM

Nick Bostic on Radiohead and Redfin (not quite related, but cute and noteworthy)

Greg Swann’s take on it

Tim Berry of Up and Running quotes the quote “Plan slow; Run fast”

 

A Seller's Guide to FHA

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FHA insured mortgages have received a stigma in past years for creating a challenging transaction.  Sellers seem to prefer conventional financing, even subprime financing, over an offer with an approved FHA buyer.   

The Federal Housing Administration was established in the 1930s following the Great Depression.   These innovative low down payment loans were intended to help more people become home owners with intentions of creating more stability in neighborhoods.  FHA insured mortgages are woven into American history.

Here are some reasons you,as a Seller, should consider an offer with FHA financing.

  • Preapproved FHA buyers are full documentation loans.  These buyers have been scrutinized and have provided income and asset documentation in order to have a true preapproval.  
  • FHA mortgages are not going to “disappear