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

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…

Sunday Night Stats – Seattle Real Estate

Median price per square foot for condos sold is starting to fall below 4th quarter of 2006 numbers, and is down 11.8% from peak pricing. 

King County Condos

2004 – 1Q – 1,694 – $188, 2Q 2,636 – $199, 3Q 2,540 – $196, 4Q 2,176 – $195

2005 – 1Q – 2,066 – $198, 2Q 2,925 – $209, 3Q 2,769 – $226, 4Q 2,266 – $224

2006 – 1Q – 1,956 – $242, 2Q 2.748 – $252, 3Q 2,737 – $269, 4Q 2,217 – $278

2007 – 1Q – 2,042 – $295, 2Q 2,862 – $302, 3Q 2,676 – $311, 4Q 1,618 – $294

2008 – 1Q – 1,258 – $299, 2Q 1,535 – $287, 3Q to date 895 – *$274


Active Listings: 3,983 – DOWN 47 – median price $319,950 – MPPSF  asking $307 (Down $3) – DOM 67 (up 2)

In Escrow:  804 –  UP 10- median asking price $289,700  – MPPSF asking $291  – DOM – 53 (up 3)

Sold YTD :  3,710- UP 650 – median list price $289,000 – median sold price  $282,450 – MPPSF – $287 (down $2) DOM 49  

Residential King county

2004 – 1Q 5,650 – $152, 2Q 9,237 – $160, 3Q 8.737 – $163, 4Q 7,467 – $165

2005 – 1Q 6,402 – $173, 2Q 9,093 – $185, 3Q 9,131 – $192, 4Q 7,301 – $195

2006 – 1Q 5,596 – $201, 2Q 8,248 – $214, 3Q 7,771 – $216, 4Q 6,204 – $217

2007 – 1Q 5,304 – $222, 2Q 7,393 – $230, 3Q 7,944 – $229, 4Q 4,301 – $221

2008 – 1Q 3,640 – $219, 2Q 4,676 – $220, 3Q to date 3,106 – *$215

*Residential median price per square foot is down another $2 per square foot since I ran the numbers two weeks ago.  That brings prices back very close to where they were in the 2nd Quarter of 2006.

Some sigificant changes for property in escrow.

In Escrow: 2,429 – DOWN 139- median asking price $409,950 (down $10,000) – DOM 51 (up 3) – MPPSF $197 (down $7)

SOLD YTD: 11.451 –  Actively for sale 12,027 – DOWN 280

Sold Year to Date and currently for sale are getting very close.


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

Having second thoughts about that High-End Condo presale?

As with any blog, this is not legal advice. If you want legal advice, consult an attorney in your area.

Escala. 1521 second avenue. Olive 8. Just a few of the many luxury, high-end condominiums going up in the Emerald City. Needless to say, when its “designed exclusively for the confident few,” you can be sure there will be a stiff price of admission. Indeed, these developers not only charge a high price, they also typically require a substantial earnest money deposit, usually 5% of the purchase price. On a million dollar condo, thats $50k. You’ll pony up this sum months, and even years, before the condo is complete and ready to close.

So what happens if you change your mind between the time you signed the presale contract and when the closing date approaches? What happens if the market goes in the tank and you want out of the deal? Or you foolishly went long on a can’t-miss investment opportunity, and now you’re not so sure you’re one of the “confident few”? Can you get your money back?

The short answer is “no.” Developers typically structure their contracts so that the earnest money will be forfeited if the buyer does not close. Buyers backing out of the deal is every developer’s nightmare — they need to sell the units and move on to the next project. Accordingly, developers do everything they can to “lock in” a buyer.

That said, there are typically a few avenues of attack if you really want out of the deal. To determine whether you are really serious about getting out of the deal (versus typical “buyer’s remorse”), ask yourself: “What would be worse, buying this condo or losing my earnest money?” If buying the condo is the worst possible outcome, worse even than losing your earnest money, then you’re ready to head for the exits.

One fertile area of inquiry is the Public Offering Statement (POS). By law, the seller of a new condo must provide the buyer with POS, which contains a variety of information about the condo development. Upon receipt, the buyer has a 7 day right of rescission and can therefore rescind the contract within that period with a full return of the earnest money. The seller must also provide the buyer with “all material amendments” to the POS, and upon receipt the buyer has another right of rescission if the “purchaser would have that right under generally applicable legal principles.”

Therein lies the rub, of course. These “generally applicable legal principles” are not spelled out in the statute, so it is a bit of an open question as to the extent of a change in the POS (between when provided to the buyer initially and when finalized) that gives rise to another right of rescission. Regardless, however, it creates an arguable point with attendant risk to all parties if they are unable to voluntarily resolve the dispute. Since every POS changes between the initial, presale version and the final version, a buyer can usually use these changes to negotiate at least a partial return of the earnest money.

There are other “arguable points” as well, all of which can lead to a negotiated resolution and a return of at least some of the money. Many developers are apparently unaware of the Interstate Land Sales Disclosure Act, a federal law that applies to large-scale developments. This statute has several requirements, including a disclosure requirement similar to the POS. If the seller fails to abide by the requirements of this federal statute, the buyer may have a right of rescission. There are many exceptions to this statue, but as long as there is some doubt, it will assist the buyer in negotiating a resolution.

In the final analysis, it is probably worth it to hire an attorney if there is a substantial amount of earnest money at issue (almost guaranteed if you’re talking about a luxury condo). The attorney will be able to identify those legal issues that can be used to negotiate a resolution. In doing so, you will probably get some of your earnest money back, and that total will probably be more than what you spent on attorney’s fees.

Flying under the radar with the stealthy SecondSpace

In Seattle, the real estate technology scene is pretty crowded. There’s the big 3: Zillow, Redfin, HouseValues. And then, there’s the cool 3: ActiveRain, Estately, and RealTech. Well, there’s another company in town, which will soon be joining the party.

Bellevue based, SecondSpace, was founded by executive Anil Pereira and former Microsoftie Alok Sinha, SecondSpace landed $6.6 million in venture funding from Ignition Partners over a year ago. Alok (their CTO) & Delane Hewett (their Software Architect) both had stints in the MSN HomeAdvisor teams (back in the Web 1.0 days), so they know the internet real estate space better than most new comers.

Pat Kitano of Transparent RE, talked about them 6 months ago when they came out of stealth mode, and starting flying under the radar. The most interesting thing about the company’s business plan is that they are attacking what appears to be small vertical niche. However, one does not talk venture capitalists into writing big checks for thinking small. Their sites, and are currently targeting consumers looking for vacation homes and vacant land. In future, they’ll probably target time shares, vacation homes in foreign countries, non regional visitors, and other second home ownership opportunities with additional sites targeted for those niches.

stealth fighter.jpgTechnologically speaking, they have some very compelling technology under development and a very talented technical staff. On their blog, They’ve talked about using SOLR & Lucene as the basis for their search engine, which should give them a near term advantage until somebody does the same thing or writes a check for Endeca. The neural network based learning they employ, should help visitors find interesting properties easier (think of a Google-like search experience tuned for real estate) and it allows them distribute more qualified traffic to their customers (brokers, developers, etc) than a traditional means would allow. They also have even more interesting features on the drawing board, that I’m probably not at liberty to discuss, but I can say their job posting on Craigslist drops some big hints.

However, given that they only have 70,000 listings at the moment; it’s difficult to fully appreciate the impressive technical infrastructure they are building until they have more data to test it with. It’s kind of like test driving a Corvette on a short pot-hole filled road. You just know it performs better than the conditions will allow for. The problem is until the test track improves, you don’t really know how much faster the car really is.

The real question is there a market for a second home or vacation home real estate web portal, when the first home real estate market is struggling? And is that opportunity worth the millions Ignition Partners is investing? For comparison sake, a typical NWMLS IDX web site has about 56,000 listings right now and popular real estate blogs currently have a larger reach than (their largest site). Even with hockey stick growth of 10,000 new listings a month, it’ll be another 7 years before they hit the million mark (which I think is the magic number of listings you need to have to be taken seriously if you have big aspirations). I think the only people that read their blog are their employees, their VC’s and I. I think they need more a LOT more listings and a LOT more traffic before they are taken seriously by the general population. That hockey stick growth better turn exponential or they better have very patient investors.

Perhaps most disconcerting, they have no visible marketing push, and no real buzz in blog-o-sphere. Maybe, they are just flying under radar of the public eye until their technological terror is fully operational? Maybe it’s because their business model and the community they serve are so different than the ones the titans Web 2.0 real estate are currently serving, that they don’t need to play by the same rules? Maybe developers don’t feel the need to read or comment on blogs? Maybe their business development leaders needs to read Seth Godin or Dustin Luther?

All I know is that sooner or later, they’ll need to soar above the clouds with after burners at full throttle or crash back to earth. They can’t fly under the radar forever with the firepower they are packing… Anyway, I’m going to be watching this company very closely. The technology under development is too compelling and the business plan is too interesting to stay under the radar at cruising speed for much longer. Will 2008 be the year SecondSpace goes supersonic?

Got renter's or condo unit insurance?

I’m constantly amazed at how many people don’t get renter’s insurance when they are renting a house or apartment. Did you realize that if a major catastrophe happens to the property you’re renting that the landlord is not responsible for your belongings?  You should.

Renter’s insurance is relatively inexpensive for the peace of mind that it will give you. Not only are you covered if a major issue happens to the property and damages your belongings, you can also check to see if the policy will cover you in the event of a break-in. Most people don’t consider the fact that a water heater might blow out and cause flooding to the interior of a property. This event could damage clothing, furniture, or more. The landlord will likely be responsible for fixing or replacing the water heater but they won’t be responsible for your stuff.

A while back we were representing a buyer on the purchase of a 20-unit apartment complex. There were 2 buildings with 10 units each. For some bizarre reason the seller decided to replace the roofs mid-contract. Unfortunately for her it rained right at the time the new roofs went on and 4 units were ruined and more were damaged – along with the tenant’s belongings. Thus began a nasty fight between her and the tenants – several moved out, resulting in lost rents, and others started attempting to boycott the property and prevent others from moving in to replace those that chose to move.

The majority of these tenants did not have renter’s insurance. More landlords are getting savvy and are adding provisions to their lease agreements that spell out a requirement for renters to show proof of insurance within a short period of time of moving in. My own lease agreements have similar language and it states very clearly that I’m not responsible for their stuff if something happens. Nature can impact a property at any time – I had this happen when a neighbor’s tree smashed into my duplex roof a couple of years ago. Thankfully my tenant’s didn’t get impacted but they could have since the tree punctured holes in the roof. Thankfully we got the roof repaired pretty quickly so no major damage occurred but it could have been ugly.

New condominium buildings are also requiring owners and tenants to have contents insurance. For owners of these units the requirement is that the policy cover up to the deductible of the homeowner’s association policy. Frequently that amount is roughly $50,000.00.  These are good things to know. Many of the condo sales require proof of insurance at closing so be sure to contact an insurance company prior to the end of your transaction if you’re in the process of buying. One guy I know that can handle this for you is Gerald Grinter of Gerald Grinter Insurance.  He can handle policies for condo owners and renters.

The condo public offering statement/resale certificate

As always, this post is not legal advice.  For a specific legal question, consult an attorney.

Buying a condo can make a lot of sense, particularly if you can purchase a unit close to work (e.g. downtown) and if your “lifestyle” is conducive to apartment-style living (e.g. no kids, no pets).  If you’ve decided to take the plunge, make sure you do your homework.  The Seattle Times had a good piece on the topic a couple of years ago.  That article notes several sources of information that you should review prior to purchasing, including the public offering statement (for new construction) or the resale certificate (for a previously owned unit).  In reality, your homework can begin and end with the public offering statement or resale certificate, as by law each of these must contain the information necessary to make an informed decision.

That said, don’t revert to your younger self and “forget” to do your homework.  The statement or certificate can be quite intimidating, often including hundreds of pages of information.  Nonetheless, you need to sit down and dedicate some time to reviewing it in detail.  Reading it in bed, before drifting off to sleep, is NOT sufficient (although you may find a cure for your insomnia).  The disclosures contain information about the financial and physical health of the devlopment, as well as the rules that will govern how you can use the unit (such as renting it out).  Ignore this information at your peril — you may find years later that you made a very poor decision, all because you did not take the time to review the provided information.

Finally, given that the disclosure contains hundreds of pages, many of them written in dense “legalese,” you may wonder whether an attorney should also review it on your behalf.  An attorney can explain the disclosure and answer any questions you may have.  Moreover, the attorney may be able to identify issues of concern that you did not appreciate.  On the other hand, the attorney does not and can not know everything that is important to you.  Therefore, while you may benefit from an attorney’s review, the key is that YOU must take the time to review the disclosure carefully.  If, after doing so, you decide that the condo is not for you, both disclosures create a right of rescission (7 days for a public offering statement, 5 days for a resale certificate) so you can cancel your purchase and sale agreement and avoid the mistake entirely.

Pine is dying, Urbnlivn get together, SLU delays


Last Tuesday the POWHat Neighborhood Association hosted the developers of Pine and Belmont so the community could find out more about the controversial project. I was unable to attend though Carl Goodman did and contributed an excellent article to Urbnlivn, Pine + Belmont Condo Development: More Details Revealed. Unfortunately the details are not too promising. The biggest concern being that they will not be replacing the five bars they are displacing over noise concerns even though their target demographic is young singles. Capitol Hill won’t be the same.

I would also like to announce the first ever Urbnlivn meetup. If you’re interested in condos and all things new downtown the date to save is January 31st at 7:30.

Project news

South Lake Union

The biggest news out of Paul Allen’s South Lake Union is that all three projects (Enso, Rollin Street and Veer) have announced delays ranging from one to two months. This is the second set of delays.

They say the reason is delays in securing permits but maybe they are busy with the closing of 2200. It must still be in the midst of closing because 6 more units hit the market.

Trace Lofts

Trace Lofts the ‘mysterious’ project at 12th and Madison announced their reservation process [pdf]. Reminder, there is a preview event this Thursday.


Seattle’s ugliest condo may get a little less ugly. It looks like they are re-painting it.

Condos in the news

The Seattle PI had an article that Downtown mostly a male domain. Meanwhile the Seattle Times wonders if Mixed-use buildings bring mixed feelings. On the other hand the New York Times tells of the condo bubble elsewhere in the nation, Buyers Scarce, Many Condos Are for Rent. If any condo project here converts to rentals, my money is on Trio.

Condos off to a busy start

(Editor’s Note: Today is another great day as I get to introduce Matt Goyer as the newest contributor to RCG. I’ve been following Matt’s Urbnlivn website for quite a while and I’ve always been impressed. With urbnlivn, Matt has managed to collect, organize and republish an incredible amount of local condo knowledge. However, if you decide you need more than condo information from Matt, then check out his personal blog, his more general real estate blog, or his contributions on the Redfin’s blog. While I don’t want to pigeonhole Matt into only talking condos, our current plan is to have him synthesize the great condo research he does on Urbanlivn and bring it to RCG on a regular basis. Matt can be reached at mail *at* mattgoyer *dot* com or by leaving a comment below!)

Relative to all of December it was a busy week this past week for new condo construction in Seattle. What made the first week of the new year so busy was three new events on the calendar and lots of action on the MLS.

Three new events

January 9 at 7pm, the POWHat, a community association, is hosting a discussion about proposed condo on Pine. This is the development that started the death of Pine/Pike meme and has been written about in The Stranger, The Seattle Weekly as well as The Seattle PI. Written about not because the developers paid to get in the Saturday New Homes section but written about because it is replacing the independent bars and restaurants which the condo’s marketing people love to tout as the reason why you should move to Capitol Hill. So I’m looking forward to seeing what is replacing the Cha-Cha, Bimbo’s Burritos, the Bus Stop, and Kincora because without those four institutions it’s going to be hard to market this project.

January 18 at at 6pm, Trace Lofts will host their buyers preview. We’re all looking forward to unraveling the mystery that is Trace Lofts. At least no one is upset about this development, yet.

January 19 at 5pm is Decatur Condominiums grand opening gala. Decatur is a conversion originally designed by the Space Needle’s architect. Now the invitation doesn’t mention whether this gala will be black tie or not. I’m assuming no since, I don’t own a tux and the units are supposedly all under $500,000 (people who make less than six figures likely don’t down their own tuxes, right?).

Active week on the MLS

At the beginning of last year most new condo developments shied away from the MLS. But then in the fall as the market slowed more developments listed their inventory hoping to attract more attention. Then towards then end of the year we started seeing price reductions and buyers bonuses; presumably to move inventory before year end. Now that the new year has started prices are increasing and I’m sure we’ll see fewer buyer bonuses.

To start us off, Noma first increased the prices on the 3 units it had on the MLS and then listed the rest of their inventory which is 19 units. They now have 22 listings on the MLS ranging in price from $222,950 to $539,950. I imagine they’re a little frustrated watching Canal’s success.

Olive 8, the development which added 3 floors, had 10 price increases ranging from $20,000 to $50,000. What is odd is that the increases range from 1.5% to 5% and seem fairly random.

9 units from Press 2 were listed. Press is a two phase development originally built as apartments. The first phase was an occupied apartment and has since been converted, phase two was never occupied and renovated.

4 units from Trio came online. Trio is unarguably Seattle’s biggest condo failure with only 28 units sold of 113 in over a year. Glad to see they’re coming to their senses and making their units more accessible to all the users of the MLS. Hopefully this gets them a little more attention in the New Year.

If you’re interested in following the day to day activity in the Seattle condo market be sure to check out Urbnlivn or check back here next week for my weekly updates.

Cocktail Party Primer

I’d like to open this thread up to a conversation on the health of the Seattle market…

but there is a catch. I will not allow it to dissolve into a conversation about racism, liberals, RCG, or faith. If you’d like to have a reasonable intellectual conversation, you are more than welcome to participate. If you attack me, RCG, or any contributor, then I’ll happily delete your comment.

By the way, please consider this post the “anti-linkbating” post. Not only will I quickly delete any off topic comments, but more importantly, I will mark those comments as “spam”. That will allow me to ban your email, name, IP, etc. from the site after only a few off-topic comments.

Two days ago, Michael Lindekugel of Team Reba made a very interesting comment. No one ever challenged him on the merits of his argument, so I think it makes an appropriate starting point into a discussion on the health of the Seattle market:

It’s the hot topic at most cocktail parties. Is Seattle going to experience a bubble and burst? The short answer is no…..the long answer follows:

We experienced a busy market with a shortage of supply and increasing demand resulting in four or five offers and short “Days On Market

Condo owners & hot water tanks – A call to arms!

[photopress:water.jpg,thumb,alignright]A lot of people worry about George Bush and political issues. Many more worry about saving the trees and global warming. I worry about condo owners and their hot water tanks.

I am buying a new hot water tank for the seller and buyer of the condo I have in escrow. When I sold the condo to the current owner/seller, the hot water tank was 14 years old. I bought him a home warranty at the time and a new coil was put in, during the first year that he owned the condo, by the warranty company. Now that I’m selling it for him, I’ve decided to have the tank replaced for the new owner (who is not my client).

Hot water tanks are one of those things that often slips through the cracks in a normal transaction. A home inspector often cannot tell if a hot water tank is “ready to blow” simply by looking at it, unless it is already leaking and corroded. A warranty company comes in and “fixes” it, but often doesn’t replace it until “it blows”. The main reason to replace a hot water tank is due to its current age, which is “past it’s life expectancy”, and not wait until “it blows”. However, in the normal real estate transaction, if it ain’t broke, no one is obligated to fix it. “Past its life expectancy” alone, is not necessarily “a defect that the seller must repair”. Old is not necessarily defective.

When I became a Realtor many moons ago, it was our charge to “uphold the value of real estate” generally. The Realtor motto has changed since then, and I am not currently a Realtor, but that motto is still my “cause of action” and it calls me to replace hot water tanks. We all need a mission in life, and so I have made this one of mine. Why you say?

Because when a hot water tank blows in a condo, it affects everyone. When FORTY GALLONS of water lets loose, while the owner is off at work, it is a chaotic catastrophe! The owner comes home to wade in water that has turned his condo into an indoor swimming pool. The next door neighbor comes home to find water all over her condo, but can’t find the source of the problem. And if it is not a ground floor unit, the people below are getting rained on. If any one of these affected neighbors doesn’t respond appropriately, because “they only got a little water, so they just let it dry out on its own”, you can have the beginnings of mold growing behind the baseboards and under the carpet. If you have a 90 unit complex that is 14 years old, you can potentially have 90 hot water tanks all ready to blow in sequence, over a 2 to 4 year period! One blown tank after another! Water, water everywhere! So it is my mission to replace these tanks before they affect people’s lives adversely. Before there are so many “water intrusion” insurance claims that the HOA loses its condo insurance, or the insurance rates are so high, to keep their insurance, that the HOA dues skyrocket! The ramifications of blown hot water tanks, in succession in a condo complex, can raise everyone’s HOA dues and negatively impact the value of everyone’s condo. So to “uphold the value of real estate”, generally…I’ve got to tackle these old tanks at every given opportunity, one sale at a time. Out with the OLD and in with the NEW!

That being said, if anyone has recently replaced their hot water tank, and can give me a referral to a reasonable and reputable source of hot water tank replacement in the Seattle area…please speak up and join me in this cause to eradicate water intrusion claims. Many “forward thinking” HOA Boards are making a rule, that all hot water tanks be replaced based on age alone, and are monitoring that every owner replaces their tank before it blows on everyone. If you live in a condo complex, especially a “stacked unit” complex, please heed this warning, go to your condo board meeting, and urge them to take a stand against water intrusion caused by hot water tank failure. Being “forewarned is to be forearmed!”

Thank you.