Tag Archives: home

"Over-priced" Houses That Don't Sell

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As I wander through the various message boards, I often read about people’s frustration regarding “over-priced houses that can’t possibly sell”.  To a buyer who likes the house, and is waiting for the price to be within reason, this can be very frustrating.

What they fail to understand is that every house that is for sale, is not necessarily going to be sold by the current owner. 

1) Divorce – Often in a divorce, one of the spouses is offered an option to buy out the other spouse.  In a market like this one, sometimes the agreed upon price must be tested.  Say the spouse who is leaving wants the buyout price to be $600,000. Let’s say they bought it for $400,000 and put $100,000 worth of improvements into it.   They put it on market for $$599,000 and keep reducing the price to $519,000.  Then it goes off market (this is a real case) and it never comes back on market.

Meanwhile, a buyer has been watching it, who wanted to buy it for $485,000.  He’s been watching it for 7 months.  He feels “used” and frustrated that it went off market before it hit an asking price of $499,950 .

Once the value was proven to be $400,000 plus $100,000 at best, the two spouses agree on the “buyout” amount, and one of them gets to stay in it.  It was only ON MARKET to prove to one of the spouses that the price of $600,000 was unrealistic.

2) Passive Aggressive – saying YES and meaning NO.  Husband and wife have a fight and the wife calls an agent to list the house, planning to get a divorce when the house sells.  Husband signs the listing paperwork at a price at which he knows it won’t sell.  He appears to be cooperating with the sale, and blames the market for the wife’s failed plans 🙂  They make up at some point, take the house off the market, and live “happily” ever after…until the next fight.

3) “Mom, you HAVE TO move” – Well meaning children tell Mom she’s too old to live in that big house all by herself.  She’s tired of hearing it, and agrees to put the house up for sale.  High price and awkward showing instructions.  “Can only be shown with listing agent present’ or “Can only be shown on weekdays from 10 a.m. to 4 p.m. and not on weekends”.

Sometimes these homes are on market from April through October, every year, year after year, with the price increasing every year.  Kids wonder why Mom’s house won’t sell, but they stop bugging her about her need to sell it.

4) Short Sale – Bank approves a sale price of $450,000.  House sits on market at $450,000.  No offers.  Owner can’t lower it below what bank has indicated they will take.  Bank won’t reduce the amount they will take, because they have an appraisal at $450,000.  House sits on market until someone buys it at foreclosure.  Some owners keep reducing it every couple of weeks, but mls says they can’t offer it at a “fake” price not ratified by the Bank…big Catch 22.

So when you look at the inventory of homes for sale, understand that they will not all be reduced to a price at which they will sell.  Often you will not get the real story about the seller’s motivation.

Attack of the Killer Assessments

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It was a warm & lovely summer evening… Our hapless hero goes through his nightly ritual of sorting the junk mail from the bills when stumbles upon his annual “Official property value notice” post card from the King County Assessor.

Before I actually looked at the card, I thought, this shouldn’t be too bad. The local real estate market has cooled down a lot in the past year. My appraised value should be flat (maybe even lower). Zillow thinks my house’s value has fallen by about 10% this past year. Cyberhomes thinks it’s fallen by about 9%. Eppraisal & Realtor.com doesn’t give me a historical chart, but their value ranges are realistic.

So I gaze upon my white post card of doom and see the following numbers…

APPRAISED VALUE

OLD VALUE

NEW VALUE
LAND

123,000

230,000
BLDGS, ETC

413,000

360,000
TOTAL

536,000

590,000

I then think, WTF? Why in the world has my land value gone up nearly 90%? Why is my total property value 10% higher than last year, despite the fact we are in a down market? Is the assessor catching up to the market? Did the assessor really blow it this badly in years past? Is this a work of comedy & horror to rival the cult classic of good garden vegetables gone bad?

So, I call the King County Assessor’s office, and they explain to me that the market sells it as one piece, but the assessor must value the land as if it were vacant. After the land value is determined, they determine the total value of the property. Then the land’s worth is subtracted from the total and the remainder becomes the value of the house. They tell me where to go to view the area report for the Issaquah Highlands if I want find out more about how they determined my property’s value.

I read the report and discover that the base land value of single family home in the Issaquah Highlands is $240,000 and that the appraised land value for Area 75 is about 56.7% higher than it was last year. OK, but it still doesn’t explain why my land value is nearly 90% higher than last year. Unless weeds are considered a land improvement or the definition of a square foot has changed in the past year, I still have no idea how they came up with that figure.

I usually read the Seattle Times, not the Seattle PI, so I didn’t see this coming! However, it’s nice to know, I’m that the only one confused about the crazy assessments this year. I haven’t decided if I’m going to get out my pitchfork and storm the assessor’s office yet, but I do feel the need to understand how they came up with their numbers. I’m sure it doesn’t help that Probably & Statistics for Engineers, wasn’t among the classes at school that improved my GPA when I was going to Cal Poly.

And if any program managers from Zillow are reading this blog post – there has to be a cool new feature idea in this experience somewhere. Your web site is very useful helping me buy or sell a home, but I really have no idea if land values really are what the county says they are. Besides, I pay property taxes on a twice a year basis, but I’ve only sold a home once in the past 10 years. Every time somebody’s assessment changes you could get more site traffic. Why can’t generating a Z-assessment petition be as easy as getting a Z-estimate? Just saying, there’s an opportunity here…

Do It Yourself Home Staging

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This is a good example of what a homeowner can do by themselves to get their property ready for market. There are really only three things that will help a property sell. Location, Condition and Price. The only thing you can do anything about are condition and price. So make sure you do your best with condition, before considering a price change.

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This 3 bedroom townhome in Brookwood Place in Bothell was already on the market with these before photos when Jeremy Keener and I arrived with nothing but a camera. We did not bring anything with us for staging this townhome to recreate the “stage” except what the owner already had in the townhome. Everything that was in the room is still in the room, just arranged a little differently.

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As you can see, this is the same room. The main change is to show the townhome’s best selling feature. By opening the blinds so that the photo in the mls shows the green out the window, a prospective buyer can readily see this prime feature. The “copy” did say it “backs to greenbelt”, but a picture speaks a thousand words. So we opened the blinds and let the greenbelt show.

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Transforming the dining room was easy. Mostly we just moved the sofa, which you will see in the living room photos, so it wasn’t blocking the entrance to the dining area. The tall piece in the corner was moved up behind the folded out futon in the bedroom photo above. The owner had already placed the tablecloth, table runner and pictures.

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We ditched the folding chairs into a closet. The room is big and bright without the chairs, so we left it that way. We reversed the sofa and loveseat, but I couldn’t get the sofa corner to fit totally out of the dining room entryway, so we simply took the blanket throw from the back of the sofa and draped it to help camoflouge the dark sofa corner intruding on the dining entry space.

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The living room was just too crowded with stuff. We pulled the big 3 foot ottoman out of the room and put it in the 3rd bedroom, which is on the main level and used as an office. We put the blue doggie bed in there also. We reversed the couch and loveseat to make more room walking into the dining area.

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We moved the coffee table into the center space between the couch and loveseat. We found the mantle items in other places, the center “picture” being a placemat. The throw pillows on the sofa ended up upstairs on the beds. We opened the blinds a tad to bring the green of the outdoors, inside. Other rooms were arranged as well, and it took less time to transform the townhome than it did to write this post.

The Flip Side of the Sub-Prime Story

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[photopress:P1000150.JPG,thumb,alignright]Who will suffer most from all of this? Will the people who honored their commitments, and who valued and appreciated the chance the lender took on them, get hurt by all of the “reform”?

No one was more surprised than I, when I got the mortgage and closed on my home. In the end, the lender wanted me to write my profile of “Who I Am” right before the loan funded. I was starting over again in a new city. No proven history of what I might be able to make long term, as an agent in a new place. Coming out of a 20 year marriage, too old to wait until I stablilized my income, arriving with only what could fit in the trunk of my car. Sleeping on the floor at my sister’s in Green Lake while I worked hard to re-establish myself after a debilitating and nasty divorce. Needing a home for my three daughters and grand daughter to come to, hoping I could woo them away from L.A. where they were not doing well, and couldn’t afford to live on their own and be safe.

I worked day and night, seven days a week, and made the payments gladly. The one day a year when all my daughters came together at Thanksgiving, the couple of weeks when my grand daughter came up and we visited the ducks up at the Marina in Downtown Kirkland. Helping them through their hard times with their car insurance and car payments and making my mortage payments. Gladly working 24/7 for the opportunity to prove to them that a woman could make it after divorce, and not just “get by” but have a nice home.

I wouldn’t trade these last two years for anything. The memories in this house with my dearest and most cherished treasures, my girls and my grand daughter. Each of them proud of me and realizing that all things are possible, and life doesn’t get you down unless you let it.

Yes, for the first time in my life I was “sub-prime”, I was “stated income”, I was 49 and starting over. I am the person sub-prime and stated income was made for, and I’ve worked hard to be the person they believed in when that loan funded. And when the news got scarier, I took a second job as Broker of BRIO to make sure I could keep going, even if I couldn’t refi, and honor my commitments.

The day they asked me to write that profile so they could take one last look at who I was to decide if they should take a chance on me, I remembered my Uncle Johnny Rosati. How no one would give him a loan for a truck for his business “idea”. How finally, one bank said yes and he started his business and busted his butt day and night to prove himself worthy of the chance they took on him. How he refused to ever use another bank his whole life, no matter how many people told him he could get more interest elsewhere. He was loyal to that bank until the day he died, because they were the only ones who believed in him when they had no reason to, and no one else would.

Every day I live in my house, every month when I pay my mortgage payments to Washington Mutual, I thank them for believing in me and for giving me my “sub-prime” mortgage. I wake up working. I go to sleep working. I work every single day. I work to be the person they believed I could be, and I worry when I read all the bad news. I worried so much I took a “second job”.

Will I never be able to convert my 2 year arm because of the reform? I don’t know. But I do know that I will pay my mortgage payment as the rate adjusts higher. I’ll work two and three jobs if I have to. I know that they took a huge chance on me, and I know it was the boldest move of my entire life when I took this on.

Every day my girls get a year older, and every day I need to have this house less and less. Every day I thank those who believed in me and took a chance on me, and work hard to honor my commitment to them. Will all this reform close the door on me? No matter. I’ve already made it to the light at the end of my tunnel.

Zillow your life – it's quite interesting

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I grew up at 4950 Lancaster Avenue My parents purchased it for $7,000 in 1957 or so. They made nothing on it and it is now the hole that you see between the buildings. But they raised seven children there. I lived there from age 3 to age 20 or so when my Dad died. I say it owes them nothing for housing nine people there for 17 years. The entire neighborhood that still exists, only values out at $15,000 max. That’s only a 50% return over a fifty year timeframe. Yes, there are “wrong” places to buy property! Always has been and always will be…ALL property does not go UP! (or down) in equal proportions.

In 1973 when my Dad died, my Mom moved to 6626 Haddington Street I remember her picking up the phone and leaving messages on the answering machines of every real estate office in town. She said I have $8,000. If you have a house to sell for $8,000, call me. According to Zillow, that house has now increased by 470%. My Mom was always a little smarter than my Dad…but my Dad was a cool dude 🙂 I don’t remember exactly what my Mom sold it for in 1980, but I do remember that she got at least double what she paid, had a non-taxable gain AND carried a portion of the price as a mortgage to the purchaser, with a double digit interest rate. That house owes her nothing either.

I moved out by the time she sold that house in 1980. In fact my Mom followed me to Northeast Philly. I rented. She bought a house for $18,000 on Fairdale now valued by Zillow at about $55,000. She sold it for $46,000 or so. It is now worth three times what she paid for it, but she took most of the equity out when she left. I bought this house in Kipling Place in 82 for $45,000 and sold in in 84 or $65,000. Zillow values it at $74,000 now, so looks like I pulled most of the equity out of that one. Me and my Mom seem to be doing pretty good pulling equity out and getting in and out at the right times.

Gotta go and I want to see if these Zillow links last. I’ll pick up in 1985 in another post.

Do the Banks Own Seattle?

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[photopress:bank.jpg,full,alignright] The photo is of the Bank I worked in for twenty years. Lots of memories in there and lots of pranks pulled up on that balcony 🙂

I was perusing The Tim’s blog while writing something on my blog earlier today, and ran into the comments regarding King County median income and median home prices, again. I never seem to draw the same conclusions as other people. So I tested my thinking on the subject. From my way of thinking, at least SOME of the people have SOME money to put down when they purchase a house. So the median income is relative to the median mortgage used in the purchase, not the sale price. Isn’t it? So I calculated some random stats you might find interesting to prove that the Banks and Mortgage Companies don’t TOTALLY finance EVERY home purchase.

First I went to the high end and found that Seattle high end homes were financed at only 36% of value. That includes 40% of the randomly chosen properties sold in the last 3 or 4 months that were bought with cash and no mortgage at all. Mercer Island and high end Eastside, like Clyde Hill and Medina, financed at a higher rate of 49.5%. Both represented about $28 million dollars worth of homes purchased. Seattle financed $9,750,000 of their $28,000,000 purchase prices while Mercer Island, Clyde Hill and Medina financed $13,500,000 of their $28,000,000. Still plenty of equity though, so NO, the banks do not own the McMansions 🙂

One thing I found that was surprising to me up in the high end is that one of the most expensive homes sold was sold all cash…not surprising. The occupant at the time of sale was a tenant! That cracked me up. Why would someone rent a Six Million Dollar house? Oh, well…just a random observation.

Then a went down to the $475,000 to $500,000 price range, more in the median range and pulled through separate market segments. South Seattle was 90% financed. North Seattle was 85% financed and Eastside was only 70% financed. Why would the Eastside have more people with more money to put down on their homes? Easy. Cheap condos. The condo market was really cheap two to three years ago, and is still relatively cheap by Seattle standards. So people who bought those instead of renting 3 to 5 years ago had built up enough equity to put an average of 30% down on their single family home purchases.

Just random stats that I found interesting. The banks own 90% of South Seattle, 85% of North Seattle, 70% of Eastside and only 35%-50% of the most expensive homes. At least the ones that everyone who is reading King County median income/median home price stats are talking about, those bought recently.

Beginning the Home Buying Process – Part 2

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[photopress:MacCommercial.jpg,full,alignright] The next step in the Home Buying Process is determining how much home you can afford and how much you actually want to spend. When buying your very first property, it is important to note that while a lender may tell you that you can afford a property priced at $350,000, lenders do not actually qualify you based on sale price. It has become common practice for the ease of agents and buyers to quote a sale price. But the actual process qualifies you for a monthly payment that includes Principal + Interest + Taxes + Insurance/HOA Dues.

This is VERY important because a Townhome with very high monthly dues can be more expensive, even though it has a lower price, than a Single Family attached townhome.

There are four townhomes on my desk. Let’s look at these as a real life, current example. Let’s calculate the monthly payment based on 20% down and an interest rate of 6.25%. 20% down is clearly not the norm for a first time homebuyer, but the way to finance the amount of loan on the 20% top portion, varies greatly from one individual to the next. So we are eliminating that factor to make the point that taxes and homeowner dues, can impact the price at which you can purchase, even though your “lender letter” says you qualify at $350,000.

1. Price $315,000 – Taxes $1,559 a year – Dues $310 a month (Condo Townhome)

2. Price $359,000 – Taxes $2,986 a year – Dues $282 a month (Condo Townhome)

3. Price $365,000 – Taxes $2,064 a year – Dues $239 a month (Condo Townhome)

4. Price $375,000 – Taxes $2,460 a year – Dues $75 a month (SFR Townhome)

1. Payment $1,550 + $130 taxes + $310 dues = Total Payment of $1,990

2. Payment of $,1765 + $250 taxes + 280 dues = Total Payment of $2,295

3. Payment of $1,800 + $170 taxes + $240 dues = Total Payment of $2,210

4. Payment of $1,850 + $205 taxes + $75 dues = Total Payment of $2,130

The homes in price order do not follow suit with regard to monthly payment order. The second lowest price has the highest monthly payment.

If the lender qualified you at a purchase price of $350,000 with 20% down at 6.25% using $200 as estimated dues and $200 as estimated taxes, that would translate into qualifying you at a payment of $2,125. Using the real life examples above, you would actually qualify better for the townhome priced at $375,000 than the one priced at $359,000, even though the lender said your max affordability was $350,000.

When you and your agent walk off with a lender letter at $350,000 and buy a townhome or condo at $350,000, but the lender used $200 a month for taxes and the real taxes are $300 a month, and the lender used $200 for monthly dues, but the real dues are $325…the sale can fail on financing issues. Many owners and agents get very angry when the financing fails, but it really falls upon the agent to know the estimate of taxes and dues used by the lender, so they can adjust on a case by case basis before submitting an offer.

Moral of the story is, when a lender hands you a letter saying “you qualify at a purchase price of $350,000”, make sure you know the interest rate, downpayment, taxes and ins./hoa dues the lender used to come up with that number. Then you can adjust, if you are liking a townhome with dues of $425 a month!

We all know that one complex in Bellevue that has high dues and more “Sale Fail Releases” than any other complex in the Seattle area. Now you know why that is happening.

Speaking of Trojan Horses!

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After reading John Cooks blog, ‘Beware of what you post on Zillow?‘ I started to think, how much is to much??? Much like my last post about the ‘Trojan Horse‘ are we all becoming so connected that it makes sense for the County Assessor to start using these tools as a way to fuel the County. In my case, King County Assessor Scott Noble was even quoted as saying, “the new Zillow service could be used as a tool to make sure that homeowners are paying their “fair share.” If the KC Assessor’s office would have used Zilllow’s Zestimate for the tax assessed value of a home LTD Real Estate just sold they would have almost doubled the tax bill. That would mean from this home alone, $2,601.51 more towards the bottom line. Hopefully Ron Sims doesn’t read this blog post…

I think I am going to keep my home information my own information.