Sellers Leaving The Mess Behind

Cleaning up after yourself is in the contract…

Recently, there seems to be some confusion as to item number 5 of the NWMLS form 22D (optional clauses addendum to the purchase and sale agreement).  Maybe the sellers are deciding that the buyer already got a good deal and they shouldn’t leave the home in decent condition?  ARDELL recently mentioned that some sellers are feeling disenchanted with this market and as a result the houses are not being exhibited in their best light.  This is definitely happening and unfortunately is being carried forward to when the sale closes and home ownership is transferred.

Item #5 on the NWMLS Form 22D:

“Items Left By Seller.Any personal property, fixtures or other items remaining on the Property when possession is transferred to Buyer shall thereupon become the property of Buyer, and may be retained or disposed of as Buyer determines. However, Seller agrees to clean the interiors of any structures and remove all trash, debris, and rubbish on the Property prior to Buyer taking possession.“

Plainly stated: Take all your belongings and clean the property prior to handing over the keys. Clear enough? One would think, but what about when you line item #5 up to item #4 in the very same Form 22D and apply it to a seller who never had their home clean to begin with and had trash all over the place while the home was being shown?

Item #4 of 22D addresses the issue of “Property and Grounds Maintained

Are you making your client homeless?

I’ve been wanting to warn sellers and seller’s agents about this for the last 10 days or so.  Courtney’s new post is a great lead in to this added consideration for sellers and listing agents.


Having had the benefit of working in a market exactly like this one, back in NJ/PA in 1992 or so, I think this warning will be timely advice for many.

When an agent is called to sell a house, they touch on the subject of “Where are you going to go when this house sells?” But most often the antennae of the agent is focusing on whether you will also be buying a house with them, or if they can get a referral fee by referring you to an out of area agent (usually 25% of the commission.)

WARNING TO SELLERS: IT IS VERY HARD TO GET A MORTGAGE.  In the last market like this, many sellers assumed that since they had a HUGE downpayment, they didn’t have to worry about qualifying for a mortgage on the house that they were planning to buy.  NOT SO!

Having 50% down and little income could leave you homeless, as NWMLS does not permit “provisional” listings.  There’s no turning back.

Here’s how it usually “plays out”:

1) Seller doesn’t want to look at homes until their house has a contract. With houses sometimes sitting on market for well over 100 days, looking at what you will buy when your house sells is often put off until you have an actual buyer for the home.

2) Once the contract is signed around, the seller goes out and makes an offer on a house they are buying with 30% to 50% down.

3) Often the seller and the agent for the seller of the home they are buying are so impressed with the big downpayment, everyone all the way around assumes that someone with that large of a downpayment can get a mortgage.

REMEMBER:  The buyer of a home has a legal out phase lasting about 10 days, but the seller does not have a legal out phase if they can’t get a house to go TO.

Often you can’t just go to the buyer and say, “Sorry.  I can’t buy a house so you can’t have mine.”

So to listing agents, I know you want that listing, and your are primarily interested in getting the seller to sign that listing contract.  But be careful that you are not making your clients homeless. If they are people living on a fixed income, saying they are planning to buy, part loan, your ears should perk up.  Make sure they check with a lender as to getting that loan…before you sell their house out from under them.

We are often in the business of “GETTING PEOPLE FROM HERE TO THERE” moreso than simply “selling houses”.  Don’t leave your seller’s homeless, as you walk off to the bank to cash your commission check for “selling their house”.

What Happens When The Equity Isn't There, But The Contract Is?

Responsibility on the listing side…

Last week’s Rain City Guide discussion on Short sales got me thinking about some of the other things that are occurring in this market as well. Many homeowners have taken out a ton of equity and are either maxed out or upside down at this point, but some may not be aware of exactly how much they owe. When it comes to listing these properties – or any property, the listing agent should pull title, but also talk to the title rep and find out how much the property is monetarily encumbered by liens. Merely relying on the seller’s information is not enough to be truly diligent.

Take a seller who thought he owed X amount of dollars on his home. After being on the market for a while, the seller’s agent relied on that information to help when it came to reducing the price. A buyer came along and a contract was executed for the purchase of the property. One week before closing the listing agent calls the buyer’s agent and drops the bombshell: The seller actually owes quite a bit more than they thought. Instead of getting a nice chunk of change from their seller net proceeds, the seller will be short X amount of money to close.

Does this really happen?

You bet! Twice I have seen this happen personally and both times the listing agent had not bothered to check the actual amounts owed on the properties. Yes, a listing agent should be able to rely on the seller’s information, but as a matter of diligence shouldn’t they go ahead and take the extra step to get the full accurate information? Title has already been pulled in most cases anyway.

Sellers, you still have signed a contract:

It is helpful to know what you actually owe on your property before you sign a purchase and sale agreement to sell it. In order to stay within contract, a seller will have to come up with the short fall dollar amount to bring to the closing table.The NWMLS Form 21 Residential Purchase & Sale Agreement clearly states: “ Monetary encumbrances or liens not assumed by Buyer, shall be paid or discharged by Seller on or before Closing.

Sunday Night Stats – At Bottom

Many buyers are waiting for the $15,000 tax credit for homebuyers in 2009 to be signed into law, as well they should.  This will continue to keep the volume stats down through the month of February as to closings. If the bill is signed by the 16th of February or so, as expected, you will begin to see volume pick up in March. 

The other thing that buyers have been waiting for, are signs that prices are “at bottom”.  While median prices for King County continue to slide as short sales and foreclosures continue to impact sold prices Countywide, we are seeing two emerging trends as to “bottom”.  20% for non-distressed property and almost but not quite 40% for distressed property, more like 37%.

Who determines “bottom” as to prices?  Sellers and real estate agents would love to control prices, but the buyers of homes ultimately control home prices.  While we wouldn’t expect to see prices bottom with continued bad news as to layoffs, buyers are consistently calling the bottom at 20% under peak pricing for non-distressed property.

The odd thing about the stats on this is that it doesn’t seem to matter how long the property is on market.  If it takes the seller 800 days on market to get to 20% under peak prices, the property sells.  If it takes the seller 65 days to get to 20% under peak prices, the property sells.  In several cases when the property gets to 20% under peak prices, there is more than one offer.  BUT rarely do those offers push the price much under the 20% under peak range.

Exception seems to be when the homes sold at peak values did not have remodeled kitchens and baths, but the property sold today does have a remodeled kitchen and baths, and possibly an addition as well.  In those cases, the sales can be as high as 11% to 14% under peak pricing.

Because every neighborhood has a different peak value, and peak MPPSF, you can’t do whole zip codes or a whole County using median statistics.  You have to find the peak price in each neighborhood for each house sold, and calculate the % off peak of the sale.  A tedious chore.

House #1 – Redmond – peak pricing $249 MPPSF – Home sold at $210 PSF, 16% under peak with a remodeled kitchen of 8 years ago.  The odd thing about this house is that in September through January, this home sat on market at 16% under peak, after first trying only 5% under peak for over 200 days.  Once the market determined the price was not going to reduce further and reach 20% under peak…it sold anyway.  This is not the norm and if the kitchen remodel had been more recent, it may have sold a bit higher and faster.

House #2 – Bellevue – Peak pricing $1.5M – this property sat on market for well over 700 days.  The minute it reached 20% under peak it sold.  This would not seem like a basis in and of itself, for calling bottom at 20% under peak.  But when you see house after house going from not sold to sold when it hits the same price point of 20% under peak, the buyers speak in unison.

House #3 – Peak pricing $1,059,000 – This is a sad one.  More than 4 buyers called this one at 20% under peak at roughly $850,000.  Unfortunately it is a short sale and the lienholder would not approve the sale price at 20% under peak, even with several multiple offers all in the same price range.  How much more proof of value to do need then several buyers in a market like this all calling current value at the same place?  This one will likely go to foreclosure and end up selling for even less than 20% under market.  Still…the buyers called the price of 20% under market the acceptable level.

House #4 – Seattle 98103 – peak pricing $425,000 – Asking price at 20% under market sold – this one was unusual as the opening asking price was 20% under market…it sold immediately…in less than a week.  Doesn’t seem to matter if the seller takes over 700 days or 1 day to get to 20% under market…it still sells either way.  This consistent price point of 20% under peak turning a property from ‘for sale ‘”to “sold”, gives us a price at which buyers determine, bottom has been achieved.

House #5 – Seattle 98115 – peak pricing $800,000 – sold when asking price reduced to 20% under peak.  This is a sad one because the owner started out at well OVER peak pricing.  Hard to believe that someone was thinking prices would actually be going up from mid 2007.  But the end result was consistent with the other properties, and a buyer made an offer when the price was within 20% under peak prices.

There are some houses selling for less than 20% under peak. There are many, many houses for sale with asking prices that are much higher than 20% under peak.  But unless it is a distressed property or an especially miserable location or condition, there are NO houses sitting on market without an offer ,where the seller is asking  20% under peak pricing.

I don’t “call bottom” nor do sellers or any real estate agent.  The buyers call bottom.  And when they consistently respond to an asking price of 20% under peak by bringing an offer…the buyers are calling bottom.  

It’s very hard for a seller to price his house at 20% under peak pricing, even if he bought it 15 years ago for much less that that.  Now it seems equally hard for buyers to see a house at 20% under peak…and pass it by.

“At bottom” has nothing to do with more activity.  “At bottom” does not help real estate agents sell MORE houses, as most sellers are not ready to price at this point that buyers have determined is the price at which they will buy.  When a given price point not only guarantees a sale, but brings multiple offers consistently at the same price point…buyers as a whole determine that “comfort zone” of pricing.  Now sellers collectively have to agree with them…or not.

Short Sale Listings: Leaving Out Key Details Is Like Telling A Lie..

[Editors note: It’s always exciting to introduce a new author to RCG… and today I’m especially excited to introduce Courtney Cooper of Cooper Jacobs as the newest RCG contributor!  Far from a newbie, she’s been running an entertaining blog on ActiveRain for over a year now (and racked up tens of thousands of points in the process!), so I’m pretty sure she’ll have no problem making her impact on the RCG community.   Welcome Courtney!   ~Dustin]

Hello RCG!

Thanks Dustin and ARDELL for the encouragement! I am a huge fan of RCG and look forward to what lies ahead!

Pushing openness with short sale listings…

A lot has been written on Rain City Guide and elsewhere about short sales in the Seattle area, but 2008 had me working with far more buyers than sellers and one sentence kept popping up: “that house is a short sale

U.S. % Change in Home Prices

This chart reminds me of the crash in real estate prices in the late sixties when REIT (real estate investment trust) stock prices dropped to pretty much worthless.  I was still in high school, but the Courts got involved in the loss of value in trust portfolios, so I was looking at those in 1974 in my accounts.  I would think that today’s national drop in home prices emulate the drop in the late sixties to some degree.

I do recall in recent years warning people not to buy into REITs, but must admit I felt a bit “old-fashioned” at the time.  Once you see those losses, you don’t forgive or forget, somewhat like people who lived through the Depression.

This post is supplemental to last night’s post and as a result of the comments that follow in that post.  The source of this info is at the end of last night’s post for those who want to look at the detail.

U.S. YOY % Home Price Changes

U.S. YOY % Home Price Changes

Who Should Get Out Of The Real Estate Business?

Dustin, Jillayne, Rhonda, Galen and I were all in San Francisco for a few days for The Inman Connect Conference.  One of the most profound and spot on statements I heard at the Conference was “If you do not have a listing, right now, in THIS market (top-heavy with inventory)…turn in your license!”. Sorry I can’t remember who said it.  In fact I think it was a woman in the audience and not on one of the panels.  But how TRUE is THAT!  With inventory at all time highs, can you say you are a real estate agent if you have NO listings?! I thought that was a punch in the glass jaw to some of the agents milling around the conference.

The highlight of my trip was when Pete Flint of Trulia came over to me at the Better Homes and Gardens Soiree and handed me his card.  He recognized me from Trulia Voices 🙂  I gained a huge respect for him given our conversation.  We were talking about Trulia Voices vs. Zillow Q & A, and I was impressed with his sincere level of interest in opinions on the subject. Trulia had the best party, BTW.  A funny in the Trulia Voices link up there.  One of the agents immediately gave my response a “thumbs down”, while at the same time the person who asked the question voted it as Best Answer.  Oh well, you can’t please everyone.

I still feel guilty about keeping Marc Davison of 1000 Watt Blog up so late that he missed his Panel Moderation the next morning.  Brian Boero filled in for him. Officially the reason for his missing the panel was related to his recuperation of severed finger.  But I can’t help but feel that had I let him get a little more sleep the night before, he might have made it.  Yet, I can’t say I’m sorry for detaining him for so long…I just didn’t want to let him go.  He’s an amazing person.

I’m hoping Inman or Sellsius will post a video of the panel I was on, moderated by Joe Ferrara.  I was a little nervous about being on a panel with THREE attorneys!  Russ Cofano, Joe Ferrara the moderator and the woman from NAR. I was told afterward that something I said was Twittered into cyberspace instantaneously. Not sure what it was…I wasn’t Twittering on my iPhone while speaking on the panel. I got visibly annoyed with Todd Carpenter during the discussion (sorry Todd). The Panel was on “How Not To Get Sued” as a blogger.  Todd was basically saying to be nice and avoid controversial topics.  But Russ and I had a really nice conversation and rapport on stage. (No Tim, no Punch and Judy show.)

I was the only one in the room that clapped for Frank Llosa on “The Future of the MLS” panel when he spoke of the button next to the Listing Agent info that explains why, as a buyer, you might not want to call the Listing Agent. Here’s a quote from Frank’s website that will give you an idea of why I like him ”

“TRUST ME, I’M A REALTOR” Yeah Right! When was the last time a REALTOR talked you OUT of buying a house or condo?…”

The big “visual event” of the trade show was a new Franchise called “BUG Realty”. “At Bug!…We are the “no hype,

Next Week on Rain City Radio: Tim Ellis

Seattle Bubble ScreenshotFresh off an great conversation with Tracy Record of the West Seattle Blog, I’m really excited to have Tim on our show next week!   I’m sure we’ll talk about all things Seattle bubble as well as Tim’s great new parody project: Naked Loon.

Please set aside Tuesday, July 1st at 4pm to join us!   And if you have some suggested topics you’d like us to cover in the conversation, then please let me know in the comments!

When it's good to know a "wiseguy"

If you’ve ever watched a show like the Sopranos you know that there is a term out there called wiseguy that has a potentially dangerous undertone.  Well, yesterday, for one of my new listings I was thrilled to know a wiseguy, or rather a Wise Locksmith, Chris Weissman.

While driving from Renton to Bellevue’s Bridle Trails neighborhood, to show this listing, I get a phone call from another agent who has shown up to view it with a client.  He’s having trouble with the door and wants to know if I am aware of any problems or special way of handling the lock to make it turn.  “No, I haven’t had any problem with the lock before and neither have the other agents that have viewed the house already”, I tell him.

Come to find out, after calling one of the sellers, there is a way from the inside of the house to turn a little switch that would lock the home from the interior and it would make it so the master lock wouldn’t work.  Not good.  *Note to sellers – always let your agent know about quirky things like this so we can stop it from happening in the first place.*  Not only was I losing this viewing but the pending showing I was about to do would possibly be lost too.  On top of it, I lost one other possible buyer showing when yet another agent came by while we were working on getting the problem fixed.  My inner MacGyver kicked in.  I wasn’t about to do some fancy trick with a paper clip but I could quickly sort out a possible way to solve the problem.

And here is where my wiseguy comes in.  Chris is actually a former client of mine.  He and his girlfriend, Maridee, sold a condo and purchased a home through me about 18 months ago. I learned at that time that he was a locksmith and I’ve referred him to several clients since that time, with very good results I will say.  So, Chris gets a call from my partner, Michael, to see if he can help and he’s on top of it immediately coming over from the Seattle area during rush hour and actually making it within about a 20-30 minute time frame. I was thrilled.  One of the great things about working with various people and different types of contractors day in and day out is that when you need something fast – most of these wonderful folks will drop everything to come help you.

His first instinct was to try various methods and tricks he’s learned throughout the years to find special ways of opening locks. Unfortunately that didn’t work.  The second attempt through the garage didn’t work but mostly because it is on an electric opener, so then he had to tear off the existing door handle and replace it with a new lock.  I’ll say that it’s a little disturbing to see how easily some of this stuff can be taken off a property – although Chris did say that since he does this all the time he makes it look easy.  He just hates having to destroy stuff.  He didn’t damage the door though and that’s all good.

It ended up that the buyers that wanted to see the house at my scheduled showing ended up coming back (I rang their cell) and we had a successful viewing.  One of the other agents is planning to come back too but I likely won’t know if that 3rd agent comes back.  Either way, the house is accessible again and all is well that ends well.  Since the clients aren’t looking at offers till next Wednesday we should be set but I’ve got Chris on speed dial now, just in case….

Warning to Thurston County agents – and this goes for FSBO folks too…

February 25, 2008. The NWMLS has received information (Thurston County area) concerning a male individual who looked at homes with an agent — all of the information he provided about himself and his employment was false. He claims to be a buyer’s consultant with the Federal Government, a PhD in Physics, his wife a professor at the University of Washington and they live in Medina, WA. None of the information he provided, except his name, is correct.

The individual is a currently registered, Level 3 Sex Offender, male, about 54, white, 5’11″, about 220 pounds, gray/red hair, tattoos on each arm and may have a beard.

Other than providing false information during the preview of two homes, the individual did not demonstrate inappropriate behavior. Showing agent did not allow herself to be placed in a perilous situation. Individual has previously been a home inspector and appears to be familiar with the real estate industry.

Please be careful! If this man contacts you, contact your local authority.

This posting from the NWMLS came out a few days ago but I was out of town and didn’t see it till today. You can never be too safe when selling your home or acting as an agent to help someone buy or sell a house, so do be careful if you are contacted by a person matching this description.