Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

107 responses to “Puget Sound Foreclosures Set New Records in January”

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  1. David McManus

    Wait until all those layoffs start hitting and the severance (if any) runs out. I expect this summer we’ll see tons more foreclosures than closed sales.

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  2. DrShort

    I’ve said this before elsewhere, but this can become a vicious cycle where:

    Price Drops trigger foreclosures which trigger more price drops which trigger more foreclosures….

    I think we’re at that tipping point. Foreclosures and distressed properties are becoming a large enough percentage of the inventory that they will have a big impact on pricing.

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  3. Kary L. Krismer

    Unless I’m mistaken, you’re comparing notices of trustee sales to actual sales. Not all NOT end up in actual foreclosures.

    Searching the recorder’s website there were in fact 915 Notices of Trustee sale filed. It’s likely many of them involve the same property more than once. Using the same method for searching for Trustee’s Deeds the number comes in at 230. It’s possible a couple of those are bankruptcy trustee deeds.

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  4. Kary L. Krismer

    By DrShort @ 2:

    I think we’re at that tipping point. Foreclosures and distressed properties are becoming a large enough percentage of the inventory that they will have a big impact on pricing.

    I’d agree, and add that the state Legislature brought this on us to some extent, with the distressed property law which made it much less likely people in distress could sell. Given the financial fallout from the bailout situation, that’s obviously not all of it, but it has made the situation worse.

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  5. Cheap South

    There’s been an increased of about 5% in inventory in the past couple of weeks (under the new inventory tracking side bar). Historical data can determine what percentage is seasonal (if any) and how much is the distress.

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  6. Sniglet

    I am very curious as to how the percentage increase in Puget Sound foreclosures from peak compares to other markets? Are we seeing a slower increase in foreclosures than San Diego?

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  7. vboring

    Tim, at some point you’re gonna have to put together or solicit advice on how one goes about buying a foreclosure.

    I found some basic advice, but nothing actionable.

    Obviously, it is still too early to jump in, but it seems buying a foreclosure could be the way to go when the time comes.

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  8. Ray Pepper

    Appears we are now all waiting for and living in ” The Darwinian Flush”

    http://ftalphaville.ft.com/blog/2008/10/20/17216/time-for-the-darwinian-flush/

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  9. Kary L. Krismer

    vboring, buying at foreclosure is very risky. No opportunity to inspect, a chance you may need to evict, and I don’t believe you can get title insurance–and if you don’t know how to search for the potential title issues, or the Recorder made an error inputting the information, you could be in big trouble.

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  10. vboring

    It seems we are finally reaching the point of recognition where the houses in my neighborhood (just north of Ballard) are no longer seen as paths to riches, but rather as the ugly, dark little boxes of mold that they are.

    While the Ballard main street itself empties of failing businesses and suddenly people notice that it is actually a home to drunken vagrants and fishermen, rather than upwardly mobile DINKs.

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  11. Kary L. Krismer

    By Cheap South @ 5:

    There’s been an increased of about 5% in inventory in the past couple of weeks (under the new inventory tracking side bar). Historical data can determine what percentage is seasonal (if any) and how much is the distress.

    Determining the distressed is very tough/impossible. The vacant units are approximately 50%, which is high.

    As to the increase, last year Jan-Feb increased 644 units. We’re roughly on track with that this year. (BTW, the Estately numbers are lower than the NWMLS numbers.)

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  12. Want to buy!

    I want to buy a house in Ballard and I went to Craigslist and the prices are absurd. Wanting 500k for a 3 br and 2 bath house….I just don’t think these sellers realize that they better price correctly or it will sit for years. I suppose hyper-inflation in the coming years will get them their price. There will be serious price pressure on rents and home prices. The range of 150 times rent or max of 200 times rent is all i am willing to pay.

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  13. vboring

    RE: Want to buy! @ 12 – There bunches of houses in the area for rent now. It seems just about every block on 85th has a sign for a place for rent.

    It probably represents pent up selling supply.

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  14. EconE

    RE: Kary L. Krismer @ 9

    Kary…

    Are you referring to showing up at a foreclosure auction and bidding or waiting for the house to become an MLS listed REO? Also…once an REO is on the MLS, what stops a buyers agent from showing it to a client so that they may inspect it themselves?

    With the majority of the homes in CA sold being foreclosures, I don’t see how it is daunting as you make it appear to be. Of course…there are pros in the foreclosure game, so competition seems like the biggest obstacle.

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  15. Ray Pepper

    I like Ballard but never understood all the demand for that area. Just too congested now. Condos that were dropped in neighborhoods with SFH’s in between. No Thanks!!
    Magnolia and parts of West Seattle along California will always be worth a premium. But, my TOP 2 places will always be Mercer Island and West of Bellevue Square walking distance to the mall.

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  16. Kary L. Krismer

    By EconE @ 14:

    RE: Kary L. Krismer @ 9 – Are you referring to showing up at a foreclosure auction and bidding or waiting for the house to become an MLS listed REO? Also…once an REO is on the MLS, what stops a buyers agent from showing it to a client so that they may inspect it themselves?

    With the majority of the homes in CA sold being foreclosures, I don’t see how it is daunting as you make it appear to be. Of course…there are pros in the foreclosure game, so competition seems like the biggest obstacle.

    I’m referring to buying on the courthouse steps. BTW, I forgot to mention financing being an issue.

    Basically what I’m saying is that buying at foreclosure (courthouse steps) isn’t for your typical buyer. I had a debtor client once that told me when he went to his foreclosure sale the buyers were patting themselves on the back for making a great deal, until he told them that it was a second deed of trust being foreclosed.

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  17. Interloper

    Truly amazing.

    So unless I’m mistaken, this means we are adding more homes to the market just via foreclosure (each home eventually goes on the market), than we are removing from the market through all sales.

    Since foreclosure is only one of many reasons homes go on the market (e.g. owner wants another house, owner must relocate, home is new contruction), inventory can only grow for the time being, and prices can only (conceivably) fall.

    It will be interesting to see if this year’s Spring “bounce” in King County sales volume will be big enough to overcome the growing foreclosure rate.

    Either way, it’s hard to imagine repeating 2008′s short-lived Spring price bounce with these kinds of market pressures.

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  18. Kary L. Krismer

    By Interloper @ 17:

    So unless I’m mistaken, this means we are adding more homes to the market just via foreclosure (each home eventually goes on the market),.

    That is an incorrect assumption. People bring the loans current, file Chapter 13, sell, etc. The properties also could be on the market already, and thus not increasing it, but it’s shocking how many people go into foreclosure without even trying to sell.

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  19. Kary L. Krismer

    There were 168 Discontinuances of Trustee’s Sale filed in January. They don’t always file such documents, so that number understates the loans being brought current/modified. It might include only the number sold by the owner prior to foreclosure, but that seems high. I’ve never been able to figure out when they file them and when they don’t. 168 also wouldn’t include the Chapter 13s filed.

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  20. Ray Pepper

    ***********************BIG NEWS FROM OBAMA ADMINISTRATION********

    Actively working today on Principle Reduction for upside down homeowners. How will Gov’t subsidize this. If they go down this road of Mtg Cramdowns (principle renegotiation) will this assist recovery??

    My opinion………………Its the only thing that will assist to stop foreclosures. Stability in home prices and slowing down foreclosures is KEY TO ALLTHIS!!

    STAY TUNED!

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  21. CCG

    By Kary L. Krismer @ 9:

    vboring, buying at foreclosure is very risky. No opportunity to inspect, a chance you may need to evict, and I don’t believe you can get title insurance–and if you don’t know how to search for the potential title issues, or the Recorder made an error inputting the information, you could be in big trouble.

    Maybe a better question is “how to buy distressed property”. I think I remember hearing that buying a bank REO is a bit safer.

    And thanks for your regular contributions to these comments, it’s good to have you here.

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  22. Tyler

    RE: Ray Pepper @ 20

    Here is the article: http://finance.yahoo.com/news/Obama-eyes-home-loan-rb-14343095.html;_ylt=An9xbh0OxvlzE9sCExmZDsC7YWsA

    The last paragraph from the article: “”Just as we had a large overshooting to the upside. Is there any way to prevent going much further to the downside? That will cause tremendous harm to the U.S. economy, to the financial system and it’s not necessary,” he said.”

    I have a feeling that nobody agrees on the point where the overshoot/undershoot balances out. People on this blog tend to be looking at historical data, and the policy makers are just trying to get far enough back to before the bubble popped.

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  23. kfhoz

    What’s up with Ballard being such a hot topic suddenly?

    Just this morning a friend who owns in Ballard rang to say they were putting the house up for sale so they could get something cheaper but bigger, maybe in Kenmore. Her listing agent told here to get at least 80% of the stuff out of the house so she phoned to inquire about my very fine collection of saved bubble-wrap and styrofoam peanuts.

    I urged her to sell last Autumn when I saw on this site that Ballard had retained prices up through then. This is a very good friend, and I hope she gets hers sold in time. But I worry that she has left it to late and is going find herself living in “something cheaper” without needing to pack any boxes.

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  24. td

    I used to love the Ballard neighborhood (currently rent in north QA) and for a long time wanted to eventually own there, but then after visiting a lot of places I cannot understand how a pre-depression era craftsman with little more than its “period detailing and oozing charm” could garner such a high price tag. It’s got some steep competition in other close-in neighborhoods to consider.

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  25. Mike2

    By vboring @ 7:

    Tim, at some point you’re gonna have to put together or solicit advice on how one goes about buying a foreclosure.

    I found some basic advice, but nothing actionable.

    Obviously, it is still too early to jump in, but it seems buying a foreclosure could be the way to go when the time comes.

    The best route I’ve heard so far is to identify the realtor(s) that have connections with the asset managers at banks. They get first crack at the listings, and if you know what you are looking for, you could end up first in line – possibly before it even gets listed on the MLS.

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  26. EconE

    RE: Kary L. Krismer @ 18

    Kary…

    Thanks for the reply @ #16. Question…WRT the debtor clients situation where the investors were told that it was a 2nd being foreclosed on. What kind of “kinks” does this throw into the situation? What happens to the buyers? I’m just curious how it plays out on the buying side when situations such as the one you mention present themselves. I do understand the financing issues and one needs to have lots of “cash in hand”.

    On the issue of people not even trying to sell their homes before foreclosure…I can only assume that one significant reason is that they feel so overwhelmed and depressed about the situation, that it ends up being a stressor that they “just don’t want to deal with”. I can certainly understand…especially when it is actually an “unknown” whether or not their house will sell in time or at an amount that doesn’t require them to bring a check to the table.

    And just a bit of info for BH’s that are looking for foreclosures/deals etc. There will always be flippers in the game. As much as I’d like to assume those days are over…the best ones are still out there making MUCHO DINERO. Some are losing their a$$es of course, but you’ll still be competing with them for the discounted house. Sure…we can try to “wait it out” until the flppers are out of the game, however, I suspect they never will be. They are professionals. It’s their job. They’ll work the market from bottom to top and then from top to bottom. Of course…this is what I see in the Los Angeles market (good, but not top shelf neighborhoods), and it seems to only apply to SFR’s and not condominiums. Can’t see how it will be any different here.

    I’ve gotta hand it these guys (one in particular). Profiting $200k+ per flip (after all expenses) in the slowest segment of RE ($1,000,000+) is amazing. Doing more than one a year is downright unbelievable…until I see it happen with my own eyes.

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  27. David McManus

    You knew it was coming…..

    “Stocks sharply cut losses on Thursday, with the Nasdaq swinging back into positive territory, following a Reuters report that the Obama administration was hammering out a program to subsidize mortgage payments for troubled homeowners.”

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  28. Sniglet

    I remember hearing that buying a bank REO is a bit safer.

    I think it is almost always better to buy a home AFTER it has been repossessed by the lender as an REO rather than at the foreclosure sale. Not only are there issues about a lack of inspection, but the odds of getting a good deal are exceedingly slim. The lenders are almost never willing to accept a significant discount on the outstanding loan at the foreclosure sale and will just buy the property back for the price of the mortgage (i.e. they just pay themselves). Your odds of getting a good discount are vastly improved after the property has been listed as an REO and languished on the market for a while.

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  29. Hugh Dominic

    By kfhoz @ 23:

    I worry that she has left it to late….

    I am afraid she has.

    My impression is that Ballard is trending down sharply as well – lots of houses for sale for less than purchase price.

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  30. vermillionsky

    RE: Kary L. Krismer @ 16

    One of my friends bought a house in Ohio several years ago at the sheriff’s auction (her words.. not sure what stage of foreclosure that is). They had to pay 10% up-front in cash, and were required to have financing for the rest in one week.

    They weren’t allowed to inspect the home before purchase, but thought the price was good based on the other homes in the neighborhood (my friend’s parents lived on the same street). After they won, they had to remove the previous owners themselves, either by paying the Sheriff $2000 to evict them or by being nice. They tried the nice route, which required patience while the two ladies found a new place. They also helped them move by hiring local kids and renting a truck for them.

    It was a bit frustrating not being able to move in right away, but it worked out because the ladies (two sisters) were nice and weren’t out to cause problems . After my friends won the auction, but before they moved, they let my friends bring me through the house to show me what they had bought. The ladies were members of an alternative religion (I suspected Wicca, but we didn’t really ask), and had lost their home when their religious store went under.

    The house was packed from floor to ceiling with items from their store (boxes of home grown herbs, candles, books, etc.) and dozens of cats and dogs. I couldn’t count them all, but I estimate 20-25 cats, and among the dogs I remember three sheepdogs and four larger mutts (and this was a 3-bedroom house). The upstairs landing was covered in litter boxes, and the whole house smelled like cat urine. It was built in the late 1800s and the woodwork was beautiful (there was even original Chinese embossed leather on the walls in the foyer), but after the ladies moved out my friends spent almost a month treating the woodwork and floors to get rid of the cat urine smell. The kitchen was in pretty bad shape, too, and required a full remodel.

    In my friends’ case it worked out ok because the people in the home were nice (among other things they were happy my friends got the house because they thought the ghosts who lived in the house would be pleased that my friends had children and a piano), and they were able to take care of the major problems on the interior. However, I could see how it could end very badly, particularly if the people leaving were mean and/or bitter.

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  31. Interloper

    RE: Kary L. Krismer @ 18

    Thanks for your reponse and clarification.

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  32. Kary L. Krismer

    RE: EconE @ 26

    Re the buyers finding out it’s a second, I don’t remember the numbers, but it could have meant something like $300,000 being in front of them, and their grossly overpaying for the property. They might have thought they were picking it up for say $70,000, when really they were getting it for $370,000 because the first was still there. And if the first was in default (likely) they might have to pay a lot to bring that current, and it probably had a due on sale clause.

    One other comment–if the house was listed prior to foreclosure you could look at it that way. I did that in my old neighborhood once, and there was personal property (clothes, toys, etc.) scattered through the house 2-3 feet deep, with little walk-ways, and the garage was totally full of stuff 8′ high. If you bought at a foreclosure, all that stuff would be yours to deal with.

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  33. Ira Sacharoff

    I’ll second what Kary and Sniglet and others have said here…It’s better to buy a home after it’s listed as an REO and not at the foreclosure auction. Besides the risk of being unable to enter the property prior to the auction and not knowing the condition or appearance, there’s a much greater chance of overpaying. Simply because something is up for bid at a foreclosure auction doesn’t make it a deal. In fact, I believe the opening bid is what is owed on the property, and these days all too often what is owed on the property is more than what the property is worth. That also accounts for the larger number of REO, bank owned property. Some property at the foreclosure auction does not get purchased for that very reason.
    Still and all, foreclosure auctions are fun to watch. But if you plan on attending one, and have 400,000 dollars sitting in your freezer, leave it there.

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  34. Kary L. Krismer

    By Ira Sacharoff @ 33:

    But if you plan on attending one, and have 400,000 dollars sitting in your freezer, leave it there.

    And be sure to post here exactly when your attending and your home address. ;-)

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  35. dogwood

    Do you have a problem with fishermen?

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  36. dogwood

    By dogwood @ 35:

    Do you have a problem with fishermen?

    The question was for vboring…

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  37. Cris

    These house owners who rent their homes will hit the wall they file their taxes in 09 and 10. Hopefully, that will break them and cause to drop the prices to sell..

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  38. wreckingbull

    I think what vboring is really trying to say is that Ballard was a working class neighborhood and the quality of its homes reflect this fact. People are waking up to find the poo-shack they spent 500K on is really just a poo-shack. I am an ex-Ballardite and have no problem calling it like it is.

    I am married to a fisher(wo)man and have utmost respect for the profession, so no one get their panties in a wad.

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  39. Kary L. Krismer

    I like older houses, but I’m not a fan of Ballard due more to the location. Market Street businesses seem nice, however. It’s more just the getting in and out of Ballard problem. Not bad though if you work downtown (except maybe for traffic???).

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  40. deejayoh

    By David McManus @ 27:

    You knew it was coming…..

    “Stocks sharply cut losses on Thursday, with the Nasdaq swinging back into positive territory, following a Reuters report that the Obama administration was hammering out a program to subsidize mortgage payments for troubled homeowners.”

    which thing was coming, the report (aka rumor) to drive up wall street, or an actual program?

    the report was a given. The program? I doubt it. Just like the $15k tax credit.

    Is rob roy back with a new name?

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  41. rose-colored-coolaid

    RE: Kary L. Krismer @ 9

    That would be as opposed to buying a house with no money down at the height of the bubble? Risk is relative, and I think if one is unwilling to reconsider how they evaluate risk, that person will have a very difficult next 5+ years.

    So, which is riskier? A foreclosure that might have been dumped on and will require legal finangling to get into, or a house priced at 20% above actual value with an unrealistic seller who throws away your more realistic offers? I guess the best advice is that nobody buy anything…

    Agree Kary?

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  42. Kary L. Krismer

    By rose-colored-coolaid @ 41:

    I guess the best advice is that nobody buy anything…

    Agree Kary?

    Well that’s the safest advice. Not having any assets–not even cash–is the safest strategy. There’s no asset that’s risk free. Oil was at $150 a barrel in maybe July, but under $34 today. Cash is subject to the risk of hyper-inflation.

    But the risk with foreclosures is more the risk of the unknown. Like buying a new car or house without an inspection, only worse.

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  43. AMS

    RE: Kary L. Krismer @ 42

    I suggest that being in a no debt situation is better than no assets.

    Given the choice between no cash and no freezer to avoid the risks of holding assets, including the risk of hyper-inflation, or having $1,000,000 in my freezer that’s subject to inflation, I’d always take the later.

    For some reason it still seems safer to actually have cash, even if it is subject to inflation.

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  44. AMS

    Oh, and I guess I should add that if I knew that hyper inflation were coming, then I would seek to go into a high debt situation and invest in hard assets.

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  45. Kary L. Krismer

    By AMS @ 44:

    Oh, and I guess I should add that if I knew that hyper inflation were coming, then I would seek to go into a high debt situation and invest in hard assets.

    Exactly! I think that’s why gold spiked. A lot of people guessed wrong.

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  46. Kary L. Krismer

    I guess I should have looked before editing to add about gold. It’s apparently back up!

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  47. Hugh Dominic

    RE: wreckingbull @ 38
    Ballard is pretty mixed – there are some really bleak areas, but there are nice pockets. But yes, if you bought a $500k house on tiny lot on a street with lots of little box houses with no trees – and now its Zillowed at $400 and falling fast – you are bummed. But stuff is falling everywhere and Ballard is no different…

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  48. Robert

    Wait! But Obama will start subsidizing every loan. He could easily come up with a formula. Every mortgage that was taken prior to 2006 will have a new interest rate of 1%.

    And the US govt will pay for every mortgage like this. People will repay a bit but much less.

    I think they will soon start cranking out bills like this and this will change the real estate industry forever.

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  49. Kary L. Krismer

    RE: Robert @ 48 – I’m not sure how factitious (sp?)you’re being, but I think there are people waiting both to buy and to refinance for the magical 4% rate that was predicted. To me that’s a bit silly, especially if you have an 80/20 loan package subjecting you to more risk. Interest rates might shoot up before hitting 4% and/or values might decline to the point where someone couldn’t refinance due to LTV requirements.

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  50. AMS

    RE: Kary L. Krismer @ 45

    A lot of people guessed wrong about gold. And I have a friend who held his gold for about 30 years waiting to sell for a profit (purchased in 1979, sold in 2008).

    I wonder if real estate will take as long as gold to recover. Thirty years is a long time.

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  51. AMS

    Tim-

    How about increasing the edit time to at least ten minutes. That two minute limit is just too short!

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  52. old ballard

    RE: AMS @ 51

    Write it in word first, then cut and paste.

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  53. Kary L. Krismer

    By AMS @ 51:

    Tim-

    How about increasing the edit time to at least ten minutes. That two minute limit is just too short!

    I’d second that request. Two minutes is very short.

    Oh, and while you’re at it you might want to change the copyright date at the bottom of the pages.

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  54. old ballard

    My handle is old Ballard because I’m old Ballard (free Ballard from our condo overlords!) I started fishing in Alaska in the late eights. I worked my way up through the maritime industry, tugboats, trampers, offshore supply vessels in the Gulf of Mexico and then deep-sea vessels for ten years.

    Ballard was always the place where working class people could find a place to live. If you made $12.50 an hour, you live in Ballard. It was never meant to be the home of the meritocracy and wine bars. It broke my heart to see the apartment I once lived in ($450 month for one bedroom, mid 90’s) converted to 450,000-dollar condo.

    I’m hoping that Ballard will become the epicenter of the collapse in rental prices.

    There are at hundreds unsold condos most of them conversion units. Very few actually listed on the MLS. It’s been over a year since the Northlake Group finished the Ballard Trio and they still haven’t sold but a couple. Sooner or later, these condos are going to be reverted to apartments.

    There’s two apartment complexes just completed with over 300 units. After all is said and done minimum rent for a one bedroom including utilities and parking runs about $1700.00 a month. Their bank won’t let them take an application from anyone with an income below $61,000 a year.

    It seems to me the collapse will be from the top down.

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  55. Kary L. Krismer

    By old ballard @ 54:

    There are at hundreds unsold condos most of them conversion units. Very few actually listed on the MLS.

    That’s common with new construction (and conversions of condos) and another reason the NWMLS actives understates the real supply.

    It’s actually nice they don’t clutter the listings with a bunch of duplicate units, but it would also be nice if the NWMLS would somehow require the agents to report each month how many units are really finished and available. That would throw off the historic comparisons though.

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  56. shawn

    Can someone tell me the diff btwn a regular listing and a REO? What is involved to buy one, the advantage, etc. Compare and contrast? I know I can go search online, but I think I will get a more “honest” answer here.

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  57. Ira Sacharoff

    An REO listing is one where the property was foreclosed on, and the property open for bidding at the sheriff’s foreclosure auction. Because the amount owed on the property was higher than the value of the property, the property did not sell at the foreclosure auction and the property reverted to the lender, who then takes possession of it.
    Some REO properties are not listed, and are sold directly by the lending institutions, but many are listed with a real estate brokerage/agent, and sometimes offer really good deals. At the same time, there’s a much greater chance that these properties will require more work…It is different from a short sale, as a short sale the property is still technically in the hands of the seller who is underwater and has received permission from the lender to sell it for less than what is owed. Short sales, while also offering potential bargains, are more fraught with complication and the possibility that the deal won’t happen for a variety of reasons.

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  58. Sniglet

    Can someone tell me the diff btwn a regular listing and a REO? What is involved to buy one, the advantage, etc.

    The ONLY difference between a “regular” listing and an REO is that REOs are owned by a lender (i.e. the “bank”). Other than that, there is no diffrerence whatsoever in how you find, view, or purchase an REO. When you write an offer, the realtor representing the bank will pass it on to their client (i.e. the bank).

    As a buyer, the thing to keep in mind with an REO is that you are NOT dealing with an individual, but a bureaucracy. You can’t make emotional appeals, but they will look at cold hard dollars and cents (e.g. what does it cost us to keep this house empty for another 6 months).

    REOs typically sell for much better prices than comparable “normal” listings, since banks are much more motivated to sell the place for the market price and don’t have hang-ups about what they feel it is worth.

    That said, there are plenty of cases where REOs sit on the market for a year or more due to the fact that 1) the banks are overwhelmed with REOs these days and their staff are unable to adequately examine each case and price them properly and 2) their particular financial institution might be technically insolvent and they just can’t sell for the actual market rate without having to go into conservatorship when the losses are recognized.

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  59. DaveyDave

    RE: Kary L. Krismer @ 49
    Kary, there’s an article at CNBC that talks about the difficulty some are having getting refinancing due to low LTV and little equity here:
    http://www.cnbc.com/id/29158056
    A quote from the article:

    McCusker, a public relations executive, and his wife, a school teacher bought their home in July of 2005 for $462,500 with a 30 year fixed loan at 6.3 percent.

    But today, the home has a value today of $433,000. “We have good jobs, never missed a mortgage payment, “says McCusker. “But I can’t get any help. There’s something wrong with that.”

    My question is, why is this so wrong? Here is a couple making payments on a 30 year fixed that they agreed to, but somehow feel it’s not right that there isn’t someone (i.e. the govt.) out there helping them even get a better deal. We have turned into an odd country somehow…

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  60. CCG

    By Kary L. Krismer @ 46:

    I guess I should have looked before editing to add about gold. It’s apparently back up!

    I think of gold as warning about the mammoth piles of Trashury debt we’ll have to issue to pay for all this stimuseless. Issue Trashuries, and you need foreign central banks to scarf them up. If that fails, you need primary dealers to puke up stocks and buy them (which I believe is what we got this week). If that fails, we fire up the printing presses and buy them ourselves, or else the stimuseless runs into a brick wall. But that’s just my guess.

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  61. Kary L. Krismer

    By Sniglet @ 58:

    Can someone tell me the diff btwn a regular listing and a REO? What is involved to buy one, the advantage, etc.

    REOs typically sell for much better prices than comparable “normal” listings, since banks are much more motivated to sell the place for the market price and don’t have hang-ups about what they feel it is worth..

    They often sell for less because they are poorly marketed or in poor condition.

    Another difference with an REO is you’re most likely not dealing with NWMLS forms, and so you should have an attorney review them. One difference I saw in one REO form was the seller (bank) could sue you if they wanted, rather than just retain your earnest money. That’s the type of thing that is a huge issue, and could be caught by an attorney. Agents aren’t really licensed to deal with that type of issue.

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  62. AMS

    RE: Kary L. Krismer @ 61

    “They often sell for less because they are poorly marketed or in poor condition.”

    Alright, this begs the question:

    How much is ‘proper’ marketing worth? (I am not sure what proper marketing is, but since you claim there is ‘poor’ marketing, this implies that there is some ‘proper’ marketing. It does not matter what it is, but rather that it exists. The question is what is the value of proper marketing, and how did you measure it?)

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  63. harbored

    My perception during the bubble was that most houses on the market were in sale ready condition. Even if the asking prices were way out of wack, you could count on most of the inventory being in good condition.

    I’d say proper marketing means more agents are going to have to manage the process of preparing the property for sale. Since almost everyone these days is previewing properties on the web, proper marketing dictates taking a good, comprehensive set of photos and a competent description of the property.

    That being said, i’ve seen horrid examples. Photos that suck, fluffy descriptions, 6%’er jargon. One good thing about this recession might be the return of earnestness in marketing. I’m tired of all the bs I find in marketing, not just in real estate. I have to preach to my kids every day how to be skeptical.

    This thread makes me think the 6%’ers that will survive will need to morph into hybrids. It may sound silly, but give it some thought. Kary is technically an Agent/Lawyer hybrid. A lot of these dumps that people are walking away from need a agent/carpenter hybrid. I know a couple of guys who are agent/loan officer hybrids. If your starving for foot traffic, maybe you could hire a agent/chef hybrid to put out a spread to attract prospective buyers. An agent/mover hybrid could discount his services and move your stuff. If you are selling your bachelor pad you could hire an agent/stripper hybrid. The list goes on and on.

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  64. AMS

    RE: harbored @ 63

    “I’d say proper marketing means more agents are going to have to manage the process of preparing the property for sale. Since almost everyone these days is previewing properties on the web, proper marketing dictates taking a good, comprehensive set of photos and a competent description of the property.”

    Do you have any evidence that “a good comprehensive set of photos and a competent description of the property” results in a significantly higher sales price?

    Similarly, how much does “photos that suck, fluffy descriptions, 6%’er jargon,” detract from the true market value?

    Isn’t there a cost-benefit to consider?

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  65. Ira Sacharoff

    For clients tired of overly verbose real estate agents, the agent/mime hybrid. might work.
    For those with small children, the agent/clown hybrid.
    And for nice housewarmings, the agent/drug dealer hybrid..

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  66. harbored

    RE: AMS @ 64

    Alas, AMS I have no evidence, but my intuition.

    Yes there is a cost benefit analysis, your carrying costs. IMHO: If you want to have a prayers chance to sell your house in this market, you must make it stand out from the competition. You only get one chance to make a good first impression. For the few buyers out there, swimming in a sea of listings, your house must look great, priced right, and must be optimized on the website.

    Check out the difference between these two:

    MLS# 28051778

    MLS# 28130414

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  67. harbored

    RE: Ira Sacharoff @ 65

    Exactly Ira!
    Be forewored, clowns hate mimes. If you mention clowns and mimes in the same post, you are liable to get a drive by pie ing from a crowded clown car.

    And I think I’ve met your 3rd hybrid example. He tried to say a skunk ran through the place just before the open house, but the empty trays of cookies told me otherwise.

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  68. AMS

    RE: harbored @ 66

    Regarding the two listings, I am confused. Are you suggesting the higher priced one has better photos? If I were a photo critic, I’d suggest that the lower priced place has in-focus photos, but I am no expert. Certainly it’s might cause dismay when you have better photos and are asking about $180,000 less, yet both are unsold. Certainly the price of the $559,900 attracts my attention as a buyer.

    It would be nice if we could take one property and see how much it is worth with ‘proper’ photos and a ‘proper’ description and compare that with ‘poor’ photos and a ‘poor’ description. I will say this, I, personally, would go out in person to take a look at a given property before I purchase it.

    “IMHO: If you want to have a prayers chance to sell your house in this market, you must make it stand out from the competition. You only get one chance to make a good first impression.”

    I am not sure about the financial value of a ‘good’ first impression, but a low asking price is a good first impression for many people. In fact, we must make the basic assumption that given equal products, the buyer will always buy the lower priced offering.

    I certainly understand that the NAR suggests that the value of a REALTOR is in excess of the cost. If I were the NAR, I’d suggest the same thing. I also appreciate that many people are not equipped to handle the sales process.

    When housing price appreciation was very positive, sellers didn’t really care what the cost of selling was, as the increased sales price kept them happy. Now we have sellers that are very sensitive to the commission.

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  69. vermillionsky

    RE: harbored @ 66

    I’m not sure “priced right” is considered part of the marketing. I consider marketing to be the advertisements, MLS listing, online photos, etc. I think an underpriced house will sell much faster than an overpriced house, no matter how good the pictures, description, or other marketing materials are.

    I don’t understand the point you’re trying to make about those two houses you referenced. The biggest difference I see between them is a $63/sq foot price differential… that’s huge. And at either price, they’re both unsold in >= 200 days.

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  70. AMS

    RE: vermillionsky @ 69

    Marketing includes:

    Price
    Position (Location)
    Product
    Promotion (Advertising)

    (The classic “four Ps” of Marketing)

    And, finally, the Consumer should be considered.

    Given the current market conditions, price is getting to be a bigger and bigger factor of the marketing mix.

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  71. Kary L. Krismer

    By AMS @ 62:

    The question is what is the value of proper marketing, and how did you measure it?)

    Well apparently it’s equal to whatever the bargain is people think they’re getting going REO. Judging from one neighborhood I recently looked at, it’s about $25,000 on a $300,000 to $500,000 house.

    I was just looking at one REO yesterday where they didn’t even have more than one picture. And here are the stats for the listings I was looking at:

    Bed/Bath SqFt Lot Size Price
    4/2.75 2165 11761 255,000
    3/2.5 1521 10454 299,000
    3/2.5 1811 10608 315,000
    3/2.5 2100 24000 365,000
    3/2.5 2148 12632 417,000

    These were all similar style houses built within two years of each other, but the bottom two had updated kitchens. The $255,000 one was REO. Now I didn’t go in, because it’s already sold, but it didn’t describe it as a fixer (although it did use “as is.”) So what’s proper marketing worth?

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  72. Kary L. Krismer

    By harbored @ 63:

    My perception during the bubble was that most houses on the market were in sale ready condition. Even if the asking prices were way out of wack, you could count on most of the inventory being in good condition. .

    I remember going into a lot of dumps before the peak. The difference between now and then is dumps sold.

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  73. AMS

    RE: Kary L. Krismer @ 71

    “So what’s proper marketing worth?”

    That’s what I keep asking!

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  74. AMS

    RE: Kary L. Krismer @ 72

    “The difference between now and then is dumps sold. ”

    The only reason the “dumps” don’t sell today is price. Hopefully we can agree that the leverage is just too high, and sellers are generally reluctant to price that results in a short sale, banks don’t want to admit the property is worth much less (both short sales and REO), and so on.

    This is not to mention that consumer sentiment has drastically shifted from “buy, buy, buy” to “maybe it’s better to rent today.”

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  75. Kary L. Krismer

    AMS, you can get some really nice places that are priced well and not dumps, so I’m not sure why you’d take the further discount to get the dump and the headaches. Maybe I’m just biased right now though because we have two buyer clients looking in that area and they are not looking for anything more than a slight fixer.

    A couple of weeks ago we found a really nice relocation one in a very nice neighborhood in Kent that was $335,000, and after we saw it they replaced the carpet. A couple of years ago that would have been over $500,000. The relocation company was apparently tired of holding it.

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  76. Everett_Tom

    RE: Kary L. Krismer @ 71 – I’m not sure if REO is the best comparison for this, were any of the others FSBO / short sales?

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  77. Kary L. Krismer

    RE: Everett_Tom @ 76 – No, I checked for that.

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  78. AMS

    RE: Kary L. Krismer @ 75

    It’s only a matter of discounting.

    I’ll take a few headaches for the right price, and I suspect the same is true for many other buyers. The question I might ask, using your terms, is: How much is my headache worth?

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  79. patient

    In the meantime inventory is making a come back. From have dipped almost 1000 units in the first days of january we are now back up again. Sorry bulls that straw some of you clinged onto just broke.

    01.01.2009 03:00 10285 8613 8862
    02.13.2009 15:00 10331 10215 8922

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  80. jon

    It’s hard to tell what the inventory is these days. Last year it took 9 days into January to get back to Dec 31 levels, this year in took 6 weeks. By this time last year, inventory was up by 1000 from year end. But the real inventory is not there:

    “Government-controlled mortgage finance companies Fannie Mae and Freddie Mac, and major banks JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. said Friday they are halting foreclosures through March 6.”

    I don’t know why they are holding on to those units, whether it is an investment decision to not sell below cost while the population is growing, or if it is a desperate act of self-preservation to avoid facing bankruptcy themselves.

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  81. patient

    It’s to give the people in foreclosure a chance to get helped by the foreclosure help plan that the gov is working on.

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  82. Andy

    Patient,

    Amazing; my wife and I (earning over $250K combined) – after med school, biz school + hard work are going to have to pay higher taxes for the typical skater picker emo loser Pacific Northwest hippy couple (in foreclosure in Puyallup or Pioneer Square) that work at Starbucks

    Interesting that the government is helping people in foreclosure; these people should give all their equity immediately to Uncle Sam

    How is this FAIR?

    My wife and I save, were not fooled by the bubble in Real Estate, and now are getting close (1-3 years out) on buying a home

    We will be taxed to death to support the lower classes; stimulus, lower taxes for low income families is disgusting – WE NEED A FLAT TAX

    To all you hippie, lazy thieves; take my hard earned money – just tell me you are stealing from me (MY HARD WORK; not your pouring latte at Starbucks) and my family….

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  83. Andy

    I can’t stand the hippy lazy culture
    You want social services and foreclosure help; pay for it yourselves

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  84. vermillionsky

    RE: AMS @ 70

    Fair enough.. I’m not a marketing person, so I’m not used to thinking about it that way.

    With regards to price, I think proper marketing means actually listing your house at or below the market value of the property. If you price low, you increase the opportunity of having multiple bidders, or at least having one good offer. If you price too high and later have to do a lot of price drops you may end up selling later, at a lower price than if you had properly priced at the beginning. Good advice on how to properly price your house is worth a lot in that case (although, if you do your homework and follow the market closely, you can do this part on your own).

    I’m still curious what point harbored was trying to make by comparing those two listings.

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  85. AMS

    By vermillionsky @ 84:

    RE: AMS @ 70

    Fair enough.. I’m not a marketing person, so I’m not used to thinking about it that way.

    With regards to price, I think proper marketing means actually listing your house at or below the market value of the property. If you price low, you increase the opportunity of having multiple bidders, or at least having one good offer. If you price too high and later have to do a lot of price drops you may end up selling later, at a lower price than if you had properly priced at the beginning. Good advice on how to properly price your house is worth a lot in that case (although, if you do your homework and follow the market closely, you can do this part on your own).

    This is far more complicated than how you present it. First of all, let’s agree that past history is gone, so that does not really matter, so we will have to price it in the future.

    Assume zero inflation.

    Now it’s a matter of discount rates.

    I have long said that when selecting a REALTOR, the following questions must be asked:

    1. What’s the average time to sell.
    2. How much is my home worth
    a) To sell right away (no longer 4 weeks).
    b) To sell at approximately the average time
    c) To sell within twice the average time.
    d) The maximum given a year or two (or more if twice the average is too close to a year or two).

    NOTE: If the maximum price is the price to sell within 4 weeks, then the agent thinks the market is going down over the long-term.

    Next we must consider how bad the seller wants to sell. If the market is going up, then the seller can decide how long he must wait for his desired price. We can also compute the seller’s discount rate from this information.

    By the way, and I have posted this before, I suggested this to a friend. He did exactly as I suggested. One day his agent called him up and suggested a price drop, you know to garner more interest and get the home sold. When my friend called he wanted to know what to do. I suggested he pull out the sheet where the agent suggested that if he were to wait longer, then he could get more for the home. My advice was simple: Ask the agent why he is suggesting a price reduction when you listed the home he suggested values are increasing in time. My friend thought that was a reasonable question.

    He met the agent at the local Starbucks, and while I didn’t attend the meeting, and I am yet to get the full story, I do know that there was an immediate separation between the two. My friend then went back and selected what he considered to be an honest agent. He cut his price and sold the home. My buddy felt that his first agent had lied to get the listing, a form of bait-and-switch.

    I don’t know what was going on in the agent’s head, but I tend to agree that the agent was overly optimistic to get the listing.

    I have also posted about people who chase the market down, often using these same agents. The market goes down 5%, so they lower their price by 5%, but since they were overpriced at the start, 95% of overpriced is still overpriced. In a down market you need to make sure that your price reductions outpace the price reductions in the market.

    Similarly, I had a friend who made a bundle of cash in California by botching up a flip. Obviously this was a few years ago. He went way over budget, and he went way over on time. Lucky for him the market went up by a significant amount nearly overnight. He received multiple offers that were miles above his original asking price–>a poor job done=extra pay. This is not so likely in today’s economic conditions.

    I’m still curious what point harbored was trying to make by comparing those two listings.

    It was Kary that brought them up, but you are not the only one.

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  86. AMS

    Small correction: Kary brought the issue of marketing up; harbored picked out the two listings to compare.

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  87. Kary L. Krismer

    By AMS @ 78:

    RE: Kary L. Krismer @ 75

    It’s only a matter of discounting.

    I’ll take a few headaches for the right price, and I suspect the same is true for many other buyers. The question I might ask, using your terms, is: How much is my headache worth?

    Again, I’m probably biased because we need a kitchen remodel and I just saw how long our neighbor’s took!

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  88. vermillionsky

    RE: AMS @ 85

    Sure, it’s more complicated, depending on the market conditions. I was really just thinking about our current market.. a declining one. I think in this market it’s really important not to overprice because you’re more likely to just chase it down. I personally don’t think the market has reached its bottom, so selling sooner at a higher price would be the priority for most sellers, unless they can sit on the house for a year or more, and even then I think the market will stay at the bottom for a while before it rises again.

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  89. Kary L. Krismer

    By harbored @ 66:

    Check out the difference between these two:

    MLS# 28051778

    MLS# 28130414

    There’s a limit to what I can say about active listings, but there are a number of differences. The more expensive one has one more bedroom and bathroom, over 1/4 acre more land, is new construction rather than 8 years old, and is further from Hwy 16 closer to the water. I’m not familiar with that area so I don’t know whether that justifies the price difference, but there are a number of differences.

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  90. AMS

    RE: The Tim @ 90

    That’s better. I was finding it difficult to hit “save” within the 120 seconds.

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  91. AMS

    RE: vermillionsky @ 88

    This depends wholly on which direction you believe the market is going. It should be clear from this blog that some people think the market is going up while others think it is going down.

    As always, if you are wrong in your forecast, then you lose.

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  92. AMS

    RE: Kary L. Krismer @ 87

    Time, money & Scope–

    You pick two, and I pick the third. If you demand a big scope and want it right away, then you will have to pay accordingly. If you want a big scope and want it done for very little money, it may take many years. If you specify the time and money, I’ll let you know what you can get in that time and money.

    If I can buy a piece of property in poor condition at enough of a discount, then I can get the new kitchen installed right away within my scope, and still be money ahead.

    And so on and so forth.

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  93. shawn

    RE: Ira Sacharoff @ 57 – thanks, Sniglet and Kary too

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  94. Kary L. Krismer

    This is something I wrote responding to Mack on one of the P-I soundoffs. It goes to why I don’t like the comparison of NOTs to sales:

    Basically you should not just count the number of Notice of Trustee’s Sales (“NOTs”) that are filed and compare that to NWMLS sales. It’s apples and oranges. If you wanted to use NOTs, the better comparison would be to active listings. If you want to use NWMLS sales, the better comparison would be to Trustee’s deeds (and that would probably overstate it slightly).

    NOTs are merely the bank saying: “We want to foreclose in 90 days, and here’s what you can do to avoid foreclosure.” It’s thus like a listing, where a seller says: “I want to sell, and here’s what you can offer to be the buyer.”

    Like listings, where you can have two listings for one property in two NWMLS areas, you can have two or more NOTs for one property if there are two or more deeds of trust against the property. An example would be an 80/20 loan package, where both are in default.

    Like listings, where you can have a listing canceled and then reposted, you can have two NOTs where there was a technical error in the first, or where something interrupted the process (e.g. a bankruptcy).

    Like listings, not all NOTs result in sales–far from it. People can bring the loan current, sell, file Chapter 13, bring a lawsuit against the lender, all sorts of things.

    This is probably an area where you need something more like what Case-Shiller does when it’s looking at sales data–tries to connect things up. Case-Shiller tries to connect up a current sale to a prior sale. Here they really need to track the NOTs to the property and what happens. Absent doing that, they’re really just a stat more akin to how many people are 60 days behind on their credit cards.

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  95. Kary L. Krismer

    One other point on this topic. Locally I don’t think foreclosures have been what’s had the greatest effect on the market. I think it’s the threat of foreclosures by builder’s banks (and just generally overbuilding).

    The biggest change in the actives isn’t that there are some dumpy properties on the market for less money. The biggest change is that the build in 2008 and 2009 properties are pushing the resale prices down. Before when pricing a resale you could ignore new construction. No more. I find surprisingly few buyers like new construction (maybe the buyers that do don’t use agents?), but at some price point a shiny new cookie-cutter house on a postage size lot apparently doesn’t look that bad.

    Anyway, that’s a change that started sometime in the last year.

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  96. Herman

    The new construction in this area is horrible. They build warehouse-sized boxes with no charm at all. Insensitive to the neighborhood. I’ve been looking for a bigger house and from time to time visit new construction. Every time I visit I leave with more resolve not to buy.

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  97. David Losh

    RE: AMS @ 93

    My company A Spring Cleaning has been preparing properties for sale since 1988, I worked at the direction of a Real Estate company for ten years before that.

    A kitchen remodel depends on taste. Your taste may be different from what a future buyer may consider of value.

    You mentioned marketing earlier. I have worked with designers over the years who are nery successful at marketing a property. Knowing what the public will buy is a gift.

    I know of an agent in the north end who has that gift. He can routinely list a property above value, not by much, and have the property sold with in weeks. He encourages sellers to do a list of enhancements to the property, pays for the staging, then has a pre Broker’s Open buzz about the property’s value.

    Now let’s take the premise that price is everything. Once the property is showing in the best light price reductions then enhance the preceived value.

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  98. David Losh

    By Kary L. Krismer @ 18:

    By Interloper @ 17:
    So unless I’m mistaken, this means we are adding more homes to the market just via foreclosure (each home eventually goes on the market),.

    That is an incorrect assumption. People bring the loans current, file Chapter 13, sell, etc. The properties also could be on the market already, and thus not increasing it, but it’s shocking how many people go into foreclosure without even trying to sell.

    There are properties being foreclosed on that are “unsalable.”

    When a seller discloses defects it can negatively impact value. In foreclosure you have no disclosure. In these crazy years of refinancing with no equity or 125% of value some investors refied properties rather than trying to sell them. After the refis were in place the investor walks away or file bankruptcy.

    By unsalable I mean structural defect or obsolesence. There are some properties that have too many issues to deal with. An appraiser determines comparable values on a set of criteria. Land Use, bad remodel, code violations, and structural defect may be missing from that criteria.

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  99. Kary L. Krismer

    By David Losh @ 99:

    By unsalable I mean structural defect or obsolesence. There are some properties that have too many issues to deal with. An appraiser determines comparable values on a set of criteria. Land Use, bad remodel, code violations, and structural defect may be missing from that criteria.

    I sort of wonder if there are some that are unsaleable dueto location. My wife doesn’t always use an aerial view prior to selecting listings to view, and we arrived at an REO property yesterday that was across the street from I don’t know what. It was a fairly large government type building, with a large antenna array on one end, that the public notice indicated was going to be expanded to become even bigger. I can’t imagine who would want to live across from that thing. During a hot market people tend to ignore location issues, but during a weak market they become very important.

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