RE: AMS @ 104 – Could I make it a rental? ;-)

I agree someone will buy it for a price. I’d have to be in desperate straights to live there myself.

Yes, the laws have not changed. I am not an attorney, so I cannot tell you that you can for sure rent it, but I would bet on yes. I guess you could rent it, sell it, burn it to the ground (with a permit, of course), put it on craigslist for free, and so on–whatever is legal.

The point remains, however: It’s not a matter of if, but rather, at what price.

I agree someone will buy it for a price. I’d have to be in desperate straights to live there myself.

RE: AMS @ 102 – No not me.

Would you buy for $1? (After this, the deal will include cash to you, maybe you can just save the hassle and tell me how much cash I have to toss in to get you to buy the unit. Mind you are not required to live in the place.)

A year and a half ago, when we were looking, we found a place we both liked, but it was near four large electrical transmission lines (the ones by 140th and the Maple Valley Highway). You couldn’t see them through the trees (at least in the summer), but I didn’t want to live near such a thing.

How much would I have to pay you to live in that area?

But yes, at some price someone will buy that place. I just wonder what kind of discount for that thing across the street the appraiser put on that place when the foreclosed loan was made. I bet there wasn’t a single dollar adjustment.

I’d suggest that your price is below some other buyer’s willing and able price. One of the basics of economics is that you will buy given the right deal. One basic assumption that is normally made is that all property has positive economic value to each potential buyer, but this is not always true. Often people have to pay to get rid of trash, and there are properties out there that have negative value, for example Superfund sites. It’s not a question of if, but rather, how much.

But yes, at some price someone will buy that place. I just wonder what kind of discount for that thing across the street the appraiser put on that place when the foreclosed loan was made. I bet there wasn’t a single dollar adjustment.

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.

At the right price, I bet you’d buy it.

RE: AMS @ 93 –

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.

This is the same as understanding the customer. If you understand the customer, then you know what will add value for that customer.

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.

Price is one part of the marketing mix, but in our current conditions, I suggest it’s becoming more and more important. Specifically supply continues to increase, and as such, pricing becomes more of an issue. This also follows from the shift in demand. I hope it is clear that the demand curve has shifted to the left.

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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!

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.

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.

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….

“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.

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

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?

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.

“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.”

“So what’s proper marketing worth?”

That’s what I keep asking!

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.

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?

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.

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.

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.

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.

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

“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?

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.

“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?)

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.

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.

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…

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.