Posted by: 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.

24 responses to “Strategies for Finding the Best Value in Today’s Market”

  1. Scotsman

    Hey, what about me?

    Best strategy? Now that you’ve got your new car (Cash For Clunkers) drive around looking at houses, identifying the neighborhoods you like. Try to focus on areas where social climbers and DINK’s bought way more house than they could ever realistically afford- that’s where the short sales will soon be cropping up. Keep an eye on the up-and-coming Cash For Clunkers Appliances program while picking up as many old appliances off Craig’s List as you can- you’ll need those rebates to boost your down payment. Then wait for it…. wait for it….. It will be coming- the spring 2010 $25,000 home buyer tax credit!! That, coupled with the fabulous but short lived FHA sponsored “2-2-2″ loan program is when you make your move! (2% down, 2% interest, 2% non default rate) Remember kids, Obama and the feds are your friends, and the fun goes on until the checks bounce!

    |You can thank me later- I’ll be somewhere in Montana.

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  2. AMS

    RE: Scotsman @ 1 – Don’t we have a governmental system that includes “checks and balances?” Isn’t this what our “Founding Fathers” wanted for us?

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  3. Ray Pepper

    What about calling Steve Tytler to see if you found a good value?

    I’m sure he will have an opinion you can BANK ON!

    **********************************
    Tim hows the house hunting going?

    I have just 79 days left to cash in on my bet. Hmmm..I’m not sure if we clarified. Did it have to close Ira? Be in Escrow ? What if your wrapped up in a short sale? Good God Hurry Tim!

    Sign on that LINE and bring on the Claim Jumper FULL RACK of Hearty Beef Ribs!!!!!and some Pretzels to warm up on……!!!!!!!!!!!!!!!!!!!!!Getting worried Ira?

    I think I saw Tim touring homes and Ardell caught it in a picture.

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  4. Ray Pepper

    Was this you Tim? I know your out there looking.

    http://raincityguide.com/2009/11/12/seattle-characters-welcome/

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  5. Scotsman

    RE: AMS @ 2

    You betcha! Feds write the checks, China funds the balances…

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  6. meadows

    The reason I counsel patience is from my family’s own experience. We had lived for 5 years on the north side of town and now with a growing family we wanted to live on the south side of town, closer to better schools and stuff. We would walk by homes we liked. One day I said to D., “I definitely could live there!” Big lot, old house, trees, view, etc. A couple months later we got a call from a Mom in our pre-school, “My neighbor’s selling his house.” (1993) We checked it out and it was the exact house. We bought it for $239,000 which seemed way too much at the time but we’ve never regretted it. I don’t care what Zillow thinks it’s worth, I’m handing it over to my progeny.

    So these things do happen. I call this my “toe-tag house.”

    http://www.flickr.com/photos/meadows1953/4139141883/

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  7. AMS

    RE: Scotsman @ 5 – I thought it was Feds writes the checks and then its a balancing act?

    Or possibly, I cash Uncle Sam’s check, and then he balances it?

    Thank you founding fathers!

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  8. AMS

    RE: Ray Pepper @ 4 – A blog entry about some guy walking around without a shirt? Business must be slow.

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  9. Ray Pepper

    RE: AMS @ 8

    I thought the same when I read it.

    I think RCG needs another JOLT of “TALES FROM THE DARKSIDE part 2″

    A truly award winning Blog Entry.

    http://raincityguide.com/2009/07/09/tales-from-the-dark-side-1/

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  10. AMS

    RE: Ray Pepper @ 9 – Commentary about sales: It seems that whenever there is a fight between salespersons, the deal never goes down. So often the fight is over someone who doesn’t end up buying, and this observation goes beyond real estate. When there is an atmosphere of “doing what’s right for the customer,” deals seem to go so much smoother.

    My guess is that your client liked your business model, and the other agent should have respected that a bit more. Instead of 0% of 100% of 6%, she probably would have ended up with 100% of 50% of 6%–I use 6% as a basic benchmark.

    (success % X participation rate % X commission %)

    I have no idea why when the customer says, “I want to work with Ray,” that another agent doesn’t respect that.

    BTW, this reminds me a bit of one of Jim’s latest videos:

    http://www.youtube.com/watch?v=sAbhlDp3WPs

    (First 35 seconds is on point, and Jim gives a little more commentary near the end, starting at 7:00 the last 55 seconds where he talks about how much work he does for free. The people “love his videos,” but work with another agent.)

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  11. Ray Pepper

    I have no idea why when the customer says, “I want to work with Ray,” that another agent doesn’t respect that.

    They do now. It has gotten ALOT better then it was 3 years ago. I thank Red Fin for that. The Venture Capital of Red Fin helped educate 1000’s. There will always be isolated incidents that occur and be worthy of Tales From the Darkside.

    There will be so many more 500 Realty/Findwell type Brokerages coming in the next few years it will shock you. Still, less then 10 in the PNW..AMAZING!

    I liked the Jim Realtor. I checked out a few of this vids. very funny.

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  12. Kary L. Krismer

    I’ll comment on Medic’s strategy of looking for a large price drop since the peak. That I think would work best for the buyer who has a positive outlook as to the future, and thinks there will be another run up in the relatively near future, and plans on selling at that time. For the buyer who is looking for a place to live long term, I think that strategy would likely lead to finding houses in a lot less desirable neighborhoods.

    So to some extent, the strategy for looking for value would depend on the purpose and term of the buyer.

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  13. AMS

    RE: Kary L. Krismer @ 12 – This was exactly what I suggested: Value the home, and if the selling price is less than that value, buy.

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  14. DrShort

    RE: Kary L. Krismer @ 12

    The houses I’ve seen that are heavily discounted aren’t that way because of great prices today, but rather the prior owner completely overpaid a few years ago (even relative to that market). Some of the prior sales amounts were so high that I can only think there was some sort of fraud involved.

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  15. singliac

    RE: AMS @ 8
    The conversation between Ardell is about the funniest thing I’ve read all day. That type of passive-aggression is what truly makes you a Seattle native.

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  16. Jonness

    Advice #1: Don’t buy. Instead, live as cheaply as possible and continue saving your downpayment while house prices continue to drop. My chart of median household income to median house prices shows that Seattle is at least 25% overvalued compared to incomes. Sure interest rates are cheap, and that helps affordability. But as I have pointed out in the past, given the same monthly payment in the current economic environment, you are way better off paying less for the house and more for the interest.

    We are in a rare period of history where you can save a larger downpayment and not lose a portion of it in a race to beat increasing prices. Better yet, house prices are continuing to trend lower. Despite what some RE agents enjoy telling you, this trend will continue, which is doubly good from an investment perspective. Use this to your full advantage because it won’t last forever. Don’t pass up this once-in-a-lifetime opportunity to save up a real downpayment and wind up with instant equity in your dream home.

    http://housingcorrection.com/misc/MPtoMHI3.jpg

    Advice #2: Be careful about which RE agent you choose to represent you. Last year, many agents were claiming any money saved by waiting would be lost in rising interest rates. Before that it was, house prices never go down. How can you spot these con games? Always question authority and expertise. Ask yourself what the person in authority has to gain if you carry out the given advice. Then verify the accuracy of the claims. Google is cheap.

    Advice #3: Use common sense. I forcefully predicted months ago that we have not reached the bottom of Seattle house prices and prices would continue to reach new lows as we progressed into winter. Pointless claims to the contrary ensued. But let’s face it, anyone who believed the Spring bounce was permanent is as blind as a bat. Stay away from short-term noise. That’s where the blind get caught up and confused. Instead, take a step back and look at the bigger picture.

    What is it about the current economic period that would justify paying higher percentages of incomes than in times of relative economic prosperity? If your answer is “government stimulus” then ask yourself what will happen to your new home’s value when the stimulus is removed from the equation?

    Advice #4: Housing bubbles do not unwind as quickly as stock bubbles. They take years to fully retrace. Do not get caught in the trap of believing the government can permanently prop a mortally wounded market up above historically fair value. All’s it can do is slow down the rate of decline. In the absolute best case scenario, it can keep house prices going sideways for 7 years while inflation catches up. Even if that were to happen, which is improbable, it would still pay to save a bigger downpayment while house prices track sideways. IOW, your downpayment will not be partially eaten up as you race to save against rising house prices. Once again, take full advantage of this. It is more meaningful than it looks, because while prices might only typically rise 5% or so per year, that is 5% of the full price of a highly leveraged asset. It adds up. To take that cost out of the equation is huge.

    Advice #5: Go to http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx and punch in your loan details. Be sure to hit the amortization button so you can see the monthly details so you know how much principle you are actually paying down. For example, with a $450K loan at 5% interest, after 10 years you will have paid $85K in principle and $207K in interest. That would not be bad if you bought and we moved into an inflationary environment. But for as long as we stay in the current Japan-style deflationary period, it is murder as an investment.

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  17. Kary L. Krismer

    By DrShort @ 14:

    RE: Kary L. Krismer @ 12

    The houses I’ve seen that are heavily discounted aren’t that way because of great prices today, but rather the prior owner completely overpaid a few years ago (even relative to that market). Some of the prior sales amounts were so high that I can only think there was some sort of fraud involved.

    I was assuming that the comparison made was to prior value, and not prior sales prices. You’re entirely correct that if you base it off a prior sales price you might be way off base.

    Just recently I was looking at a recent sale to attempt to value another property. There was one sale that really stuck out because it was for about 15% more than other similar sales. Since it’s a sold property I can’t go in, but after looking at the pictures and even driving by I couldn’t figure out the reason for the high price. Some things never change.

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  18. Cheapest Seattle Homes: December Edition | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

    [...] Please note: These posts should not be construed to be an advertisement or endorsement of any specific home for sale. We are merely taking a brief snapshot of the market at a given time. Also, just because a home makes it onto the “cheapest” list, that does not indicate that it is a good value. [...]

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  20. Cheapest Homes: May Edition • Seattle Bubble

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  21. Cheapest Seattle Homes: March Edition • Seattle Bubble

    [...] because a home makes it onto the “cheapest” list, that does not indicate that it is a good value.Here are this month’s three cheapest single-family homes in the city limits of Seattle [...]

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    [...] because a home makes it onto the “cheapest” list, that does not indicate that it is a good value.Here are this month’s three cheapest single-family homes in the city limits of Seattle [...]

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  24. Cheapest Homes: December Edition • Seattle Bubble

    [...] because a home makes it onto the “cheapest” list, that does not indicate that it is a good value.Here are this month’s three cheapest single-family homes in the city limits of Seattle [...]

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