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.

230 responses to “Surprise! You Owe Thousands of Dollars!”

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  1. Kary L. Krismer

    RE: Doug @ 200 – They probably could have had different programs for old and new construction. They probably had reasons not to do so, some valid and some not.

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  2. Julie Lyda, RE/MAX Northwest Realtors

    Dave,

    So I presented this situation to First American Title and here is their response:

    “Yes we do reflect King County Sewer Capacity Charge issue on Every Title that goes out both for Snohomish and King County. Yes, escrow should be checking with King County to see anything is due. It is taken care of on the escrow side.”

    So I would be curious if this Sewer Capacity charge was listed on your title insurance paperwork.

    If this is the case, then the charge is listed on title and escrow’s role is to check for outstanding amounts due, your situation appears to have fallen through several cracks.

    Upon learning this I believe our forms of disclosure are adequate. Here are the ways it should show up.

    1. Form 17 “Seller Property Disclosure Form”.
    2. Purchase and Sale Agreement – Form K “Utilities”.
    3. Listed on the Title Insurance.
    4. Verified by Escrow for amount due.

    How many ways does it need to be disclosed? I think this is more than adequate.

    We can agree that this feels more like a “sewer assessment”, and as a buyer’s agent I would definately negotiate a payoff as part of the purchase agreement.

    I did read part of the RCW and this is a lienable utility that can be foreclosed on.

    Thanks again for bringing this topic up, as it’s been a learning experience for me.

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  3. David Losh

    I’m sorry Doug, you made good points, and handled it well.

    Yes, Kary builders have a lobby, it is the Master Builders Association, and NAR goes along with it. The NWMLS has a vested interest in keeping builders happy for future listings, and the government makes more money, I think the quoted taxation with fees is $90K for new coinstruction housing units.

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  4. David Losh

    RE: David Losh @ 16

    “This is another Seattle Bubble OMG! moment.”

    Kary had already had 6 out of 16 comments at that point, now we are over 200.

    OMG!

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  5. Kary L. Krismer

    By David Losh @ 203:

    I’m sorry Doug, you made good points, and handled it well.

    Yes, Kary builders have a lobby, it is the Master Builders Association, and NAR goes along with it. .

    Actually it would have been WR, or as they were known back then, WAR. And the reason they would go along with it is that it would lead to more houses being built at lower prices. Oh, how horrible is that! /sarc

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  6. Kary L. Krismer

    RE: David Losh @ 204 – If you understood the issues the number of posts would be a lot lower, and also you’d understand why there are so many posts.

    This is actually a very interesting issue. There’s not only the fairness issue, but also the issue of making sure consumers understand how the system works. I’ve already tweaked my practice because of this. I always have gone over the provision, but now I also do so in writing.

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  7. Kary L. Krismer

    By Julie Lyda, RE/MAX Northwest Realtors @ 2:

    1. Form 17 “Seller Property Disclosure Form”.
    2. Purchase and Sale Agreement – Form K “Utilities”.
    3. Listed on the Title Insurance.
    4. Verified by Escrow for amount due.

    Of those, really the form 17 is the best disclosure, assuming it’s properly disclosed. I don’t think 2-4 are that great. It’s actually Form 21 (or 28) of the P&S which describes it, and that’s in the boiler plate, and it really doesn’t describe it that well.

    As to the title insurance, many agents can’t read those things, so what chance does a consumer have?

    And finally, while Tim (the resident escrow here) said he discloses the amount due, I don’t know that is standard practice. Checking for past due amounts would be, but otherwise it seems to be outside the scope of the escrow. And if you’re talking about new construction, how independent is the escrow? I once had a builder escrow try to screw my client out of their homeowner title coverage even though there was nothing in the builder’s addendum which changed it to an owner’s policy. Do you really think that if they would screw a buyer over a $100 fee that they’re going to tell the buyer that $10,000 is owing? If they didn’t, I do NOT think it would be malpractice on their part.

    I really think a separate writing describing the system is what’s required. That would clearly draw attention to the fee. And that would be for the buyer’s agent to do.

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  8. David Losh

    RE: Kary L. Krismer @ 206

    This is a learning curve for you. It’s a common issue, and that was pointed out to you.

    The issues are very clear, and Doug outlined them very well. Every one pointed out the issues to you, clearly. I’m not that bright, but am able to follow along.

    What’s clear is the agent screwed up, so in turn the Brokerage screwed up. Doug took the issue to the Broker, and had to have a discussion, even online, where Real Estate agents told him tough luck, you should have done more due diligence.

    Then the mukoh guy pops up with the same we win, you lose sucker comments, and that just gets passed over.

    Real Estate is a complex business, but once the Brokerage got caught, and there was money left on the table, they should have made the client whole. It’s just good business.

    That’s what seperates Real Estate from attorney work. We do deals, make our money, bury the mistakes, and move on to the next deal. There is always another deal, there is always more money.

    You don’t have a practice here to tweak. You’re a guy with a Real Estate license who is trying to figure stuff out. That’s just another part of the business.

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  9. Kary L. Krismer

    RE: David Losh @ 8 – The “learning” is figuring out just how misunderstood the system can be by consumers. After listening to Doug I realized this is more confusing to consumers than what I thought. After listening to some of the others who posted here early on, it’s more common problem than what I thought. That’s presumably because I have always tried to explain this to clients when explaining the Purchase and Sale agreement. Even so, I now want to make extra effort to make sure my clients understand. And I wrote a blog piece, linked above, so that more agents and more buyers understand.

    But David, don’t say the issues are very clear. You clearly don’t understand them even today. You have no idea what is or is not clear here.

    And seriously, you think the real estate business is about making mistakes, moving on and making more money?

    That’s what seperates Real Estate from attorney work. We do deals, make our money, bury the mistakes, and move on to the next deal. There is always another deal, there is always more money.

    That may be your standard of practice, but it’s not the standard of practice of any halfway decent agent in the state. That’s a pathetically sick attitude.

    Finally there’s this gem from you:

    You don’t have a practice here to tweak. You’re a guy with a Real Estate license who is trying to figure stuff out. That’s just another part of the business.

    An agent (or anyone actually) should always be looking to do every transaction better than the last. They should be constantly trying to perfect procedures, and be looking for ways to improve. If you don’t understand how things work, that’s impossible to do. Instead I guess those people just try to “bury” their mistakes, assuming they even realize they made a mistake.

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  10. David Losh

    RE: Kary L. Krismer @ 209

    You learn Real Estate by doing. There are never enough classes, or forms. We learn by doing deals, because each deal is a new adventure. You never know what you don’t know until you do deals.

    Mistakes are made every transaction; is that a better term?

    This agent made a mistake, maybe both agents made a mistake. You pay, learn, and move on. Is that a better way to put it?

    You will make a lot of mistakes your next transaction, hopefully they won’t cost you money, and that is how you become more cautious.

    Here’s another saying in Real Estate: New agents can make more, and do more deals because they don’t know any better, or know the liabilities.

    If you remain frozen thinking about liabilities that also doesn’t help your client. It’s good to be aware, and know as much as possible, but you get that knowledge by doing.

    You’ve already stated you don’t stop the car, get out and talk with people you think might want to sell. You don’t door knock. How about cold calling? Do you cold call? If you just work by referral you may be stuck never knowing more.

    You gotta do deals. You take what comes, do your best, your very best, and move on.

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  11. Kary L. Krismer

    By David Losh @ 210:

    RE: Kary L. Krismer @ 209

    You learn Real Estate by doing. There are never enough classes, or forms. We learn by doing deals, because each deal is a new adventure. You never know what you don’t know until you do deals.

    Mistakes are made every transaction; is that a better term?

    This agent made a mistake, maybe both agents made a mistake. You pay, learn, and move on. Is that a better way to put it?

    I think that we probably both agree on that, or at least on every transaction there should be things you would question whether you would do differently for a possibly better result. Agents who don’t do that type of self-review do not improve their practice.

    As to this agent though, we don’t know for sure that he made a mistake. As noted above, Doug probably had four different things informing him of this charge. Perhaps the agent explaining it to him was a fifth thing, but he simply doesn’t remember it! We don’t know that for sure. But going beyond that, assuming that the agent said absolutely nothing about the capacity charge, that still would not mean that the agent was liable. As discussed above, with a short sale it’s rather unlikely the bank would agree to have this item paid. Assuming that’s the case, Doug did not suffer damages if he in fact got the deal he thinks he did, and therefore he could not recover from the agent.

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  12. David Losh

    RE: Kary L. Krismer @ 211

    I have paid thousands of dollars for mistakes, and have had the same Real estate attorney since 1984.

    There are no damages if you do things right, but if they go wrong you become pro active, and don’t let the situation become fodder for an internet forum.

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  13. Doug

    RE: Julie Lyda, RE/MAX Northwest Realtors @ 202

    I can tell you that the short sale complicated matters, as we agreed at the seller’s request that utilities be paid out of escrow.

    The seller agreed to pay utilities, then didn’t pay this, and the selling agent disputed that this amounted to a utility charge.

    So it looks like we were bamboozled. They decided that this should be settled out of escrow as a utility charge, and then that it should not be paid, as it’s NOT a utility charge. Then when I get the bill a year later (and why did it take a year, KC?), sorry the seller’s too broke to pay and we’re offended you even asked.

    So, I do feel that a little something unethical was going on here, and that I could have a case if I took it to court. However, the ~$1,000 I paid isn’t worth pursuing. I’m sure I’m not the first person to which this has happened, and the nature of this debt is problematic. In my opinions, It’s a poorly-written, NIMBY-ist law, that will have some unpleasant consequences, but it’s far from the first or last that will be passed in WA.

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  14. Julie Lyda, RE/MAX Northwest Realtors

    RE: Doug @ 213

    Well it’s all moot now.

    And yes it is considered a utility charge by definition of the RCW.

    http://apps.leg.wa.gov/RCW/default.aspx?cite=60.80.005

    By the way, don’t feel bad. I got stuck with the sewer capacity charge when I bought my home in 1990 as it wasn’t even on the disclosure radar yet. :)

    I still don’t think you could have got either the bank or the seller to pay this in a short sale.

    However, for my own practice, I intend to make this an item for which the seller pays off at closing for any transaction I may do in the future on behalf of a buyer. It is definately a negotiable item.

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  15. Kary L. Krismer

    By Doug @ 13:

    The seller agreed to pay utilities, then didn’t pay this, and the selling agent disputed that this amounted to a utility charge. .

    Without seeing your forms it would be impossible to say, but if it was just Form 22k, requesting utilities to be paid, I would agree with the listing agent. Checking that box doesn’t get the capacity charge paid. You need to check the charges and assessments due after closing box.

    BTW, the selling agent is the buyer’s agent where there is a buyer’s agent. I assume you meant listing agent.

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  16. Kary L. Krismer

    By Julie Lyda, RE/MAX Northwest Realtors @ 14:

    RE: Doug @ 213 -Well it’s all moot now.

    Not until the statute of limitations runs. But as noted, a claim is doubtful.

    However, for my own practice, I intend to make this an item for which the seller pays off at closing for any transaction I may do in the future on behalf of a buyer. It is definately a negotiable item.

    Good luck with that. It will most likely just result in a higher sales price.

    Interesting question though. If a buyer came in with a non-contingent offer for full price, but asked for the capacity charge to be paid, would the buyer’s agent be entitled to a commission if the seller said no?

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  17. Kary L. Krismer

    I just received information on the capacity charge for one of my clients. It took King County six days to get the answer back to the escrow. That really isn’t very timely.

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  18. Kary L. Krismer

    By Julie Lyda, RE/MAX Northwest Realtors @ 14:

    RE: Doug @ 213

    Well it’s all moot now.

    And yes it is considered a utility charge by definition of the RCW.

    http://apps.leg.wa.gov/RCW/default.aspx?cite=60.80.005

    That’s incorrect. None of those statutes mentioned in that link are the capacity charge. It is RCW 35.58.xxx.

    Also, per this statute, if the Form 22k didn’t properly identify the utility, then there wouldn’t be an obligation of the escrow to pay it.

    http://apps.leg.wa.gov/rcw/default.aspx?cite=60.80.010

    I’ve heard there’s a case out there which requires a correct address for the utility. It’s extremely doubtful that the Form 22k even mentioned King County or gave its address.

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  19. Julie Lyda RE/MAX Northwest Realtors

    RE: Kary L. Krismer @ 218

    Yes it is a utility charge.

    I did provide the wrong link:
    http://apps.leg.wa.gov/RCW/default.aspx?cite=35.58.570

    Definitions of a utility:
    http://apps.leg.wa.gov/RCW/default.aspx?cite=60.80.005

    Personally to me it feels more like an assessment for the fact that it can be “paid off”. There is even a discount if “paid off” early.

    I just went through a sewer hook up in Lake Forest Park, it was really expensive. I don’t have the file in front of me, but maybe I’ll post the total hook up fees later. Not only was there a “one time sewer capacity fee”, in additional to the “sewer hook up fee”, there was the monthly “sewer capacity fees”.

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  20. Kary L. Krismer

    By Julie Lyda RE/MAX Northwest Realtors @ 19:

    RE: Kary L. Krismer @ 218

    Yes it is a utility charge.

    I did provide the wrong link:
    http://apps.leg.wa.gov/RCW/default.aspx?cite=35.58.570

    Definitions of a utility:
    http://apps.leg.wa.gov/RCW/default.aspx?cite=60.80.005

    The second link defines what a utility is by citing to other statutes. Specifically it says: ” All lawful charges assessed by a utility operated under chapter 35.21, 35.67, 36.36, 36.89, 36.94, or 57.08 RCW,. . .” RCW 35.58.570 is not cited, so the capacity charge is not a utility paid by an escrow at closing using the Form 22k procedure.

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  21. David Losh

    RE: Julie Lyda RE/MAX Northwest Realtors @ 219RE: Kary L. Krismer @ 218

    So, even though you are now both aware of these charges, and Julie has been since 1990, and I think we can all agree that this system feels like this buyer was bamboozled, you are both talking about yourselves, rather than being as outraged as this consumer is.

    This is a typical cover your ass situation that Real Estate agents hide behind.

    This is a system that is messed up, but as common as Julie points out. The agent should have known, both agents should have known, and the Brokerages should have known, yet nothing was done, but collect the commissions.

    This consumer could have used redfin and had the funds to cover the cost.

    Now why are people still paying Real Estate agents?

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  22. Kary L. Krismer

    By David Losh @ 221:

    RE: Julie Lyda RE/MAX Northwest Realtors @ 219RE: Kary L. Krismer @ 218
    So, even though you are now both aware of these charges, and Julie has been since 1990, and I think we can all agree that this system feels like this buyer was bamboozled, you are both talking about yourselves, rather than being as outraged as this consumer is.

    First, I have a response to Julia’s latest post which is held up in moderation. But basically the capacity charge statute is not referenced in the utility statute.

    Second, it’s hard to be “outraged” when a consumer has probably been given 3 if not 4 disclosures of this issue. Even so, I agree the disclosure should be better and that’s why I will start giving clients written disclosure in addition to the oral disclosure which I’ve been doing. And I don’t know why you think that is just for me. While there is obviously a bit of CYA in such a disclosure, to protect against selective amnesia, the disclosure is given to better inform the client. I’m not sure how much more you want? Do you want me to start paying the capacity charge before I even show the property to the client? /sarc

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  23. Kary L. Krismer

    By David Losh @ 21:

    <Now why are people still paying Real Estate agents?

    LOL. This is exactly why consumers should be dealing though real estate agents, but like anything else it’s important to pick the right agent.

    How many consumers do you think are aware of this issue when they start looking? This thread has proven that too many are not aware of it even after they buy! Using an agent and picking the right agent is extremely important!

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  24. David Losh

    RE: Kary L. Krismer @ 222

    This thread proved that the right agent wouldn’t be available.

    We advocate for the client, as much as we facilitate.

    This capacity charge issue has been a part of my practice since 1986, as Ardell pointed out to you, and that was another nowhere discussion. I know about the charges because we paid them for the client, I split it with my manager.

    These fees, and charges are always there in one way or the other.

    Even if this charge was disclosed, as you are now claiming, four times, the negotiation with the client should have been handled by the Brokerages, which it was not.

    I’m betting the Brokerages hid behind the same cover your ass type of talk we are seeing here. They should have handled it, they have the money to handle $1000, but they chose not to. It’s just another haha, got you sucker, and we got ours, better luck next time.

    It’s just not good business, and that is the only point here.

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  25. Kary L. Krismer

    By David Losh @ 224:

    This capacity charge issue has been a part of my practice since 1986, as Ardell pointed out to you, and that was another nowhere discussion. I know about the charges because we paid them for the client, I split it with my manager.

    That’s incredible, considering the charges have only been in effect since 1990. Check out either the King County website or the first link to the statute which Julia gave above.

    You really are a forward looking agent! You pay charges that won’t even exist for four years!

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  26. Kary L. Krismer

    By David Losh @ 24:

    Even if this charge was disclosed, as you are now claiming, four times, the negotiation with the client should have been handled by the Brokerages, which it was not.

    “Now claiming?” The numerous times this was disclosed has been addressed repeatedly during the first 100 posts on this issue.

    Not sure what you mean by “negotiation with the client.” If you mean better disclosure, I have been agreeing with that. If you mean negotiate to have the sum paid at closing, the bank almost certainly would not have approved that in the context of a short sale.

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  27. Kary L. Krismer

    By David Losh @ 24:

    I’m betting the Brokerages hid behind the same cover your ass type of talk we are seeing here. They should have handled it, they have the money to handle $1000, but they chose not to. It’s just another haha, got you sucker, and we got ours, better luck next time.

    Do you have memory problems like pfft? The fee was about $2,000 and the broker did offer to pay half. Doug declined.

    And again, that was actually a very generous offer because it’s not clear at all that Doug suffered any damages. He just didn’t get quite the bargain he thought he was getting. Doug has agreed to that point, but for some reason you’ve either forgotten or don’t understand.

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  28. Akp

    I purchased a home in 2008 in Snohomish County, close to Mill Creek. I was told about the Sewer Capacity charge and as a new home owner this charge was a total of 7000$. I could pay upfront 5000$ and get a discount.
    But yes we are paying a huge amount of money for “sewer”. I pay monthly 51$ sewer charge to Alderwood Waste Water District and then 125$ every quarter to King County to treat the waste water.

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  29. Ryan Halset

    I never could quite figure out why Impact Fees for Roads, Parks or Schools, are required to be paid in-full at the time the developer sells a new home, but King County doesn’t roll the sewer capacity charge into new construction as well…which, when you think about it, is essentially an Impact Fee on the sewer system.

    If it is rolled into the initial permitting fees when building a home, then it can be more appropriately and clearly accounted for in the cost of building/selling a home. That seems like a more fair solution than leaving it up to buyers/sellers to negotiate the remainder of the fee for the next (potentially) 15 years…and leaving it up to King County to verify whether or not there is a capacity charge or not. Since these impact fees can typically be paid when a developer sells a home, rather than up-front or out-of-pocket, it seems that this would alleviate a lot of headache.

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  30. Joe

    This is a related issue, but one I can’t seem to find addressed anywhere. What are the stipulations on billing capacity charges to renters?? We’ve been renting for 2 years in Seattle – both complexes built after 2009. Ou current landlord has switched to third-party billing, and now charges us directly for the KC Capacity Charge. Since we have no vested financial interest in the property, is this even legal? Seems like the “standard” way to do this would be to roll the charge into the rent rather than have it billed monthly (I assume this is what our previous landlord did, since we’d never heard about this until this month!)

    Any help or advice – especially resources – would be appreciated. I’ve already followed links in this post, and nothing seems to speak specifically to renters.

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