Reader Question: Did I Just Step Into a Shark Tank?

I received the following pair of emails from Seattle Bubble readers in the last few weeks, both describing a similar frustration with today’s housing market in Seattle.

They’re a little long, but both worth reading. Here’s the first one:

My husband and I are hoping to buy a house sometime this summer in the Shoreline area.

We looked and found a house at roughly 147th and Wallingford, west of I-5, in Shoreline, that we both thought was a pretty decent listing. Really close to exactly what we are looking for.

We moved on it. I contacted Redfin and requested a tour, we were all set up for 6:30 today, but it was canceled. The touring agent explained that someone made the seller an offer “they couldn’t refuse”—cash—and they would likely be taking this offer.

Is this what is happening when I read that there are more cash buyers? Are these likely real estate investors buying nice (move in condition), family (3 bed, 1.75 bath), forever homes (for us) before the rest of us who don’t have $300K CASH lying around?

We are just getting started on our home search. Is this what we can expect for the summer? What is your prediction for the cash buyer snatching nice houses out from under us?

And here’s the second:

My wife and I recently began looking for a home. We decided to look in the $375-400k range. That would put us at a manageable monthly payment and we were quickly pre-approved for the full 417k that FHA gives in king county.

We are looking for 3 bedrooms, 1.5 bathrooms, good schools, and a good commute to downtown for around $400k, which I know, is typical for young married couples everywhere.

What I am shocked by is the voracity of this market for that exact thing. I thought I was walking into a buyers market, where the world would bend over backwards to sell me a house. In reality, we cannot get into a house that’s near decent, that doesn’t already have multiple offers. I was in a nice home last weekend that had been on the market for less than 5 days. I counted 98 cards on the counter. I’m told the $410k asking price ended up “much higher” with the buyer waiving all contingencies.

This morning I found a decent house at $375k and I’m being told that they are only accepting offers until Monday, we need to preinspect, and FHA would probably kill our chances because of the extra fees on the seller.

This house is $25,000 less than my target, needs a ton of interior work, and I’m out of the game before it starts?

So my question is this: What’s going on?

Like I said, I’m very new to this. I don’t want to panic and rush into a house to find this is just the normal spring uptick, but is this normal? Did I really just step into a shark tank, or is this a typical feeling when you start out looking at homes?

Maybe I’m just being a baby?

I’ve been hearing similar stories in person from friends who are looking for a home to buy around Seattle this season, and at Redfin, 60% of the offers our agents submitted for buyers in April were up against at least one other competing offer.

So what’s going on? A combination of factors are contributing to the mini-feeding-frenzy we’re seeing right now:

  • Prices are back in line with both rents and per capita incomes.
  • Therefore, many buyers have decided that prices are “low enough” for them to finally buy.
  • Meanwhile, those same low prices mean fewer home “owners” can afford to sell, since they owe the bank more than their home is worth.
  • Many home owners that could sell are holding out for an imagined “recovery” in home prices.
  • It’s spring.

Unfortunately, “low prices” is not synonymous with “buyer’s market.” Until the pent-up supply is released to the market by would-be sellers who finally get the picture that peak pricing isn’t coming back even in the best-case “recovery” scenario, it’s likely going to be a frustrating time to be buying a home in and around Seattle.

836 Sycamore Dr Palo Alto, CA 94303That said, I do have to be thankful that at least things aren’t as bad here as they are in the Bay Area, where the 2-bed, 1-bath, 971 square foot post-war Palo Alto shack pictured at right listed in late March for $948,000, received 12 offers, and sold just four weeks later for $1.35 million (hat tip to Redfin for the details). You really have to have the right combination of too many dollars and not enough sense to believe that was a good buy.

Personally, if I were looking for a home right now, I’d probably put the brakes on and pick my search back up in the fall when there will (hopefully) be less competition from other buyers and more supply (also hopefully). Unfortunately, one of the biggest variables in all of this is the human psychology of it all—Shiller’s “animal spirits.” No matter how many ways you crunch the numbers, you can’t account for the emotionally-driven decisions of other participants in the market.

  

About 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.

173 comments:

  1. 1
    wreckingbull says:

    Another contributing factor to the frustration is that he housing stock in the Puget Sound area is just not that good. Add bidding wars and unreasonable prices and you get a bad situation. I am always amazed at when I go to midwestern cities and tour their older neighborhoods. You get the feeling that a whole different class of craftsmanship went into these homes when compared to neighborhoods of similar vintage in Seattle.

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  2. 2
    Brady says:

    I have multiple friends in the same boat in Seattle. It has been very frustrating for them to buy a home. The all cash offers are interesting to me. Is it really to the point where investors think they can get a good return for renting a home in Seattle or do they think an increase in value will give them that return. Or maybe these are just owner/occupants that are sitting on a lot of money after they sold at the peak in the market.

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  3. 3
    Scotsman says:

    Curse or blessing? “Priced out forever” in a market/economy that could go over the cliff at any moment.

    Want to save on rent, maybe position for an inflationary surge? Buy a crap house and wait- either way you can win. Buying anything above the median, unless, like the $5M condo buyer discussed below you have cash to burn, is a major risk.

    Yes, Scotsman bought a house- but his dark side still exists. If the desired purchase is at all a stretch for you- wait.

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  4. 4
    JB says:

    Aaahh, my wife and I loved living in Palo Alto before we had kids, but it was clear that it was just this side of insane to try to buy a house and raise a family there unless you’d won the stock option lottery.

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  5. 5
    bulldog91 says:

    I don’t understand why, in this environment, don’t Seattle sellers just raise their price?

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  6. 6

    FHA shouldn’t kill the deal because of the extra fees. You can adjust the offer price to account for that. The seller’s concern would be the appraiser required repairs. For example, I saw a listing last week that said they would take FHA, but the house had some peeling paint which an an FHA appraiser (and maybe others) would almost certainly require be repaired. If the seller has a perception FHA is more likely to call out repairs, that can be a problem for a buyer.

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  7. 7

    A month ago exactly I wrote about a fundamental market shift over at Trulia. In the past week I’ve been to two listings where buyers were lined up to look (three in each case). Not unusual on a weekend maybe, but Tuesday night at 7:30?

    And again, I think many of you will be shocked when you see the April median.

    Welcome to the current market. As someone here said, the bottom isn’t as fun as we thought it would be.

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  8. 8

    What’s going on right now is the flip side to the housing bubble. Lots of people biught houses in ’05, ’06, ’07, and if the market were just a regular, steady thing, a lot of those people would now be trying to sell and buy a bigger house, or in a hipper area, or an area with better schools, etc.
    But they can’t. They owe more than what the house is currently worth, and they don’t have the savings to make up the shortfall if they sold at a loss. So that’s a factor in the abysmally low inventory. Others are intentionally keeping their homes off the market because they are convinced that prices are going back up, although for those who chose that path a few years ago, it was a pretty costly strategy.
    Cutting to the chase, it’s probably a good time to have a home for sale in decent shape in a decent neighborhood, especially if you have plenty of equity.
    For buyers, prices are down, but there aren’t very many nice houses on the market, and the competition is fierce. Everybody’s situation is different. Some people just aren’t happy if they don’t own a home, some people just hate renting, and you can’t tell people how to feel.

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  9. 9
    krs says:

    I agree with Tim. Step back from the market and wait until later this summer or even into winter. This is the traditional home buying season and people seem to be particularly emotional this year. I think it’s because they are tired of waiting and there is so little to chose from. It’s not worth getting caught up in. That’s not easy to say because I, too, have been looking for a house for quite some time. But I don’t trust what the market seems to be doing right now.

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  10. 10
    David Losh says:

    I was in a Broker’s Open yesterday for a house on Queen Anne. The price is outrageous, the condition needs work, but the lay out was nice.

    Offers being accepted later, and another agent was chatting up the listing agent that he had an all cash buyer who was pre inspecting, and waiving contingencies.

    I see dozens of houses that could be on the market, and many more that are coming on the market because sellers never imagined they would get these kinds of prices again. The down side is that if you sell you have nowhere to go. In 2007, 2008 you could sell, and wait out the market to buy at lower prices. Now you have only lateral trades.

    I’ve said for years that the Real Estate market has changed dramatically. Buyers should be beating the brush, and step away from the computer, or they should hire an agent who can beat the brush for them.

    Buyers for sure should wait out this feeding frenzy, but I think it has already passed. There is no rush to buy now unless you have a school already picked out. Other than that, just wait.

    There is plenty of inventory out there. We are at the time when the baby boomers are retiring, and keeping the family home seems kind of passe. As my teen age son says, he would rather invest in the stock market.

    The other thing is that the Real Estate industry is lamenting the fact residential construction is at an all time low. The government is going along. Just wait that out also, new construction is where those short sales, and foreclosures make more sense. When that inventory clears we’ll see new construction come back, but it won’t be the same.

    There are lots of deal to make. Figure a strategy you never imagined, and think outside of the box, to build equity. There are lots of equity situations.

    Buyers need to change the thinking patterns to match today’s realities. Walk away from multiple offer situations, and become smarter consumers. Buy what you can pay off so you become that cash buyer.

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  11. 11
    S. Marty Pantz says:

    ‘Silicon Valley real estate: The Facebook effect': http://tech.fortune.cnn.com/2012/04/30/fb/

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  12. 12
    Howard says:

    Does it make sense to buy a piece of crap and renovate it? (If it can be bought low enough)

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  13. 13

    By Howard @ 12:

    Does it make sense to buy a piece of crap and renovate it? (If it can be bought low enough)

    Yes. If you can keep renovation costs low, and if the piece of crap is located in an area where people want to be. And also what your purpose is. If you are looking for a place for a family, and you happen to find a piece of crap in South Park or Skyway, you can make the house nice, but the schools are still going to suck. But if your kids are grown or non existant and the schools don’t matter, then you can find something potentially nice, with lake or mountain views, the downside being that when you need or choose to sell it, a large chunk of buyers who are looking to buy in a good school district will not be interested.
    Also, some pieces of crap are irredeemably crappy. Some of those have already been remodeled years ago by someone who has no sense of design, and you’d hvae a lot of undoing to do. Better is to find something that may be a piece of crap, but a piece of crap with good bones, a piece of crap that hasn’t been too screwed with. Sure, it may need all kinds of things, but at least it’ll be easy to visualize how nice it can become. Some of these “already screwed with” homes are hard to see as fixed up, and may be better candidates for a wrecking ball.

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  14. 14
    mukoh says:

    Palo Alto is a crazy area. Recently looking at a possible hold purchase there we were bid up over 20%. We were out. This property house + 2 extra lots were not even listed. The buyer is Chinese and is getting it because of the green card. Cash offers there are at this point somewhere in the 50%+ range.

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  15. 15
    Matt the Engineer says:

    What @5 said. I’ve been considering buying, and there’s very little out there (looked at $300k – $800k, for various reasons). I’d pay more than the market is currently asking for a good home, but they’re all sitting out of the market at these prices.

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  16. 16
    Updog says:

    By Brady @ 2:

    The all cash offers are interesting to me. Is it really to the point where investors think they can get a good return for renting a home in Seattle or do they think an increase in value will give them that return. Or maybe these are just owner/occupants that are sitting on a lot of money after they sold at the peak in the market.

    Without having any evidence, I’d be curious if the all-cash offers come from investors or just well-off individuals who really want a great house. It would be interesting to get these numbers on a large scale.

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  17. 17

    By David Losh @ 10:

    The down side is that if you sell you have nowhere to go..

    Wrong! The fundamental shift I’ve been talking about is move-up buyers can now buy first and have some reasonable assurance that they can sell! So they can buy a new house first. In fact, it’s now more risky to sell first, because they might be left homeless.

    I recently had a move up buyer do that, and their old house sold about a week early, meaning if the other sale fell through, they would have been homeless!

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  18. 18

    By Updog @ 16:

    By Brady @ 2:
    The all cash offers are interesting to me. Is it really to the point where investors think they can get a good return for renting a home in Seattle or do they think an increase in value will give them that return. Or maybe these are just owner/occupants that are sitting on a lot of money after they sold at the peak in the market.

    Without having any evidence, I’d be curious if the all-cash offers come from investors or just well-off individuals who really want a great house. It would be interesting to get these numbers on a large scale.

    Depends on the price. Under $200k almost certainly investor. Over $1M, almost certainly owner occupied.

    Also, keep in mind that many “cash” transactions are really family loans, with the buyer’s agent providing proof of funds.

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  19. 19
    Eastsider says:

    The rental situation for SFR is not any better. In desirable areas (e.g. Bellevue), the number of reasonably priced SFR rentals are almost nonexistent. It has not been like this in years. I believe the population growth and easy money are major contributors to the current shortages.

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  20. 20

    By Eastsider @ 19:

    The rental situation for SFR is not any better. In desirable areas (e.g. Bellevue North of I-90), the number of reasonably priced SFR rentals are almost nonexistent. It has not been like this in years. I believe the population growth and easy money are major contributors to the current shortages.

    Fixed your post. ;-)

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  21. 21
    Howard says:

    By Ira Sacharoff @ 13:

    By Howard @ 12:
    Does it make sense to buy a piece of crap and renovate it? (If it can be bought low enough)

    Yes. If you can keep renovation costs low, and if the piece of crap is located in an area where people want to be. And also what your purpose is. If you are looking for a place for a family, and you happen to find a piece of crap in South Park or Skyway, you can make the house nice, but the schools are still going to suck. But if your kids are grown or non existant and the schools don’t matter, then you can find something potentially nice, with lake or mountain views, the downside being that when you need or choose to sell it, a large chunk of buyers who are looking to buy in a good school district will not be interested.
    Also, some pieces of crap are irredeemably crappy. Some of those have already been remodeled years ago by someone who has no sense of design, and you’d hvae a lot of undoing to do. Better is to find something that may be a piece of crap, but a piece of crap with good bones, a piece of crap that hasn’t been too screwed with. Sure, it may need all kinds of things, but at least it’ll be easy to visualize how nice it can become. Some of these “already screwed with” homes are hard to see as fixed up, and may be better candidates for a wrecking ball.

    I am thinking Redmond/Kirkland… maybe Juanita… anything in the Lake Washington School district..

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  22. 22
    joe dirt says:

    Even in a down economy there are still many people with good jobs and a lot of money attracted to properties that cash flow as rentals. Plus market forces disrupted by Govt. with the 3.x % interest rate, quantitative easing, delaying of foreclosure process…

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  23. 23
    calvis says:

    RE: mukoh @ 14

    We were also looking in the Palo Alto area about 3 weeks ago. It’s certainly a nice area. Nice weather, great educational system, and vibrant shopping areas. The high tech environment is very conductive which is important to me. We found an agent from a friend, but she would not take us to view houses unless we had the money lined up. We are talking about 2 to 3 mil here. She said the area is full of future Facebook Millionaires and they are snatching up properties right and left.

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  24. 24
    David Losh says:

    RE: mukoh @ 14

    That is a good point about the green card, and purchases of property.

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  25. 25
    David Losh says:

    RE: Kary L. Krismer @ 17

    It’s a trade of equity, and yes people are buying then selling behind. It’s a trade, and still considered a lateral move.

    The only people who win there are the Real Estate agents.

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  26. 26
    Steve says:

    By Kary L. Krismer @ 17:
    Wrong! The fundamental shift I’ve been talking about is move-up buyers can now buy first and have some reasonable assurance that they can sell! So they can buy a new house first. In fact, it’s now more risky to sell first, because they might be left homeless.

    I recently had a move up buyer do that, and their old house sold about a week early, meaning if the other sale fell through, they would have been homeless!

    You act as if this is the end of the world. “Doesn’t currently own a home” and “homeless” are not the same thing.

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  27. 27
    Dweezil says:

    I really thought this spring/summer was going to be my personal ‘right time’ to buy, even with few choices. This recent frenzy has been a real turn off and I have decided to consider the next 4 months DOA and wait for Fall, just as Tim suggested.

    I am real curious whether this turns out to be a super spring bounce or Bubble Part Deux. Suppose I’d rather risk being -priced out forever- than step into the shark tank.

    Just thinking about how much money that palo alto house sold for makes me ill.

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  28. 28
    HappyRenter says:

    By wreckingbull @ 1:

    Another contributing factor to the frustration is that he housing stock in the Puget Sound area is just not that good. Add bidding wars and unreasonable prices and you get a bad situation. I am always amazed at when I go to midwestern cities and tour their older neighborhoods. You get the feeling that a whole different class of craftsmanship went into these homes when compared to neighborhoods of similar vintage in Seattle.

    How do they achieve this in the Midwest? Do they tear down old houses and build new ones in the same spot? I’m really curious because Seattle has a lot of 1940’s ramblers that look like army barracks and still sell for 400K.

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  29. 29
    HappyRenter says:

    By David Losh @ 24:

    RE: mukoh @ 14

    That is a good point about the green card, and purchases of property.

    It’s really disgusting and proof of how dysfunctional this country is setup. Luring foreigners with the chance of becoming permanent residents if they buy a house will drive real estate prices up (like what is happening in Vancouver, BC right now). Normal people who don’t have 1/2 million lying around won’t be able to afford buying a house, maybe not even renting and more people will end up on the street.

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  30. 30
    HappyRenter says:

    RE: HappyRenter @ 29
    This is from an article in the Los Angeles Times:

    http://articles.latimes.com/2011/oct/20/business/la-fi-visas-home-buyers-20111021

    “Many people want to come and live in the United States,” said Sen. Charles Schumer (D-N.Y.), who introduced the legislation Thursday along with Sen. Mike Lee (R-Utah). “They will be here spending money and paying taxes, and the most important thing is they’ll sop up the extra supply of homes we have right now compared to demand, and that’s what’s dragging our economy down.”

    Charles Schumer should have said: “Many RICH people want to come and live in the United States, and we welcome all of them including their money”.

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  31. 31
    redmondjp says:

    By HappyRenter @ 28:

    By wreckingbull @ 1:
    Another contributing factor to the frustration is that he housing stock in the Puget Sound area is just not that good. Add bidding wars and unreasonable prices and you get a bad situation. I am always amazed at when I go to midwestern cities and tour their older neighborhoods. You get the feeling that a whole different class of craftsmanship went into these homes when compared to neighborhoods of similar vintage in Seattle.

    How do they achieve this in the Midwest? Do they tear down old houses and build new ones in the same spot? I’m really curious because Seattle has a lot of 1940’s ramblers that look like army barracks and still sell for 400K.

    RE: HappyRenter @ 28 – Well, one difference is in the choice of building materials. Out here in the west, wood is (/was) cheap and plentiful, so it was the primary building material. In the Midwest, some places are a long ways away from lumber sources, so you will find more brick homes. And those homes tend to be built, well, like brick s _ _ _ -houses, as they used to say!

    There are other fundamental differences between the eastern and western parts of the US which may factor in as well. For example, many of the towns east of the Mississippi were founded in the early to mid 1800s (before the westward expansion), and grew very slowly. There was a sense of permanence and stability in those places. Out west, some towns literally sprang up overnight as a result of mining operations, and were dead and abandoned only a few years later (so no sense in building “permanent,” nice buildings). Most others were created and promoted by the railroads. Others centered around logging camps.

    And there is no sense of history out west either, if something is 30+ years old here, we tear it down and build something new (which makes a certain amount of sense, if you build something out of wood and don’t maintain it properly, and as long as the new structure doesn’t contain building materials that are even worse such as OSB and defective LP siding!).

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  32. 32

    By calvis @ 23:

    We found an agent from a friend, but she would not take us to view houses unless we had the money lined up. .

    I don’t care what the market is, most agents will not take people out to see property unless they have financing arranged or a way to buy. That’s Real Estate 101.

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  33. 33

    By David Losh @ 25:

    RE: Kary L. Krismer @ 17

    It’s a trade of equity, and yes people are buying then selling behind. It’s a trade, and still considered a lateral move.

    The only people who win there are the Real Estate agents.

    Are you really a real estate agent? Where do you come up with this nonsense?

    The situation I was mentioning was hardly a lateral move. Not that many people want to make lateral moves.

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  34. 34

    By Steve @ 26:

    You act as if this is the end of the world. “Doesn’t currently own a home” and “homeless” are not the same thing.

    It would have been for these buyers who were moving from a really good house to a great house, and weren’t even in the market for a house until the great one came on. It’s not like they would have been living out of their car, but getting them back in a house as good as the one they left would have been tough in this market.

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  35. 35
    Howard says:

    Speaking of mining towns… its were I spent 1996 to 2010.

    Leadville, Colorado. They didn’t even bother with foundations during the gold and silver rushes.. Knob and tube, mud sill foundations, 8 months of winter at 10,000 feet.

    http://www.trulia.com/property/3001543520-320-Chestnut-St-Leadville-CO-80461

    http://www.trulia.com/rental/3068811666-325-W-7th-St-Leadville-CO-80461

    http://en.wikipedia.org/wiki/Leadville,_Colorado

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  36. 36
    patient says:

    A market controlled by the banks ( sellers ), investors ( buyers ) and the government ( funding ). Now why doesn’t that sound exciting? Talk about witch brew…

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  37. 37
    SG says:

    Tim, you have often listed current homeowners holding on to the bubble prices as one of the the reasons why the market is so competitive lately. While I agree that there will be more inventory if more homeowners would just accept today’s home prices and put it up for sale anyway. However, every seller morphs into a buyer after the sale looking for their trade up home or down-sizing condo effectively negating the additional inventory. Yeah, there will be a few moving out of the area – but given that Seattle’s economy is doing pretty well, the influx is more than compensating for that group. I am trying to understand if there is more to the following statements than my take on them:
    -Meanwhile, those same low prices mean fewer home “owners” can afford to sell, since they owe the bank more than their home is worth.
    -Many home owners that could sell are holding out for an imagined “recovery” in home prices.

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  38. 38
    David Losh says:

    RE: Kary L. Krismer @ 33

    When I was a kid I might have tried a stunt like that, getting a person to buy, and hoping to sell off behind. I mean, that’s a really good way to create some motivation to price the home they are selling “right.”

    So the Real Estate agent has the luxury of shopping the buyer into a great home, while creating the motivation to sell off the home behind.

    That’s a win win for the agent.

    Out of the three move up buyers we know, two are living in rental units while that great house is remodeled, and the third hasn’t sold off the place they left, so they are paying two mortgages.

    Let me also say that the Real Estate agent, in one case, refused to door knock a neighborhood for the client. They settled for a house they didn’t really want, but in a location they could live with. They are living in a rental, while the other house is being changed to suit them.

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  39. 39

    By SG @ 37:

    However, every seller morphs into a buyer after the sale looking for their trade up home or down-sizing condo effectively negating the additional inventory.

    As an agent I like volume–obviously. But a healthy market needs to not be locked up. That’s why in the financial markets they often have market makers, to facilitate the market operation. For housing, earlier it wasn’t a healthy market because not enough buyers wanted to buy. Now it’s not a healthy market because not enough sellers want to sell.

    Yeah, there will be a few moving out of the area – but given that Seattle’s economy is doing pretty well, the influx is more than compensating for that group. I am trying to understand if there is more to the following statements than my take on them:
    -Meanwhile, those same low prices mean fewer home �owners� can afford to sell, since they owe the bank more than their home is worth.
    -Many home owners that could sell are holding out for an imagined �recovery� in home prices.

    I think he’s stating two reasons why inventory is low. Sellers who don’t want to go the short sale route and sellers who don’t like the current prices.

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  40. 40

    By David Losh @ 38:

    RE: Kary L. Krismer @ 33 – When I was a kid I might have tried a stunt like that, getting a person to buy, and hoping to sell off behind. I mean, that’s a really good way to create some motivation to price the home they are selling “right.” .

    These people came to me. They wanted to buy the house that came on the market, and only wanted to sell if they bought that one house. They had no desire to look at any other houses. Fortunately we were able to convince the agent and seller that our offer was better even though it wasn’t the highest.

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  41. 41
    David Losh says:

    RE: Howard @ 12

    Yes, it makes sense to buy a place to repair, and I write about that a lot.

    You can buy a used house for less per square foot than new construction, that’s the first point. The second point is to keep your costs under control.

    In the Juanita area, all the way over to Kirkland, you see these properties that are dozer bait. Some are in pretty good shape, and worth keeping, or adding on to.

    I was at a house today that sits in the middle of two lots. The house had no value because of the lot prices. The person who bought it owns a landscape business so he has a use for the property. It now has a green house on the South side, and addition on the North that are the bedrooms, baths. The main house is a great room of kitchen, dining, and living area.

    The trick is to get the bank to lend on the property. In the landscapers case he had a sizable down payment. In your case you might consider a rehab loan.

    There are a lot of tricks to this, but I have always bought fixers.

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  42. 42
    David Losh says:

    RE: Kary L. Krismer @ 40

    People who want one house only have other motivations than move up buyers.

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  43. 43
    wreckingbull says:

    RE: redmondjp @ 31 – Good stuff.

    Anyone wonder where the term “Hell on wheels” came from? It’s really pretty funny.

    The town (yes I said town) could literally pack up at the end of the day and be in full operation by morning, 100 miles west (or east, depending on which railroad you worked for).

    http://en.wikipedia.org/wiki/Hell_on_Wheels

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  44. 44
    StillRenting says:

    We have been watching the market and visiting open houses, even though we don’t want to buy until this fall at the earliest. There have been a couple of houses we really liked, but we have been pretty firm about not getting caught up in the “irrational exuberance.” Most of the houses we have seen have not been worth the price, in our opinion. It’s not just that the houses themselves are dumpy and need more work than is justified by the sales prices, but many have fundamental flaws that can’t be upgraded post-sale. Getting into a bidding war over a house with high voltage lines running over the backyard or upstairs views of the neighboring shopping center just seems crazy to me.

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  45. 45
    MM says:

    yep, just like I said before, you can’t stay in the way of the herd. it will kill you on it’s way to fall off the cliff..
    400 000 typical for a young family? really? especially if you don’t have 20% down? is it just me or is something really wrong with this picture? that’s how this country went to hell…

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  46. 46
    Lily says:

    I’m not surprised that there are all cash buyers even in the $300k price range. Someone who moved from Silicon Valley, Vancouver, or Beijing could easily have that much cash from their previous house. Heck, someone from Silicon Valley could have that much cash from their stock options. Someone in Seattle who sold at the peak could be coming back into the market (for every buyer at the peak, there was a seller who made money). Some young college grad could have rich parents. Many of these people could get a mortgage, but there is a cash discount so they pay cash and maybe refinance it later.

    If I was a buyer, I would probably wait until September.

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  47. 47
    wreckingbull says:

    RE: MM @ 45 I’ll just remind you that it is not like Seattle everywhere. I agree with your thoughts….so much that I moved out of the Seattle area four years ago and never looked back. Still in the PNW but in a much more affordable house with a better quality of life.

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  48. 48
    whatsmyname says:

    “Until the pent-up supply is released to the market by would-be sellers who finally get the picture that peak pricing isn’t coming back even in the best-case “recovery” scenario, it’s likely going to be a frustrating time to be buying a home in and around Seattle.”

    Does this mean that potential sellers take a binary approach to maximum historical pricing, or that supply and demand mismatches only affect prices to the downside?

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  49. 49
    calvis says:

    By Kary L. Krismer @ 32:

    By calvis @ 23:
    We found an agent from a friend, but she would not take us to view houses unless we had the money lined up. .

    I don’t care what the market is, most agents will not take people out to see property unless they have financing arranged or a way to buy. That’s Real Estate 101.

    Ah, I am smarter than what you think Kary. It’s not that we don’t have the funds, but if that is all an agent cares about then that is not the kind of agent I want representing me. Creating goodwill goes along way in business.

    I’m glad you have shown your true colors Kary.

    I always find it laughable that a person such as yourself who claims to be an authority is actually out of touch and delusional.

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  50. 50
    whatsmyname says:

    RE: calvis @ 49
    So you didn’t have the money lined up, or you did?
    I’m not a realtor, but I can see that it is not their job to provide high end house tours to people regardless of their ability to engage in the business at hand. It’s odd that you would use good will in business as a cudgel against competence in business.

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  51. 52
    Jonness says:

    There has been/is massive and unprecedented stimulus in the economy, with the root of the nuke aimed directly at the housing market. So people are jumping off the fence and paying far too much for houses. Despite Seattle prices still being far too high, they feel they are not overpaying, because interest rates are at record lows (due to our country being caught in a massive liquidity trap).

    85% of people are considered of normal intelligence or below. IOW, ignorance and emotions are driving this market far more than price and intellect. Ask yoursef what causes people to pay a particular price for a particular house? Most people pay that price based on the emotional belief if they don’t buy it for that price, somebody else will. IOW, most people do not do in depth economic analysis and think it out. They simply figure out about what things are worth to other people at the moment, and then start using their emotions to do what is necessary to get them into the house.

    It’s not like we are seeing all cash offers because “investors are smart.” On the contrary, while there are some smart investors, there are even more who are not smart. Just because people are competing for assets doesn’t mean it’s the right thing for you to do. As an example, look back to 2006/2007, and ask yourself how many of these smart people who bought got wiped out or are severely regretting their decisions? IOW, you should think independently of what others want and what they would do and concentrate on what you want, and what you would do that leads to the best long term outcome for you and your family.

    If you look at the American Housing Survey data, which is the only legitimate source of accurate historical data comparing homeowners incomes to house prices, you’ll see that Seattle area homes are still priced about 25% higher than historical relationships to Seattle-area homeowners’ incomes. But even with homes priced 25% too high, people feel like prices are low because they are lower than they were a few years ago, and mortgage rates are at historical lows. When you throw in an artificially low supply of homes, it seems like we are in a red-hot market as we move into the peak selling season. But given the near-depression-like environment in the U.S. economy, house prices in Seattle are not cheap!

    In order to understand home prices, you have to understand macro-unemployment, because macro-unemployment is tied to the interest rates you will have to pay for a mortgage. So when the RE agents claim house prices are going to skyrocket, or that all RE is local, before you believe a thing they tell you, you have to look at the macro-economy (because stimulus rules are governed by the Federal Government and the Fed). Ask yourself where the additional money is going to come from in order to provide the money to drive up house prices? Well, if rates move down (and I foresee a possible 15 to 20 more basis points to the downside max), then it provides more money for people to bid up prices. If the government gives a tax break (not likely), it provides more money. If the Fed prints more money (very likely) by buying Treasuries or MBS with magic money, it drives up stock prices, drives down mortgage rates, and provides a wealth effect on the more well-to-do portion of the population. Thus, these people can afford to buy the house you want with all cash.

    But this artificial stimulation doesn’t mean a lot in the grand scheme of things, despite it being what 90% of economists and RE agents are currently basing their outlook on. In truth, what we really need to look at is jobs and credit availability, because these are the main sustainable forces that can increase the money supply on mainstreet in order to support house prices.

    Are there more jobs, and if so, are people’s wages increasing? Have banks loosened lending standards so that there are more loans available to compete for houses? Well, the employment to population ratio has remained largely unchanged since the deepest pit of the recession (forget about the magic numbers you hear about on your favorite news channel. They are phony numbers designed to make things look better than they really are). Wages have not increased appreciably, and mortgage standards are actually getting stricter (credit cards have loosened somewhat though).

    So just how do you suppose house prices are going to increase when there isn’t any additional money in the economy? Well, if we are to believe the mainstream experts, they will increase because there are so many people underwater or so financially wrecked that they can’t list their homes. And there are so many banks withholding supply in an attempt to prevent prices from plummeting, that it creates an artificial low-supply environment that will cause house prices to stabilize. But that’s BS! These factors are actually a sign of market weakness, not market strength. So while they might temporarily help support house prices, they are not sustainable factors. In short, we need jobs and loans. Forget about the loans, because that ain’t going to happen. So we need high-paying jobs (real jobs, not government trick numbers).

    Meanwhile, our country has to borrow about $1.5 trillion per year in order to keep the Ponzi scheme (I.E. economy) alive by which you are expected to pay 25% too much for your house. But it gets even uglier. You see, nobody will buy $1.5 trillion in government bonds from the U.S. per year, so Ben Bernanke prints up money from thin air and makes up the $800 billion shortfall each year. And if that doesn’t seem like a lot of money to you, consider that all U.S. Individual Income Taxes combined in 2011 only added up to $1100 billion. In short, Bernanke printed almost as much money and bought Treasuries as we paid in taxes. If not for that, we would be in dire straights, and the house you want would be priced at least half of what it currently is.

    So just how much longer do you think Bernanke can keep this game up without causing extreme repercussions in the global economy? Well, if Bernanke has his way, he will print the money to keep this game going indefinitely. But he is walking a tight rope, because, if he overprints, it creates inflation, in which case, the Federal Government can no longer afford to pay the interest on the debt (actually, they currently pay for this 100% with Bernanke money), so Bernanke has to print even more to cover the even greater short fall, ad nausea up until hyper-inflation destroys our economy. And if Bernanke doesn’t print enough, then we fall back into a deflationary depression, and all the banks go bust. So Bernanke keeps trying to print just the right amount of magic money in order to thread the needle. And if he succeeds to perfection, then perhaps, we start growing at a healthy clip again in, say, 5 more years. Otherwise…

    So there you have it. The current housing market is a reflection of unprecedented pain on mainstreet, unprecendented government/Fed stimulus, and predominant emotion-based thinking strategies. My strategy is to continue to watch the great deleveraging from the sidelines, live frugally, and save and invest as much as possible. Once we start seeing some legitimate and sustainable signs of a healthy economy, then I’ll buy a house. Chances are, in the meantime, I’ll be waiting a good long time as many people continue to suffer the consequences of thinking with their emotions instead of using logic.

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  52. 53
    2kt says:

    Another anecdote – I am seeing “Sold” signs on empty lots in the new Buchan development (high $600K for 2700-2800 sqf homes on very small lots, $700K+ for 3000+ sqf). Suddenly 4-5 empty sites sold in two months. It’s been a while since that sort of thing took place.

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  53. 54
    calvis says:

    RE: whatsmyname @ 50

    Depends on what you mean by lined up.

    Did I have a letter of credit from a bank? No. Did we have funds at our disposable if the right house appeared? Yes. They wanted the letter of credit, but I wasn’t going to jump through all the hoops to get that done.

    Normally when I enter into a professional relationship I am qualifying both their competency and their character. Competency is the easy one to figure out because it’s based on their education, experience, licenses, and degrees. Character is the hard one to figure out at times but it plays an important role in my business philosophy. I am looking for the whole package. In a commission based business you are planting a lot of seeds (providing acts of goodwill) before reaping the harvest.

    Maybe in Silicon Valley it’s customary to show a letter of credit to agents before they will show you a house, but I found the practice very disturbing to say the least.

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  54. 55
    2kt says:

    RE: Jonness @ 52

    Some people think that being a computer programmer is something similar to god gift to society. You are one of them. Right now the rent payment is approaching the house payment and to most people that don’t spend all their time in front of the stupid box it’s enough of a reason to buy. Don’t let that shake your beliefs, however. Stay cool.

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  55. 56

    By calvis @ 49:

    By Kary L. Krismer @ 32:
    By calvis @ 23:
    We found an agent from a friend, but she would not take us to view houses unless we had the money lined up. .

    I don’t care what the market is, most agents will not take people out to see property unless they have financing arranged or a way to buy. That’s Real Estate 101.

    Ah, I am smarter than what you think Kary. It’s not that we don’t have the funds, but if that is all an agent cares about then that is not the kind of agent I want representing me. Creating goodwill goes along way in business.

    I’m glad you have shown your true colors Kary.

    I always find it laughable that a person such as yourself who claims to be an authority is actually out of touch and delusional.

    LOL. Your position is rather ignorant of the business and reality.

    How in the world do you show properties to people if you don’t know what they can afford? Again, Real Estate 101.

    It’s laughable how so many people think they know so much about real estate because they can look up listings on Redfin. The agent above was taking a very reasonable position, but a know it all consumer who in reality doesn’t know squat thinks they were being unreasonable.

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  56. 57

    By whatsmyname @ 50:

    RE: calvis @ 49
    So you didn’t have the money lined up, or you did?
    I’m not a realtor, but I can see that it is not their job to provide high end house tours to people regardless of their ability to engage in the business at hand. It’s odd that you would use good will in business as a cudgel against competence in business.

    Maybe we’ll start with this nice little $150,00 fixer, and then end with the $3,600,000 condo.

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  57. 58
    whee says:

    Also, if you aren’t willing to jump through the hoops for a pre-approval, what reason does the agent have to believe you’ll jump through the financing/closing/offer submittal hoops when the time comes?

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  58. 59

    By calvis @ 54:

    Maybe in Silicon Valley it’s customary to show a letter of credit to agents before they will show you a house, but I found the practice very disturbing to say the least.

    Knowing what the buyer can do is standard practice anywhere. People tend to like more expensive houses better than less expensive houses. Without knowing what they can actually afford all you can do is determine the obvious–that they like more expensive houses. Nothing is accomplished other than wasting time.

    In addition, what you don’t understand from all of your great experience looking at listings on the Internet is that if you do find a property you want, then the offer needs to go in ASAP. To do that the agent should already have the information they need on their computer to submit an offer. If you delay to get that information to the agent you very well could end up either with the property already pending inspection or in a multiple offer situation. So the agent having that information is also beneficial to the client.

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  59. 60
    whatsmyname says:

    RE: calvis @ 54
    ” Did we have funds at our disposable if the right house appeared? Yes. ”
    Anyone can say that. But sometimes it’s not true.

    If I were selling said house, I would not consider it good character for someone to bring people through my home who weren’t willing to be properly vetted. I would consider that person to be of weak character; inadequately protecting normal standards of my security to potentially catch a commission.

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  60. 61
    Jonness says:

    By bulldog91 @ 5:

    I don’t understand why, in this environment, don’t Seattle sellers just raise their price?

    Because the bidding wars are a figment of our imaginations. Take a closer look, and you will see a whole bunch of overpriced crap that’s been rotting out there forever. Then someone lists a decent home for a decent price, and a bidding war breaks out mostly due to pure frustration. Someone then lists a decent home for a high price, and it rots out there with all the other overpriced crap. The catch is, you only hear about the bidding wars, because that’s what happens to anything decent that mere mortals can afford.

    Actually, I’m quite happy about all these people bidding up the few decent houses out there. I’m looking forward to picking them up at a huge price reductions in a few years as short sales or REO’s. As for the cash sales, why do you think the supply is so low? These people paid too much cash for the house and can’t psychologically withstand to sell at a loss. Thus, they choose to wait it out. If they are as patient as I am, they might get out from under the bazillion pound turkey. Otherwise, they’ll lose and be forced to sit idly by as they watch me win the game. :)

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  61. 62
    whatsmyname says:

    RE: Jonness @ 61
    Good luck to you in the waiting game. If I understand your history correctly, though, they have a 7 year advantage in the “tired of waiting” risk category. You can greatly mitigate this by concentrating on appreciating one level homes near bus lines. Do not overpay for grab rails. They can be retrofitted.

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  62. 63
    Jonness says:

    By 2kt @ 55:

    RE: Jonness @ 52

    Some people think that being a computer programmer is something similar to god gift to society. You are one of them. Right now the rent payment is approaching the house payment and to most people that don’t spend all their time in front of the stupid box it’s enough of a reason to buy. Don’t let that shake your beliefs, however. Stay cool.

    As for claiming oneself to be God, if you were to look in the mirror, you would see yet another person in a sea of endless people vying for this title.

    As for rents, of course the rent payment is approaching the house payment. Did you think when people were kicked out of their houses and couldn’t afford or qualify for loans to buy another, or when newly graduating students couldn’t get high-paying jobs or loans, it was going to put downward pressure on rents? Obviously, when more people compete for the same rental units, it puts upward pressure on rents.

    Your attitude wreaks of one who is currently underwater on his mortgage. Stop making payments immediately. Fight the bank tooth and nail in order to get as much free rent as possible. Live as frugally as possible, and save up as much free money as possible. Learn from your mistake, and walk out of the house with a hefty amount of cash in your pocket.

    My neighbor put $0 down, pulled $300K in equity at the bubble peak, and has enjoyed about 4 years of free rent and counting. It can be done. It was accidental genius, but it’s the results that count.

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  63. 64
    calvis says:

    RE: Kary L. Krismer @ 56

    I am just curious Kary do you require clients or perspective clients to have a Letter or Credit in hand before showing them a single house? If so, I think you are missing out on some perspective sales.

    The way I would locate a property is search on Redfin and have an agent show me those properties. Is that really asking too much? Kary, I know that you think most buyers are ignorant and not capable of understanding real estate, And I’m sure you have met a lot of people like that, but there are lots of people that are very educated and can figure out the pros and cons of a property. I need the agent to help me open the doors to view the innards of a property so I can make my own analysis.

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  64. 65
    calvis says:

    By whatsmyname @ 60:

    RE: calvis @ 54
    ” Did we have funds at our disposable if the right house appeared? Yes. ”
    Anyone can say that. But sometimes it’s not true.

    If I were selling said house, I would not consider it good character for someone to bring people through my home who weren’t willing to be properly vetted. I would consider that person to be of weak character; inadequately protecting normal standards of my security to potentially catch a commission.

    Can a seller demand that only those with Letter of Credit be able view a property? I don’t know. I think it would be an unusual request. I would have no problem if the agent said, “Seller A won’t allow anyone view without a Letter of Credit.” Then I could probe more thoroughly to see if that is customary or move on to the next house. Personally I’ve never had to have a Letter of Credit to view a property. But I have been pre-approved to put myself in favorable light many times.

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  65. 66
    Jonness says:

    By whatsmyname @ 62:

    RE: Jonness @ 61
    Good luck to you in the waiting game. If I understand your history correctly, though, they have a 7 year advantage in the “tired of waiting” risk category. You can greatly mitigate this by concentrating on appreciating one level homes near bus lines. Do not overpay for grab rails. They can be retrofitted.

    I started looking to buy a house in 2005 and subsequently realized something was wrong with the housing market. Due to holding off, and instead living frugally, saving, and investing, I have completely changed my financial future. It hasn’t been easy, but it’s been worth it.

    Don’t get me wrong, I am all for people buying houses! It’s just that I don’t think the current housing market is suitable for getting a decent house for a decent price. After 7 years of watching the market, I’ve never even come close to seeing so much crap inventory. On top of that, the macro economy is extremely volatile, rigged, and scary. Maybe it won’t turn down. But what if it does? IMO, people should be financially prepared to handle this situation ahead of time as opposed to simply rolling the dice and hoping all will end in their favor.

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  66. 67
    whatsmyname says:

    RE: calvis @ 65
    “I would have no problem if the agent said, “Seller A won’t allow anyone view without a Letter of Credit.” Then I could probe more thoroughly to see if that is customary or move on to the next house. Personally I’ve never had to have a Letter of Credit to view a property. But I have been pre-approved to put myself in favorable light many times.”

    Leaving aside the superfluous, by your account the agent did require a letter of credit, you did have a problem with that, and you did not probe more thoroughly to be able to say whether or not that is customary in the market. I also have never had to have a letter of credit to view a property, and I don’t want to be contentious (I prefer the hit and run), but your narrative does not hold together well.

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  67. 68
    whatsmyname says:

    RE: Jonness @ 66
    I am happy that you are glad with your choices, and don’t get me wrong, it warms my landlord’s heart to see people renting. I’m just saying that for a fellow who’s banking on other people growing tired of waiting, you have a head start in waiting.

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  68. 69
    Macro Investor says:

    By whatsmyname @ 60:

    RE: calvis @ 54
    ” Did we have funds at our disposable if the right house appeared? Yes. ”
    Anyone can say that. But sometimes it’s not true.

    If I were selling said house, I would not consider it good character for someone to bring people through my home who weren’t willing to be properly vetted. I would consider that person to be of weak character; inadequately protecting normal standards of my security to potentially catch a commission.

    This is really a good point. People live in these houses you want to tramp through to satisfy your idle curiosity. They have to keep it clean and put their lives on hold for each person who wants to view it. Have some respect. Houses for sale aren’t your personal shopping experience. Go to the mall like any normal shopping addict.

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  69. 70

    RE: calvis @ 65
    Some agents won’t work with clients who don’t have preapproval from the get go. I always make sure my clients have a preapproval letter or proof of funds prior to making an offer, but I don’t demand to see a letter of credit before I will accompany them to a house. I think most people who want to go see houses with me have at least some interest in buying them, and that they’re not out to steal the staging or occupy the place and set up a meth lab. I attract oddball clients, but not thieves.

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  70. 71
    whee says:

    Many good agents are ok with a toe dip client who has no preapproval and views 4-6 homes over a couple weeks, but usually after that they start talking about preapprovals.

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  71. 72
    Scotsman says:

    There’s a certain testiness to this thread. What is it- the weather, the political choices, the reported sightings of the Death Star?

    In my own conversations with people and what I read I’m picking up a level of diiscomfort with what seems to be increasing uncertainty in much of life. In the past trends have been strong and/or more easily discerned, cause and effect more easily understood, and some minimum level of certainty was in play. Now, not so much. People are certainly getting tired of waiting, but for what isn’t always clear.

    Relax, enjoy today, realize this time is different (at least on a multigenerational basis), don’t put life on hold. If you want a house, buy one. If the idea makes you uncomfortable, don’t. But recognize that over the coming decades flexibility and a willingness to adapt will probably be more valuable than “being right”- because what’s right may well be a moving and highly situational target. Maximizing your checkbook balance over time may prove difficult. Maximizing your life needs to look beyond that criteria.

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  72. 73
    yosef says:

    Total head scratcher these past couple months have been. We’d like to buy in Newcastle but everything is either ugly or sells in a few days and we’re not in a frame of mind where we are interested in fighting other people for a home the first weekend it’s on the market. Vacant lots are also expensive.

    One way I see prices going up in some locations is the Amazon’s, Google’s, etc keep hiring and bringing more high wage earners to the area. These are people who only have a few weeks or months to move and especially if they have kids are gonna pay whatever they have to for the nice house in the community with the better rated schools.

    Palo Alto is nuts, but so is Medina and Clyde Hill.

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  73. 74
    calvis says:

    RE: Macro Investor @ 69

    So curiosity with a Letter of Credit is OK, but if you prefer not to jump through the hoops ‘YET’ then you are considered trailer trash? I think the sellers of homes are tolerant of the fact that strangers will need to enter their house to see the innards that is a given. Plus if you are lucky you might get to wear some booties. Not sure what caused you to mention respect – perhaps you wanted to jab me with a personal attack instead of attacking the merits of the observation.

    @whatsmyname made a good point concerning my narrative and let me explain more. The topic of this thread was called, “Did I just step in a Shark Tank?” It was great timing because I just experienced my own personal Shark Tank while visiting the Silicon Valley while we were researching the real estate market there. Here are the points that I wanted to convey in that narrative which I might not have been clear or left out:

    1) The real estate market in silicon valley is so much more crazier than it is here. I mean it blew me away totally.
    2) The agents in the area are attributing this to the Facebook Millionaire Affect. (Future IPO)
    3) We were introduced to an agent by a mutual friend 4 days prior to leaving.
    4) We were initially going to just explore the area alone until in contact with the agent at the time she started email listings. And showing us example and example of bidding wars in the area. She said to bring letter of credit. Told her I did not want to do that because was too short notice and too much hassle.
    5) The day before we left we called her and asked her out to eat in SF. She says she never drives to SF. We tell her that we will in the Palo Alto area but not sure when, but will call.
    6) Two days later we head to Palo Alto we call her and tell her some houses we would like to see. She asked if we had Letter of Credit. Told her no. She said she was busy and directed us to the shopping center. We were stunned. I thought she would a least meet us for coffee.

    OK, I am not sure why she blew us off like that. ( I have to admit I was at least expecting a coffee) But I tend to believe that it came down to the phrase, “Money talks, BS walks” She thought we B’sing and made us walk. Since then we have had no contact and prefer it remain that way.

    This was the most awkward agent experiences I ever had and I almost have to attribute it the craziness of the market there. It certainly threw me for a loop and I was just hoping that someone could benefit from my experience.

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  74. 75

    By calvis @ 64:

    RE: Kary L. Krismer @ 56 – I am just curious Kary do you require clients or perspective clients to have a Letter or Credit in hand before showing them a single house? If so, I think you are missing out on some perspective sales.

    I’ve already stated the reasons:

    1. I don’t like wasting my time.
    2. There’s no way to know what you should show without knowing what they can buy.
    3. It’s impossible to make a timely offer if you do happen to find something they like.

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  75. 76

    By calvis @ 64:

    Kary, I know that you think most buyers are ignorant and not capable of understanding real estate, And I’m sure you have met a lot of people like that, but there are lots of people that are very educated and can figure out the pros and cons of a property. I need the agent to help me open the doors to view the innards of a property so I can make my own analysis.

    Buying real estate is very complex, and thus most buyers are ignorant of the ins and outs of it. Look at the recent discussion of the capacity charge here. By and large agents knew about that, others didn’t. There’s nothing wrong with being ignorant on a topic. I’m ignorant of the ins and outs of transmission repair.

    In your case you think you understand the process, because you don’t know what you don’t know. Here you don’t even know the first step necessary in looking at property.

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  76. 77

    By Ira Sacharoff @ 70:

    RE: calvis @ 65
    Some agents won’t work with clients who don’t have preapproval from the get go. I always make sure my clients have a preapproval letter or proof of funds prior to making an offer, but I don’t demand to see a letter of credit before I will accompany them to a house. I think most people who want to go see houses with me have at least some interest in buying them, and that they’re not out to steal the staging or occupy the place and set up a meth lab. I attract oddball clients, but not thieves.

    The problem is you never know when you’ll find that property they want, and then you’re not ready to move.

    A few years ago we were dealing with a couple where the wife was from Seattle and the husband NYC. They were planning on moving out here in six or eight months, so we were showing them properties in different areas so that the husband could see the different parts of the city. No pre-approval at that point, because they weren’t going to be buying at that point. But then one of the houses we found they fell in love with. They strongly considered making an offer on the house even though they wouldn’t need it for months.

    In that case I discouraged them from making an offer, but if the situation had been more normal, where it was just a first showing of properties for a buyer wanting to buy now, not being ready to make an offer would have been bad. In this market it would be very bad.

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  77. 78
    wreckingbull says:

    Look, a pre-approval takes 30 minutes on the phone with a lender. That is all. You are emailed a PDF and you are done. I can understand why agents want this before you start stomping around in people’s homes.

    If it were my home, I would want some basic form of vetting before people were led though my place. I’m not sure how the term ‘letter of credit’ has been injected into this conversation, as I have always just used the term ‘pre-approval’. Maybe we are talking about the same thing.

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  78. 79

    By calvis @ 74:

    This was the most awkward agent experiences I ever had and I almost have to attribute it the craziness of the market there. It certainly threw me for a loop and I was just hoping that someone could benefit from my experience.

    That very well could be. You’re right their market has been pretty strong (not sure how crazy it is). The agent is probably more busy than she would like to be, so if the choice is only working 8 hours a day, or working longer to show someone who is possibly not serious about buying a house, that seems like a pretty easy choice.

    I don’t know what happened to the number of agents down there, but up here they have declined. And looking for properties for buyers now takes more time because of the inventory situation. That means the workload for the typical agent is rather high right now.

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  79. 80
    wreckingbull says:

    RE: Kary L. Krismer @ 76 – Kary that statement has a double edge.

    If real estate is so complex, why are our licensing standards so lax? It is either complex, and we need real professionals, or it is simple and just about anyone can get their license. State and national agent associations would never admit this though, as it would mean either a drastic cut in their revenues or an admission that an agent is really just a key-turner.

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  80. 81
    2kt says:

    RE: Jonness @ 63

    Thanks for the advice, dear. I have a fair amount of equty in all homes I own and have Einsteins like you paying my mortgages. When your code-monkey gig is up, you should seruiously consider a career as a calvinist preacher.

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  81. 82

    By wreckingbull @ 78:

    I’m not sure how the term ‘letter of credit’ has been injected into this conversation, as I have always just used the term ‘pre-approval’. Maybe we are talking about the same thing.

    There is an instrument called a letter of credit, but I’ve never seen it used for a residential housing transaction. It might be a regional thing though. Even an approval letter though will be conditioned on things like an appraisal. I’m not sure how you accomplish that with a letter of credit, because it’s not something I’m familiar with.

    I do know of one person in California who bought a condo with a loan not secured by the condo. They might have used a letter of credit. It would be sort of like if you were using a HELOC on your old house to buy a new one, back in 2007.

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  82. 83

    By wreckingbull @ 80:

    RE: Kary L. Krismer @ 76 – Kary that statement has a double edge.

    If real estate is so complex, why are our licensing standards so lax? It is either complex, and we need real professionals, or it is simple and just about anyone can get their license. State and national agent associations would never admit this though, as it would mean either a drastic cut in their revenues or an admission that an agent is really just a key-turner.

    Actually they have tightened up the licensing in recent years, but I’m not sure anyone new has become an agent since they did that! ;-) In addition to increasing (doubling?) the hours of class time required, new agents have to have their transactions subject to heightened review for two years by their managing or designated broker.

    But I do agree with you–not all the agents fully understand the business. Using one of my pet peeve issues–email transmission of documents–agents really don’t understand that. They think it just means clear copies, but don’t understand at all the potential downsides. They apparently think that the attorneys who drafted the NWMLS forms just discovered email in 2010. In reality the only reason an email option was added to the forms was because agents were drafting their own language to allow email, and their language tended to be bad.

    Since that option has been available I think I’ve only allowed email transmission on one transaction, and that was a situation where I represented the buyer and the counteroffer came back with the box checked. I wanted to get to mutual acceptance on that property very badly.

    If I were representing a seller rather than a buyer, and the counteroffer came back with email checked, I would be very reluctant to let that stand. I’ll let Calvis and Losh tell you why, since they understand real estate so well.

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  83. 84
    David Losh says:

    RE: calvis @ 64

    You kind of had me until this comment about agents opening doors for you. I do show people property without pre approval as a courtesy for another client, but there are limits on my time. BTW a letter of credit is more of an international business term, but what the heck, that might be a term in California.

    To be pre approved is more than a phone call, and talk, it’s documents in hand, with some verification of income, and credit.

    A pre qualitifaction is more to see what you can afford.

    Aside from that, the introduction was made, and the terms of a showing were presented to you. You just went along with your life, and ignored the agent. The was disrespectful, and not good business for you.

    You have no working knowledge about the market place in California, yet you wanted an agent to drive to San Francisco, buy you coffee, and be on call when you decide to look at something.

    Really, if you wanted doors opened why didn’t you call redfin?

    I’m asking because what you just presented, the attitude you just gave, is one of the main reasons redfin exists. redfin was made for people like yourself who have no regard for Real Estate agents; that’s a mistake.

    If you were a buyer, you would be prepared. Buyers want to buy. An agent may add you to the pipe line, but you would have to show some effort, or concern.

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  84. 85

    Pending sales Jump 27.4% From a Year Ago

    No wonder sellers prefer cash offers only [even lower price offers too, I imagine]; we all know the horrible failure rate of unqualified Seattle area pending sales offers failing anyway.

    http://www.trulia.com/blog/the_cascade_team/2012/03/seattle_area_pending_home_sales_jump_27_4_percent_from_twelve_months_ago

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  85. 86
    David Losh says:

    RE: wreckingbull @ 80

    Real Estate is learned by doing. Each transaction is different, each locale is different. An agent may choose a niche, and there are many of those.

    You can’t teach this in a classroom, many people, and agencies have tried.

    As an example, you chose to leave Seattle, and found a whole new world of Real Estate concerns. Farm land, agriculture, timber, water, and easements are big factors outside of municipalities. I deal in urban Seattle, and that is a vast area of pit falls and complications. I have done some transactions outside of the city for other clients, but it is a whole new learning curve.

    So on a national level it would be impossible to teach Real Estate.

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  86. 87
    wreckingbull says:

    RE: David Losh @ 86 – I’d prefer you don’t learn while on the job, since it is my money being tossed around.

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  87. 88
    wreckingbull says:

    You know a thread has reached the lowest common denominator when someone thanks a renter for paying their mortgage. I think that snappy one liner has been showing up here since 2006.

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  88. 89

    By softwarengineer @ 85:

    Pending sales Jump 27.4% From a Year Ago

    No wonder sellers prefer cash offers only [even lower price offers too, I imagine]; we all know the horrible failure rate of unqualified Seattle area pending sales offers failing anyway.

    http://www.trulia.com/blog/the_cascade_team/2012/03/seattle_area_pending_home_sales_jump_27_4_percent_from_twelve_months_ago

    That’s a rather old link, and in any case pending sales hasn’t been a useful stat for a long time, if ever. Also most sales, IMHO, don’t fall through because of unqualified buyers. A lot are due to short sales and the condition of the property.

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  89. 90
    David Losh says:

    RE: wreckingbull @ 87

    You have no choice. I started when I was sixteen. You wouldn’t hire me then so I worked for others. It took me until thirty before I got a license. By that time I was involved with a few hundred transactions.

    Are you going to hire some person with one of those Real Estate degrees they are passing out?

    What I advocate is that Brokerages should have a mentoring program. You have to do deals to get good at it, and by the way you aren’t paying me.

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  90. 91
    ARDELL says:

    RE: Kary L. Krismer @ 82

    Letters of Credit are more common in high-end than pre-approval letters, as they go the extra step of confirming that the buyer has the cash to close. They are used for cash buyers and buyers who are putting 35% or more down. In areas where 35% or more down is the norm, Letters of Credit are used more often than pre-approval letters.

    If someone is looking to purchase a home that is $2M or more, rarely would the agent ask for a pre-approval letter vs a Letter of Credit. At time of offer the Letter of Credit is expanded to include “proof of funds”.

    People buying homes costing $2M to $3M, as Calvis stated, would usually be buying it with more cash than loan. The cash to buy being verified via a Letter of Credit becomes more important, or at least as important, as the ability to qualify for the financed portion of the purchase price. A Letter of Credit includes both as in “Mr. X qualifies for the financing, and has on deposit the additional monies needed to purchase.”

    The general ethics of showing property is for the agent to be reasonably sure that the person they are bringing into someone’s home has the desire and means to possibly purchase it. Every agent exercises that ethical standard differently. It is not uncommon in high end areas to ask for a copy of someone’s driver’s license before going out to see expensive homes with them. This is done both for the safety of the agent and for security reasons related to high end homes. Add to that the buyer saying they are from out of town, so no means to track them via where they live or where they work locally, and more verification is needed prior to “opening a door” for them.

    I have worked in areas where many homes were owned by celebrities, and many people would love to tour celebrity homes while on vacation. It would be highly unethical in that area for an agent to show homes based on a phone call, or a chat over coffee, without further verifying who the potential buyer was and whether or not they had the means to purchase.

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  91. 92
    wreckingbull says:

    RE: David Losh @ 90 – I am going to hire someone who I interview thoroughly, and from that interview I will make a decision if they are competent. I don’t see this base level of competency today, thus my comment to Kary. And yes, you are correct, I won’t be hiring you.

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  92. 93
    David Losh says:

    RE: ARDELL @ 91

    and that’s why Ardell is a great resource.

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  93. 94
    ESS says:

    In the real estate market, as in any type of market, one must differentiate between irrational exuberance and rational exuberance.

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  94. 95
    David Losh says:

    RE: wreckingbull @ 92

    The Real Estate agent is interviewing you. If you are a buyer, or seller, the agent will determine if you are worth the time commitment.

    Being a Real Estate agent is a very difficult profession. It takes a lot of skill, and specialized knowledge.

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  95. 96
    patient says:

    RE: David Losh @ 95
    Reality check. It’s the buyer that hires the agent not the opposite. Any agent that make you feel different is an automatic disqualification.

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  96. 97
    David Losh says:

    RE: patient @ 96

    There are very few working Real Estate agents in the Seattle area. It’s the same throughout the Real Estate profession.

    There are millions of people who have Real Estate licenses for a variety of reasons, that doesn’t make them agents, or sales people.

    For a buyer to get a good agent they need to cooperate, something calvis refused to do.

    I’m correct, the agent is interviewing you, the agent agrees to work with you. If the agent has knowledge that is a great, and beautiful thing. If the agent is writing you up, then yes, as Ray says, you should educate yourself.

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  97. 98
    Scotsman says:

    RE: wreckingbull @ 80RE: Kary L. Krismer @ 76

    Real estate isn’t that complex- but those who practice it try to make it look that way. 98% of the people who call themselves agents and fill out the forms have no idea what’s going on beyond their potential commission check and the few hours of training they received on how to fill in and check the various boxes.

    The myth of complexity is part of the “dark science” that keeps the 6% model alive- or at least tries to. If there ever is a serious issue, hire a real lawyer who practices real estate law.

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  98. 99
    patient says:

    RE: David Losh @ 97
    I’m sure the agents listen to the buyer to see if he wants his business or not but as a buyer I would kick out the agent immediately if I could hint that they don’t want to work with me, long before they have a chance to reject. I’m bringing the money, I’m doing the hiring interview and decide who is going to work for me.

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  99. 100
    greg says:

    I know this thread has gone off the rails a bit but I’d like to add that real estate agents have much better access to information than what you get from zillow or redfin. they can not only get the sales prices from different neighborhoods but also understand the conditions of the sales and history. they can also network much better with the right people. not to say all agents are equal. it might just turn out the agent that wants some verification of your ability to finance may also be the best agent to do the best research for you.
    as an investor I can tell you that having a friend who had access to this information because he was a broker/agent was invaluable. he was also unbiased and highly intelligent which was equally as invaluable.
    the best advice i could give to a buyer is find an agent based on feedback from others. if he/she requires some evidence that you have financing place then so be it. spend 30 minutes to go and get it. some agents are really sh!t and won’t care if you can afford what you are buying. they just want you to buy and get the commision. if you find a great agent that doesn’t require any proof of ability to purchase then that is great as well, but this is not a good way to judge an agent.

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  100. 101
    ChrisM says:

    Maybe get creative:

    http://www.wsdot.wa.gov/RealEstate/Auction/default.htm

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  101. 102

    RE: ARDELL @ 91 – A letter of credit is different than proof of funds. Proof of funds shouldn’t typically require a letter of credit, but I could see it might (as in that condo transaction I mentioned).

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  102. 103

    By patient @ 96:

    RE: David Losh @ 95
    Reality check. It’s the buyer that hires the agent not the opposite. Any agent that make you feel different is an automatic disqualification.

    It’s a mutual decision. But there are probably a lot more reasons to not hire an agent than for an agent to turn down a client.

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  103. 104

    By Scotsman @ 98:

    RE: wreckingbull @ 80RE: Kary L. Krismer @ 76 – Real estate isn’t that complex- but those who practice it try to make it look that way. 98% of the people who call themselves agents and fill out the forms have no idea what’s going on beyond their potential commission check and the few hours of training they received on how to fill in and check the various boxes.

    I would agree a lot of agents don’t understand the complexity. It’s not 98% of them, but it is too many.

    But you’re not really in a position to assess how complex it is, because you don’t know what you don’t know. You’re right though that an attorney is another option. They would tend to know things, assuming they’re a real estate attorney.

    On the topic of interviews and attorneys, I was once talking to an attorney who was listing his house the cheap route (a very limited service broker) and asked the attorney if he was familiar with the lead based paint issues. He answered that he was, but I later discovered that he was not. I’ve also seen attorney drafted purchase and sale forms which tried to integrate the lead based paint disclosure, but failed. And at that Core class I keep mentioning, Annie Fitzsimmons brought up that some bank forms don’t properly comply with the lead based paint laws.

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  104. 105
    Ryan says:

    Alternatively, we could, you know…allow more building of multi-family units around the city w/ 3br options for some of these families. Shocking, I know.

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  105. 106
    jerdobi says:

    “Elephant in the room”.

    Why don’t everyone talk about the elephant in the room. The reason your hearing of all cash offers is most likely because of Chinese and Korean nationals coming over and buying these homes. I know of one instance of this happening last week for a home in Wallingford in the $600K+ value. I had a home bought out from me in Factoria by a Korean couple for cash $60K above asking price 5 years ago just to be in the Newport school district. The south Bellevue area east of 405 and south of I90 maybe +30% or more foreign nationals in the school system by now. I know people in Seattle that are actively recruiting Chinese millionaires for EB5 visas to build office buildings in downtown Seattle; they host them here and take them shopping for homes and cars. Each of these recruiters are lining up 20 of these millionaires each year making a $20K commission each. There are real estate businesses and lawyers in Seattle that are in the business of making this all happen.

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  106. 107

    RE: jerdobi @ 106 – That could be part of the reason, but I doubt it’s anywhere near even half of the cash offers. I’m not sure if there’s a way to even tell the percentage.

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  107. 108
    ARDELL says:

    Moving the discussion back to the post topic, I’m surprised no one brought up this issue in email number 2: “I thought I was walking into a buyers market, where the world would bend over backwards to sell me a house.”

    With all of the news stories pointing to low inventory and 2 months of supply in several categories, why would anyone think they were walking into a buyer’s market, when 6 months of supply is a balanced market? Is that potential buyer frustrated with actual market conditions, or merely needing to reset his erroneous expectation that he is walking into a buyer’s market?

    I have two different conversations going on with various clients this week:

    1) Be calm. Don’t be so anxious that you end up with the wrong house for you, or the right house for you at the wrong price.

    2) NO, the market is not as “soft” as you are suggesting it is. But that could change after August 1st or thereabouts.

    The reality is that there will be more houses coming on market during May…through June 15 where inventory usually peaks…and still strong through July 31. After August 1 it trails down significantly BUT you get the not sold homes dropping price through year end, unless they come off market at the end of the season.

    The most dangerous bidding wars are on “lipstick on a pig” homes as they cater to buyers who are overly impressed with homes that “look good” vs “are good”. Saw two flip homes come on at the same time at the same price. One did the work exceptionally well and the other threw up some paint and new carpet. They both had bidding wars and ended up selling at the same price.

    Small hint…go inside the bedroom closet and look at the back of that sliding door you think is “new”. I just saw one where they didn’t even cut the line and there were haphazard white brush strokes on the back of the dark door now painted white only in the front. :)

    Also, pick up the heating vent in the “new hardwood floor” (they usually lift right out) and check the thickness of that new wood floor. Many can only be refinished once or twice during the life of the floor while others can be refinished many times over for years to come. Huge difference, and easy to check which type of floor it is.

    Don’t be dazzled by those new pendents hanging over the breakfast bar. Make an actual list of which items are new and which are not and add the cost of improvements. On the two I noted above, one had $100,000 of improvements and the other had $20,000 of improvements, and they both sold for $150,000 more than the owner had just paid for the home.

    Get out your pencils and sharpen them before making an offer on a flip.

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  108. 109

    By ARDELL @ 108:

    The reality is that there will be more houses coming on market during May…through June 15 where inventory usually peaks…and still strong through July 31.

    News reports of the first YOY increase in the median in something like four years should make that happen.

    Let’s just hope that the sellers, their agents and the press understand why that happened (fewer REO sales both in absolute number and as a percentage).

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  109. 110
    Geek says:

    RE: krs @ 9
    I *bought* a house and had to not get emotional about 2 or 3 first, and we weren’t hardcore/actively “looking”. You can do it but don’t get attached to anything.

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  110. 111
    ARDELL says:

    RE: Kary L. Krismer @ 109

    It’s just a cyclical event, Kary. I was not suggesting that sellers were going to rush on market because of some huge increase in price gains.

    What I said is true every year…regardless of market conditions. Some people wait until they are within 30 days of school closing and some people wait until school actually closes. May 1 through June 15 is always the best time for good inventory of single family homes in the best schools. “Good” being relative to other months of the year and not a promise of a deluge of inventory to choose from.

    May 3rd is never a time to panic and grab any new listing that comes on market.

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  111. 112

    By ARDELL @ 111:

    RE: Kary L. Krismer @ 109 – It’s just a cyclical event, Kary. I was not suggesting that sellers were going to rush on market because of some huge increase in price gains.

    It’s not just cyclical. It’s largely due to a decline in REOs. REOs did not decrease in total sales as a result of a cycle. This year is different than last year.

    But to be clear, I’m not suggesting that they rush to get out because of the median increase. In fact I’m saying that the median increase is not what it seems to be. What I’m suggesting is that hearing of the first YOY increase in 50 months might get a lot of them to move.

    What should get them to move is the reports of multiple offers on many different types of property. That’s what is important to sellers.

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  112. 113
    patient says:

    RE: Kary L. Krismer @ 112
    Don’t be so boring Kary, we need some entertainment while we are waiting for true market health to return. Some panic and another little bubble would breakup the monotone status we’ve been in for a while. This time though I will have no compassion with bubble buyers, there is no excuse and hopefully no bailout when the new bubble pops.

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  113. 114

    RE: patient @ 113 – I would agree that excitement is good. But I think you’re missing the point a bit about the median increase. Some of that is a real increase, but some of it is just REOs decreasing in volume. So it’s not really clear there is another bubble.

    Stated differently, houses in King County didn’t increase in value almost 10% in one month.

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  114. 115
    patient says:

    RE: Kary L. Krismer @ 114
    I know that but most buyers will not since there will be a media blitz about multiple offers and skyrocketing prices. More than enough to cause panic and a resulting bubble. We can thank Bernanke and his bankster buddies for enabling it as usual but if you don’t know better as a buyer this time around I will no longer blame the enablers. I thought you were a strong advocate for that the median is just as good as C/S to show price fluctuation while others like me argued what you are saying now? What made you see the light?

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  115. 116
    David Losh says:

    RE: patient @ 99RE: Scotsman @ 98

    Most working agents have an interview process that may include showing you homes. However that is a part of the process to see if you will cooperate.

    There is also another comment here about what agents know that you will never get access to, and that is the network involved with other agents. You’re a one, or two deal wonder, so in the business world of agents they can afford to pick, and choose.

    You are either a profitable entity, or a waste of time.

    I’m just saying that the attitude, and mind set, that you, the buyer are a gift, is a problem for you the buyer, or seller for that matter.

    Look, I have no skin in this. I respect, and admire Real Estate agents. I know from years of experience that a good agent brings a lot to the table, and that 6% is nothing in the big scheme of what’s at stake for you.

    You’re the buyer with hundreds of thousands of dollars that you will be paying a mortgage on. If you come in with and attitude that you are doing some one a favor, you’re wrong.

    That 6% is nothing in the cost saving you can have by being represented, and advised by a good agent. It’s the cost of doing business.

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  116. 117
    Scotsman says:

    RE: Kary L. Krismer @ 104

    “you’re not really in a position to assess how complex it is, because you don’t know what you don’t know”

    Well, OK. But here’s what I do know: If a high school drop-out whose main attributes are big boobs and a pretty smile can be trained to fill out the forms and successfully (98% of the time) not only get the house sold/bought but legally protect her self interests and those of the brokerage she works for, then it can’t be that complicated. Those are the facts.

    The old addage that “to a man with a hammer, everything looks like a nail” has never been more true. You’re an attorney, so everything looks like a legal mine field to you. But most people just see the house, agree on the price, make the deal happen. Remember, I’ve worked as a mortgage broker and delt with a lot of real estate agents. The vast majority aren’t that sharp.

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  117. 118

    By Scotsman @ 117:

    You’re an attorney, so everything looks like a legal mine field to you.

    I don’t disagree with a lot of that post. As I’ve said before, there are too many agents that don’t know what they’re doing. That doesn’t mean it’s not complicated. It just means they are not aware of the complications or protecting their clients from the possible complications.

    As to the sentence I quoted, when I first started in this business people would often ask me what the transition was like. I would mention all the things I worried about on every transaction–things most agents would probably never even think of. Fortunately most those things never happen, but I try to be ready for them if they do. There are quite a few mines out there!

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  118. 119

    RE: Scotsman @ 117
    Most real estate agents don’t get stopped on the street and asked “Are you a brain surgeon?” ” Rocket scientist?”
    No, more commonly, the real estate agent is seen, in the middle of the crosswalk, looking dumbfounded trying to figure out what three percent of 100,000 is.

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  119. 120
    2kt says:

    RE: patient @ 115

    You can not have a bubble without easy access to credit.

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  120. 121
    living the market reality says:

    We are living the very scenario described in the article. After nine years of home ownership, we put our 2200 sq ft home on the market. It sold in two weeks – a surprise to us that we weren’t entirely prepared for. We lined up a rental situation (which was no easy feat given our inability to sign a year-long lease), and silently hoped that “the one” would come on the market this spring so we wouldn’t have to.

    Well, we bid on the only two homes in our neighborhood that met our specs. Both were multiple offer situations and both ended in failure. We are emotionally exhausted.

    We are eager to rent, but more eager to be settled. Our desire to stay in the city may get trumped by a newly constructed Eastside home. I sure hope not, but it sounds more and more attractive every time I comb the listings.

    Our whole plan was to take advantage of the low interest rates, and I sure hope we get to.

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  121. 122
    David Losh says:

    RE: Scotsman @ 117

    Most of the people I know are successful in the business of Real Estate. They buy, and sell, keep rental properties, or have a portfolio.

    The forms part of it is something everybody makes a big deal about, but the nuts, and bolts of Real Estate is knowing the mine fields.

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  122. 123
    David Losh says:

    RE: living the market reality @ 21

    Every investor goes out in October, November, and December to look for a deal. The idea is to buy a place from a frustrated owner, or from some entity who is clearing the books before the end of the year.

    If you buy right you can buy a place, fix it, and have it back on the market for the next spring.

    If you are buying a family home July, or August might be a good time to search.

    Right now you are competing with emotions in the market place; give it some time.

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  123. 124
    Jonness says:

    By 2kt @ 81:

    RE: Jonness @ 63

    Thanks for the advice, dear. I have a fair amount of equty in all homes I own and have Einsteins like you paying my mortgages. When your code-monkey gig is up, you should seruiously consider a career as a calvinist preacher.

    Thanks for the advice.

    I’m glad to hear you are not underwater. My point is, it’s better to protect yourself and your family from harm than become a life-long debt-slave to the bank. If you managed to do avoid chaos, then more power to you.

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  124. 125
    Jonness says:

    By whatsmyname @ 68:

    RE: Jonness @ 66
    I am happy that you are glad with your choices, and don’t get me wrong, it warms my landlord’s heart to see people renting. I’m just saying that for a fellow who’s banking on other people growing tired of waiting, you have a head start in waiting.

    Well, I’m waiting in a different way than most. I own my current home outright (as well as everything else I own). I would like to by a second home on Puget Sound closer to where I work, as I’m more than ready for an upgrade. I figure I’ll keep my current home as well, because I can afford to keep two homes. I could never have done this had I not practiced what I preach.

    I don’t have a headstart in waiting. The market started tanking at the same time for us all. The difference between me and the other side is, every month I put well over half my paycheck into my investment account. Meanwhile, the other side continues to bleed out of its ears. Make no mistake, given the real state of the U.S. economy, I have the advantage when it comes to waiting this one out.

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  125. 126
    Jonness says:

    By jerdobi @ 6:

    “Elephant in the room”.
    I know people in Seattle that are actively recruiting Chinese millionaires for EB5 visas to build office buildings in downtown Seattle;

    The lengths some rich people will go to in order to get a green card. IMO, there are way easier ways, but it works for some people. And I agree they buy homes for cash, as do many other foreign investors.

    It’s a world economy. And precisely for this reason, most Americans cannot begin to understand what’s really occurring in this country. Everything seems all right to most people right now, but IMO, it’s an illusion. We are really in a pickle, and it’s not yet safe to go back into the water unless you are a guy like Scotsman or The Tim who understand what’s occurring and have enough common sense to understand whether or not they can afford to buy a house in this environment and still be fine in the worst case scenario. Maybe we never get the worst case scenario, and the housing market comes back tomorrow. But what happens to people if things go south? Have people learned nothing from the bubble collapse?

    Your government has no other way out than to attempt to blow another bubble somewhere. Lately it’s been in stocks and bonds. If this goes south, it will print until something else blows up. The point is, if you are not in the market being pumped, then you are getting your rear-end handed to you. BTW, bonds are really scary right now. Market timing is everything.

    Most people have a one-track mind. They can’t forget how easy the money was in the housing bubble. For most of them, it’s the only time they’ve ever actually made money off an investment. So they keep hoping things will come back for them. Yet, each month, things just continue to look worse.

    Housing is not the winning investment class right now. Due to the state of the liquidity trap, the government and Fed are having a really difficult time rebuilding another housing bubble. So money flowed back into stocks and bonds and excess reserves instead.

    Who knows what the future will hold? My bet is that the housing market will continue to experience pain. If I’m wrong, I simply buy in when it actually begins to appreciate in a sustainable way. It’s a win, win scenario.

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  126. 127

    RE: living the market reality @ 21 – It’s now safer, IMHO, for move up buyers to buy first and then sell to avoid exactly the situation you’re describing.

    http://www.trulia.com/blog/kary_l_krismer/2012/04/significant_market_shift

    A year or two ago that wasn’t true. Back then we had a move up buyer whose first sale flipped, and the same house they wanted was still there when it finally did close months later. That wouldn’t likely happen today.

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  127. 128

    I cannot stress how important it is to get preapproved by a reputable mortgage originator…and by preapproved, I mean you’ve provided this lender all of your income and asset documents along with a pint or blood or perhaps your first born.

    It’s not unusual to have the listing agent contact the lender to verify the preapproval letter and do a “sniff test” to make sure the buyers are actually qualified and that the transaction has strong odds of closing.

    Forgive me if someone has already mentioned this…I haven’t read all the comments :) and I know its probably obvious however I do find panicked buyers who need to get preapproved asap yet they don’t have all of their supporting documentation prepared.

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  128. 129
    ARDELL says:

    RE: Kary L. Krismer @ 127

    Sounds good, Kary…maybe… BUT the buyer has to qualify for BOTH mortgages at the same time to do that! Seriously…do you really think that’s an option for most people? And what happens when they overestimate what the home they will sell later will actually sell for?

    Easier said than done and not a practical reality for most people. Talk about “land mines”.

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  129. 130

    By ARDELL @ 129:

    RE: Kary L. Krismer @ 127 -Sounds good, Kary…maybe… BUT the buyer has to qualify for BOTH mortgages at the same time to do that! Seriously…do you really think that’s an option for most people? And what happens when they overestimate what the home they will sell later will actually sell for?

    It is true the banks are a bit tougher in that area now, to make sure that they are not setting up a strategic default. But some buyers can still qualify. And again, not all houses are bought on loans. Some people actually have liquid assets! ;-)

    As to over-estimating what the house will sell for, the agent has to be careful there. But again, in this market that risk is greatly reduced.

    The greatest problem is finding the new home.

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  130. 131
    ARDELL says:

    RE: Kary L. Krismer @ 130

    Yeah right..you are severely overestimating the strength of “this market”. It’s gonna turn on a dime so fast your head’s gonna spin.

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  131. 132

    By ARDELL @ 131:

    RE: Kary L. Krismer @ 130

    Yeah right..you are severely overestimating the strength of “this market”. It’s gonna turn on a dime so fast your head’s gonna spin.

    Ignoring the fact that I’ve not really stated any opinion about where the market is headed, you and Losh are the only two people on the planet that pay any attention to your predictions of the future market. The rest of us know your record:

    http://seattlebubble.com/blog/2010/10/26/case-shiller-seattles-home-price-double-dip-begins/comment-page-1/#comment-113959

    But thanks for sharing. That’s probably even better news for the Seattle market than if Cramer himself had made a negative comment!

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  132. 133
    David Losh says:

    RE: Kary L. Krismer @ 132

    Kary, you are in over your head dragging me into your comments.

    Actually if you read the other thread it looks like the bottom was in in 2009, because we don’t have those pesky short sales, and REOs dragging down the market any more.

    You should learn something here. Ardell just made a great point about qualifying for two mortgages, and banks fearing strategic default.

    Some people have liquid assets? That’s the come back? Come on.

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  133. 134

    By David Losh @ 33:

    RE: Kary L. Krismer @ 132 – You should learn something here. Ardell just made a great point about qualifying for two mortgages, and banks fearing strategic default.

    Some people have liquid assets? That’s the come back? Come on.

    Actually, I’m the one who made the point about banks being more afraid of strategic default. You’re so in love with everything that Ardell says you think she said it.

    But yes, her comment was so insightful. Someone has to qualify for financing to get a loan to buy a house. I never would have thought of that! I am so glad she said that because I after all am the real estate agent who goes out and shows people houses without their being pre-approved to buy them. /sarc

    And your love affair with Ardell is what’s causing you to think there was a bottom in 2009. The lowest median that year was about $364,000, and this year about $308,000. The lowest Case-Shiller about 147 in 2009, and this year about 129. And yes I realize that both those numbers are affected by mix, but even using those numbers as a sign of the health of the market, there’s no way 2009 was a bottom. You need to remember, just because you hear Ardell say something, that doesn’t mean it’s true (unless you hear me say it and think it was Ardell who said it).

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  134. 135
    David Losh says:

    RE: Kary L. Krismer @ 134

    What I know is that in the internet Real Estate world Ardell is the only person I can think of that that gives good Real Estate information for free.

    You said it was less risky, now, to sell off a home after your “move up” purchase. That’s a Real Estate agent sales gimmick. It’s a rookie move.

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  135. 136

    RE: David Losh @ 135 – Ardell gives out mainly bad information, so being free hardly makes it a bargain. She is also the queen of sales gimmicks. The best example of that is her sales pitch to potential sellers that she will reduce the commission if an unrepresented buyer shows up. That sounds good to someone outside the industry because they don’t have any information on how seldom that happens. What Ardell does there would be an ethical violation if she were a Realtor.

    As to your thinking my information is a sales gimmick, it’s because you don’t understand real estate. You don’t understand how the market has shifted. Before 2007 it was very common for people to buy first. After that it became risky because with high supply and few buyers a house could sit for months without a decent offer. So you would sell first, asking for an extended close w/ possession 3 days after close so that you could find a place and then has a consecutive closing. Now there’s too little chance you could find that new place in the time needed to have consecutive closings, so selling first has a greater risk.

    Letting people know the risks of different strategies is not a sales gimmick. Not understanding those risks is being a novice agent who doesn’t know what he’s talking about.

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  136. 137
    Johan says:

    I asked my real estate agent what was going on too. I think Tim summarizes here brilliantly. I would also add that buyers who were going to buy with cash saw that home prices were falling and held on until they thought they were “low enough.” Throw in the Warren Buffet factor of people getting antsy and you get a bubble mirage market as I call it.

    The bubble mirage market has all the features of a bubble market – bidding wars, jacked up prices, contingency waivers, etc.

    The problem here is that home prices have fallen SO much since the height of the bubble and credit is MUCH tighter now (thank heaven), most sellers can’t afford to sell. My father went through a short sale and he basically said that he’s within a few years of retirement, he has ample funds for retirement, and he doesn’t plan on using credit. Ergo, don’t need credit, don’t worry about a ruined credit score.

    My father is not in the norm though. Many of the home buyers in the bubble years were Gen-X’ers and Millenials and others who DO need credit. And unless they’re jobless thanks to the wider economy, most likely they can muddle by until prices do recover minus inflation.

    So this creates a mirage bubble market. I’m sure home builders will jack up production again and combine that with more apartment buildings being built, and credit being tight will continue being so, and prices will stay depressed long term. We won’t see a return to the days when you could flip a house a month after buying it and make a 15% profit.

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  137. 138
    David Losh says:

    RE: Kary L. Krismer @ 136

    I’m sorry, but before 2007 you could move up, and leverage into a better equity position. Today it would be better to sell, when the getting is good, rent, and find a place later, or never at all.

    The market has shifted.

    Ardell has sales gimmicks in the mix, for sure, but it is Real Estate information.

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  138. 139
    David Losh says:

    RE: Johan @ 37

    “The bubble mirage market”

    I really like that phrase.

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  139. 140

    By David Losh @ 138:

    RE: Kary L. Krismer @ 136

    I’m sorry, but before 2007 you could move up, and leverage into a better equity position. Today it would be better to sell, when the getting is good, rent, and find a place later, or never at all.

    The market has shifted. .

    I agree the market has shifted, that’s been my point, but renting is not an option for everyone. Also, renting for even a short time would involve two moves.

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  140. 141
    ARDELL says:

    RE: Kary L. Krismer @ 136

    A certain % of the sales price is set aside by the seller and the seller’s agent to pay for the buyer to have equal and separate representation. You may think it is ethical for the agent for the seller to take that money to NOT represent the buyer. I disagree.

    Why you think it is more ethical to just pocket the money, and leave the buyer totally unrepresented after you take the money, is beyond reason. Yes…I know that is how the system is set up and what the fine print says an agent can do…take the money for NOT representing the buyer. But that doesn’t make it “right”.

    It is not a “sales gimmick” to refuse to take money for nothing. It is simply the right thing to do. I do not hope to change your mind. If you were a younger man I might try harder. :)

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  141. 142
    ARDELL says:

    Correction. I do not “reduce the commission if an unrepresented buyer shows up”. I simply do not steal that portion of the commission from the buyer and leave him unrepresented in the process. I call that ethical…you call it unethical. I DISCLOSE that there are X dollars set aside to that purpose…for the buyer to HAVE an agent. How else would a buyer know that? The buyer agent fee is not disclosed in the public portion of the mls data feed. It is only disclosed to agents. So if a buyer shows up at an Open House who is not working with an agent, how else would they know that X dollars has been set aside for them to use to go get equal and separate representation? It is not unethical nor is it a sales gimmick. It is truth…and a matter of full disclosure.

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  142. 143
    ARDELL says:

    A side note on multiple offers…two of my current buyers in escrow did bid in multiple offers, but we did not bid more than the home was worth. We consequently “lost” in the initial bidding. In BOTH, the buyer who did bid too high and “won”…cancelled after 5 days or so without even doing a Home Inspection. In both cases my clients ended up being able to purchase the homes for less than they would have had to pay if they had tried to “win” in the first go round.

    This is a good reason not to walk away from multiples offers, but to put your hat into the ring at a fair amount. In both of those cases the Agent for the Seller called us when the “bid-winning” buyer cancelled. If we had not made an offer, even though we knew someone else was bidding higher, we would not have gotten that call. In both cases the owner did not show the property in between the first buyer cancelling and my clients going into escrow.

    Neither of the above two homes were distressed property sales. In fact the 2nd one is the original owner of the home from when it was built in the 60s. :)

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  143. 144

    By ARDELL @ 41:

    RE: Kary L. Krismer @ 136 – A certain % of the sales price is set aside by the seller and the seller’s agent to pay for the buyer to have equal and separate representation. You may think it is ethical for the agent for the seller to take that money to NOT represent the buyer. I disagree.

    Why you think it is more ethical to just pocket the money, and leave the buyer totally unrepresented after you take the money, is beyond reason.

    The reason it’s unethical is you’re setting up a system where you’re offering X% to other agents, but not disclosing an uneven playing field. In addition, you’re setting up a system where the listing agent has financial incentive to “leave the buyer totally unrepresented.” Either that or you’re getting your seller to agree to dual representation in advance, fully disclosing to them what that means, which I highly doubt.

    But the point was more that it’s a sales scam. You go to listing presentations making that pitch to get listings. Do you disclose to your targets how seldom an unrepresented buyer actually buys one of your listings? You’re making a claim that the seller will save on commissions, when the chance of that happening is very slight.

    For the benefit of others here, how about disclosing how many times it has happened for your entire firm in the past three years?

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  144. 145

    By ARDELL @ 42:

    Correction. I do not “reduce the commission if an unrepresented buyer shows up”. I simply do not steal that portion of the commission from the buyer and leave him unrepresented in the process.

    But you do leave them unrepresented, right? That would be the standard result of the scheme. Alternatively you could throw your client under the bus by unnecessarily setting up a dual agency. Which is it?

    Let’s get to specifics here. When you’re drafting the purchase and sales agreement for this nearly completely hypothetical buyer, are you selecting “assumed by buyer” or “paid by seller” on the King County capacity charge we discussed recently? If you’re representing the seller only, then presumably you’d want to push assumed by buyer. If you’ve unnecessarily created a dual agency, it’s not so clear what you’d want to push, so you’ve lessened your representation of the seller client. I could go further into the transaction, such as the problematic inspection stage.

    The problems with your scheme the few times it does happen are abundant. It’s much better to simply have the buyer go to a rebate broker if they’ve already selected the property. Or go to Craig Blackmon. That way you continue to represent your client fully, and the buyer is fully represented.

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  145. 146

    RE: ARDELL @ 43 – I’ll agree with you here. I have never understood the rational behind walking away from multiple offers. If the offer hasn’t been made yet, then it just seems like the buyer’s agent is being lazy not wanting to spend time drafting the offer and getting it signed. If the offer has been made, why would you want to withdraw your offer just because the property is a nice property appealing to others?

    I would also point out that with rational sellers (e.g. not certain banks) the highest offer is not necessarily the best offer. And being the best offer doesn’t mean you have to do crazy things, like waive the inspection contingency.

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  146. 147
    David Losh says:

    RE: ARDELL @ 143

    You can put in a back up offer at any time, because I agree that buyer’s in a panic will bolt.

    Like in the presentation strategy of being the last to present an offer, its many times better to be the last offer in, and make it a fair offer, rather than about bidding, or the price.

    What I continue to say is that in today’s market exuberance it’s best for buyers to walk away. I’m already seeing more properties coming on the market, and more properties getting ready for sale.

    I personally would be driving neighborhoods, because I see a lot of work going on that looks to me like some one is wanting to sell. I’d make the offer before they finish because you know your buyer is going to want to change it anyway.

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  147. 148
    David Losh says:

    RE: ARDELL @ 41

    Representation is by who pays. If the seller is paying, you represent them, if the buyer pays, you represent them.

    All of the money in a transaction flows through the hands of the buyer, so they do have the right to representation. You might be a nuetral third party, but that is a slippery slope.

    You can’t represent both sides, and do it well. Your loyalty has to lie somewhere.

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  148. 149
    ARDELL says:

    RE: Kary L. Krismer @ 146

    In both cases the seller chose highest offer in the initial bidding “war”, only to have that highest offer fall out prior to inspection. My clients were then chosen on best…best agent or best buyer…without regard to highest price. Sometimes it’s better to be 2nd in. Neither had to pay over asking price and both got the home for less than the highest offer in the first round, best I can tell. Definitely true in the first case where there were 5 or 6 offers capping at 3% higher than my clients’ price.

    Neither seller wanted to start with showings again, so only those who made offers in the first round were considered. So staying out of the multiple offers entirely would not have been the best strategy in either case.

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  149. 150
    ARDELL says:

    RE: Kary L. Krismer @ 45

    Kary, I don’t think you fully understand this scenario. It is the buyer’s choice, not my choice or the seller’s choice. Simple as that. It is always the buyer’s choice to use the money set aside by the seller to purchase representation (agent and or attorney) with that money, in whole or in part.

    Every time an agent lists a house in the mls, money is allocated to pay for the buyer to have equal and separate representation. That fact is generally not publicly disclosed as to how much has been set aside to that purpose. If the buyer has an agent, the agent knows that amount set aside to that purpose, as they can see it in the private section of the mls data. If the buyer wanders into the Open House with no ability to view this pertinent fact, then it should be fully disclosed to give them an equal playing field.

    It is not a “sales gimmick” as the issue usually doesn’t even come up until after a seller has selected me to represent them in the sale of their home. Consequently it is not a means by which I secure a listing. It is a simple truth, and a matter of disclosure to all concerned, that the money set aside to pay a Buyer’s Agent becomes the purview of the buyer and the agent they hire…or not.

    In order to put that in the Buyer and Buyer Agent’s purVIEW they have to equally be able to see/view that amount set aside for buyer representation, whether the buyer has an agent or not at the time they are considering making an offer on a home.

    It is just fair business dealings to not treat buyers who have not yet chosen an agent to represent them any differently than those who have, by giving them equal access to that information.

    Again, I don’t hope to change your mind. However please don’t presume to “know” that my motivations have anything to do with “selling” my services. It is just not true, as the information is generally not even “in the room” until the client has chosen me to represent them in the sale of their home.

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  150. 151
    whatsmyname says:

    RE: ARDELL @ 150
    “Every time an agent lists a house in the mls, money is allocated to pay for the buyer to have equal and separate representation. That fact is generally not publicly disclosed as to how much has been set aside to that purpose.”

    Is that fact disclosed to the seller? I mean if you’re going to be fastidious about not “stealing” from someone because they don’t know what’s going on, you might provide that same consideration for the person contractually liable for the money.

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  151. 152

    By ARDELL @ 50:

    RE: Kary L. Krismer @ 45 – Kary, I don’t think you fully understand this scenario. It is the buyer’s choice, not my choice or the seller’s choice. Simple as that. It is always the buyer’s choice to use the money set aside by the seller to purchase representation (agent and or attorney) with that money, in whole or in part.

    Every time an agent lists a house in the mls, money is allocated to pay for the buyer to have equal and separate representation.

    That’s incorrect. Look at your listing agreement. You have a total commission, and of that you agree to offer X% to the selling office. The selling office can be you or some other agent. That is not set aside for the buyer to have representation because the selling agent might not be the buyer’s agent!

    If what you were saying was true, then when an unrepresented buyer came in and presented an offer, the listing agent would only get 3% on a 3/3 listing agreement.

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  152. 153

    By ARDELL @ 50:

    It is not a “sales gimmick” as the issue usually doesn’t even come up until after a seller has selected me to represent them in the sale of their home. Consequently it is not a means by which I secure a listing.

    So you’re telling me that prior to the seller signing a listing agreement, you don’t disclose to them the terms of that agreement?

    Just out of curiosity, do you disclose to them how unlikely this is to happen? Do you disclose to them the problems that can arise when you have an unrepresented buyer or if you create dual agency?

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  153. 154
  154. 155
    David Losh says:

    RE: ARDELL @ 154

    Did I mention that this is a slippery slope?

    About ten years ago, maybe eight, there was a defined shift in what was acceptable in terms of dual agnecy. I forget why, but it was a big deal.

    If it’s your listing, you have to represent the seller, no matter how many disclosures you have. They signed an agreement with you, and even if you did make all the disclosures in the world to your seller, they would need to be in writing, and a part of your listing agreement, but you can’t do that, you aren’t an attorney. You couldn’t do that even if you were an attorney, because you would probably want to collect a commission, and you would be in a situation of a conflict of interest.

    What I have done is have my Broker represent the buyer, but I feel much more comfortable referring the buyer to an agent outside of my Brokerage.

    Should I go on, or is that enough?

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  155. 156

    RE: David Losh @ 155 – The disclosures for dual agency are already in the listing agreement, and also the purchase and sale. And dual agency has nothing to do with the commission. Ordinarily with an unrepresented buyer the listing agent would get both the LOC and the SOC.

    But you do hit on an important point. The liability for a listing agent having an unrepresented buyer is much greater than if the buyer is represented by an agent. Thus if Ardell is in fact giving up all of the SOC, that’s not a very wise business move because she (and her firm) would be talking on additional liability for no additional compensation.

    Where I’ve seen this commission scheme sold to agents as the thing to do, it’s typically to retain 1% of the SOC for the listing agent, telling the seller they will get to keep 2% for themselves. A win-win situation is the sales pitch.

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  156. 157
    David Losh says:

    RE: Kary L. Krismer @ 156

    Man, we are on a real slippery slope, and exposing dirty laundry.

    The Listing Agreement can say whatever it wants, but the buyer is the one writing, and signing, an offer to purchase. The buyer can represent themselves, or they can go to an attorney, or an attorney with escrow option for far less than a commission.

    The listing agent has no claim to a buyer’s commission dollars, so talking about carving it up with the seller is …..

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  157. 158

    By David Losh @ 57:

    The listing agent has no claim to a buyer’s commission dollars, so talking about carving it up with the seller is …..

    It’s not the buyer’s commission dollars–that’s the fallacy of Ardell’s position. In say a 3/3 commission arrangement, the listing agent gets 6% from the seller and is offering 3% of that to the selling office. If there isn’t a third party selling agent, the listing agent gets 6%.

    And again I would point out that the major side effect of Ardell’s scheme, if it actually worked, would be that the buyer would be unrepresented in a large dollar transaction. Thankfully that type of scheme doesn’t work very often. Very few buyers are stupid enough to want to be unrepresented. And if I had to guess, most of the time when this does occur, the buyer thinks they are getting dual agency, when they are not.

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  158. 159
    ARDELL says:

    RE: David Losh @ 155

    SOoooo…how about those Yankees? :)

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  159. 160
    David Losh says:

    RE: Kary L. Krismer @ 158

    I don’t see that in the Listing Agreement.

    Who would be writing up the Purchase, and Sale Agreement? The listing agent?

    That may be possible, but again, I don’t see it.

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  160. 161

    RE: David Losh @ 60 – Paragraph 3 of the listing agreement: “Seller will pay Firm a commission of _____% of the sales price, or $____________ (“Total Commission”). From the Total Commission, Firm will offer a cooperating member of MLS representing a buyer (“Selling Firm”) a commission of _________% of the sales price or $__________.” In the 3/3 hypothetical I mentioned above, the first blank would be filled in with a 6 and the third blank with a 3 (the second and fourth would not be filled in). Thus the total commission being paid by the seller is 6%, and if there is no buyer’s agent the listing agent would get all of the commission. If an agent mistakenly fills in 3 and 3, the listing office wouldn’t get a commission if there is a buyer’s agent.

    As to who would prepare the purchase and sale agreement, anyone could prepare it. The listing agent could prepare it, making it very clear that they’re representing the seller and that not the buyer. I’ve had buyers prepare them.

    Again, this doesn’t happen very often that an unrepresented buyer tries to play. The last time I had an unrepresented buyer try to make an offer was almost two years ago. It was a multiple offer property and his offer was the only one under $400,000. Is offer consisted of only the first page of an outdated (2006) purchase and sale agreement and wasn’t even a legally binding document because the guy didn’t know what he was doing (e.g. no legal description). We didn’t accept his offer, so he came back with an even lower offer. The property sold for over $400,000.

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  161. 162
    David Losh says:

    RE: Kary L. Krismer @ 161

    You’re toast.

    Once again you started out great, and should have stuck to your guns, then flip flopped a little bit to demonstrate what you don’t know.

    Now, according to you, Ardell most certainly can write ‘em up and make any arrangements she chooses with the proper disclosures.

    Of course Ardell can use this “sales gimmick.” You agreed with her.

    I on the other hand read the Purchase, and Sale, see the flaw, but would choose only to represent my seller. It’s just good business, and avoids liability.

    There is no right or wrong, once a transaction closes, but for me the commission dollars are secondary to my over all business model of providing a service.

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  162. 163

    By David Losh @ 162:

    Now, according to you, Ardell most certainly can write ‘em up and make any arrangements she chooses with the proper disclosures.

    Of course Ardell can use this “sales gimmick.” You agreed with her. .

    Huh? When did I ever say it was illegal? I said it would be unethical if she were a Realtor (not being a Realtor she has no ethical code by which she has to abide).

    You do hit on the topic of disclosure. I’ve not ever seen Ardell disclose this scheme to other agents (although I haven’t done an extensive search either–maybe she has at times.) If she does disclose it, other issues come up. Whether failing to disclosing her scheme to other agents is a violation of NWMLS rules is another topic Ardell and I have discussed on this topic, but it hasn’t come up here.

    But let’s assume it was 100% legal, you’re missing one of my main points. All it does (besides give her a listing presentation pitch–which she denies) is encourage buyers to not be represented. That is not a good thing! That is very, very bad! That’s what I was trying to point out by going into the details of what it looks like when a buyer tries it. Buyers don’t understand the issues. The recent post Tim did on King County’s capacity charge proves that.

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  163. 164

    By David Losh @ 62:

    I on the other hand read the Purchase, and Sale, see the flaw, but would choose only to represent my seller. It’s just good business, and avoids liability. .

    Yes, that is good practice. I would add some sort of documentation (beyond the NWMLS forms boilerplate) that you advised them to consult an attorney or get their own agent.

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  164. 165
    David Losh says:

    RE: Kary L. Krismer @ 164

    Why? They aren’t my client, I represent my seller.

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  165. 166
    David Losh says:

    You’re toast.

    “failing to disclosing her “scheme” to other agents is a violation of NWMLS rules”

    Making random accusations, I mean random, doesn’t promote your abilities.

    This is why, as time goes on, I recognize Ardell as probably the only source of free Real Estate information on the internet. You don’t like? Fine, but I know the difference between Real Estate information, and……..

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  166. 167

    By Kary L. Krismer @ 63:

    If she does disclose it, other issues come up. .

    As I may have mentioned, this scheme was something I first heard of at a clock hour course. It’s one of the reasons that I don’t like clock hour courses because no mention was made that Realtors would have to disclose the scheme, or the negative implication of the scheme. But let’s create a script for a listing agent to sell the scheme to a potential seller client.

    Agent: If you list with me, and an unrepresented buyer shows up, you’ll save money because I’ll only charge 3%, saving you 3%. That savings can be split between you and the buyer, or you might capture all of that savings.

    Seller: Gee, that sounds great! How often does that happen?

    Agent: Almost never.

    Seller: Okay, not sounding so great. Are there any downsides?

    Agent: Well if I were to comply with Realtor ethical standards I would need to disclose this scheme in the agent only remarks. You see it’s unfair to other agents and represented buyers to not disclose all the terms of the commission offer you are making to them. So you see, if I disclose these terms in the listing, that would be bad for you. But fortunately I am not a Realtor.

    Seller: Okay, any other downsides.

    Agent: Well, if we do manage to snag an unrepresented buyer, then both your liability and my liability in the transaction will be greatly increased. We’ll need to make sure we fully document that we advised the buyer to get legal counsel or other representation. But in addition, if something goes wrong with the property transaction down the road, such as say a problem with condition, you and I will be the only target for the buyer’s lawsuit. And because the buyer isn’t represented and likely doesn’t know what he is doing, the chance of that occurring will be much higher. Also, assuming the buyer does an inspection, the buyer won’t have any guidance at all as to how to deal with the inspection report. Negotiating the inspection could be much more problematic.

    Seller: Okay, still not sounding so great. Why do I want to do this?

    Agent: Did I not mention that you could save 3%?

    Seller: But you said that almost never happens!

    Agent: That’s why you don’t need to worry about those downsides!

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  167. 168

    By David Losh @ 66:

    You’re toast.

    “failing to disclosing her “scheme” to other agents is a violation of NWMLS rules”

    Making random accusations, I mean random, doesn’t promote your abilities.

    Misquoting me doesn’t promote your abilities. What I said was: “Whether failing to disclosing her scheme to other agents is a violation of NWMLS rules is another topic Ardell and I have discussed on this topic, but it hasn’t come up here.”

    Read rules 11(b)((vi) and 101(f). Ardell’s position is that this isn’t a variable selling office commission. I believe it is.

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  168. 169

    By David Losh @ 65:

    RE: Kary L. Krismer @ 164

    Why? They aren’t my client, I represent my seller.

    As an agent you have duties to all parties, including under RCW 18.86.030. One of those duties is to act honestly and in good faith. I suspect that’s why the statewide forms have the language in them advising parties to get legal and tax advice. I’m just saying I wouldn’t rely solely on the boilerplate in the NWMLS forms.

    Standard boilerplate is the type of thing that can often be missed, or claim to have been missed. That’s why it’s better to document what you told them by having them sign something specific stating that they have been advised to get representation.

    Note quite 100% on point, but note the recent appeal Craig won, where the release contained in the boilerplate did not stand up. If the parties had actually discussed the release and negotiated its terms and drafted a specific release for the situation, it would have more likely stood up.

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  169. 170

    By David Losh @ 165:

    RE: Kary L. Krismer @ 164

    Why? They aren’t my client, I represent my seller.

    A better answer to that would be Hellickson. Just to refresh your recollection on that, I had been hitting hard on the topic of agents pricing short sales too low, and been getting a lot of push back both from agents and one clock hour course instructor saying it wasn’t a problem. The Department of Licensing didn’t agree.

    The Hellicksons lost their license for 10 years, and of all their violations the only one that supported losing the license for that period of time was the short sale pricing issue. The reason that was a problem is that it was unfair to people that the Hellicksons didn’t represent, namely buyer’s agents and buyers.

    You do need to take into account the interests of parties you don’t represent.

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  170. 171
    Homebuilder says:

    Back to the original topic. I look at the recent uptick in median home price as nothing more than a statistical aberration attributable to a temporary slowdown in foreclosures and short sales coming on the market. The media will again drop as the great unwinding continues.

    Unfortunately real estate industry folks are so desperate for any good news that they gran onto any statistics that are positive and point to them as an indicator of the bottom or a turn around. I say this as a home builder and remodeller – and I wish the market were better since my business would inevitably benefit but I find it best to be realistic with my clients when sharing opinions about market conditions. As soon as I make comments that make me sound like a real estate agent I immediately lose credibility. I wonder why that is?

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  171. 172

    By Homebuilder @ 171:

    Back to the original topic. I look at the recent uptick in median home price as nothing more than a statistical aberration attributable to a temporary slowdown in foreclosures and short sales coming on the market. The media will again drop as the great unwinding continues

    Hopefully the media is cute!

    Seriously, if Freddie, Fannie and BoA uphold their promises regarding processing short sales, that could have a negative impact on the median, because as I pointed out earlier, they have 9 months of pending short sales sitting around at the current rate of closings.

    Unfortunately real estate industry folks are so desperate for any good news that they gran onto any statistics that are positive and point to them as an indicator of the bottom or a turn around.

    Did you read the reports? They were quite restrained.

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  172. 173

    […] reader who wrote in earlier this month contacted me with a There are SO FEW homes that are 1,500-1,700 square feet (about the square […]

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