Posted by: The Tim

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

173 responses to “Reader Question: Did I Just Step Into a Shark Tank?”

These comments are paged! This is page 2. Navigate the pages here:
1 2
  1. ChrisM

    Maybe get creative:

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

    Rate this comment: Thumb up 0

  2. Kary L. Krismer

    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).

    Rate this comment: Thumb up 0

  3. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  4. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  5. Ryan

    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.

    Rate this comment: Thumb up 0

  6. jerdobi

    “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.

    Rate this comment: Thumb up 0

  7. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  8. ARDELL

    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.

    Rate this comment: Thumb up 0

  9. Kary L. Krismer

    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).

    Rate this comment: Thumb up 0

  10. Geek

    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.

    Rate this comment: Thumb up 0

  11. ARDELL

    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.

    Rate this comment: Thumb up 0

  12. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  13. patient

    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.

    Rate this comment: Thumb up 0

  14. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  15. patient

    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?

    Rate this comment: Thumb up 0

  16. David Losh

    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.

    Rate this comment: Thumb up 0

  17. Scotsman

    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.

    Rate this comment: Thumb up 0

  18. Kary L. Krismer

    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!

    Rate this comment: Thumb up 0

  19. Ira Sacharoff

    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.

    Rate this comment: Thumb up 0

  20. 2kt

    RE: patient @ 115

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

    Rate this comment: Thumb up 0

  21. living the market reality

    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.

    Rate this comment: Thumb up 0

  22. David Losh

    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.

    Rate this comment: Thumb up 0

  23. David Losh

    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.

    Rate this comment: Thumb up 0

  24. Jonness

    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.

    Rate this comment: Thumb up 0

  25. Jonness

    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.

    Rate this comment: Thumb up 0

  26. Jonness

    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.

    Rate this comment: Thumb up 0

  27. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  28. Rhonda Porter

    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.

    Rate this comment: Thumb up 0

  29. ARDELL

    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”.

    Rate this comment: Thumb up 0

  30. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  31. ARDELL

    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.

    Rate this comment: Thumb up 0

  32. Kary L. Krismer

    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!

    Rate this comment: Thumb up 0

  33. David Losh

    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.

    Rate this comment: Thumb up 0

  34. Kary L. Krismer

    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).

    Rate this comment: Thumb up 0

  35. David Losh

    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.

    Rate this comment: Thumb up 0

  36. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  37. Johan

    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.

    Rate this comment: Thumb up 0

  38. David Losh

    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.

    Rate this comment: Thumb up 0

  39. David Losh

    RE: Johan @ 37

    “The bubble mirage market”

    I really like that phrase.

    Rate this comment: Thumb up 0

  40. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  41. ARDELL

    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. :)

    Rate this comment: Thumb up 0

  42. ARDELL

    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.

    Rate this comment: Thumb up 0

  43. ARDELL

    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. :)

    Rate this comment: Thumb up 0

  44. Kary L. Krismer

    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?

    Rate this comment: Thumb up 0

  45. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  46. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  47. David Losh

    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.

    Rate this comment: Thumb up 0

  48. David Losh

    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.

    Rate this comment: Thumb up 0

  49. ARDELL

    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.

    Rate this comment: Thumb up 0

  50. ARDELL

    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.

    Rate this comment: Thumb up 0

  51. whatsmyname

    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.

    Rate this comment: Thumb up 0

  52. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  53. Kary L. Krismer

    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?

    Rate this comment: Thumb up 0

  54. ARDELL
  55. David Losh

    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?

    Rate this comment: Thumb up 0

  56. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  57. David Losh

    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 …..

    Rate this comment: Thumb up 0

  58. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  59. ARDELL

    RE: David Losh @ 155

    SOoooo…how about those Yankees? :)

    Rate this comment: Thumb up 0

  60. David Losh

    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.

    Rate this comment: Thumb up 0

  61. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  62. David Losh

    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.

    Rate this comment: Thumb up 0

  63. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  64. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  65. David Losh

    RE: Kary L. Krismer @ 164

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

    Rate this comment: Thumb up 0

  66. David Losh

    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……..

    Rate this comment: Thumb up 0

  67. Kary L. Krismer

    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!

    Rate this comment: Thumb up 0

  68. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  69. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  70. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  71. Homebuilder

    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?

    Rate this comment: Thumb up 0

  72. Kary L. Krismer

    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.

    Rate this comment: Thumb up 0

  73. Seattle Bubble • Reader Question: Where are the modest homes?

    [...] 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 [...]

    Rate this comment: Thumb up 0

These comments are paged! This is page 2. Navigate the pages here:
1 2

Leave a Reply

Do you want a nifty avatar picture next to your name, instead of a photograph of Tim's dog? Just sign up with Gravatar, and make sure to use the same email address in the form below. It's that easy!

Please read the rules before posting a comment.

You have 4 comments remaining on this post.

Archives

Find us on Google+