New Listings Drop 25% From 2012’s Already-Depressed Level

New Listings Drop 25% From 2012’s Already-Depressed Level

Well, this is just depressing:

New Listings Added to Market January 1-14: King County Single-Family Homes

After the first two full weeks of the year, new listings of single family homes in King County are down 25% from last year. This follows a 14% drop last year and an 18% drop the year before that.

For buyers who were hoping that the new year would bring some relief from the problem of sparse selection, this is extremely unwelcome news.

I had hoped that last year’s strength would convince more of the homeowners with “pent-up supply” to list their homes this year, but so far that is definitely not the case.

  

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.

153 comments:

  1. 1
    Matthew says:

    We basically have a frozen market. People who want to sell can’t do so because they are underwater. First time home buyers can’t buy into the market because they still can’t afford to. A bunch of people can’t buy because they can’t get the financing due to tightened lending standards. That’s why we aren’t seeing a huge increase in median price despite the dramatic drop in inventory.

    I’m starting to agree with The Tim’s prognosis of a sideways market for years to come. This market could be “the new normal” for the foreseeable future. I guess that is what happens when the government steps in and attempts to fix asset prices. If we just let the market correct itself, sharp and painful, and then fully recover, I would make the argument that we would probably be on the road to recovery faster. Instead we are going to stuck in a market that is wearing cement shoes for a long time.

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  2. 2
    softwarengineer says:

    RE: Matthew @ 1

    Yes Matthew

    We have zombie low interest rates coupled with “0% Mattress Savings Interest Rates” [albeit your mattress might be safer to put it than a bank] and we call it the Recession is over, bottom of the bubble. When was the horrifying top then?

    I know, past Seattle free economy American history has no place today, we’ve entered the Fascist foreign/corporate controlled Twilight Zone….but let’s face it, all the really good times in Seattle for home affordability in the past were when home mortgages were 6-8%, population density was about 1/5th of today’s and home ownership was affordable with one income. We had youth full of hope then, that learned math ond science for half of the staff cost of today’s public schools….but we also had 1 acre lots in Seattle, tree houses, dirt bikes and green belts galore too….not kids crammed in apartments/condos, with no place to dream except in front of a Halo video game in the living room.

    But what the heck, throw more money at it anyway…..borrow [take] it from our Social Security, we’ll never retire anyway….

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  3. 3
    Blurtman says:

    RE: softwarengineer @ 2 – Step away from the computer screen. Exit your home with your hands above your head, and carefully follow the commands of the drone circling above. Do not attempt to flee.

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  4. 4
    softwarengineer says:

    RE: Blurtman @ 3
    LOL Blurtman

    Nope, we still have freedom of speech, last time I checked…

    Even overpopulated China can’t stop free speech:

    http://weather.yahoo.com/severe-beijing-smog-prompts-unusual-transparency-104822044.html

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  5. 5
    Erik says:

    RE: Matthew @ 1
    I think this is a pretty good analysis of why we are experiencing low inventory. Watch the video. This is not for washington, but I think the same reasons apply.

    http://toddmillertv.com/

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  6. 6
    Marc says:

    It is pretty brutal out there. I had clients put in an offer on a new listing yesterday in a desirable but modestly priced part of town. Seller received more than 20 offers and despite going way over list price, my clients didn’t get it.

    Oh yeah, there’s an abandoned oil tank in the yard. Might be a small cost to decommission it or a huge cost to remove it and any contaminated soil. I’d bet the “winner” agreed to take it as is. Wow!

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  7. 7
    Blurtman says:

    RE: softwarengineer @ 4 – Patriot Act, comrade. Obama can kill you and there is nothing anyone can do about it.

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  8. 8
    Plymster says:

    RE: Erik @ 5 – Per Todd Miller, inventory is low because:
    a) REOs – Banks won’t/can’t foreclose, short sell, sell properties for some reason (clouded title, no incentive to sell, etc)
    b) Homeowners that would like to move, but can’t because they are underwater and don’t want to sell at a loss, or just don’t want to move due to economic uncertainty. This seems unlikely to me, because for every buyer, there would be a seller, but what we are seeing is that only the supply is gone (there appear to be plenty enough buyers out there for multi-offer scenarios).
    c) Investors/Accidental landlords – People are turning what used to be inventory into rental units. This also seems to be false, or there would be a widespread increase in the vacancy rate of rental properties (apparently not true: http://www.naahq.org/publications/insider/pages/apartmentvacancyratefallstodecadelow.aspx#575947). At the very least you would expect craigslist listings to explode.

    So it all comes down to REOs.not being released. The banks have every incentive to hold onto these properties, since they don’t have to declare them as a loss until they sell them.

    There’s also the weird occurrence where even non-short-sales are out there for months on end in “pending” status. In almost any area you look at, the number of “pending” properties exceeds the number of “active” properties, and most of them have been on the market for more than 3 months, yet are being snapped up within days of being on the market only to appear in “active” status again after 2-3 months. I’ve seen nothing to explain this widespread activity all over the west coast.

    In short, this market feels as gamed and phony as the bubble did on the way up.

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  9. 9
    No Name Guy says:

    RE: Matthew @ 1

    Pretty spot on. Look at Japan for where we’ll be……or Greece.

    What we have here in analogous to pilot induced oscillations in aircraft. Each time the pilot (Bernake, Obama, Congress, etc) try to fix the last oscillation with a counter input, they just make the next oscillation even bigger, they then try and fix that one, causing yet a bigger one, etc, etc, etc. What my flight instructor taught me was to just hold the stick steady and it’ll damp itself out in just a bit.

    Too bad our financial overlords can’t seem to understand that this same principal applies in finance and economics. Let the insolvent go bankrupt (e.g. no bail out’s, no ZIRP, no mortgage mods, no stimulus, etc). Sell off the distressed assets at the then (much lower) market price. The bad debt is wiped away, the zombie assets are freed up for productive uses, the market prices are reset to a level that will clear inventory and THEN a “normal” market can continue.

    But, how can we expect this from the current crop of loser boomers that are in charge – the “me” generation has never known hardship and they’ll be darned if they’re going to start now – better to kick the can down the road and let the X-ers, Y’s and Millennial shovel up the cow dung the boomers sprayed all over.

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  10. 10
    Erik says:

    RE: Plymster @ 8
    a) I don’t believe shadow inventory is that substantial that it accounts for the entire reason for low inventory.
    b) Banks will not loan to someone that is underwater. It’s not that they don’t want to buy. Maybe these people foreclosed or short sold and cannot rebuy for a few years. They cannot buy a new place or sell.
    c) The people that are holding their properties are waiting to not be underwater rent to the people that cannot rebuy after a short sale or foreclosure. That’s why you don’t see tons of listings on craigslist.

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  11. 11
    Erik says:

    RE: Matthew @ 1
    Bummer. My idea was to ride the ups and downs for 3-5 years buying when prices are low and selling when prices are high until we are out of this housing mess. At that time, I planned to own 100% of my home and then just sit on it mortgage free. I may have to scrap that plan.

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  12. 12

    By Plymster @ 8:

    There’s also the weird occurrence where even non-short-sales are out there for months on end in “pending” status.

    I’m not sure why you use the word “even” or think that’s weird. Banks don’t put enough resources into processing short sales. For King County SFR it usually bumps around just over 200, but about three months have been about 250. Even at the higher volume, there are almost 1,500 in some sort of pending status. That’s almost a six month supply, and that’s rather common.

    If they just processed these things more would sell and they’d sell for higher amounts.

    Numbers from NWMLS sources, and my recollection, but not compiled by or guaranteed by the NWMLS.

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  13. 13
    David Losh says:

    RE: Erik @ 11

    It’s looking like the people who bought in 2008, 2009, and even 2010, were geniuses, many of those you could sell today for a profit. One guy in Arizona bought four houses in 2008, 2009, and parlayed those into two more houses in 2010. All of his properties cash flow, and he claims to have a Million Dollars in equity. Well, we’ll see.

    I think there are still deals to be made, but have lost a lot of faith in the NWMLS, and Real Estate agents.

    There are plenty of sellers who need help. We get calls from people who would like to sell, but don’t know what to do. Real Estate agents come in with a laundry list of things they want to see done so the property will sell. There are also those agents who tell people just to get it on the market because the market is so hot.

    I’d almost say a lot of Real Estate agents are getting to be more of a problem than a help in a Real Estate transaction.

    Sure, some sellers are underwater, but what difference does that make to you? If it’s a good property, and it’s close to a sales price what do you care if you pay down the loan? Your 20% down payment may get the deal done.

    Forget the agents for a minute, and start looking at the market place.

    I just don’t buy the idea there are so few properties for sale.

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  14. 14
    ray pepper says:

    RE: Marc @ 6 – brutal? We think its heaven. Lots of low bids at Trustee Sales, albeit increased competition, but appears there are enough properties to go around. Banks letting em loose for years to come and with the economy up here ON FIRE the flippers are smiling as we put em back on the mkt!

    I guess its Brutal if your on the wrong side of the transaction!

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  15. 15
    ray pepper says:

    here is just a few of the 57+ morsels this week in King County only:

    237183 2012 DAYTON AVE NE
    RENTON, 98056
    3br / 1 ba / 1390 sqft
    Built 1958 SFR
    Grantor : BUFORT Active 1st $343,682.44 $105,000.00 op bid 1/18/2013 10:00:00 AM
    ***************************************************
    233865 22743 SE 269TH ST
    MAPLE VALLEY, 98038

    4br / 3 ba / 3540 sqft
    Built 2005 SFR
    Grantor : DAVIDSON Active 1st $460,137.86 $241,690.00
    ***************************************************
    238380 1050 149TH PL SE
    BELLEVUE, 98007

    3br / 2 ba / 1520 sqft
    Built 1956 SFR
    Grantor : GERCHOW Active 1st $495,865.81 $251,887.01
    **************************************************
    238325 17129 134TH AVE SE
    RENTON, 98058

    3br / 3 ba / 1760 sqft
    Built 1981 SFR
    Grantor : HENDERSON Active 1st $311,677.45 $160,776.0
    ***************************************************
    238298 9745 PHINNEY AVE N
    SEATTLE, 98103

    4br / 2 ba / 2400 sqft
    Built 1954 SFR
    Grantor : LEAHY Active 1st $475,926.08 $244,960.00

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  16. 16
    The Tim says:

    On a positive note, at least things aren’t as bad here as they are in California:

    • Inland Empire: -39%
    • Los Angeles: -36%
    • Sacramento: -41%
    • San Diego: -30%
    • San Francisco: -47%

    Dang.

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  17. 17

    By ray pepper @ 14:

    RE: Marc @ 6 – brutal? We think its heaven. Lots of low bids at Trustee Sales, albeit increased competition, but appears there are enough properties to go around. Banks letting em loose for years to come and with the economy up here ON FIRE the flippers are smiling as we put em back on the mkt!

    I guess its Brutal if your on the wrong side of the transaction!

    Didn’t you just say a couple of weeks ago that too many people were bidding to get a good deal at the auctions?

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  18. 18
    Ray pepper says:

    Personally on the flip its been very frustrating with all the bidders but I would not call it a brutal market. Anyone looking for an owner occupied residence it’s far from brutal. Homes on the flip I have been outbid the last 4 months each and every time. However, my LLC dough is doing tremendous. Its pooled with other investors and flips r doing well but my percentage is one twelfth. We buy bigger props that exceed 250k and turn em. That’s too much risk for me to float personally.

    But, like anything it just takes patience. I suspect something will pop up in coming months.

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  19. 19
    Marc says:

    RE: ray pepper @ 14 – You’re correct, it’s only brutal for buyers. If your selling it can be great, especially if you’r selling a house that needs work like the one yesterday. Buyers are desperate and are willing to overlook issues that, IMHO, they really shouldn’t.

    As for buying at trustee sale, that’s a whole nother ball of wax. I don’t recommend it to the layman or inexperienced. Unfortunately, the only way to get experience is trial by fire or finding someone to advise you and that don’t come free.

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  20. 20

    By Marc @ 19:

    RE: ray pepper @ 14 – You’re correct, it’s only brutal for buyers. If your selling it can be great, especially if you’r selling a house that needs work like the one yesterday. Buyers are desperate and are willing to overlook issues that, IMHO, they really shouldn’t.

    Like aluminum wiring, LP siding, etc. It hasn’t been so good for such sellers since the expiration of the tax credit.

    I can’t believe some of the crap out there that gets offers. Some of it is priced as if it doesn’t have the defects it does have.

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  21. 21

    By Kary L. Krismer @ 20:

    By Marc @ 19:
    RE: ray pepper @ 14 – You’re correct, it’s only brutal for buyers. If your selling it can be great, especially if you’r selling a house that needs work like the one yesterday. Buyers are desperate and are willing to overlook issues that, IMHO, they really shouldn’t.

    Like aluminum wiring, LP siding, etc. It hasn’t been so good for such sellers since the expiration of the tax credit.

    I can’t believe some of the crap out there that gets offers. Some of it is priced as if it doesn’t have the defects it does have.

    It’s not only defective crap that’s getting offers, it’s defective crap that’s also ugly. Not everywhere, though. Only the places where people want to live.

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  22. 22
    ray pepper says:

    RE: Marc @ 19 – Well, Marc I do recommend it for the “layman” or the inexperienced. Historically and Currently Agents still tell Buyers that side of the market is taboo and you must be a professional. This is told because Agents get ZERO commission and they know NOTHING about this side of the market.

    The FACT is Buyers CAN and DO get in these homes prior to purchase. These same Buyers bring their contractors and inspectors to all the homes they desire prior to Trustee Sale. Some homes you can get in and some you cannot. We skip all the ones that are inaccessible.

    “Trial by fire?”…….”doesn’t come free”….Its all negotiable Marc and will cost the BUYER ALOT less then 3% for assistance.

    Worried about Title? No need. Provided by First American . HOA, water, sewer, IRS, etc…

    See Marc we are in a different world now with the amount of homes that will be brought back to the market this decade. For Buyers to not engage in Trustee Sale homes, especially when they are having difficulty on the retail market, is beyond stupidity.

    Lastly, Buyers wondering about this should attend a trustee sale. There will be MANY tents set up with many different companies trying to earn your business. Attend the “dog and pony show” dinners that are given every week. They are FREE. Educate yourself Buyers. Take 6 months and learn the process. You will be VERY happy you did!

    The only truly “scary” part is BUYING in this environment, with multiple offers, and NOT knowing whats going on around you on the “other” side of the market.

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  23. 23

    By ray pepper @ 22:

    RE: Marc @ 19 – Well, Marc I do recommend it for the “layman” or the inexperienced. Historically and Currently Agents still tell Buyers that side of the market is taboo and you must be a professional. This is told because Agents get ZERO commission and they know NOTHING about this side of the market.

    No, it gets back to what Ardell said about not investing what you can’t lose. There are risks to buying at a foreclosure.

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  24. 24
    Todd Miller says:

    Las Vegas inventory is at historic lows. Last time our inventory was this bad we saw 50% price appreciation in just one year. Right now even our Trustee Sales are selling for market value!

    So its not just Seattle.

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  25. 25
    Erik says:

    RE: Todd Miller @ 24
    It sounds like we will not see price appreciation in Seattle even at super low inventory because people can’t get financing. Tim, the owner of this site thinks we will be a sideways market for the next 3-5 years around here as long as nothing unexpected happens. That seems like the most probable prediction I’ve heard.

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  26. 26
    David Losh says:

    RE: ray pepper @ 22

    Give them heck Ray.

    Yes there are plenty of sellers in distress, bank owned, and Trustee Sales out there. Investors who buy at auction will also turn a property for a little profit, and you do get to do your inspections.

    Real Estate agents are scared shoeless because most of the deals are outside of a commission.

    As a buyer you are going to need to take some intiative, do some networking, go to these Trustee Sales, and free events, just don’t sign anything on the first few times around.

    Ray is absolutely right that it takes about six months to get educated.

    Remain humble, ask lots of questions, play nice, and pay attention.

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  27. 27
    David Losh says:

    RE: Todd Miller @ 24

    How is Henderson doing?

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  28. 28
    Howard says:

    By Marc @ 19:

    RE: ray pepper @ 14

    As for buying at trustee sale, that’s a whole nother ball of wax. I don’t recommend it to the layman or inexperienced. Unfortunately, the only way to get experience is trial by fire or finding someone to advise you and that don’t come free.

    While I actually haven’t completed a purchase a trustee auction, it seems actually less stressful than a shortsale and waiting for months to close, maybe.

    Watch the auctions, subscribe to a data feed ($50 a month), line up a hard money lender, Do you homework (Spy on the house, see if there is anyone living there, peek in the windows, ask the neighbors, look at the assessor’s info, look at the history of the owner and the real estate through county records, you can search court records using their names, ASK the current tenants what is going on, have your architect or contractors look at it. Go to the auction with a number in the sand, DON’T bid unless you have the potential to walk in with 15-25% equity. If there is no equity from the day you move in, why take the risk??

    If someone was not too particular about neighborhoods, school districts but had a general idea (south of I-90 Eastside or Lake City to Montlake Terrace as another)

    I bet within 30 days you could be living in your new house.

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  29. 29
    whatsmyname says:

    By The Tim @ 16:

    On a positive note, at least things aren’t as bad here as they are in California:

    Was it really only a week ago that Seattle’s most prominent bubble blogger was bemoaning the media’s characterization of market movements as “positive” when they were only positive for one side? I guess it depends on whose audience is being gored.

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  30. 30
    whatsmyname says:

    By Matthew @ 1:

    We basically have a frozen market. People who want to sell can’t do so because they are underwater. First time home buyers can’t buy into the market because they still can’t afford to. A bunch of people can’t buy because they can’t get the financing due to tightened lending standards. That’s why we aren’t seeing a huge increase in median price despite the dramatic drop in inventory.

    if you will go back to Tim’s January 7 posting you can see charts that show December’s sales at the highest level for a December in 6 years. It’s also higher than 2000 and 2001. That’s 8 out of 13 years tracked. What kind of frozen market is that?

    First time buyers can’t get in? Tim has two days of Posts on how house purchasing is more affordable than at almost any time since 1993.

    Financing is about as easy as its ever been, excepting for the period where everyone on this blog agrees it was unacceptably reckless. You don’t want to go back there. Some people shouldn’t get financing. Most can.

    Some people can’t sell, true. But most can choose not to. Just as a few years ago, many could choose not to buy. Do you not recognize the symmetry?

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  31. 31
    whatsmyname says:

    By No Name Guy @ 9:

    What we have here in analogous to pilot induced oscillations in aircraft. Each time the pilot (Bernake, Obama, Congress, etc) try to fix the last oscillation with a counter input, they just make the next oscillation even bigger, they then try and fix that one, causing yet a bigger one, etc, etc, etc. What my flight instructor taught me was to just hold the stick steady and it’ll damp itself out in just a bit.

    What did your flight instructor suggest when you were about to collide with a buiding or another aircraft?

    bad our financial overlords can’t seem to understand that this same principal applies in finance and economics. Let the insolvent go bankrupt (e.g. no bail out’s, no ZIRP, no mortgage mods, no stimulus, etc). Sell off the distressed assets at the then (much lower) market price. The bad debt is wiped away, the zombie assets are freed up for productive uses, the market prices are reset to a level that will clear inventory and THEN a “normal” market can continue.

    When you don’t know much about something, it frequently seems as if there isn’t much to know. Bad debt isn’t something you just wash away to leave a clean economy. There are many places where your prescription is as real as it is obvious. We typically refer to those places the “third world” or “undeveloped countries”.

    , how can we expect this from the current crop of loser boomers that are in charge – the “me” generation has never known hardship and they’ll be darned if they’re going to start now – better to kick the can down the road and let the X-ers, Y’s and Millennial shovel up the cow dung the boomers sprayed all over.

    Dang boomers, livin’ the easy life with no flight instructors puttin’ the hurt on ‘em. By the way, that’s not cow dung sprayed all over. Evidently someone removed your diapers prematurely.

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  32. 32
    Flo says:

    Who said it’s a flat market? Low inventory precedes price appreciation and all the charts are trending up. If at the end of 2013 prices are up a couple % yoy, then we can talk about a flat-ish market

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  33. 33
    Erik says:

    RE: Flo @ 32
    Tim did. Tim said so and we trust his judgement. Quit second guessing him. I did and I regret it. You can try to use all the power in your brain power, but I would still bet on Tim.

    It would be like getting in a fight with a big gorilla. Yeah, maybe you have a knife in your boot. Maybe you have been hitting the weights real hard and you got all your rest. Take his advice as fact and stop overthinking it.

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  34. 34
    Eleua says:

    I’m looking at that graph and spitballing some conclusions.

    Current new listings are below what they were in the go-go years.
    Current new listings are WAY below what they were in the bust years.
    The trend is down.

    So, it looks like people are sitting on losses and not forced to punt (as Plymster says about the banks). There may be buyers but there isn’t money – big difference.

    Smells like demand destruction, and that is with dropping interest rates and Uncle Sugar co-signing just about every bit of MBS out there. They can’t generate true demand. This market is a corpse with a blood transfusion.

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  35. 35
    ARDELL says:

    RE: Eleua @ 34

    E!!!!!!!!!!!!!!!!!!!!

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  36. 36
    Eleua says:

    @Ardell,

    How are things? Believe it or not, I bid on a house in November. Crazy times…

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  37. 37
    Ron says:

    RE: whatsmyname @ 30

    “Some people can’t sell, true. But most can choose not to.”

    I agree and i think that a fair majority of homeowners in Seattle are busy living life and know that selling now at the bottom of a cycle ain’t such a good idea although arguably, this isn’t the bottom of the cycle. A lot of people think it is though and it influences their behavior. After prices rise, I expect that many would sell and move on to whatever is next…
    Ron

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  38. 38
    whatsmyname says:

    RE: Eleua @ 34
    Hope springs eternal. I am so pleased to see you back.

    Still, I must contest your theory of demand destruction. As with Marc’s post #6, we are seeing many complaints about losing houses in multiple bidding scenarios with lots of bidders (20 in that particular case). This is not lack of demand/money. As you state yourself, it is listings that are lacking.

    Why is that? Well, let’s hark back to 2008. We’ve passed the point of inflection. On one side, price movement has turned the wrong way. Would-be transaction principles see rapidly ballooning competition for fewer and fewer partners, as those potentially on the other side of the trade recognize that their advantage is in waiting and riding the price trend.

    Is there any reason for that mechanism to work differently in 2013? The weakest homeowners are already washed out. Marginal players have staying power, and stronger (or at least more immediately compelling) financial incentives than their buyer counterparts of 5 years ago. Who wants to be an f’d seller, snatching defeat from the jaws of victory?

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  39. 39
    ARDELL says:

    RE: Eleua @ 36

    Was it on one of those islands where you have to take a ferry to civilization? :)

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  40. 40

    RE: whatsmyname @ 30 – I would explain what you’re noting (relatively high volumes together with low inventory) as follows:

    I think part of the reason people aren’t selling is the average person simply isn’t that tuned into the market. They don’t know about the low inventory situation and how that benefits sellers.

    In the past I’ve said people do seem to follow interest rate news, so that’s been bringing in the buyers. But the news of low inventory isn’t doing the same for sellers, at least to the same extent.

    What those two situations create is buyers coming in and eating up the halfway decent listings that come on the market, but not enough new listings coming on to make up the loss of inventory. There’s no way to know what the volume would be like if the inventory was “normal.”

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  41. 41
    softwarengineer says:

    RE: Erik @ 25
    Apparently It isn’t Just Homes

    Without steller credit, ya can’t buy a new car on loan payments. Apparently the short sellers of the past are discovering this too….but hey, ya can buy used one for what I paid new and I’ll drive free.

    I just saw a 3 year old Honda with 50K on the odometer and they want $22K…yes I said Honda.

    I’m driving my new American engineered car for 50K too and ask what I paid new [the dealers are offerring me what I paid for it now, at a 1 1/2 yr old with 20K] ….I’m just like the Seattle home sellers “over-pricing” with multiple offers…LOL

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  42. 42
    Erik says:

    RE: softwarengineer @ 41
    Yeah, good credit rules right now. I am paying Lexington Law $100/mo to repair my credit after my short sale so I can reap the benefits of someone responsible. I figure I have 3-5 years of low housing prices and low interest rates to buy some more real estate before prices go up. A new car would be nice, but i’d rather have another house.

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  43. 43
    Plymster says:

    Interesting that everyone (except for Eleua and a handful of others) sees buyers being “brought in”. I see Closed Sales roughly in line with historical norms (http://seattlebubble.com/blog/wp-content/uploads/2013/01/KingCoSFHClosed2012-12-600×401.png), while interest rates are at historical lows, inventory is at all-time lows, and unemployment is near multi-decade highs. All the while there is an unprecedented level of institutional investment and speculators chasing homes with all-cash purchases.

    Meanwhile, I read complaints from RE agents that first-time buyers have shriveled up and died (http://economistsoutlook.blogs.realtor.org/2012/10/31/first-time-buyers-32-percent-of-residential-buyers-in-september/), and the percentage of first time buyer purchases have gone from ~39% to 32%. This appears to be happening in virtually every major market west of the Mississippi. The housing market is (once again) advancing without a foundational element of its economic ecosystem.

    That says speculative mania to me.

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  44. 44
    HappyRenter says:

    RE: softwarengineer @ 41
    Could it be that it’s just cultural? Things simply don’t depreciate in America?

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  45. 45

    RE: Kary L. Krismer @ 40 – I don’t think so, Kary, if I understand you correctly. People aren’t putting their houses on the market because they don’t realize they could sell them quickly? Maybe it’s because I’m in the industry, but it seems to me that most people know that there’s very little for sale. I don’t know for sure why the inventory is so low. But a lot of people did buy houses in ’06-’07, and many of those people are still underwater, so can’t sell their homes without bringing money to the closing that they don’t have. Plus I’m a little more paranoid than that, and think maybe there were stormtroopers/Mafiosi from the NAR threatening people late at night to not put their homes on the market.

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  46. 46

    RE: Plymster @ 43 – Bizarre, but NAR surveys get results that sometimes cannot be explained.

    My complaint, and the complaint I’ve heard from other agents, is the lack of move up buyers. Move up buyers are better for agents because it will frequently involve two transactions.

    And connecting up to what I said in post 40, I would attribute that to existing home owners not being that in tune with the market. Many probably still think selling their existing house would be hard.

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  47. 47

    By Ira Sacharoff @ 45:

    Maybe it’s because I’m in the industry, but it seems to me that most people know that there’s very little for sale. I don’t know for sure why the inventory is so low.

    People who are currently buying know that. People who are currently selling know that. Readers of Seattle Bubble know that. But ask someone you know who isn’t in one of those categories. When people ask me about the market and I mention the low inventory, the response is usually surprise.

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  48. 48
    Haybaler says:

    RE: Plymster @ 43
    This brings up a potential answer to my question posed to Tim in the submit ideas box.

    Corporate investment in single family homes for investment is reportedly a growth niche. Billions of Hedge fund and Retirement fund money pooled to buy homes nationally.

    Perhaps that money is filling the gaps between the (weak) retail owner occupant demand and the supply of housing being offered?

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  49. 49

    RE: Haybaler @ 48 – I think I posted a link last week to the billions being invested that way. Google for a story last week.

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  50. 50
    The Tim says:

    By Plymster @ 43:

    Meanwhile, I read complaints from RE agents that first-time buyers have shriveled up and died, and the percentage of first time buyer purchases have gone from ~39% to 32%. This appears to be happening in virtually every major market west of the Mississippi. The housing market is (once again) advancing without a foundational element of its economic ecosystem.

    Oh crap! Without the first time buyers, the “sales activity pyramid” will collapse!

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  51. 51
    David Losh says:

    RE: Haybaler @ 48

    That’s been discussed, and bulk buyers are getting good deals.

    They bundle the rental returns and sell those returns to investors.

    We’ve seen it before, and these big players make management another problem. I think most of these bulk purchases promise to keep the properties as rentals for three to five years, after that they can sell, consolidate, and buy into, or build bigger complexes, or buildings that are easier to manage.

    I look at it as good news for buyers, and home prices in the future, but yes, it may well sop up inventory today.

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  52. 52
    Haybaler says:

    RE: David Losh @ 51RE: Kary L. Krismer @ 49

    Yes Kary, I saw your post. What caught my eye in Plyms post is his spread of 7% between previous First Time purchasers and current. It may mean nothing but its the first statistic that I’ve seen anybody write (and I don’t know where he got it from) that I could imagine might be attributable to corporate purchases.

    Sure David, Corporate purchases will support the market to some extent. My burning question is How much of the local market do they eat up?…and by extension, if the corporate investors weren’t buying SFD’s then what would the market look like?

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  53. 53
    Plymster says:

    RE: The Tim @ 50 – LOL! That’s not exactly what I’m getting at. It’s not so much a pyramid as it is a “circle of home-buying”. With first time buyers being pushed out of the market, you end up with more homes on the back end (from folks who are last-time sellers, generally retirees). Without first-time buyers, you don’t get repeat business, and the entire chain withers away (sort of like antelope dying on the savanna – eventually the buzzards and the hyenas go hungry).

    RE: Haybaler @ 52 – It may mean nothing but its the first statistic that I’ve seen anybody write (and I don’t know where he got it from) I got it from the NAR in the link I included up above. They set the number of first-time home buyers as typically 40%, but I read another article that set it at ~39% traditionally (I’m afraid I don’t have the link handy), so I chose the more conservative number I’d seen thrown around, since the NAR chart only goes back to 2009, and they are notorious for being “truth benders”.

    I think this is the “demand destruction” that Eleua is referring to, but he’s a smarter man than I am, so he easily may be referencing something invisible to me.

    Institutional investors in single family housing is new in such a large scale. I’m curious what the ramifications will be for hedge funds (who typically require relatively liquid assets) getting ensconced in the housing market. What happens to an illiquid home owned by a defunct hedge fund and transferred to someone who wants or needs cash immediately? Will this create a secondary market where homes are bought, sold, and transferred on the “open” market? Or will some TBTF hedge fund collapse and force the Fed to come in and purchase more of the housing market? Between the Fed and the GSEs, they already own the lion’s share of the mortgage market.

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  54. 54
    Blurtman says:

    RE: Ira Sacharoff @ 45 – This had been discussed, but perhaps not lately. The rate of job hopping moves has likely slowed, meaning a related decrease in turnover.

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  55. 55
    David Losh says:

    By Eleua @ 34:

    I’m looking at that graph and spitballing some conclusions.

    There may be buyers but there isn’t money – big difference.

    Smells like demand destruction, and that is with dropping interest rates and Uncle Sugar co-signing just about every bit of MBS out there. They can’t generate true demand. This market is a corpse with a blood transfusion.

    I’ve heard this before, but don’t really understand it. All we hear about is low inventory, and multiple buyers for every property.

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  56. 56
    corndogs says:

    RE: Eleua @ 34 – “I’m looking at that graph and spitballing some conclusions”. “Smells like demand destruction, and that is with dropping interest rates and Uncle Sugar co-signing just about every bit of MBS out there. They can’t generate true demand. This market is a corpse with a blood transfusion.”

    I think you got some spitballs in your eyeballs. Sales are up, prices are up. Only a fool talks about lack of demand during record low inventory and steady increased sales. Everything transpiring is consistent with a bottoming of a market. Nothing smells like anything except lost opportunity.

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  57. 57
    corndogs says:

    RE: whatsmyname @ 38 – Whatsmynames one of few people on here with a brain.

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  58. 58
    Erik says:

    RE: corndogs @ 56
    I would expect a larger price increase based on the low inventory. The magnitude of price increases we are seeing doesn’t reflect the level of low inventory we would see in a “normal” market. I think this is what Eleua means by “This market is a corpse with a blood transfusion.” I expect larger price increases with this low of inventory.

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  59. 59
    HappyRenter says:

    By Ira Sacharoff @ 45:

    RE: Kary L. Krismer @ 40 – it seems to me that most people know that there’s very little for sale. … But a lot of people did buy houses in ’06-’07, and many of those people are still underwater, so can’t sell their homes without bringing money to the closing that they don’t have.

    This is also the sentiment that I get when I talk to people who bought homes in ’06-’07 and would like to sell but can’t because they would not nearly get the price they paid for. They end up either staying in the same house or, if their job situation forces them to move, rent it out. On the other hand, I have also heard from people who bought in 2000 or earlier who have been waiting to sell hoping that prices would increase. So, it seems that low prices encourage low inventory. But, for how long is this sustainable? The US economy depends on the real estate market. Am I wrong?

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  60. 60
    corndogs says:

    RE: Kary L. Krismer @ 40 – “I think part of the reason people aren’t selling is the average person simply isn’t that tuned into the market”

    What evidence is there that people aren’t selling? A low inventory is not necessarily an indication that people aren’t selling. When it’s been noted that sales are actually up and short sales are roughly inline with the fraction of underwater buyers, how does that translate to sellers being unwilling or unable to sell?

    Seattle Bubble bloggers are following yet another faulty logic path. First they thought inventory was dependent on foreclosures, now they think it’s dependent on upside down sellers being locked in. There is no evidence for either.

    With home ownership down from 69% to 66% over the course of this downturn, it’s pretty obvious that Joe-Blow homeowner isn’t locking up the inventory. Joe Blow sells, Joe Blow buys or becomes a renter. This big fluctuation in inventory in such a short period can only come from the guy who buys/sells multiple properties. Investors dumped at the top of the market, Investors bought the inventory at the bottom. That’s it. that’s all there is. Joe Blow homeowner is a causality of war.

    Phase 1 of the recovery is complete. The inventory was repurchased by the investors at great prices with cheap money.
    Phase 2 is starting now – Joe Blow starts getting interested when he hears prices are going up. But now there’s a much smaller pie and he’s a renter with messed up credit. Prices escalate, rents escalate and the rich get richer.

    With cheap money, you can cash flow these hamster dumps out till the cows come home. It’s too bad people on here listened to the Tim when he said housing was a bad investment.

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  61. 61
    Eleua says:

    So the theory is that we are at an inflection point and RE is about to commence another leg up, right? That would ‘splain the low inventory and multiple buyers.

    Are prices shooting up, and if so, is it widespread or very localized phenomena over a relatively small sample?

    With interest rates at these levels, any meaningful demand should create a seller’s paradise.

    How would the market react in the face of rising interest rates, which would occur if we had demand outstripping debt supply on higher volume. We have rates plumbing new lows on lower volume. Where is the frenzy that we had in the go-go years?

    Oh, yeah…we are at an inflection point…just as we have been for the last umpteen quarters.

    Zillow is a crude tool, but you can look and see that the pricing trend shows no sign of a sustained march upward, and that is with interest rates in the low 3s. Imagine prices with rates in the mid-5s.

    As long as the rates remain low the prices of the debt remains high, which is where this game is being played. Once rates tick upward, or the quality of the loans cracks (defaults start up again), the value of the mortgage debt all these SUPER BANKS and community banks hold will, once again, crater. Uncle Sugar is propping up the market to keep prices of assets held by banks high to prevent widespread insolvency. Rates can only go so low and with the margins for error of the .gov stopped debt being low, there can’t be any significant default, or its 2008 all over again, but SUPERSIZED.

    We are in a debt bubble and it is why The Fed is having to become the buyer of last resort. There is no organic demand for this stuff. It is all being traded with the guarantee that Uncle Sugar is going to make good on it, which is laughable against the backdrop of the numbers they are racking up. You can raise taxes on the rich to 1000% and it won’t help in that scenario.

    Is there demand for credit? Not with rates where they are. Homes are priced for perfection.

    My anecdotal evidence (not worth anything other than conversation) tells me that people go to market with high expectations based upon all the hype over a stellar market and then start knocking 3/5/10% off the price and still can’t generate any buyers. If the market was as strong as my local deeds peddlar says it is, I wouldn’t have much opportunity to see homes linger in this declining state.

    That being said, my observations are over an area that is considerably more ‘banjo’ than the Lake Washington Basin.

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  62. 62
    ChrisM says:

    RE: HappyRenter @ 59 – “This is also the sentiment that I get when I talk to people who bought homes in ’06-’07 and would like to sell but can’t because they would not nearly get the price they paid for.”

    A fun exercise is to look at neighborhoods where the houses were built post 2004. Almost no listings (except short sales) because they’re all underwater.

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  63. 63
    corndogs says:

    RE: Erik @ 58 – “I would expect a larger price increase based on the low inventory, the magnitude of price increases we are seeing doesn’t reflect the level of low inventory we would see in a “normal” market.”.

    Well, you can expect all you want Erik, but there is no precedent or basis for your assertion, so you’d have to admit you’re talking out your blow hole, right? Price increases in the order of 15% to 30% in a year is very good. With easy money and low inflation, appreciation doesn’t have to be high, but it is. All investments must be judged against the next best alternative. Have you seen a better investment over the last year?

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  64. 64
  65. 65
    Erik says:

    RE: corndogs @ 63
    I am talking out my blow hole. I try to learn based on what others on here say and then I parrot it. When I make statements, I like when people correct me so I can learn. :)

    I think it’s a great time to invest in real estate compared to other investments. I cannot invest in real estate because like some of the other sheep, I bought too high and short sold my house. I cannot buy for about 2 years or I would.

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  66. 66
    corndogs says:

    RE: Erik @ 65 – I appreciate your honesty, you are a good kid, I will put you on my list of people to be nice to.

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  67. 67

    By corndogs @ 60:

    RE: Kary L. Krismer @ 40 – “I think part of the reason people arenâ��t selling is the average person simply isnâ��t that tuned into the market”

    What evidence is there that people aren’t selling?

    I meant in sufficient numbers to maintain inventory at more normal levels, rather than historical lows.

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  68. 68
    softwarengineer says:

    RE: Ira Sacharoff @ 45

    Two Main Reasons

    Banks are scrooges with their money.

    Underwater loans that won’t sell without a short sale.

    BTW, the used car inventory is also SUCKED DRY even worse in Seattle because new insourced folks, CLEARLY causing our current 1.7 depopulation birthrate to overpopulate anyway, ALL WANT CARS TOO….we gave ‘em new cars before and too many went into repossession [I was buying those before on the cheap]….they aren’t anymore.

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  69. 69
    corndogs says:

    RE: softwarengineer @ 68

    “Two Main Reasons, Banks are scrooges with their money, Underwater loans that won’t sell without a short sale.”

    Low inventory is NOT caused by underwater sellers!

    You obviously don’t research anything, you just keep saying the same thing over and over.

    Here’s a negative equity map, look at, compare it to the inventories in the corresponding zip codes.

    http://www.zillow.com/visuals/negative-equity/#10/47.5691/-122.3211

    Mercer Island is only at 7% underwater, most parts north of I-90 are around 10% of the mortgages underwater. Yet, there is no inventory!. In fact, there is higher levels of inventory in the regions in Pierce and Sno County where 45% of the mortgages are upside down! So what you keep saying is a$s backwards and has no basis in fact. Surprise people, come up with a new theory.

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  70. 70
    S-Crow says:

    Today my signature is on a $20K check to a seller who has not paid a dime of the mortgage for around 3 yrs. Said $20,000 is courtesy of the US taxpayer. A couple weeks ago it was $27K plus an additional $3K in HAFA funds to get a “new start.” And that’s just very recent transactions. The idea that this market is anything but heavily “subsidized” is just nuts.

    If banks would like to recover more of their loss they need to start enforcing their DOT Riders regarding investment properties. However, Banks probably don’t want to become landlords and account for collecting the rents that are going into the pockets of the owner who’s chosen to stop making their payments because said “investor/owners” claim they never knew what they signed or that the property would generate negative cash flow even though they were sophisticated enough to verify expenses against income or CAP rates.

    S-Crow

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  71. 71
    Haybaler says:

    RE: S-Crow @ 70 – How the heck does that work?…. A defaulted owner occupant is paid to leave and leave the house in good condition?
    At what stage of the process does that get negotiated? Seriously, I’m very curious.

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  72. 72
    David Losh says:

    RE: Eleua @ 61

    Thank you, that was very well put.

    I talk about mounting personal debt a lot. It is neck, and neck with the government debt.

    You’re right to point out we have a debt bubble, and nowhere near a normal debt market. It seems to be global, so I don’t see how the market will find equilibrium.

    People point out Japan had 0% interest, but that was isolated.

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  73. 73

    Would someone please explain to me, as if addressing a kindergartner, exactly why inventory is so pathetically low? Sure, some sellers are underwater, that explains some of it. Prices did drop a lot, so some potential sellers are waiting for prices to rise before they’re willing to put their homes on the market. That explains some of it. But inventory is lowest in those places which dropped the least in price. ‘Splain that.. Are more transactions happening outside of the MLS system, giving the impression that inventory is really low, but it really isn’t quite that low, with deals being made by investors outside of the system? Is it that the economy stinks and people are just holding onto jobs longer with stagnant wages, and aren’t willing to move?
    I have theories, but I don’t really know.

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  74. 74
    ray pepper says:

    About 200 properties go each month at Trustee Sales (in King and Pierce). Upside down Homeowners are getting DEALS OF A LIFETIME to stay in their homes so why list them.(principal is being chopped in 1/2 or MORE and you would have to be BRAIN DEAD to walk away or attempt short sale). Countless people continue to SQUAT in their homes and live for FREE while hindering the foreclosure process in hundreds of ways. Equity evaporation made millions of people TRAPPED in their home with not enough proceeds to sell and buy another. Furthermore the sellers know they will NOT be able to buy again for at least 2 years post short sale or BK so why list their home. SHADOW INVENTORY (even 5 homes in my neighborhood) continue to sit and decay until Lenders decide their number is up. There could be countless thousands of homes in Washington State waiting for their same fate…

    There you go Ira…That is a start as to why inventory is so low and will remain that way……..

    One more tid bit of info I found out yesterday at the monthly meeting that surprised me. Many people I know personally, and investors who stopped paying in and around 2007, have rented out their homes or continue to live in them for FREE riding the hamster wheel. Anyway the squeeze has been put on them as of late with Trustee Sale Notices and such. Appears the filing of Chp 7 has a far more delaying effect on the trustee Sale Date then I ever imagined. In the past it was 4-6 months. Appears now it is 2 years plus because the Lender is forced to file all over again and with the backlogs and Lenders being overly cautious the wheel just turns and turns on what appears to be an endless cycle. Imagine so many living a decade in their home for FREE, not paying taxes or insurance, is mind boggling.

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  75. 75
    whatsmyname says:

    By Kary L. Krismer @ 67:

    By corndogs @ 60:
    RE: Kary L. Krismer @ 40 – “I think part of the reason people aren�t selling is the average person simply isn�t that tuned into the market”

    What evidence is there that people aren’t selling?

    I meant in sufficient numbers to maintain inventory at more normal levels, rather than historical lows.

    A certain number of transactions will happen in any market. But on the whole, owners don’t sell in order to maintain normal inventory levels any more than renters buy to maintain normal inventory levels. Inventory levels only find an equilibrium through the mechanisms of price and future expectations. You already know this.

    I agree that a lot of owners aren’t paying much attention to the market. As Ron said, many have adjusted their lives and expectations. They are concentrating on other priorities, and they expect that things are/will turn around. With enough positive (oops, there’s that word) buzz they will start to reevaluate again. In the interim, not very many people are interested in an “easy” sale for less money. They want more money. They are already committed to wait. (Sound familiar bubbleheads?)

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  76. 76
    One Eyed Man says:

    RE: Eleua @ 34

    Eleua says: “Smells like demand destruction, and that is with dropping interest rates and Uncle Sugar co-signing just about every bit of MBS out there. They can’t generate true demand. This market is a corpse with a blood transfusion.”

    Query: Is demand destruction also inventory (supply) destruction in the housing market? There are clearly alot of potential components to demand destruction but there is at least one market dynamic that to my knowledge hasn’t been specifically mentioned, market inertia (as opposed to momentum) and the lack of “animal spirits?” Perhaps some will say these concepts are pure academic theory and just rhetoric, but perhaps academics like Shiller would agree they have some merit. I’m not saying its the “sole cause” but I think its one of the variables in the equation. If Shiller is right and “animal spirits” were part of the reason fools would ignore economic fundamentals and elect to over borrow, over spend and over lend on real estate, isn’t the post crisis perception of risk and fear of loss which translates to a “lack of animal spirits” part of the reason that sellers who aren’t distressed still don’t sell (i.e. why sell and move up if its just going to put you at increased financial risk?).

    If seven years ago the lemmings were running off the cliff because they thought debt financing was the fast track to the American Dream aren’t they largely hunkered down in their rat holes (even the expensive holes in areas like Mercer Island) and too gun shy to make a move now? Once they found out that fundamental valuation eventually matter more than market momentum and fundamentally unsound debt kills both the borrower and lender, the stampede stopped. It will likely take more than a partial retracement of the market collapse to convince people who don’t need to sell that they should increase their potential energy (risk) by going further up the so called property ladder.

    Also, as Ira mentioned, what about lack of job mobility and relocation. Does anybody have any data on relocation? I assume in the early 2000’s people would relocate for work and sell a Seattle area house because of job change. Higher employment numbers probably ment job movement during the boom much more often than now but (like Ira) that’s purely my speculation for which I have no data.

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  77. 77
    whatsmyname says:

    By Eleua @ 61:

    We have rates plumbing new lows on lower volume. Where is the frenzy that we had in the go-go years?

    Check out Tim’s monthly charts. Volume is decidedly up; Best Q4 in 6 years. Things aren’t up unless they match the top extreme? What’s that called, fallacy of the unreasonable comparison?

    , yeah…we are at an inflection point…just as we have been for the last umpteen quarters.

    Really? I didn’t know. I suppose things are moving slowly enough that no one noticed for a while. I will say that I think people who bought in 2011 probably did better than today’s buyer. Of course, if it hasn’t hit your market yet, you should wait until it does; then wait some more. To be sure.

    Zillow is a crude tool, but you can look and see that the pricing trend shows no sign of a sustained march upward,

    Oops, Corndogs got this one.

    is with interest rates in the low 3s. Imagine prices with rates in the mid-5s.

    OMG, the great reset is back. And still not happening. A stronger economy and expectations of inflation will support higher rates, and durable goods will see inflation pricing premiums. Otherwise, I wouldn’t expect to see higher rates. But, OK, This is a risk if the libertarian burn it down and start over crowd takes over. Still, less of a hassle than eating dogs, and hiding from Mad Max.

    I think you’re a little rusty. I look forward to your getting back in shape.

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  78. 78
    Scotsman says:

    Bunker mentality. Deer in the headlights. Frozen in time, trying to make sense of a world that doesn’t follow any of the old rules- indeed, it seems to make up the rules as the game evolves.

    In short, it is a lack of confidence- in the markets, in the future, in the government, in the ability of any entity to articulate and implement a solution that all can agree on that would actually work. The market will freeze until it finally collapses, or confidence in the future and our institutions is restored. Simple as that.

    Caged rat.

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  79. 79
    Erik says:

    RE: corndogs @ 66
    Your words don’t hurt me anyway, so go ahead and bring it on. I am waiting for inventory to increase before I buy another house. I think that’s likely since inventory will likely increase at some point. Losh doesn’t think it will be better by this summer, so maybe next fall.

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  80. 80
    corndogs says:

    RE: Erik @ 79 – “Losh doesn’t think it will be better by this summer, so maybe next fall.”

    For a guy who claims to be an intuitive thinker, it’s sure taking you a long time to realize Losh is idiot savant sans savant.

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  81. 81
    corndogs says:

    RE: ray pepper @ 74 – “Countless people continue to SQUAT in their homes and live for FREE while hindering the foreclosure process in hundreds of ways”.

    It isn’t countless, seriously delinquent accounts are tracked and data shows they are decreasing with time. Shadow inventory overall is decreasing…. so it’s not a factor to explain continual lowering of inventories.

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  82. 82

    By whatsmyname @ 75:

    By Kary L. Krismer @ 67:
    By corndogs @ 60:
    RE: Kary L. Krismer @ 40 – “I think part of the reason people aren’t selling is the average person simply isn’t that tuned into the market”

    What evidence is there that people aren’t selling?

    I meant in sufficient numbers to maintain inventory at more normal levels, rather than historical lows.

    A certain number of transactions will happen in any market. But on the whole, owners don’t sell in order to maintain normal inventory levels any more than renters buy to maintain normal inventory levels. Inventory levels only find an equilibrium through the mechanisms of price and future expectations. You already know this.

    Yes, and I would agree with that. The problem is the lack of what economists call “perfect information.” Sometimes buyers are affected more by that and sometimes sellers. That can cause too few (or too many) buyers or sellers at different points, throwing things out of balance. It’s sort of like the 520 and I-90 bridges. Sometimes the traffic on one gets much worse than the other, because not everyone has GPS traffic devices to warn them.

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  83. 83

    RE: Corndogs @ 80 – If you want to insult Losh, you cannot use big words. Unfortunately, simple words are also over his head, but you clearly cannot use big words.

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  84. 84
    corndogs says:

    RE: Ira Sacharoff @ 73 – Would someone please explain to me, as if addressing a kindergartner, exactly why inventory is so pathetically low?

    Dick is a homeowner.
    Dick sells his house. Dick buys a new house. In total Dick adds one house to the inventory for just a 2 month period. This is how long it took for Dicks old house to sell.

    Jane is an investor.
    Jane buys houses when it is extremely beneficial to do so. When the time is right Jane buys 3 houses. Jane doesn’t sell her houses ever because the cost of transaction is prohibitive and she enjoys the stream of earnings that her houses provide. Jane does not contribute to the inventory. Jane permanently removes 3 houses from the pool of homes potentially available to homeowners like Dick.

    Since Janes choice to buy is based on analytic data available to all other investors, the other investors tend to make the same decision as Jane at the same time. So they also buy 3 houses or as many as they can afford. When there are no more houses left to buy homeowners like Dick have to compete with each other for the remaining homes. This causes prices to go up and up. Those who successfully compete remain homeowners, those who don’t rent from Jane.

    During this time home ownership drops from 69% to 66% as Dicks friends become renters.

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  85. 85
    David Losh says:

    RE: Kary L. Krismer @ 82

    I’m starting to get this. You call me out with insults so you can have another fifty comments on a thread.

    Let me let me dumb this down for you and your very good buddy corndogs, because you are two peas in a pod.

    If you look at the over all debt markets who wants to buy thirty year mortgages at 3.5% when there is a risk of default.

    If we don’t have hyper inflation there is really no point to having a debt load.

    If you don’t have cash, you don’t have money, and many people have used this time between 2008 to 20012 to build cash that we are seeing in the Real Estate market place.

    What that means is that the consumer, those who are buying properties retail today are very nervous, and picky about what they buy. The only thing the buyer pool is promised is to pay less for a mortgage payment than they would on rent.

    Let’s say that savings on rent is $1000 a month, that’s $12000 per year. On a $400K purchase that rent savings is about a wash, so after thirty years they get to keep the property, and sell it.

    Thirty years is a long term hold without much upside, so why do that?

    It’s the same for sellers, there is no upside to selling. It’s a lateral trade with fees involved.

    If you look at the numbers renting is looking pretty good right now.

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  86. 86
    David Losh says:

    RE: Corndogs @ 84

    Well, that makes absolutely no sense, and the renters end up reaping the benefits of Jane’s hard work, good for them.

    OK, BTW, I did paint the front of my house, and put on a new roof, at your suggestion, so in your opinion did my property go up, up, up in value or price?

    Here’s what happens in your scenario. Jane finds out rentals take effort, work, and some money. Renters are hard on properties, and if Jane doesn’t keep up, she loses renters, and the property turns to poop.

    Actually that’s already happened to a lot of long term hold rentals, that now are just cash flow.

    Most land lords will tell you, you either have to go big, like twenty units or more, or you have a part time job.

    At twenty units it would probably be smart to convert to commercial properties.

    I think this is good for consumers, and think there are purchases to be made, but they just aren’t very pretty. Retail buyers like pretty.

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  87. 87

    RE: Corndogs @ 84 – Maybe the perception of possible profit is more incentive for investor types to determine what’s going on than whatever incentive exists for sellers who desire to move for one reason or another?

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  88. 88
    wreckingbull says:

    I hear quite a few theories, but no compelling answers. If I were to pick a theory to start proving, I’d start with Ray’s. And no, corndoggie, comparing regional delinquency rates to point-in-time inventory numbers does not tell us anything useful, contrary to your belief.

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  89. 89
    ray pepper says:

    RE: Corndogs @ 84

    Corndog as long as interest rates remain low, along with inventory, we may continue to see an improvement in housing. But, the success of an “investor-driven” recovery going forward is speculative. There must be a resurgence of first-time home buyers that have good-paying jobs who plan to live in these homes thereby stabilizing both the housing market and the neighborhoods where they live.

    As quoted from CBS:
    “There’s a whole new form of shadow inventory, driven by investors who have been snapping up homes as prices bottomed out, but have not yet put those homes back on the market to buy or rent. Add to that the homeowners that want to sell but are waiting for their homes to increase in value and you have a potential glut of new homes that, if they suddenly come on the market at the same time, could potentially derail the housing recovery.”

    Buying into this current market and engaging in bidding wars because of LOW INVENTORY and LOW RATES will bite these new home owners in the ass down the road. We may see another EPIC round of foreclosure activity from people who bought in 2012-2014 when properties begin to decline again and we have another EPIC batch of upside down homeowners. In the end THEY ARE ALL COMING BACK, one way or another, and in the face of this new “mini bubble” BUYER BEWARE because interest rates, taxes, home construction, and cost of home ownership are all going up and you don’t want to become a bagholder again do you?

    Mimimize your losses friends. Trustee Sales going forward friends and let the retail players scrounge for short sales and Gems on the MLS while they engage in their bidding insanity!

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  90. 90

    RE: Corndogs @ 84
    You stated in a previous post refuting someone’s theory, that the inventory level of homes for sale was lowest in the places with the least number of distressed property sales, places like Mercer Island. So, have investors come in and purchased homes on Mercer Island to rent them out? Again, I don’t know the answers to these questions, I’m just throwing them out there, but home prices never dropped on Mercer Island to the point where you could rent them out and get a positive cash flow. If investors did buy single family homes on Mercer Island to rent them out, did they do so for cash flow or simply because they’re convinced that subsidizing their losses every month will be rewarded once they sell at much higher prices in a few years?

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  91. 91
    corndogs says:

    RE: David Losh @ 85 – “Let me let me dumb this down” I think, I think, I think you did.

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  92. 92
    Erik says:

    RE: Corndogs @ 80
    Ha ha ha. Whoa corndogs. I restated his statement to see if there is another opinion out there. Obviously there is.

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  93. 93
    David Losh says:

    RE: ray pepper @ 89

    Really well put.

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  94. 94
    corndogs says:

    RE: ray pepper @ 89 – “But, the success of an “investor-driven” recovery going forward is speculative”.

    I didn’t say it was sustainable, I just said that’s the reason that the inventory is low. You don’t seem to disagree with that.

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  95. 95
    corndogs says:

    RE: wreckingbull @ 88 – “comparing regional delinquency rates to point-in-time inventory numbers does not tell us anything useful”

    It isn’t regional delinquency rates you bone head. It’s an estimation of the percentage of mortgages underwater in a particular zip code compared to the inventory in that zip code. Think before you puke!

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  96. 96
    corndogs says:

    RE: Ira Sacharoff @ 90 – “You stated in a previous post refuting someone’s theory, that the inventory level of homes for sale was lowest in the places with the least number of distressed property sales, places like Mercer Island.”

    I wasn’t trying to prove any correlation, I was proving that there is no correlation, between Inventory and underwater mortgages.

    I said that Mercer Island has only 7% of mortgages underwater and it has lower months of inventory than many other areas with 45% of mortgages underwater. This calls into question whatshisgoober who says inventory is caused by underwater homeowners who can’t sell. I like to say ‘Correlation doesn’t prove causation’. In his case he doesn’t even have correlation so his theory blows.

    I think if underwater homes went to zero, he’d still be on here saying that… eventually, hopefully, it will stop.

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  97. 97
    Macro Investor says:

    By corndogs @ 96:

    RE: Ira Sacharoff @ 90 – “You stated in a previous post refuting someoneâ��s theory, that the inventory level of homes for sale was lowest in the places with the least number of distressed property sales, places like Mercer Island.”

    I wasn’t trying to prove any correlation, I was proving that there is no correlation, between Inventory and underwater mortgages.

    I said that Mercer Island has only 7% of mortgages underwater and it has lower months of inventory than many other areas with 45% of mortgages underwater. This calls into question whatshisgoober who says inventory is caused by underwater homeowners who can’t sell. I like to say ‘Correlation doesn’t prove causation’. In his case he doesn’t even have correlation so his theory blows.

    I think if underwater homes went to zero, he’d still be on here saying that… eventually, hopefully, it will stop.

    Dog boy, I think enough people have answered your question. You can flake off now — you got your lulz from folks who don’t understand about feeding trolls.

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  98. 98

    By ray pepper @ 89:

    RE: Corndogs @ 84

    But, the success of an “investor-driven” recovery going forward is speculative. There must be a resurgence of first-time home buyers that have good-paying jobs who plan to live in these homes thereby stabilizing both the housing market and the neighborhoods where they live.

    You’re sounding like the stereotypical politician from about 1980 to 2007: “We need more people buying homes. Renters suck!”

    There’s a fairly significant percentage of the population that is better off renting for a number of reasons, or would just prefer to rent. I’m not sure why the housing market would care if those people rent a house or buy a house. Either way, someone owns the house and someone is living in it.

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  99. 99
    Erik says:

    RE: ray pepper @ 89
    I agree, this makes a lot of sense. I would love to buy a trustee sale house. I do not buy a trustee sale house because it requires all cash and I don’t have that kind of cash on hand. How do I buy a trustee sale house without paying all cash? Is there a way to get a loan for this sort of thing?

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  100. 100
    whatsmyname says:

    By Erik @ 33:

    RE: Flo @ 32
    Tim did. Tim said so and we trust his judgement. Quit second guessing him. I did and I regret it. You can try to use all the power in your brain power, but I would still bet on Tim.

    It would be like getting in a fight with a big gorilla. Yeah, maybe you have a knife in your boot. Maybe you have been hitting the weights real hard and you got all your rest. Take his advice as fact and stop overthinking it.

    Pure gold.

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  101. 101
    ARDELL says:

    RE: corndogs @ 96

    Usually “underwater” is a term used only relative to the loan amount. There are many owners who paid more than their home is worth today.

    Just because they “can” sell it at their loss vs the bank’s loss, doesn’t mean they are more willing to sell it just because it is their loss and not “short” of the liens on the house. In fact, usually the opposite is true.

    People with skin in the game are more likely to stay or rent their home than those who are truly “underwater”, meaning the loss will be their lender’s loss vs their personal loss of all or part of the down-payment they made at time of purchase.

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  102. 102

    By Erik @ 99:

    RE:
    I agree, this makes a lot of sense. I would love to buy a trustee sale house. I do not buy a trustee sale house because it requires all cash and I don’t have that kind of cash on hand. How do I buy a trustee sale house without paying all cash? Is there a way to get a loan for this sort of thing?

    There’s more than just financing issues. Unless the house was listed for sale prior, you’d likely be buying it totally sight unseen, unless you could somehow get the prior owner to let you check it out. But even if it checks out fine, the owner does not have to be out right away, and if it’s a tenant, they typically have even longer they can stay in possession (and the new owner collecting rent may be problematic, even assuming there is the legal need for the tenant to pay anyone rent). They could purposefully damage the property on their way out, because of course the fact that they had their property foreclosed was 100% the bank’s fault. /sarc

    There are also some odd situations sometimes where the foreclosure gets contested. The ones I’ve seen are where the owner files bankruptcy right beforehand, doesn’t let anyone know, and the sale occurs. Sometimes the bank has an argument that the bankruptcy wasn’t effective to stop the sale, and that might take some time to sort out. I’m not sure what the buyer’s rights to back out are in that situation.

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  103. 103

    RE: ARDELL @ 1 – That is an interesting human trait. Assuming two houses are both owned free and clear, it’s usually easier to negotiate a 5% reduction in price from someone who is making money on the sale than from someone who is losing money. If they’re making a lot of money (e.g. they’ve owned for over 20 years), it may be very easy.

    You see the same thing in the stock market, where people who could sell for a gain are more likely to sell on certain news than people who would be selling at a loss. It’s the same news and same stock in both cases, but it’s easier to terminate ownership in something at a gain than a loss.

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  104. 104
    corndogs says:

    RE: Macro Investor @ 97 – “Dog boy, I think enough people have answered your question.” Corndog didn’t ask a question numb nuts. What are you talking about?

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  105. 105
    corndogs says:

    RE: ARDELL @ 1 – Very true, That’s why credit scores are BS, what we really need is for people to have skin in the game.

    The point I made is that people with mortgages underwater, who ‘allegedly’ CAN’T sell, according to @software engineer, are not the cause of low inventory. The fact is they CAN sell and they are selling.

    There is no correlation showing that people who owe more than their house is worth are causing low inventory. The opposite appears to be true.

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  106. 106
    Howard says:

    By Erik @ 99:

    RE: ray pepper @ 89
    I agree, this makes a lot of sense. I would love to buy a trustee sale house. I do not buy a trustee sale house because it requires all cash and I don’t have that kind of cash on hand. How do I buy a trustee sale house without paying all cash? Is there a way to get a loan for this sort of thing?

    Easy financing.. quicker approvals than a conventional loan.

    I am sure there are a lot more than you can find online, but if you just google trustee auction loan funding you will have a bunch to check out..

    Generally

    10-20% down, 12% annual interest, 1-2 points. All depends on your credit & if you are a owner occupy/flip/investor

    I have been using Datasnap Foreclosures for my data feed. Don’t use Vestus, they want to collect their broker’s commission. Matt and Datasnap is also an auction lender.

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  107. 107
    ray pepper says:

    RE: Kary L. Krismer @ 102

    Kary, using your own words…You don’t know what you don’t know! Financing is the biggest stumbling block. 20% cash down. Credit about 640 so you can refi out of the 12% (escape plan) in case house doesn’t sell because hard money loans are less then a year. Enough time for a flip if you may.

    Using Vestus or Datasnap and paying them ANYTHING is absurd but you will learn that after the dog and pony show dinners.

    Kary, this is absolutely incorrect: **you’d likely be buying it totally sight unseen, unless you could somehow get the prior owner to let you check it out**
    Over 90% of the time the owner is long gone. The homes are vacant. You should never buy a home that you do NOT get inside. Furthermore. The astute investor does NOT buy homes that have tenants living in them. Some of our partners do buy tenant/owner occupied homes, offer cash for keys, and you will be shocked how fast they are out for $2000 and a U haul paid day. They do this only after long conversations with the “concerned” tenant/owner of what is happening prior to the sale.

    I have never seen this in 13 years: “There are also some odd situations sometimes where the foreclosure gets contested”….Yes, and a Cult could move into the home the day of the trustee sale while your bidding as well ….because Kary………….anything could happen anywhere…and I remind everyone…Buying Trustee Sale properties is far easier then any conventional purchase….Do your DD and find out!

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  108. 108
    ARDELL says:

    RE: Corndogs @ 105

    No arguments on the credit score issue. I literally stood up in the real estate office and screamed out loud the day FICO scores became the be-all; end-all “measure of a man”. Unfortunately I was the only one standing up and screaming…me being the only East-Coast-Crazy Italian lady in the Manhattan Beach CA real estate office at the time. Everyone else, and most people everywhere, were completely unaware of the implications long term.

    On your 2nd and 3rd paragraphs…I’ll mix a little Ray Pepper and David Losh in there.

    You say “There is no correlation showing that people who owe more than their house is worth are causing low inventory. The opposite appears to be true.” Yes and no, and I agree with you. But Ray is also correct that for someone underwater, staying as long as the Powers That Be will let you, is the better result for that family. Still…there’s an end of the road, which makes your statement true, whether it’s sooner or later is the only question.

    Now to David’s mantra as to “where are the agents to knock on the door and find out if someone is wanting and willing to sell?” It’s a bit unfathomable for people outside of the industry to understand that someone might think about selling all day every day, but not act on that until a real estate agent knocks on the door and shows them the way. Same with buyers who wander into Open Houses forever without someone showing them how to go from “I like this” to “getting it on paper”.

    I am like Kary with regard to the latter. I never talk anyone into the idea of buying or selling unless they happen upon me and ask me to help them buy or sell. I don’t go out “looking for business”. I wait for people to come to that conclusion as to the idea of buying or selling, and then call me to assist them in that regard.

    BUT I work my butt off getting the house ready to sell, and most agents won’t do that anymore. Part of low inventory are the agents who won’t roll up their sleeves and help someone get the house ready for market. Let’s say you want to move, but you have a messy house. Lots of people in that category. Easier to stay than to do all that is necessary to get behind fifteen 8 x 10 color glossies of your mess showing up on the internet. It’s like asking a girl to take their profile pic on a bad hair day.

    Letting someone stick a sign out front in the old days was easy. One black and white photo of the front of the house in a real estate office “no one is allowed to have this” mls book. Today the decision to be on market involves your mother 1,000 miles away seeing your dirty underwear on the floor on the internet. All of your co-workers, including your boss, seeing just how good of “an organizer” you are NOT when it comes to your own home.

    David is right. While I will move heaven and earth and spend day after day getting reasonably nice photos of a reasonably nice house, I will not do one thing to help someone who “maybe wants to sell” reach the conclusion to actually DO it. I will say…well call me when you are sure about what you want to do, and I will help you with all the hard part of that decision. I will NOT “sell them on the idea” to sell their home. David blames low inventory on that, and he is clearly correct. What % of the market is that? Add them all up and you have low inventory.

    Now add that the goofy claims of low inventory do not account for the increased number sold. Someone is striking a day to count the inventory without including the 30 days prior of things that came on market and went pending. The numbers would not be nearly as OMG if you didn’t ONLY count what was left on the table after the good stuff was all picked out and sold. That’s like the guy who cries there no Halloween Candy left on the shelf at 7 p.m. on October 31st.

    Last but not least, EVERY YEAR for 23 years, in 4th Quarter and early 1st Quarter, I hear much whining and chest pounding about “low inventory”. If you want to be in a house by the end of January or end of February and start looking in November….no matter what year it is…you are going to have to deal with slim pickings, over-priced homes and at least a 70% chance that you will buy the wrong house in the wrong place at the wrong price.

    Off to work to get one more piece of inventory ON market for the good of the Country. :)

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  109. 109
    wreckingbull says:

    By ray pepper @ 107:

    RE: Kary L. Krismer @ 102

    I have never seen this in 13 years: “There are also some odd situations sometimes where the foreclosure gets contested”….Yes, and a Cult could move into the home the day of the trustee sale while your bidding as well ….because Kary………….anything could happen anywhere…and I remind everyone…Buying Trustee Sale properties is far easier then any conventional purchase….Do your DD and find out!

    I am sure it is rare. That being said, this exact thing is going on with my neighbor. He is in year 3 of the fight. He won last year, but it was apparently appealed. Next hearing is in six months. It has cost him a fortune. I don’t know any more details, other than if you look up his parcel, it is still in the old owner’s name.

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  110. 110
    Howard says:

    By ray pepper @ 107:

    RE: Kary L. Krismer @ 102

    Using Vestus or Datasnap and paying them ANYTHING is absurd but you will learn that after the dog and pony show dinners. anywhere…

    Datasnap no longer is operating under that method.. $50 a month, no strings attached. Easier than dealing with scamming off of Vestus. Liberty Capital will provide access if you are “true” investor.

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  111. 111
    One Eyed Man says:

    RE: Erik @ 99

    “How do I buy a trustee sale house without paying all cash? Is there a way to get a loan for this sort of thing? ”

    Lenders outside the traditional market place are available and known as “private lenders” if you like them and “hard money lenders” if not. If you’re willing to spend your fridays at the sales for about 6 months trying to be a winning bidder without taking absurd risks, after doing all the leg work and trying to learn all the risks of buying at a trustee’s sale, then you can wheel your wheelbarrel that you’ll need to move your big brass balls down to Zeke’s on Lake City Way and talk to Guido in the back booth. (Actually he probably has an office in a building in Bellevue, Kirkland or downtown Seatlle these days.) You’ll save money on the appraisal, cause Guido probably just does a drive by, but his origination fee is a few points higher than the commercial lenders and the loan term is probably only 6 months to a year so you’ll need to re-fi as soon as you can. And Guido might need you to set up an LLC (if he’s smart and has a good lawyer) and for you to warrant and represent that you are getting the loan for business purposes, cause he probably doesn’t provide Truth in Lending Act Disclosures that would be required for a non-business loan and might need to charge some kind of fees that would appear to violate residential consumer lending laws and maybe usury laws and be generally more repugnant in a “non-business” setting.

    Jillayne cited an article (I think on last weekend’s open thread) about two guys in Kirkland (licensed real estate brokers) who used to work for Vestus (a big player in the “we help you buy foreclosures” space) and now do hard money lending and help people buy foreclosures. Apparently they paid some aging Viet Nam Vet less than half the fair market value of his house to keep it from going to tax foreclosure. Ironically the Vet who I believe was over 65 years old could have probably stopped the tax foreclosure directly with the county due to his age and without paying until his death or sale of the property. They are now being sued by a prominent Seattle attorney in the consumer and foreclosure fairness area. Consider that if you used them to buy that house you might now be caught in the middle of a costly lawsuit, as a witness if not a party.

    If you default on your hard money loan they may use the normal foreclosure process, but the process might be slightly different than the normal collection procedure. They may have sold your loan to someone outside the normal secondary market. And you might get a visit from Joey’s Kneecap Collections. Joey probably don’t post a Notice of Default, and there may be a very minimal risk that the late payment penalty may involve your left nut (although most people say those days went out with Jimmy Hoffa and J. Edgar – it is perhaps possible that these things are under reported cause who wants to explain their missing anatomy to the officer taking the police report).

    You should check the article Jillayne posted the link to if you’d like to find a hard money lender and get a feel for the risks in dealing with them. Here are some other articles about people known to have been in that business on a bigger scale involving real estate developers (aka Mike Mastro and Tom Hazelrigg III):

    http://www.bizjournals.com/bizjournals/search?q=Thomas+Hazelrigg+III

    http://www.dfi.wa.gov/sd/orders/S-09-003-11-CO02.pdf

    Caveat: I think that there are legitimate hard money lenders out there (I represented one when I practiced law) who follow the law but they are in that market to make higher than normal returns on their money, and lender is one more thing you’ll have to research in order to limit your risk.

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  112. 112

    By ray pepper @ 107:

    RE: Kary L. Krismer @ 102 -Kary, using your own words…You don’t know what you don’t know! Financing is the biggest stumbling block. 20% cash down. Credit about 640 so you can refi out of the 12% (escape plan) in case house doesn’t sell because hard money loans are less then a year. Enough time for a flip if you may.

    I didn’t attempt at all to rank the potential issues. I just pointed out that there are other issues. But in any case, I knew the general terms of this type of loan. I recently checked into it for a client.

    *you�d likely be buying it totally sight unseen, unless you could somehow get the prior owner to let you check it out**
    Over 90% of the time the owner is long gone. The homes are vacant. You should never buy a home that you do NOT get inside. Furthermore. The astute investor does NOT buy homes that have tenants living in them. Some of our partners do buy tenant/owner occupied homes, offer cash for keys, and you will be shocked how fast they are out for $2000 and a U haul paid day. They do this only after long conversations with the “concerned” tenant/owner of what is happening prior to the sale.

    I guess I don’t know what I don’t know! Prior to the foreclosure sale the bank cannot let you in. Only the owner would have that right. So just how do you propose getting inside to see a house if it’s not through the owner? Please keep it to legal methods. ;-)

    I have never seen this in 13 years: “There are also some odd situations sometimes where the foreclosure gets contested”….Yes, and a Cult could move into the home the day of the trustee sale while your bidding as well ….because Kary………….anything could happen anywhere…and I remind everyone…Buying Trustee Sale properties is far easier then any conventional purchase….Do your DD and find out!

    That is exactly the problem. Real estate agents only tend to see transactions where things go smoothly. The ones where something odd happens are rare. An attorney, on the other hand, sees mainly only the problem situations. I saw problems like that a lot in my 20 years of practicing bankruptcy.

    The thing is though, that when it’s the individual buyer, it doesn’t really matter that something bad only had a 1% chance of happening. If it happens to them, it’s bad.

    I’ve gone to one of those buying at foreclosure classes before–the ones aimed at agents and buyers. I don’t remember the name of the company, but their ignorance of the issues was staggering. They couldn’t even answer simple questions asked of them by other agents attending.

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  113. 113

    By wreckingbull @ 9:

    By ray pepper @ 107:
    RE: Kary L. Krismer @ 102

    I have never seen this in 13 years: “There are also some odd situations sometimes where the foreclosure gets contested”….Yes, and a Cult could move into the home the day of the trustee sale while your bidding as well ….because Kary………….anything could happen anywhere…and I remind everyone…Buying Trustee Sale properties is far easier then any conventional purchase….Do your DD and find out!

    I am sure it is rare. That being said, this exact thing is going on with my neighbor. He is in year 3 of the fight. He won last year, but it was apparently appealed. Next hearing is in six months. It has cost him a fortune. I don’t know any more details, other than if you look up his parcel, it is still in the old owner’s name.

    There’s also that case that the Washington Supreme Court decided last year. I cannot remember the name, but that went on for a few years and in the end the buyer lost out.

    I had one once take a couple of years going through the courts.

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  114. 114

    By One Eyed Man @ 11:

    Caveat: I think that there are legitimate hard money lenders out there (I represented one when I practiced law) who follow the law but they are in that market to make higher than normal returns on their money, and lender is one more thing you’ll have to research in order to limit your risk.

    Even if you find a “legitimate” hard money lender, you need to determine your exit strategy before you go in. I believe there may be a period of time you have to wait after buying before you’ll be able to get a conventional loan, so that is something you’d need to check out. If you get locked into 12% interest and 2% loan costs for a period of six months, that’s something you should know before you buy, not after. Maybe it’s still worth it, but maybe it isn’t. I’m just saying determine your exit strategy.

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  115. 115
    ray pepper says:

    RE: Kary L. Krismer @ 114 – Kary again….You just don’t know..

    “you need to determine your exit strategy before you go in”…You the borrower can plan all you want. Day after day you can plan but its meaningless. The Hard Money Lender must qualify you with THEIR Exit Strategy or THEY will not lend you the money. The property, your credit, your 20%, and most importantly THEIR 80% DOES NOT GET LOANED if your EXIT strategy is not approved. They must be able to finance you in a conventional loan in case the property doesn’t sell or YOU GET SQUAT!

    “If you get locked into 12% interest and 2% loan costs for a period of six months, that’s something you should know before you buy, not after”…Kary there is no getting “locked”…You are granted the funds…9 month term with 3 month rider under special circumstances…Pay off loan in less then 60 days? 1 point back!

    “I’m just saying determine your exit strategy.”…Again YOU can determine all you want…It means nothing..Before they throw 80% at you THEY MAKE THE CALL and determine your exit strategy, if its feasible, with balancing the property purchase price as well. Don’t qualify? Then you “partner up” with someone who either has the “CREDIT” or has the “DOUGH.”…Don’t have a partner? Good credit? No 20%? Then your just another schmo at the Trustee Sale walking around sucking up space.

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  116. 116

    RE: ray pepper @ 115 – Whatever Ray. I would assume the hard money lender would pull your credit and thereby attempt to determine your ability to finance your way out. I would not assume they would necessarily give you that information. They might prefer to loan money for 6 months than 2 months, and if that’s the case, there’s no reason that they would tell you you’re locked in for 6 months. Maybe most of them do, I’m just saying that the buyer should make sure they know that type of thing before they go in.

    But beyond that, I would never rely on a hard money lender to verify my exit strategy. They are not in the business of making conventional loans, and there are a lot of conventional loan originators who are in the business, but not very good at it. I’m dealing with two properties now that flipped due to financing. Both went about 45 days in before failing. I don’t know the circumstances of the one, but I do know the other and it was pure loan originator incompetence. That other buyer is reportedly extremely PO’d. Also, about two years ago I had a client that came with their own incompetent loan originator. We went from supposedly being able to close about a week early to needing a three week extension. At that point I brought in one of my people and he determined that the original lender’s backup plan would also eventually fail. So anyway, IMHO it would be totally asinine to rely on the opinion of a hard money lender on this topic, especially since they often make these type of loan decisions very quickly.

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  117. 117
    ray pepper says:

    Good God Kary! Wrong Again. The Hard Money Lenders work inconjunction with conventional Brokerages (Guild for exp) that will Pre Qualify you for a CONVENTIONAL LOAN UNLESS you can show you have 100% of the cash or reserves to pay off the loan within the granted time frame. Some Trustee Sale Buyers are looking for primary residences and some are rentals. I see Guild at The Trustee Sales every week passing out their literature to ReFi borrowers into conventional rates. If you choose anything other then a flip you are referred to Guild (seems to be the one of choice now) or various other Lenders as part of your Exit Strategy.

    If your credit is above 720 you must have 20% down. If its below 720 you must have 25% down. Then the Rep must QUALIFY the property purchase price. If you get your money in BAD you will lose your 20-25% but the Reps are pretty in tune before recommending 80% coming from their funding sources. If you do not pay off loan as agreed they will foreclose on you in a stream line fashion to secure their 75-80% back. 5 months and 2 points or 9 months and 4 are typical now.

    I really wish you would educate yourself on this side of the market before you offer ANY advice on anything related to Trustee Sales. Its getting me agitated.

    One more thing you should know in re to this:” They might prefer to loan money for 6 months than 2 months, and if that’s the case, there’s no reason that they would tell you you’re locked in for 6 months”…………The Trustee Sale companies and their Lenders are one in the same. They make their money when you buy and charge about 3% of the TAXED ASSESSED VALUE…The lending portion is a service to faciliate more Buyers being able to qualify to buy. The Lenders desire you pay them off the next day so they can Lend the funds out again and again. They do not want 12% for 9 months. They want their 2 points, a quick turn, 3 points up front on the buy side, and then the buyer to come back and do it again and again…Furthermore if you can understand this…The Trustee Sale Companies are also linked with Conventional Brokerages (Windermere)..They further get many of their clients listings which equate to 3-6% additional commissions coming into the Reps and their Brokerages. See where the money flows Kary. Its very lucrative and a VERY important side of the market for many years to come!

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  118. 118
    ARDELL says:

    RE: Kary L. Krismer @ 12

    Love this!

    Kary said: “Real estate agents only tend to see transactions where things go smoothly. The ones where something odd happens are rare. An attorney, on the other hand, sees mainly only the problem situations. I saw problems like that a lot in my 20 years of practicing bankruptcy.”

    Talk about shining a big light on the reason for difference in perspective.

    Going back to Erik’s “intuition” vs “thinking”. A good agent, via intuition, only makes a huge big deal of every tiny detail when their intuition kicks in that this could end up being a disaster if we don’t dot every i and cross every t. Have one of those going on now.

    Erik’s intuition theory is key to knowing when to rock the boat and when to not give everyone a huge headache (talking about me not you Kary) over the potential monster scary “could be’s”. That’s why I say the paper part of it is only to record “the meeting of the minds”. Without a true meeting of the minds, the “good on paper” doesn’t solve the potential for disaster.

    When the agent on the other side of the table starts writing things in the wrong direction, all hell breaks lose because intuition of that turning into the 1% being the end result is only apparent to the one who isn’t screwing up.

    Sorry…thinking out loud here.

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  119. 119

    By ARDELL @ 118:

    RE: Kary L. Krismer @ 12
    Love this!

    Kary said: “Real estate agents only tend to see transactions where things go smoothly. The ones where something odd happens are rare. An attorney, on the other hand, sees mainly only the problem situations. I saw problems like that a lot in my 20 years of practicing bankruptcy.”

    Talk about shining a big light on the reason for difference in perspective. .

    This might help too. For an attorney to evaluate whether a transaction violates the “Rule Against Perpetuities” they may need to assume a mass tragedy right after the transaction is set up, involving all of the participants and most of their families. ;-)

    Attorneys often think of worst case scenarios, because they’re trying to determine all the scenarios. An agent may only think about a successful closing. As I mentioned, if something bad only has a 1% chance of happening, that doesn’t matter if it happens to you.

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  120. 120

    By ray pepper @ 17:

    Good God Kary! Wrong Again. The Hard Money Lenders work inconjunction with conventional Brokerages (Guild for exp) that will Pre Qualify you for a CONVENTIONAL LOAN UNLESS you can show you have 100% of the cash or reserves to pay off the loan within the granted time frame.

    Maybe you didn’t understand my points. 1. Those other two transactions I mentioned were conventional brokerages. They failed to deliver what they promised. 2. Given their short approval times, the take out part of the equation would be suspect. 3. I would never rely on a third party to determine my exist strategy.

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  121. 121
    S-Crow says:

    RE: Kary L. Krismer @ 116 – We actually told an agent about three weeks ago in a purchase they sent over under no uncertain terms to absolutely not have their client use “that” specific lender. Wha’d they do? Yup, and now it’s a mess. Meh, what hell do escrow companies know? All we do is push the green open escrow & green close escrow button. In other news from the trenches: we are still waiting on getting a commission disbursement form from an agent and their brokerage>>file closed just prior to Christmas……and still waiting. Agent inquired early this week and we said “still waiting.” Here it is Friday.

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  122. 122

    By ray pepper @ 17:

    If your credit is above 720 you must have 20% down.. . .

    I really wish you would educate yourself on this side of the market before you offer ANY advice on anything related to Trustee Sales. Its getting me agitated.

    On the transaction I mentioned with my buyer client a couple of years ago, the credit score was not the issue. On a seller transaction, the buyer’s lender sent me an email saying we could close in five days, and then the next day he discovered the loan could not go through with that lender. Again not a credit score issue.

    I am sorry to agitate you, but people need to know the risks. Not being able to get out of a high interest rate loan is a risk.

    Finally, I purposefully said some lenders might want to keep a transaction alive six months. I’m well aware of their income from fees, and how that relates to 12% interest. That’s rather obvious, but that is not the only thing that would affect their decision.

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  123. 123
    ARDELL says:

    RE: Kary L. Krismer @ 19

    My portfolio of trusts and estates were almost always the exception to “The Rule of Perpetuities”. Talk about a fraction of 1% of the business. Still, I didn’t let my superior knowledge of the exception area cloud my judgment when dealing with the non-exception accounts. :) Trusts not subject to The Rule of Perpetuities was my forte and primary “job” in the 70s and 80s before real estate in 1990.

    What you carry forward into your real estate career from your previous career is good…to a point. Most people kick that habit after 2 years in the biz…or they never become a good real estate broker. #justsayin

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  124. 124

    RE: S-Crow @ 21 – An escrow can probably assess lenders better than anyone, because of the higher volume. I would fine tune it down to the loan officer, just like for real estate brokerages or escrows you have to look into the person who will actually be doing the work.

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  125. 125
    S-Crow says:

    RE: Kary L. Krismer @ 124 – to an extent. However, many LO’s are not high touch (not all but MANY) involved after taking loan application. The most important person in financing is the processor and their competence followed by their company operational systems.

    I think one of the things that consumers really should question (and firmly) is why they have to pay fees for extensions on their rate locks. They have no idea what ‘really’ delayed their closing. In too many cases it is not the consumer but their processing (or lack thereof). I see it weekly.

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  126. 126

    RE: S-Crow @ 125 – Thanks. I guess the LOs I sent people to are “high touch.” They stay involved through the whole process, and stay on top of the process. That’s why they are referred.

    I don’t see many extensions on my buyer clients. The last one was free even though it was clearly the seller’s fault we needed an extension, and not the lender’s fault at all.

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  127. 127
    Erik says:

    RE: ARDELL @ 118
    Yep, you are able to view the forest and Kary is only able to view a tree in the forest.

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  128. 128
    ARDELL says:

    RE: Erik @ 127

    Good thing we need both arborists and foresters. :)

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  129. 129

    RE: ARDELL @ 128RE: Erik @ 127 – I know there’s the saying “cannot see the forest for the trees,” but I have no idea why anyone would think that applies here. Just because you can see details doesn’t mean you can’t see the big picture.

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  130. 130
    ARDELL says:

    RE: Kary L. Krismer @ 129

    Saying you don’t care about thumbs down is kind of like saying you don’t care about your clients wants and needs. You care more about “make a problem; fix a problem” and the trees of that, than you do about what people think and feel. And real estate is a think and feel business…not a paper pushing business.

    That’s why.

    Sorry…typed that quickly on my way out the door so it’s a bit terse. But hopefully you get my drift. Until you care about thumbs down…you can’t be a good real estate professional. Because you have to “care”.

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  131. 131
    Erik says:

    RE: Kary L. Krismer @ 129
    Kary, there are lots of other engineers at my work that are like you that are considered much more valuable than me. It’s not a bad thing at all to think like you for many things. I imagine you were a great lawyer and I would even guess you did pretty good in school.

    You gave me an example in the first thread we discussed this where you were able to see the big picture of a document you were analyzing. This is a perfect example of you analyzing all of the pieces of something until you get a clear picture. I’m sure you can see the entire picture, but in order to do so you must understand all the pieces. That is great! people like you are valuable to society in many ways. What I think you aren’t able to do is not understand all the pieces and still see the big picture. I work with very smart people like you everyday.

    Also, people like you have blind spots such as this one where you don’t even know that you don’t know. When you do see the big, picture I imagine it’s pretty clear, right? That’s because you’ve understood all the pieces. Everyone has weaknesses, and you should understand yours.

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  132. 132
    ARDELL says:

    RE: Erik @ 131

    I have come to call this type of agent when I run into them “a Kary” and that has helped me work with them, to some extent. They are busy with 10 trees….while the rest of the forest on the other side is burning down. Haha! I have to drag them away from the trees to help me go over and put out the fire. It makes a transaction 10X more difficult most of the time, for me and my clients…and their clients too.

    There are so many moving parts to a real estate transaction that if you obsess over 10 of them you miss 20 in the process. Learning to prioritize which 10 trees are most important in THIS transaction, by looking at the big picture first, is key to the client’s overall success vs merely “closing the sale” at hand focusing entirely on “risk aversion”. Risk aversion is usually not even close to the top 30 important issues in most residential real estate transactions. So risk aversion being one’s forte…rarely translates outside of Commercial Real Estate transactions.

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  133. 133

    By ARDELL @ 30:

    RE: Kary L. Krismer @ 129

    Saying you don’t care about thumbs down is kind of like saying you don’t care about your clients wants and needs..

    Not sure what that has to do with thumbs down, but what you just said is crazy. What do my clients have to do with the morons that post thumbs down here, without saying anything? I have a special relationship with my clients, which I treat as a fiduciary relationship, regardless of what the law says. I have no such relationship with the morons that post thumbs down here. Also, I really don’t like to have morons as clients, so hopefully the two groups are completely separate populations of people.

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  134. 134

    By ARDELL @ 32:

    RE: Erik @ 131

    I have come to call this type of agent when I run into them “a Kary” and that has helped me work with them, to some extent. They are busy with 10 trees….while the rest of the forest on the other side is burning down. Haha!

    Wow, Ardell. That’s ironic because that’s how I would describe you! You don’t recognize problems at all, so you’re the type of agent that doesn’t see the smoke (or possible fire). Or in your case, you mis-diagnose the smoke as being something that is just fine!

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  135. 135

    Kary said” Also, I really don’t like to have morons as clients.”
    You don’t like to have morons as clients, but at the same time, you gotta eat. What are you going to do, tell the client” I’m sorry, but I’ve already made my quota or moron clients earlier this year. You’ll have to find someone else.”

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  136. 136
    ARDELL says:

    RE: Kary L. Krismer @ 134

    Let’s play with smoke and fire, Kary. That “lawyer clause” that requires an offer to proclaim on day minus one WHO is going to pay “assessments”. A loosely defined term at best. The Agent for the buyer should of course say SELLER will pay them in full at or prior to closing. The Agent for the seller should then stand up on his highest horse and scream NO! The BUYER will pay them!!!

    I say…n/a…there are no assessments. I cross the whole thing out and say there aren’t any…until and unless the seller discloses that there ARE assessments. Except in the case of an obvious “special assessment”…that pesky long term Sewer Capacity charge.

    So you have a real test of egos about WHO is going to pay nothing, in most cases. I step around it and cross it out and say n/a when the reasonable expectation would be n/a.

    Why would a whole team of lawyers writing contracts used all over the State not think of adding a block that says “n/a”. Why would any buyer or seller agree to pay an undisclosed amount? Talk about a moron…let’s talk about every time you write a contract asking someone to pay an undisclosed amount. Anyone agreeing to that would be a moron…so what does that make the person who is asking them to pay this undisclosed amount?

    Add to that the fact that King County never says it is “paid in full” or there never even was one. They send a reply saying “nothing is due at this time”. Gotta love that.

    We do not have the privilege in our business to refuse to deal with “morons”. If you come to me with an offer on one of my listings…I would have to deal with someone I may on that day consider to be a moron because it is in my client’s best interest for me to do so. Likewise…vice-versa.

    In any given real estate transaction from start to finish…there will be a moron we MUST deal with and well, because our clients best interests call for us to do so. Consequently thinking that 90% of the population qualifies as “a moron” and saying you refuse to deal with “morons” pretty much puts you out of business…or at best, at loggerheads with the purpose for which you were hired. You were hired to deal with the morons…so that your client does not have to deal with the morons. You can’t refuse to deal with morons and call yourself “a fiduciary”.

    Speaking of Fiduciary, since you and I are among the few people who truly know what that means, NO ONE needs a “FIDUCIARY” more than “a moron”. Without a few morons…we would have no need for fiduciary powers at all.

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  137. 137
    ARDELL says:

    system duplicated comment

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  138. 138

    By Ira Sacharoff @ 35:

    Kary said” Also, I really donâ��t like to have morons as clients.”
    You don’t like to have morons as clients, but at the same time, you gotta eat. What are you going to do, tell the client” I’m sorry, but I’ve already made my quota or moron clients earlier this year. You’ll have to find someone else.”

    I’ll fire a client, and no one should want an agent who would not fire a client because they’re concerned about their own finances. If that’s the case, an agent would also likely have many of their other decisions affected by their own personal finances. For example, maybe that item the inspector found really isn’t so bad. Or maybe the agent won’t point out defects in the house that the client really loves on their first visit.

    But let me be clear, this isn’t just about the client disagreeing with one of my opinions on an issue, or needing a lot of help in the process. I like helping people. It’s more about where they are beyond help.

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  139. 139

    RE: ARDELL @ 36 – I deal with that in a different way, that is dependent on their answer (or lack of answers) in Form 17. You’ll get no argument from me that the NWMLS forms are not well drafted as it pertains to assessments due after closing.

    I’ve made this complaint before, but the NWMLS doesn’t circulate proposed forms changes before making a decision on the changes. In the attorney world there will be a rules committee, and proposed changes will be circulated to practitioners for comment prior to their becoming final. But the NWMLS treats agents as children, and doesn’t seek any input. Reviewing input requires time, but it gets you to a better result, in this case because agents see more transactions than attorneys.

    As to your proposal though, I don’t think N/A is perhaps the best answer, but it is something that could clearly stand some tweaking.

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  140. 140
    David Losh says:

    RE: Kary L. Krismer @ 139RE: ARDELL @ 136

    Well, this has certainly degenerated when Kary is picking up Ardell’s line about being a fiduciary. Fiduciaries may not seek personal benefit from their transactions with those they represent.

    The commission structure of Real Estate sales is a direct conflict with acting in a parties sole best interest.

    This thread was about a lack of inventory which I kind of dispute. It seems like Real Estate agents are still making sales, there are people still doing deals, but it isn’t translating into the NWMLS because of economic factors.

    We aren’t discussing the economy, or why people aren’t ready to move at this time, now we are discussing the NWMLS forms, and who will represent the client better.

    Ray’s talking about how people should look at the foreclosure auctions, which they should, but that isn’t being discussed either.

    We’re all here blogging for business, but this thread has run it’s course.

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  141. 141

    RE: David Losh @ 140 – Do you really think all fiduciaries work for free?

    And no, we’re not all here “blogging for business.” First, only Tim is blogging. Second, I’m not here to get business–I mainly work off of referrals.

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  142. 142
    David Losh says:

    RE: Kary L. Krismer @ 141

    A trust charges fees on an ongoing business, rather than being paid for a sale.

    Yes Kary you are blogging, you refer to posts that you make. You bogging on another person’s blog doesn’t change the fact you are here drumming business.

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  143. 143

    By David Losh @ 142:

    RE: Kary L. Krismer @ 141 – A trust charges fees on an ongoing business, rather than being paid for a sale..

    Distinction without a difference. Attorneys can also be fiduciaries, and they charge based on what they do. Once again you don’t have a clue what you’re talking about, but once again, that doesn’t stop you.

    I can hardly wait until you’ve responded 20 more times, said absolutely nothing new, and then declare yourself the winner. /sarc

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  144. 144
    David Losh says:

    RE: Kary L. Krismer @ 143

    You don’t want to have this discussion with me Kary, that’s why you resort to insults.

    It’s never my twenty commnets, it’s yours. You just don’t want me to respond.

    Attorneys can charge fees within the trust as long as they are for the sole benefit of the trust. A Real Estate commission is an incentive outside of the clients interests.

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  145. 145
    ARDELL says:

    RE: David Losh @ 144

    No need to go back and forth on this one, David. Kary is correct and there really are no real estate agents who will ever understand fiduciary, if they were not acting as a fiduciary prior to becoming an agent. So having a discussion about it is moot.

    I only chose to talk with Kary about it because he and I both understand the concept from our previous careers, and I like talking with him about something we don’t argue about…once in awhile. Neither of us is having that discussion for business purposes. We are just chatting nicely…for a change. :)

    Now go enjoy the football game guys.

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  146. 146

    By ARDELL @ 36:

    <Speaking of Fiduciary, since you and I are among the few people who truly know what that means, NO ONE needs a "FIDUCIARY" more than "a moron". Without a few morons…we would have no need for fiduciary powers at all.

    I would agree with that, but see my post on firing clients. Since fiduciaries don’t control their clients, but rather assist and advise their clients, their services can end up putting the client in a relatively bad situation. As I mentioned, some people are beyond help, and I don’t want to be assisting them making a bad decision, in this case buying into a bad situation.

    Again though, it goes beyond just buying a house I might not really care for. Clients don’t have to like what I like, or visa versa.

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  147. 147
    ARDELL says:

    RE: Kary L. Krismer @ 146

    I don’t run into that very often, and usually only when a client is referred to me by a local agent. You learn to “look a gift horse in the mouth” pretty quickly after the first time. Lucky for me the first time was in 1991. :)

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  148. 148
    David Losh says:

    RE: ARDELL @ 147

    Are you referring to the client I referred to you?

    I’m asking because as much as I support you they closed the week of Thanksgiving after looking at three properties with another agent. They closed with the same lender, no problems.

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  149. 149
    ARDELL says:

    RE: David Losh @ 148

    Of course not, David. That makes no sense. I did not know you in 1991. :)

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  150. 150
    David Losh says:

    RE: ARDELL @ 149

    Good because I would continue to direct people your way, and that is the point.

    Who would you recommend as an agent, based on what you read on this blog?

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  151. 151
    ARDELL says:

    RE: David Losh @ 150

    I don’t think I would make that type of decision “based on what I read on this blog”. I generally think that people should do their own research and make their own decision regarding choice of agent. I don’t generally believe in agent to agent referrals, as you know. Most of my “referrals” come from people who have bought and sold houses with me.

    Agent + Client is an important relationship and buyers and sellers need to be comfortable with the people they work with and should do the choosing. They sometimes travel a long and bumpy road together. The final choice has to come from the person who has to rely on the agent and their ability to communicate well with one another.

    Speaking of referrals, one of my clients who has moved out of State but got divorced in WA is asking if I know a good divorce attorney. I do not. Maybe you or Kary do?

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  152. 152

    By ARDELL @ 51:

    RE: David Losh @ 150 – I don’t think I would make that type of decision “based on what I read on this blog”. I generally think that people should do their own research and make their own decision regarding choice of agent. I don’t generally believe in agent to agent referrals, as you know. Most of my “referrals” come from people who have bought and sold houses with me.

    Agent + Client is an important relationship and buyers and sellers need to be comfortable with the people they work with and should do the choosing. They sometimes travel a long and bumpy road together. The final choice has to come from the person who has to rely on the agent and their ability to communicate well with one another.

    Yet more things we agree on.

    Check your gmail for the attorney referral.

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  153. 153

    […] take a brief follow-up look at new listings. When we checked in two weeks into the new year, new listings in the Seattle area were down 25% from 2012. The data from this post is largely […]

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