Posted by: The Tim

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

74 responses to “NWMLS: Prices Dipped, Inventory Inched Up in January”

  1. David Losh

    I want to high light for buyers what Mike Skahen, owner/designated broker at Lake & Co. Real Estate in Seattle said: “Even homes that were hard to sell for various reasons are being snapped up so those sellers were wise to list,” he added.

    There is a lot of polished poop on the market today. Buyers should be careful what they are rushing into.

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  2. softwarengineer

    RE: David Losh @ 1

    And Its Not Like We’re All Rolling In Dough

    and capaable of really fixing the places up for staging with new replacement lumber, etc….

    Even the home inspectors don’t use x-ray machines and covering up the cracks, rot and other discrepencies is as easy as plastic glue and paint. But a weak spot ready to fail anyway.

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  3. Kary L. Krismer

    By softwarengineer @ 2:

    Even the home inspectors don’t use x-ray machines and covering up the cracks, rot and other discrepencies is as easy as plastic glue and paint. But a weak spot ready to fail anyway.

    It doesn’t matter. The example I’ve been using lately is a house that had LP siding that was clearly in a state of failing. It sold, it sold quickly and IMHO it sold at a price that did not reflect the need for all the siding to be torn off and replaced.

    Things haven’t been so good for the sellers of crappy homes since back when the first time buyer tax credit was expiring.

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  4. softwarengineer

    RE: Kary L. Krismer @ 3
    You’re Right Kary

    The other Bubbleheads talk of scarce supply homes sold without an inspection….I agree with Tim, even if the inspection misses stuff…its better than nothing.

    Once you move in though [its almost too late then] and do weeding and notice a lot of ants in the flower beds, there’s ants likely eating up the lumber too….

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  5. Kary L. Krismer

    I take back what I said yesterday. This decline from December does seem to be largely related by short sales and REOs making up either more of the mix, or more of them selling below the median. I’m showing the non-distressed median as being slightly up.

    Vague references to numbers are to numbers from NWMLS sources, but such numbers are not compiled by or guaranteed by the NWMLS.

    Also, interesting factoid: For the last three months the median pendings have been at between $349,000 and $349,999, with this month the median sold coming in at $350,000.

    Those specific numbers are not guaranteed by the NWMLS either.

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  6. Kary L. Krismer

    RE: The Tim @ 6 – We must be doing our searches slightly different, because I’m getting slightly higher numbers, and slightly higher for January than December. I’m not restricting it by the reported date, so maybe that’s the difference?

    But whatever. At least we don’t have to determine the percentage of sales for the two months that were above and below I-90. ;-)

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  7. ARDELL

    RE: Kary L. Krismer @ 7

    If you do above I-90 you don’t have to falsify the actual data by eliminating the “distressed” property as a separate data point. :) The actual end result including ALL property is A-OK. No need to sift and sort. haha

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  8. David Losh

    RE: The Tim @ 6

    I would also point out that is 19%, and 24% of the market place over a broad area. That’s a lot.

    Has there ever been a time when we had a Real Estate market place so driven by Bank controlled properties?

    What I’m saying is that it seems foolish for people to pay above distressed property prices.

    It seems Bank controlled properties have been 25% of the market place for at least four years.

    So if flippers are buying distressed properties to put in kitchen, bath, and basement improvements then selling as non distressed, it only adds to the broad base of lower priced sales. Eventually it all evens out, when people go to sell those flipper dream homes.

    There is no added value to home improvement, only salability. Once a house is lived in it’s all used stuff.

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  9. Kary L. Krismer

    RE: ARDELL @ 8 – Don’t say that! You’re going to make me test out your theory, even though I know it was a joke. ;-)

    It wouldn’t surprise me if the difference between the total median and non-distressed median was greater north of I-90, at least in nominal dollars.

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  10. David Losh

    RE: ARDELL @ 8

    Here in Seattle we have the cut off of Snohomish County, and above. Is it the same cut off on the Eastside?

    In other words, just because it is above I-90, it isn’t completely golden, is it?

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  11. Kary L. Krismer

    RE: David Losh @ 9 – I don’t think the NWMLS data segregates REO/SS back four years. I think it’s only about 3.5 years. In any case, REO was much higher in 2011 than today, because the REO volumes were about 3x as high at times, and the total volumes were lower.

    Short sales are slightly different because they peaked last year, and were pathetically low for January.

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  12. Evelyn

    I think that taking advantage of possible irrational decisions by sellers is a good idea. If you can get a home you want by appealing to pride, attachment etc. I say Go for it.

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  13. wreckingbull

    “Buyers should not forget the human element of appealing to a seller in this multiple offer market,” Maul emphasized, adding, “You just never know who is on the other side of a transaction and what might be important to them. In this case, selling their home to an owner occupant who appreciated special features of their home versus an investor sealed the deal, not cash.”

    Gross indeed. I will say it once again. When you read this sort of drivel, it is SCREAMING at you to wake the F up. I had just sold a home and was shopping for a new one in 2006, and this handwritten letter/begging/groveling routine was suggested to me by a realtor. This was the exact moment I said enough is enough and started searching for rentals.

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  14. Kary L. Krismer

    By Evelyn @ 13:

    I think that taking advantage of possible irrational decisions by sellers is a good idea. If you can get a home you want by appealing to pride, attachment etc. I say Go for it.

    I wouldn’t disagree, but I’ve never lost out in a multiple bidding situation because the listing agent said the other buyer had a really nice love letter, and it’s never affected one of my listing clients. So yes it could help, but it’s very unlikely.

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  15. David Losh

    If you buy poop at a low price as an REO, polish it up, and sell it later, the price of poop just went up, and people are paying extra for the polish. It’s the shinola people are paying for, but the property is still what it is.

    I’m going to applaud Mike Skahen, of Lake Realty once again.

    It’s guys like him who remember the markets of the 1970s, and 1980s who can call this for what it is, exhuberance.

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  16. ARDELL

    RE: David Losh @ 11

    I don’t really make the distinction of “Seattle and The Eastside” as my clients are generally North of the I-90 on both sides. A lot of my clients work at Microsoft and Google and they live on both sides of the Bridge, but generally not too far North or South.

    I would not say the line is the County Line on “The Eastside” or on the Seattle Side. The line is drawn at the end of a School District and Northshore runs over the County Line. The line is at Everett School District. on the North side…at the end of Lake Washington School District in parts and at the end of Issaquah School District. Those lines don’t observe County differences in most cases.

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  17. ARDELL

    RE: Kary L. Krismer @ 10

    But it is wholly appropriate to leave ALL data IN until and unless most of the data becomes “contaminated” by an aberration. You can’t “sift the cream off the top” when that cream represents 95% of the whole. You must include the distressed properties until and unless those distressed properties are impacting the balance of the homes for sale.

    It is not ALWAYS appropriate to treat “his house” differently than “her house” and for any area that is not at least 18% distressed property, it is not at all appropriate to pull those off to the side.

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  18. ARDELL

    RE: wreckingbull @ 14

    It also suggests that sellers can pick by “who they like”, which raises the issue of who they DON’T like, as in protected classes. It’s a slippery slope and somewhat nauseating.

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  19. David Losh

    RE: ARDELL @ 17

    Here in Seattle there is a big difference between North, and South of 145th. I think you can make the same distiction as above, or below I-90.

    There are pockets all over. I was just asking because there seems like there are lines of pockets North of Bellevue, that are a little less defined than they are on the Seattle side.

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  20. Ron

    How much of this may simply be related to housing prices that are historically cyclical in nature and possibly becoming more cyclical like securities, gold, etc. as new methods of investing in real estate come online. If real estate speculation by fat-cat investors is on the rise my guess is that broad swings in housing prices will become more common.

    Copious amounts of cash comes to town, takes a profit at the top, then leaves. The cycle continues….

    After all, there is a ton of fast money sloshing around looking for a home and Seattle is arguably the most attractive city with investment potential north of the SF Bay Area. I am shocked when I see how quickly my neighborhood and the Lake Union area has snapped back. The beginning of yet another boom appears to be here.

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  21. whatsmyname

    By ARDELL @ 18:

    RE: Kary L. Krismer @ 10

    But it is wholly appropriate to leave ALL data IN until and unless most of the data becomes “contaminated” by an aberration. You can’t “sift the cream off the top” when that cream represents 95% of the whole. You must include the distressed properties until and unless those distressed properties are impacting the balance of the homes for sale.

    True enough for buyers who are indifferent to whether they get distressed or non-distressed property – and all that goes with that. But that’s not every buyer. And with the two medians $50,000 apart, there would appear to be contamination in play. There is real information here. Information that any seller who is paying a real estate agent is entitled to have.

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  22. ray pepper

    RE: David Losh @ 1 – Got this “unpolished poop” at Trustee Sale on Friday for 58k: http://www.redfin.com/WA/Tacoma/122-E-68th-St-98404/home/2921607

    When I’m done polishing ( for about 10-15k) it will hit the mkt for 115-125…I’m finding alot more GEMS each and every week. Only 4 bidders on this home…Plenty to go around for everyone it appears now….Another 20 sold in Pierce this last week and about the same in King.

    Buyers take the time and see this other side of the market. You will be VERY happy you did…

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  23. Erik

    RE: ray pepper @ 23
    Good information here Ray. It sounds like you have a good process here.

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  24. ray pepper

    RE: Erik @ 24 – No real “process”…Do your DD and Buy LOW sell HIGH…Make a mistake and you have a rental..Personally I don’t need more rentals so I wait it out until landing one..Patience is the key…………..There is ALWAYS another one.

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  25. 2kt

    Many rentals, eh? Are you making many mistakes, Raymundo? :)

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  26. softwarengineer

    RE: ARDELL @ 17

    My Neighbor Works at MSFT

    and lives across the street from me in SE KIng County. He couldn’t afford the eastside prices; much cheaper to commute.

    He also agrees with me that keeping the investment down in price, decreased the future loss per unit too.

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  27. David Losh

    RE: ray pepper @ 23

    That means your property will sell for $50K more than it’s worth, and some one will be paying a mortgage on that.

    It makes no difference to me, it has to do with the rising Real Estate prices.

    Home sold for $58K in one transaction, then $115K in the next transaction, it gives an illusion of rising prices.

    Those rising prices helped push the stock market over 14000 yesterday, and gave people the sense of a wealth effect.

    The statistics are just a game, but you demonstrated the fallacy of it.

    BTW, that’s a 5000 sq ft lot, and the house looks a little questionable. Whats that empty space to the left? Are you sure this isn’t a building lot? or is that a wetland next door?

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  28. Kary L. Krismer

    By ARDELL @ 18:

    RE: Kary L. Krismer @ 10

    But it is wholly appropriate to leave ALL data IN until and unless most of the data becomes “contaminated” by an aberration. You can’t “sift the cream off the top” when that cream represents 95% of the whole. You must include the distressed properties until and unless those distressed properties are impacting the balance of the homes for sale.

    It is not ALWAYS appropriate to treat “his house” differently than “her house” and for any area that is not at least 18% distressed property, it is not at all appropriate to pull those off to the side.

    Maybe you weren’t joking????

    Being able to analyze data is always better than misunderstanding data. This is the perfect example of that.

    But for being able to analyze the January NWMLS data all you would see is that the median had about an 8% decline between December and January. By looking at the non-distressed median and the number of sales of different types in those two months we know that is misleading. In fact, it’s possible that values actually rose from December to January, which is what you would expect given the inventory situation and the prevalence of multiple offers.

    But I would agree with you that you do need to determine the market you’re in. A few months ago I was critical of an appraiser that used two or three short sales as comps in attempting to value a non-distressed sale in Newcastle. Given how few short sales there are in that area, it’s almost as if the appraiser was going out of their way. If anything in that area short sales should be excluded as a comp, while in a few other areas perhaps they might be the only thing included. The market area does matter, but there’s no excuse for not doing the analysis.

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  29. Plymster

    Institutional speculation in RE is rampant. Blackstone is buying up RE for investors. JP Morgan Chase has now added RE to the investment “opportunities” it offers its clients. I know of two people whose financial advisers wererecently pushing local Residential construction RE loans as an investment. I know another who was pushing commercial RE loans in Phoenix. This is going on at relatively respected institutions.

    The banks are in desperate need of bagholders and are now willing to sacrifice their clients.

    There are currently 416 properties in King County that have been foreclosed but not on the market for over 90 days (according to Redfin). To put that in perspective, that is 30% of last months closed sales. There are currently twice that many foreclosures out there (none of them on the market), and pending sales are almost double the number of closed sales.

    The banks and GSEs have been paying carrying costs on those homes, in addition to losing yield on loans. And again, this is only on the handful of homes they have ACTUALLY foreclosed on. There are still millions out there in default that haven’t been touched. My guess is that the bank doesn’t step in unless it looks like the local governments will foreclose for tax recovery purposes.

    I’m not sure how long this next bubble will last (I was surprised at how long in the tooth the last one got), but I’d bet that it can drag on much longer if they can sucker private equity into propping up this sham of a market. This bubble will either destroy the last remnants of private wealth in the country, or it will collapse soon.

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  30. Kary L. Krismer

    By ARDELL @ 19:

    RE: wreckingbull @ 14

    It also suggests that sellers can pick by “who they like”, which raises the issue of who they DON’T like, as in protected classes. It’s a slippery slope and somewhat nauseating.

    That I will agree with.

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  31. Kary L. Krismer

    By whatsmyname @ 22:

    True enough for buyers who are indifferent to whether they get distressed or non-distressed property – and all that goes with that. But that’s not every buyer. And with the two medians $50,000 apart, there would appear to be contamination in play. There is real information here. Information that any seller who is paying a real estate agent is entitled to have.

    That, and much more. If you’re talking about actually making a decision to sell a house, then the focus would be much more precise than this type of data, or even similar data for one of the smaller NWMLS areas. The focus would be on similar houses in the same area, and depending on the area, the distance from the subject house might be quite small.

    Once I heard an agent try to sell the idea of taking the NWMLS median for the NWMLS area when the house was purchased, and then taking the current median for that area, and finally, apply the increase or decrease that occurred to the original purchase price of the house to determine the sales price. Any agent who actually suggests that to a client should be picked up and thrown out the door.

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  32. Kary L. Krismer

    By David Losh @ 28:

    RE: ray pepper @ 23 – That means your property will sell for $50K more than it’s worth, and some one will be paying a mortgage on that.

    I don’t understand why you have such a hard time understanding that the price paid depends on how a house is sold (e.g. auction or listing) or its condition. Those seem like very basic concepts.

    Sometimes even the seller affects the price paid. The best example of that is HUD.

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  33. David Losh

    RE: Ron @ 21RE: Plymster @ 30

    These two comments sound like massive Real Estate market manipulation, like with gold.

    I’m saying all of this data is pumping the Real Estate market.

    Buyers should beware and look at broader market conditions.

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  34. Kary L. Krismer

    By ray pepper @ 23:

    RE: David Losh @ 1 – Got this “unpolished poop” at Trustee Sale on Friday for 58k: http://www.redfin.com/WA/Tacoma/122-E-68th-St-98404/home/2921607

    You’re going to have to explain that one to me. I’m seeing 8 similar houses sold within a 1 mile radius in the past six months for at or below that price, two active listings and six listings in some sort of pending status, all at or below that price. We you able to go into this house and somehow verify that its condition justifies going the foreclosure sale route as opposed to a listing.

    On a listed property you could do an inspection and get a 3% commission, further reducing the price.

    What made this one house so attractive?

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  35. David Losh

    RE: Kary L. Krismer @ 33

    The data is the data. It makes no difference how it’s sold.

    In Ray’s example he is paying $58K, then selling it for $115K.

    That gives the illusion of price increases where none exists.

    Ray’s buyer will pay the $58K plus $50K for the repairs, or remodeling. The remodeling doesn’t add value to the property, it is done to make the property sell.

    Another aside is that the auctions have moved up in price considerably in the past two years. More buyers are in the auction market place.

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  36. Kary L. Krismer

    By David Losh @ 36:

    The remodeling doesn’t add value to the property,

    I’ll have to take your word on that because I haven’t seen Ray’s work? :-D

    Seriously, you don’t think the condition of the property affects value? You think a house is worth the same amount of money if it is just about falling over as it would be if it were totally turnkey?

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  37. No Name Guy

    By David Losh @ 9:

    RE: The Tim @ 6

    I would also point out that is 19%, and 24% of the market place over a broad area. That’s a lot.

    Has there ever been a time when we had a Real Estate market place so driven by Bank controlled properties?

    It seems Bank controlled properties have been 25% of the market place for at least four years.

    This is what I’m saying, when I repeatedly state that the banks, JP Morgan Chase, BoA, etc are manipulating the market holding off inventory. To those that say “where’s the shadow inventory” I state – look and you’ll find it in your ‘hood. There are a LOT of houses out there that are just sitting empty – held off the market post foreclosure, not even listed for sale. They’re dribbling them out, little by little. They’re dragging their feet on the foreclosure process – letting deadbeats slide for a year, two, or more, and not make a payment. What would have happened in 1994 if you missed 6 payments? Yeah, out you go, quickly, and the house is on the market about the time the last load of your particle board junk furniture is thrown on the curb by the Sheriff.

    Why is it different today? To whose benefit is it different? You can bet it isn’t to YOUR benefit. Chase et al aren’t delaying foreclosures, aren’t holding inventory off market to benefit you – they’re doing it to benefit THEMSELVES. Follow the money – that will lead you to the truth.

    Its like the old saying: If you don’t know who the sucker / mark is at the poker table, it’s YOU.

    Buy in ignorance in this market and you’re willingly being the mark, the same as those folks who bought in 2006 or 2007.

    It’s the eye of the storm, dead cat bounce, suckers rally, call it what you will…..the spaghetti is really going to hit the fan. I don’t know when, I don’t know how, I just have a sinking feeling that it will.

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  38. Erik

    RE: ray pepper @ 23
    Do you get financing or do you pay cash? Who do you use for financing?

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  39. Marc

    RE: Kary L. Krismer @ 35 – Well, according to Redfin the property taxes are $7. If that doesn’t scream bargain what does?

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  40. Kary L. Krismer

    RE: Marc @ 40 – Realist is showing $6 or $7 for the past three years. That seems a bit beyond what I’ve seen for senior discounts. I wonder what the deal is there?

    I’ve seen open space plans where the taxes are reduced, but if the use of the land is changed the taxes are reassessed. I doubt that would be the situation for a 5,000 square foot lot.

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  41. Marc

    RE: Kary L. Krismer @ 41 – I think it’s just a Redfin error. The county website shows the taxes as eight or nine hundred (I forget the exact amount). Looks like the previous owner had the senior discount.

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  42. ray pepper

    RE: Erik @ 39RE: 2kt @ 26 – Me? Never! Partners…well they do or at least say did in the past

    to answer all your questions………….

    1. I pay cash on my personal non partner stuff…HOWEVER….its too time consuming to get cashier checks each week and then get to the Trustee Sale only to find too much activity on the homes I have interest in. So I choose to pay 1/2 point to use the Auction Money. Then I have to Zip to Columbia Bank before 5pm and deposit in this case (58k) and 300 bucks.

    2. I prep all my purchases for the possibility of it becoming a rental or keeping it as such. None of my stuff ever gets granite or high end anything. Basic vinyl, carpet, lighting, neutral colors, appliances, new roof, gutters, new doors, new windows, and in this particular case the entire upstairs is getting drywalled and turned into 2 extra bedrooms. This is very different from many of the Trustee Sale Buyers who LOAD THE HOMES with high end stuff and turn in much higher profits but like anything it becomes more risk. This one will be a 4 bed 1 bath and I will post the link when done. I estimate costs will be 12k-15k…(with roof 3500, debris haul 400, and landscape currently in 4700..) drywall and complete upstair bid is 1800, bathroom 1800, paint (In-out 1500), windows-doors 1000, appliances 900..variance 2000 ..

    David the lot adjacent is about an acre zoned residential. its been cleared and from the look of the activity it appears new homes are going in from all the earth movers there.

    Sometimes, if I like the neighbors and the finished product I just keep it and sell it 2 years later. Most of the time I turn it or just sell it to the partners if its out of State. Many times they are looking for a rental for various reasons. Anyway. nobody gets rich from one of these flips but they usually easily net 30k and if I do 2 or 3 of these a year, combined with the partner stuff, I’m good to go.

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  43. corndogs

    RE: Plymster @ 30 – “There are currently 416 properties in King County that have been foreclosed but not on the market for over 90 days (according to Redfin). To put that in perspective, that is 30% of last months closed sales. There are currently twice that many foreclosures out there (none of them on the market), and pending sales are almost double the number of closed sales”

    To put that in perspective another way. You’d need 10,000 additional units on the market to get to a 6 month inventory. 416 houses is peanuts.

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  44. David Losh

    RE: Kary L. Krismer @ 37

    There is a difference between fixer, and a tear down.

    Repairing systems, foundation, electrical, or plumbing may add value.

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  45. David Losh

    RE: ray pepper @ 43

    So does that mean you paid a building lot price for it?

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  46. Marc

    RE: David Losh @ 46 – There’s no definitive answer to that question. Moreover, based on Ray’s original comment all that can be concluded with any certainty is that he paid more than 3 (or 4) other bidders were willing to pay on this particular home on one particular Friday at a trustee auction. No more, no less.

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  47. Kary L. Krismer

    By David Losh @ 45:

    RE: Kary L. Krismer @ 37 – Repairing systems, foundation, electrical, or plumbing may add value.

    So you think that the condition of the kitchen has no impact on value? You should become an appraiser! /sarc

    http://blog.seattlepi.com/realestate/2007/10/30/determining-value-realtor-vs-appraiser/

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  48. Kary L. Krismer

    By Marc @ 47:

    RE: David Losh @ 46 – Moreover, based on Ray’s original comment all that can be concluded with any certainty is that he paid more than 3 (or 4) other bidders were willing to pay on this particular home on one particular Friday at a trustee auction.

    That’s surprising since Ray’s position is that a buyer should withdraw their offer on a listing if it is discovered that anyone else has made an offer on the property. If he were consistent he would only place one bid on a property at auction, and only if no one else has already placed a bid.

    Maybe there’s value to the adrenalin rush caused by the competition at auction?

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  49. banjo country

    RE: ARDELL @ 8
    I never tire of Ardell’s I-90 humor….like Henny Youngman’s ‘Take My Wife….PLEASE’!

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  50. ray pepper

    RE: Kary L. Krismer @ 49 – completely different scenario. Trustee sales properties are an entirely different purchase. Investors bid there based on what they have in standing inventory, current projects, cash available, contractors who need work, home inhabited or not (always brings lower bid) and Buyers who took the time to research that week. Remember there are increasingly more properties each week and not everyone gets to everything. This one was released on that day Friday. Very few even got to see this home. It sat live only for 3 hours.

    One other caveat about this particular purchase. Opening bid was 46k. I gapped it to 50 and had a mental max of 61k. Based on previous sales it appeared it would surpass 55k but above 60k would narrow the field (unless of course someone wanted a rental). A flipper will NEVER beat someone who wants a rental.

    Anyway, I was on the LIVE FEED over the phone. at 58,400 I heard going once, twice, 3x, SOLD. 58,400..Then I heard Trustee say “HOLD ON”. My buddy said someone in the “back” said 59k. The question came as to what was said first SOLD or 59k. Trustee must always SEEK MAX for their client. We appealed. They phoned Trustee and 10 min later home was mine.

    A very common strategy for Trustee Sale Buyers is to watch who is IN and who really wants it. On the last second they jump in as a strategy. Always seemed stupid to me. Have your MAX in mind, Gap the Bid, get the unrealistic fools out, then as they bump 100, you bump their bid 500.. They call their clients and the rest is destiny.

    So it appears Kary someone WAS going to pay more. Not sure how much more from 59k.

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  51. Kary L. Krismer

    By ray pepper @ 50:

    RE: Kary L. Krismer @ 49 – completely different scenario. Trustee sales properties are an entirely different purchase. Investors bid there based on what they have in standing inventory, current projects, cash available, contractors who need work, home inhabited or not (always brings lower bid) and Buyers who took the time to research that week

    I don’t see how that makes it any different at all. Do you think that someone who makes an offer on a listing just pulls a number out of their butt? Again I’ve never understood your defeatist attitude on multiple offers. I could see perhaps not wanting to get into a situation where you knew there was already an offer, but to withdraw an offer you made because you find out there are other offers just seems totally crazy.

    BTW, which brings the lower bid–occupied or unoccupied? I would think it would be occupied, because they could have the right to continued possession under a lease, which for those bidding on credit at 12% interest could be a huge deal. And I wouldn’t assume the condition was decent just because someone was living there. Some people live in appalling conditions.

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  52. Ray pepper

    Many investors walk from ANY inhabited home. They just don’t want to deal with it. As for a lower price. If there are less bidders it tends to equate to lower price.

    Let me clarify. If our offer is submitted and it turns into a multiple offer scenario our client decides what to do. If they ask me I always say walk and don’t engage in highest and best. But, that is what I would do. In the end the client makes their decision.

    We never write up offers when there is another known offer that has been submitted unless the LA strongly encourages us to do do. If you catch my drift.

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  53. Kary L. Krismer

    By Ray pepper @ 52:

    Many investors walk from ANY inhabited home. They just don’t want to deal with it. As for a lower price. If there are less bidders it tends to equate to lower price.

    Let me clarify. If our offer is submitted and it turns into a multiple offer scenario our client decides what to do. If they ask me I always say walk and don’t engage in highest and best. But, that is what I would do. In the end the client makes their decision. t.

    Thanks for the clarification on the inhabited status. Your first post wasn’t clear on which was a lower bid.

    As to the second paragraph, why not just let your offer sit, and see if it will win out? I don’t have a problem at all with not changing your bid when you learn of another offer, I just don’t see the reason to withdraw an offer that’s already been made, or why you would advise doing that.

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  54. Haybaler

    RE: ray pepper @ 43
    How are you handling hall way lighting and bedroom lighting in the new bedrooms upstairs? What about smoke detectors and hardwiring them thruout the house including downstairs bedrooms and hall?
    I’ll bet the electric panel is out of date and needs updating because you’ll need to add Arc fault breakers for the bedrooms.
    I’ll bet the second story floor isn’t engineered to carry new partition walls and the top floor doesn’t finish to today’s energy code without a gut and a) high density insulation boards or b) increasing the framing thickness for appropriate fiberglass or blown in.
    There is no way you can do an honest remodel into an acceptable finished product based on the info you provided.

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  55. Kary L. Krismer

    RE: Haybaler @ 55 – This is a bit outside my area, but depending on how little he does, I don’t know that there’s a reason to do any of those things. As far as I know, you can go in and paint, install new flooring and probably even new cabinets without pulling any permits. None of that would require a new electrical service panel, interconnected smoke detectors, etc.

    Even if it were a Zinsco panel, he would not need to change it out. When I go into flipped houses I’d generally rather see less done than to see more done without permits–for example a new service panel but no evidence of a permit, and evidence it was done without a permit.

    That being said, [take that Bluntman!] I will say the same thing I’ve said to Losh in the past. To do what he’s doing he possibly does need to have a general contractor license.

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  56. Haybaler

    It’s not outside my area of expertise.
    He’s adding bedrooms Kary. Bedrooms are required to have hard wired battery backup smokeys. When you start down that path then other items become requirements too. A bedroom is required to be protected by Arc fault breakers. Those breakers are installed in a panel and require a separate circuit, not a tap off of existing.
    Bedrooms require lights that are operable from the doorway. And closets. and head space.
    He’s constructing walls to shape bedrooms and closets which are loads on the floor/ceiling framing. The original construction was not framed to carry those loads and needs engineered.
    You understand how insulation works? It’s volume needs accommodated and the upstairs window openings in each bedroom need to meet fireman ingress/egress sizes as well as energy code.
    Stairs? The public record says this is a one story house. I’m afraid of what kind of attic access is being cobbled into a stairway…again structure.
    I see these kinds of fast and dirty projects all the time. It can’t be done right on the budget Ray outlined so it isn’t done right. That’s wrong.

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  57. Ray pepper

    RE: Kary L. Krismer @ 56 – Kary you are absolutely correct. Furthermore all work is completed by licensed professionals up to code.

    A bit of info to potential retail buyers if flipped homes. Confirm attics were insulated prior to drywall install. Many flippers will not do that

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  58. Kary L. Krismer

    By Haybaler @ 57:

    It’s not outside my area of expertise.
    He’s adding bedrooms Kary

    I’d not noticed that. Seems quite ambitious for only $10-15k.

    Edit: Going back and looking at the Redfin picture, I can see how I missed that. Ignoring all the structural issues Haybaler has raised, I don’t see how there’s the space up there for anything. There’s virtually no overhang on the eaves, which is something I hate, and something I noticed when looking at the link the first time. That means there’d be very little space up in the attic. I’d question whether you could even stand up in the middle of the attic area. Here’s a direct link to the picture:

    http://maps.googleapis.com/maps/api/streetview?sensor=false&channel=ldp-publicrecord&location=47.195065%2C-122.430191&size=623×600&client=gme-redfin&signature=l3mWMrbXo6X3GZsxMnIDTcGrb2c=

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  59. ray pepper

    RE: Haybaler @ 57 – The attic is framed for rooms yet it never was added. The framework is there and additional insulation and the addition of drywall needs to be completed. Will have no affect on load bearing capability. The height is about 7 feet with a V pitch so there will be no “bending” anywhere upstairs. I sent Kary a pic so he can elaborate more.

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  60. Kary L. Krismer

    RE: ray pepper @ 60 – I think what Haybayler is referring to is it might not be designed to have a load up there–people and furniture. I think that’s more of a concern for engineered trusses, but it could also be a concern for an older building like that, particularly if you only have 2x4s running across the top of the first floor ceiling.

    I did note that Realist shows more square footage than just the ground floor square footage, which is odd given it apparently isn’t finished, but that might mean something?????

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  61. David Losh

    RE: Marc @ 47

    “David the lot adjacent is about an acre zoned residential. its been cleared and from the look of the activity it appears new homes are going in from all the earth movers there.”

    So, is it a building lot to go along with the other new construction or will it be a $125K fixer next to new construction?

    That’s going to be a tough call.

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  62. ray pepper

    RE: David Losh @ 62 – my guess is 4 new homes that will most likely be 199k ish.

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  63. David Losh

    RE: ray pepper @ 63

    Dude that was a big block of no houses, and the property you bought is on the fringe of the open space.

    Have you seen the development plans?

    I’m just saying there may be a reason why there were so few bids.

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  64. Haybaler

    RE: ray pepper @ 60RE: Kary L. Krismer @ 61

    This is one of those “its a small world” stories…

    I was delivering a load of hay this afternoon at E 60th and Waller in Tacoma. I checked my gps map for Rays house and saw that it was only 2 miles away and more importantly only 2 blocks from the Mcdonalds that I planned to eat dinner at. So I stopped by Rays house to check it out.

    I like the house.

    The second floor clearly is unfinished from the view thru the second story windows and importantly it will have enough headroom for bedrooms upstairs with some of the ceiling being sloped in each room. That’s legal. I couldnt see the stairs. Rise/Run/Width?

    I observed other issues that I’m not going to bring up because none of the items that I expressed concerns about have occurred there, yet. Other issues outside the scope of work itemized above are being addressed at this time too.

    And Ray has actually put some skin into the game so I wish him good luck with his project. I think it deserves to be done well.

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  65. whatsmyname

    Tim, there is an unsightly orange smudge near the lower left corner of the inventory graph. Just thought you should know.

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  66. ray pepper

    RE: Haybaler @ 65 – Thanks for taking the time to stop by I always encourage it if anyone is in the area. The last 3 I did are all the same. I like these 900-1200 sq foot homes on good streets. Kind of a no brainer. I don’t really like the kitchen lay out but I never do in these. The last one we did (MLS # 380752) sold with LOTS of interest. I think this one will go even faster. Much more space. Whoever gets the home will be very happy with it.

    David the reason there was so few bids was explained earlier. It got released by Trustee just 3 hours prior to sale. Most homes sit all week long and people have time to go view it. I saw this hit at about 8am, raced over, then phoned it in.

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  67. Erik

    RE: whatsmyname @ 66
    2013 is starting out low. Lets see if it goes down anymore.

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  68. Kary L. Krismer

    RE: ray pepper @ 67 – Ray, have you ever considered going after HUD homes? I’m showing three active HUD homes with 1.75+ bath with a Tacoma address under $100k, and 9 such properties sold in the past six months. I didn’t check pending.

    The advantage to HUD is you probably have less competition than at an auction, you get to do an inspection, and you get a real live warranty deed. These might cost a little more, but they probably cost less to fix up, and being 1.75+ bath there would be a lot more upside.

    I don’t recommend HUD to buyers using financing to purchase, but you’re cash!

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  69. Tsuru

    There’s also a huge dotcom v2.0 (or is it v3.0 now) bubble happening down in Silicon Valley right now. I highly recommend everyone invest heavily in internet startups right now as this bubble is different and I promise you all won’t lose money like last time.

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  70. corndogs

    RE: ray pepper @ 67 – ‘The last one we did (MLS # 380752) sold with LOTS of interest.” The last house my friend in Tacoma flipped he sold to the mailman. No realtor, no advertising. It doesn’t get much easier than that.

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  71. ChrisM

    RE: Kary L. Krismer @ 69 – “I don’t recommend HUD to buyers using financing to purchase”

    Kary – Can you elaborate? I was under the impression all FHA financing now required insurance for the length of the loan. What add’l requirements do HUD loans have? I assume you’re not talking 223(f)..

    Tim – if you haven’t already done so (if so, I don’t recall it) a thread on financing alternatives would be pretty cool.

    David Losh talked elsewhere about paying off the loan for owner-occupied vs. deferring payment for income properties, but really, in this low-interest environment, why wouldn’t you put the minimum down and borrow to the max??? For once I’m not being sarcastic, this is an honest question. Seems like at under 4% you might as well borrow all the money you can. As long as income properties cover the expenses (mortgage, utilities, property taxes, etc.) For owner-occupied, I realize the loan is front-loaded, but again in this low interest environment I’d have to run the numbers to make sure that paying off the loan early really makes sense. What am I missing?

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  72. Kary L. Krismer

    By ChrisM @ 72:

    RE: Kary L. Krismer @ 69 – “I donâ��t recommend HUD to buyers using financing to purchase”

    Kary – Can you elaborate? I was under the impression all FHA financing now required insurance for the length of the loan. What add’l requirements do HUD loans have?

    I think you may be mixing together a few things I said. Last thing first, I don’t think MI for the life of the FHA loan has kicked in yet. If memory serves, that’s in June, but Rhonda ( or another LO) could answer that better than me. They did recently raise the rates for MI, but I think more is coming down the road which will make FHA financing even less attractive.

    What I’m talking about in the quote above is buying an REO property that is owned by HUD, as opposed to Fannie, Freddie, US Bank, etc. I don’t recommend that buyers of properties needing to use financing to buy purchase HUD properties because HUD is incompetent getting their transactions closed. It might not matter as much in a falling or steady interest rate environment, but even without that your choice of lenders might be more restricted.

    If you are going to finance a HUD purchase, I would recommend considering FHA financing mainly because of HUD’s no repair policy. With FHA financing you can typically use the existing FHA appraisal, so any appraisal items should be known prior to making an offer, and can be dealt with through getting bids and holding funds in escrow. Note though that gets back to the MI issue–going FHA is going to be more expensive than going conventional, so you need to take that into account in bidding on the property.

    I think that deals with your questions, but a few more points on HUD.

    1. I don’t have much experience with HUD compared to other REOs, mainly because most HUD properties are not that attractive and because they do have owner occupant restrictions during the early parts of the listing. They really haven’t been a big part of the REO market, but that will probably change.

    2. The two most difficult buyer transactions I’ve ever had were both REO properties, and the problems were both generally closing problems. The first was a property owned by a small lender which should have been a breeze because my buyer was cash. REO with a cash buyer should be a piece of cake for an escrow, but two weeks out it was apparent they weren’t going to be able to close on time. The other was a HUD transaction where the simple act of paying a utility bill seemed to really gum up the process. Again, closing an REO sale should be simple, but HUD has managed to totally screw up what should be simple. I’ve even heard of cash HUD transactions needing extensions such that they would take longer than 45 days to close.

    3. There are some good things about HUD properties. The bidding process is pretty straightforward. The earnest money is usually only $1,000, and if I recall correctly, retaining that EM is HUD’s only remedy if you breach, and even then they do have policies to return the EM in some situations even in the event of a breach. But overall a buyer will likely find the process very frustrating, more like a short sale than an REO, if not worse than a short sale. And like a short sale, I would not advise giving notice to your landlord prior to actually closing on a HUD transaction. Like the situation where a buyer is using an incompetent lender, HUD can go from “we’re closing” to “we need an extension” in a matter of days. Giving notice to your landlord might leave you without a place to live.

    4. When I say I wouldn’t recommend buying HUD, that means I would warn about the concerns mentioned (and others). It doesn’t mean I’m saying no one should buy a HUD property. That HUD is so problematic is well known, and that reduces the competition, which in turn can reduce the price you have to pay (sometimes).

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  73. Kary L. Krismer

    RE: Kary L. Krismer @ 73 – As to recent changes and future changes for FHA loans, that’s Harney’s topic for Sunday’s Seattle Times.

    http://seattletimes.com/html/homesrealestate/2020312287_hreharney10xml.html

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