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.

35 responses to “Distressed Sales Finally Saw a Winter Spike in January”

  1. Kary L. Krismer

    Is this spike because total sales went down?

    Asked differently, did the number of distressed sales go down, or just the percentage of sales which are distressed?

    I don’t track those numbers, but short sales were down considerably for January, and I don’t recall REOs being up.

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  2. David Losh

    There is no question the prices of distressed properties are flat, or rising even.

    Distressed propertie are the Real Estate market place.

    Because of low inventory, I guess, people are paying whatever the market will bear for short sales, and bank owned properties.

    From what I read about Arizona some pockets have multiple offers on both, short sales, and bank owned.

    What I don’t understand is why any one would pay more than what a distressed property sells for. It makes no sense, sorry Ray, for an investor to pay $60K for a property, then another buyer pay $125K for the same property within six months.

    OK, I understand about the low inventory, and I understand buyers are desperate, but how could a Real Estate agent sell a property to a buyer, when they know for a fact it sold for half the price six months earlier.

    My company has worked on thousands of homes over the forty years I have been in business. In the past, a long, long time ago, there could be the illusion that the economy was strong, inflation was coming, and the price you paid paled in comparison to future appreciation. We have none of that now.

    There is no way a little paint, and sheet rock is going to double the price of a property.

    If the seller spends $60K on a $60K property that should be the sellers loss. There is no reason to think that property will appreciate beyond the original price paid of $60K.

    The real price increases are due to the fact that buyers have paid double the price of distressed sales, the same as they paid over value for properties in 2008, and 2009, by comparing Bubble prices to what the banks were asking.

    The banks have always been asking the Broker’s Price Opinion so why would the Comparitive Market Analysis be that much higher?

    I think Real Estate agents, and flippers are making a lot of money where none is warranted.

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  3. Ira Sacharoff

    RE: David Losh @ 2
    The fact is, that if something is scarce, people want it. These are the exact same piece O’Crap houses that were just sitting there three years ago-nobody wanted them, and there were a lot of them around. Fast forward three years, and if that little 1940’s box that needs 75,000 dollars+ worth of work happens to be in a neighborhood like Tangletown or Phinney Ridge, you can probably sprinkle rodent droppings throughout the house and still get multiple offers.

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  4. Kary L. Krismer

    By David Losh @ 2:

    Distressed propertie are the Real Estate market place.

    Yes, capturing a whole 23% of the market makes distressed properties the marketplace. /sarc

    From what I read about Arizona some pockets have multiple offers on both, short sales, and bank owned.

    If only there were a Seattle real estate blog site available. Then you’d realize the same thing has been happening hear on REO for well over a year, and on short sales for at least a few months. /sarc

    What I don’t understand is why any one would pay more than what a distressed property sells for.

    I’ve explained that to you several times. The terms are different. The risks are different. With the exception of HUD properties, the deeds are different.

    It makes no sense, sorry Ray, for an investor to pay $60K for a property, then another buyer pay $125K for the same property within six months.

    You stated earlier this week that only structural or infrastructure changes to the property affect its value. That is incorrect. The condition and age of the kitchen is probably the best example of how improvements can change value. In any case, Ray was also talking about adding two bedrooms. I’d question how much that would increase value on a one bathroom home, but it would clearly have an impact.

    OK, I understand about the low inventory, and I understand buyers are desperate, but how could a Real Estate agent sell a property to a buyer, when they know for a fact it sold for half the price six months earlier.

    Because real real estate agents understand that condition, terms and availability of financing affect the price that can be obtained for any given property.

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  5. Blurtman

    RE: Ira Sacharoff @ 3 – Own a Piece of Crap, LLC, will be contacting you shortly regarding the slander suit. Their jingle is rather catchy

    “Own a piece of crap,
    Lever to the max,
    No more renter sap,
    Think I’ll smoke some crax.”

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  6. David Losh

    Real Estate agents are interested in getting a commission.

    23% of the market place for more than a coupld of years is dictating the market place, because it is on two sides.

    On one side “investors” and flippers buy these properties then resell them for a profit. The margins may be tight, but it gives the illusion of price increases.

    This is the market place, where investors are stacking cash reserves, and I’m well aware of it.

    There is a lot of polished poop out there, and no, a kitchen remodel is done to the taste of the owner so what looks good to one is something that needs to be replaced by another.

    The kitchen is a box with cabinets, and appliances. So people paying extra for a set of cabinets, and stainless steel appliances should think twice about that strategy.

    Granite counter tops? They may be a thing of the past.

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  7. Kary L. Krismer

    RE: David Losh @ 6 – I can see why you failed as a real estate agent. You don’t understand people.

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  8. David Losh

    I understand completely that Real Estate agents are feeding hype, without value.

    Buy a pretty kitchen is a selling point that isn’t very practical.

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  9. Plymster

    RE: David Losh @ 6 – Spot on, David! I know quite a few people who bought homes, and within the first 6 months reworked the kitchens and bathrooms to suit their tastes. Personally, I’d rather get a home with a dated kitchen for less, so that I can update the kitchen to suit myself.

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  10. Kary L. Krismer

    By Plymster @ 9:

    RE: David Losh @ 6 – Spot on, David! I know quite a few people who bought homes, and within the first 6 months reworked the kitchens and bathrooms to suit their tastes. Personally, I’d rather get a home with a dated kitchen for less, so that I can update the kitchen to suit myself.

    That’s totally different. I would agree with that myself. I would say though that you’re likely to pay more overall that way, but if you really want what exactly you want, or the house is otherwise special, that may be worth it.

    That does not mean, however, that a house with an updated kitchen isn’t worth anything more than one with a dated kitchen, or that is otherwise run down. That’s the point David is trying to make.

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  11. Kary L. Krismer

    RE: Plymster @ 9 – BTW, that also goes to the issue of whether to buy a fixer or to buy a turnkey property. There is no right answer to that. The answer varies for different people.

    When we bought I went for a house sort of in the middle. It was in pretty good condition overall, but it did have a really dated kitchen and way too much carpet. My wife saw the house first and when I saw it I told her: “I can see this house has a lot of potential, I just can’t see what that potential is.”

    So basically I agree with you on how doing things yourself can get you more of what you want. But if we’d found a similar house for the same price with an updated kitchen, we probably would have bought that house instead.

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  12. Seattle Bubble • Non-Distressed Median House Price Was Flat in January

    [...] This is quite a contrast to the $30,000 drop in the raw median price, and demonstrates that the big drop in price was due almost entirely to the shift toward more distressed sales. [...]

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  13. 2kt

    RE: David Losh @ 2

    Dave, Dave. So you are saying that if someone buys for $60,000, puts another $60,000 in it, the house price should gain nothing? Not even if all appliances are replaced, broken items repaired, siding fixed/repainted, kitchen all, new? If this is so, Dave, you, god bless you.

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  14. David Losh

    RE: 2kt @ 13

    We should all get thirty year loans on new appliances.

    I take it your in the business so you know as well as I do that in a Real Estate market that isn’t appreciating, and looks like it won’t appreciate, the way it was from 1890 to 1990, that a lot of the poop polishing that is going on now is a loss.

    If we take a house that needs repair, repair to put it into good working order, I’m buying a home repair job, for my crew.

    The buyer, on the other hand needs to realize that what they are buying is the house, and give me what they feel my work is worth to them.

    They don’t need to like my work. They may not need my new kitchen, so why pay for it?

    I’m talking about from the buyers point of view. It makes no sense that buyers pay for polish rather than substance.

    I’ll use the example up the street from me which is one of many that I see, it’s a cute house. It has probably $100K in new kitchen, bath, paint tile, carpet. It’s cute. It also has a pronounced hump in the first floor that runs the length of the house. From the furnace side of the sheet rock, to the laundry room you can see there are no structural repairs. Settling was noted on the inspection report.

    How much value does all of that work have if there is a problem with the structure?

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  15. David Losh

    RE: Plymster @ 9

    I was in the business of “home improvement” for forty years. We have prepared thousands of properties for sale, and was also a resource for people who just bought.

    As buyer you are buying a box. It’s good if the roof is good, and foundation is good. Next you can look at siding, windows, doors, and systems. You want good working electrical done by an electrician. You want working plumbing that makes sense, and should consider the cost of replacement.

    Then you want a lay out that works for you, and the structure to support it.

    After that you consider the rest of it, like paint, kitchen, and bath.

    If you are buying a house you should have cash reserves for your own improvements, like paint, because that is a personal choice.

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  16. Kary L. Krismer

    By David Losh @ 14:

    The buyer, on the other hand needs to realize that what they are buying is the house, and give me what they feel my work is worth to them.

    They don’t need to like my work. They may not need my new kitchen, so why pay for it?

    I’m talking about from the buyers [sic]point of view. It makes no sense that buyers pay for polish rather than substance.

    I highlighted your error above because what you’re doing is taking it from the “buyer’s” point of view, with the buyer being you. Not everyone is like you. You’re being like the person who says Seattle property is overpriced because it’s more than what they’re willing to pay. That’s them, that’s not the market.

    When I said yesterday you don’t understand people, what I meant is people are different. Some people want only new construction, where no one has lived in the house before them. Some people want a property that is totally turnkey, so they can just move in. Some people are looking for a complete fixer, some a cosmetic fixer.

    Someone looking for a complete fixer or cosmetic fixer is not generally going to be willing to pay as much for a house as someone looking for new construction. They are hoping to pay less due to the condition of the house.

    The one thing you’re right about is not everyone will want that new kitchen. Using a different example, early on in my wife’s career she represented some buyers where the seller had replaced all the carpet in a fairly large house. Her clients ripped it all out, because their children had allergies. So for that seller, that was wasted money. That’s the flip side. Improving the property won’t necessarily get you more, but in general, an improved property will sell for more than a property with significant deferred maintenance.

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  17. David Losh

    The reason property prices are rising, globally, is because of speculation. It’s the same for commodities.

    Investors are buying low, and selling to you, the buyer for more than they paid. Here in residential, for your home that may be a small gain, but nationally with big hedge fund investors those gains are adding up quick.

    There is a point though when this investing is done, and the big players leave the Real Estate market to move onto the next thing.

    This thread shows exactly what is going on, globally.

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  18. David Losh

    Move on counselor, I don’t have time for you today.

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  19. Kary L. Krismer

    By David Losh @ 18:

    Move on counselor, I don’t have time for you today.

    Was that really necessary? Is it not possible for you to just STFU or do you just like to troll?

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  20. corndogs

    RE: David Losh @ 14 – “lot of the poop polishing that is going on now”.

    Your fascination with poop for about a solid week straight puts you right up their intellectually with Ivan the Gorilla. Hopefully they make you wear a diaper to deter you from continually putting your finger in your butt.

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  21. David Losh

    RE: Corndogs @ 20

    So, again you have nothing to say, but are compelled to say it anyway.

    You dated yourself with Ivan.

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  22. David Losh

    RE: Kary L. Krismer @ 19

    Take your own advice.

    OK, buddy you got some one to respond to you today, is that really better?

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  23. Kary L. Krismer

    RE: David Losh @ 22 – Whatever, David. I’d insult you but you’re too stupid to take offense.

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  24. 2kt

    RE: David Losh @ 14

    The work has value, Dave. For one, a new owner would probably pay much more for doing this work “retail”. Secondly, the structural problem is probably discounted by very low price in the first place.

    So the only real issue is if that structural problem is fixable, and if so, for how much. Then, after accounting for those repairs, the question is whether the house would cost (original purchase price+ cosmetic repairs+upgrades+ structural repairs) on par with like-kind properties or end up overpriced.

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  25. David Losh

    RE: 2kt @ 24

    Long story short is that we could gold plate everything in the house and the value of the house would remain the same. The salability may increase because the buyer pool would only see the gold.

    There is no question that a new roof has value as long as they aren’t covering long term defects. A good foundation is essential, and systems are expensive to repair. It’s much easier, and cheaper to rip apart an empty house.

    There are good people who rehab properties, and I’d like to make that distinction. Some people work the numbers, and do what makes sense.

    Flippers are another breed of animal, and the market place has been over run with amateurs.

    It was a big decision for me to shut down the construction portion of our business, but I have said a number of times that the margins just got too slim.

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  26. Kary L. Krismer

    By David Losh @ 25:

    RE: 2kt @ 24

    Long story short is that we could gold plate everything in the house and the value of the house would remain the same. .

    Before you people try to did too deeply into this nonsense, remember that Losh thinks the value of real estate is a constant over time too. I don’t know what Losh thinks the term “value” means, but it’s clearly different than every other person on the planet. So talking to him about value is sort of like talking to someone about an apple if that person thinks an apple is a fish.

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  27. ARDELL

    The value starts at the dirt of it and land appreciates while the structure depreciates.

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  28. 2kt

    RE: David Losh @ 25

    All in the clear, Dave. You have no idea what value is or how it is arrived at, but that’s besides the point.

    I get it. The value of the property is always the same, not matter what. It is somewhere between where it was 30 and 40 years ago. Everything else is banks, fraud scheme and bullchocolate. Amen, brother.

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  29. CM

    It is evident a lot of people here don’t understand inflation.

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  30. Kary L. Krismer

    RE: CM @ 29 – David has mentioned appreciation which occurred in the past, and Ardell has mentioned both appreciation and depreciation, but for the most part we’re talking current value, and differentiating between houses in different situations and conditions. I don’t really see how inflation comes into play for that main topic. We’re dealing with the present, not the past or future.

    Also I would note that it is possible to estimate the value of a house in prior years. That it is worth more (or less) than before is not entirely inflation (or deflation).

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  31. corndogs

    RE: David Losh @ 25 – “Flippers are another breed of animal, and the market place has been over run with amateurs.

    It was a big decision for me to shut down the construction portion of our business, but I have said a number of times that the margins just got too slim.”

    Your failure in life is not in anyway related to the quality of work or success of other people.

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  32. Kary L. Krismer

    By corndogs @ 31:

    RE: David Losh @ 25 – Your failure in life is not in anyway related to the quality of work or success of other people.

    I would disagree. The lower end of businesses tend to fail in every area, but low end is relative. If there’s not much competition, low end businesses can survive, because there’s enough work to go around and customers/clients don’t have a choice. But as more and more people are successful in an area, the low end tend to drop out.

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  33. David Losh

    RE: Kary L. Krismer @ 32RE: corndogs @ 31

    Success is turning out a high quality product which we always have.

    If, you define success by making money, we make money.

    If you feel compelled to sell a lower quality product at the expense of the consumer that’s just wrong.

    Buyers today should be more cautious about what they buy, and not waiving inspections, or getting into multiple offers.

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  34. Kary L. Krismer

    By David Losh @ 25:

    It was a big decision for me to shut down the construction portion of our business, but I have said a number of times that the margins just got too slim.

    By David Losh @ 33:

    If, you define success by making money, we make money.

    These two sentences are inconsistent, or at the very least you apparently didn’t make enough money to be successful. In the past you said you quit being an active real estate agent because 3% was not enough money to make it worthwhile. As far as I know, you’re the only person on this site to ever claim 3% is not enough.

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  35. David Losh

    RE: Kary L. Krismer @ 34

    OK, you got me, I like to make money. Making money is my hobby.

    There is always more money, and I guess I can make money doing just about anything.

    I’m not stuck doing one thing my whole life because I live in fear of money.

    Real Estate got over run with ametuers. The margins are far lower in the past five years than they were say ten years ago. You have fewer qualified agents scrambling for fewer deals, because ametuer agents are mucking around making promises that will never materialize. It’s the same with rehabbing properties.

    So, you either see the market for the manipulated mess it is, or live the dream because those commissions are so attractive.

    Fortunately I’ve never had to lie to people to make a buck.

    It’s all numbers.

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