Weekend Open Thread (2010-09-10)

Here is your open thread for the weekend beginning Friday September 10th, 2010. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

32 comments:

  1. 1
    David S says:

    Personal Experience with Renting – We sold our house in January with the intention of moving up. Closing was in March and we still had not found anything. I did have a fishing buddy who just had a rental open up so we took that option and are still in it.

    We don’t like the rental house or the location so much. We do like the option of being patient.

    The rent is $1350 a month which is no problem. The economics of our situation is we get to bank around $5000k a month. THAT’S MONEY IN THE BANK! We are building capitol like we never have before.

    While we don’t like it, we have not been able to ‘make a move’ on anything. Our low price point of $500k has afforded us many previews of houses that need $100k to $200k worth of work to move in, yes, even the conventional sales we look at. The condition of properties is an abominable. I never imagined doubling our price point would only get us %20 more house.

    So bottom line is that renting is right for us. It allows us patience, liquidity, solvency, mobility and the ability to have huge positive cash flows. It’s a point in our lives we will look back on, reflecting on the fact that we actually had NO debt, zero, of any kind. Truly amazing.

    So hopefully our third house comes along this fall or winter that truly feels like a deal, not a steal or a loss for us. Just a deal.

  2. 2

    RE: David S @ 1 – Renting from friends or family opens up a lot of flexibility (hopefully). If your transaction doesn’t close on time, they will likely be a bit more forgiving.

  3. 3
    David Losh says:

    Ray brought up the point that in Nevada investors are simply making offers directly to banks for foreclosed properties. They write a letter offering to buy as is, where is, for a take it, or leave it, cash price.

    I’ve never brought this up, but have made reference to it. An individual, a buyer, or a seller can by pass the Real Estate system all together. Once you find a property you want to buy you only need to declare your intention. You can write your offer any way you chose.

    You can make an offer, as an individual, directly to a home you found listed for sale on redfin with a clause that says the listing agent is to get no commission. To throw a bone into the mix you can write your offer saying the listing commission is not to exceed 1%. You can state that the buyer’s commission, if one is listed, you want rebated to you in escrow.

    You used to be able to buy boiler plate Real Estate forms at JK Gill’s, but now I’m sure you can down load them on line. You can use any paper you chose, but I have found, from personal experience, that a cock tail napkin is frowned upon in court. It’s best to stick with plain paper, or a legal pad.

    We are now going to find that market place, where having homes listed for sale on the internet can be problematic. The people who list the properties for sale will need a revenue source. Having people pay them to write up an offer just isn’t cost effective for the buyer.

  4. 4

    By David Losh @ 3:

    You can make an offer, as an individual, directly to a home you found listed for sale on redfin with a clause that says the listing agent is to get no commission..

    You can do that, but the seller cannot accept without being in breach of contract, and you could be sued for intentional interference with a contract. Other than that, it’s a great plan! ;-)

  5. 5
    Daniel says:

    By David S @ 1:

    It’s a point in our lives we will look back on, reflecting on the fact that we actually had NO debt, zero, of any kind. Truly amazing.

    Maybe the problem is that even you regard this as amazing. That actually amazes me.

  6. 6
    David S says:

    By Daniel @ 5:

    By David S @ 1:

    It’s a point in our lives we will look back on, reflecting on the fact that we actually had NO debt, zero, of any kind. Truly amazing.

    Maybe the problem is that even you regard this as amazing. That actually amazes me.

    We sold out. Cashed out everything. We own everything we have. Not living on borrowed dime. We consume plenty but with no excess.

    Median credit scores both over 800. Low FICO between us 750. We qualify for all the good stuff, the best rates of the day on all of it. But we have not taken the bait. Not yet. Maybe never. Come on deal. Just a good deal not a steal. We will live within our means. Always will. We will see to our children’s future. Perhaps others’ future as well.

    Amazed? Yes, indeed. I never would have considered myself to be such a standout kind of guy. It turns out that I am. We are.

  7. 7
    Dirty_Renter says:

    The Tim, I like this new format.
    That is all.

  8. 8
    HappyRenter says:

    By David S @ 6:
    Amazed? Yes, indeed. I never would have considered myself to be such a standout kind of guy. It turns out that I am. We are.

    David S, I’m happy for you. But how do you know that you are a standout? Maybe, 70% or more in your age are like you. Is there any statistics about the amount of personal debt (student loans+mortgage+etc.) in the US population broken down by age? It would be then interesting to compare it to other countries (in particular Europe).

  9. 9
    The Tim says:

    Moved a series of generic economic comments to the Global Economic Open Thread.

  10. 10
    David Losh says:

    RE: Kary L. Krismer @ 4

    How do you figure that? A seller has signed a listing agreement. As a buyer you can make any offer you want. How does that interfer with the contract?

    This is where Residential Real Estate really departs from contract law.

  11. 11

    RE: David Losh @ 10 – Your contract is asking them to breach their other contract. Assuming they do sell to you, they will still owe the broker the commission (both halves). If you convince them not to pay it for some reason, you’re interfering with the broker’s contract.

    Let’s use another contract. Seller agrees to sell to Joe. John decides he likes the house and offers Seller more money, and tells him not to sell to Joe. Seller sells to John. Joe can sue both Seller (breach of contract) and John (intentional interference with contract).

  12. 12
    Blurtman says:

    RE: The Tim @ 9 – Tim, What is appropriate for the Open Thread. “You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.” Except economic or healthcare comments?

  13. 13
    David Losh says:

    RE: Kary L. Krismer @ 11

    Exactly where residential Real Estate diverges from contract law. You can sue anybody for anything, but in court, it’s all different.

    By your same logic a buyer shouldn’t ask for points, or closing costs. There would be no work orders.

    In a hot market, or a sellers market, maybe some cases could be made, but in a buyer’s market the agent has to work in the best interest of the client, in this case the seller. An agent interferring with a legitimate sale is also working against his, or her client.

  14. 14

    By David Losh @ 13:

    RE: Kary L. Krismer @ 11 – By your same logic a buyer shouldn’t ask for points, or closing costs. There would be no work orders..

    That’s not at all the same, because that’s not a breach of contract in any manner.

  15. 15
    David Losh says:

    RE: Kary L. Krismer @ 14

    It’s completely the point. As an unlicensed buyer a person can make any offer that they chose.

    No one is forced, by any measure of the law, into dealing with any one other than the principle. If that buyer feels that the listing agent is only entitled to whatever compensation, they can make that a condition of the sale.

    The seller, with a listing contract, can either accept, or reject the offer. If the agent says anything, other than take action to protect the client they have a contract with, then they would be interfering.

    No one has to use an agent, or an attorney.

    I’m really kind of stymied here. You must know that what I’m saying is true. It’s the basis of discount, or rebate Brokerage. Just because some one, or entity, is charging less doesn’t mean they have a higher claim to collecting a commission.

    Actually if you watch the video of Glenn talking at Blood Hound Unleashed he is asking, or saying the same thing. Why do people pay Real Estate agents, or attorneys in a Real Estate transaction? Once the have found the home, they can, they have the right to, approach the seller with a legitimate offer. They can fashion, and write the offer up any way they chose.

    The seller has the right to accept, or reject the offer. If the seller is kind enough, at that point, to give the gift of a cash compensation to the listing agent, then gawd bless that gesture of good will.

    Going into court with some bogus listing agreement is the kind of stunt Demco Law would pull to extort money from the huddled masses. The most they would be given, as a gift, in court, would be the listing commission, and a lecture from the judge about mediation.

  16. 16
    Macro Investor says:

    RE: Kary L. Krismer @ 11

    “Your contract is asking them to breach their other contract. Assuming they do sell to you, they will still owe the broker the commission (both halves). If you convince them not to pay it for some reason, you’re interfering with the broker’s contract.”

    I kind of disagree with both of you.

    David, why would a buyer even mention that in a contract? The buyer offers X dollars. The seller’s commission, if any, comes out of that. The buyer shouldn’t care either way.

    Kerry, how is it breach of contract if a buyer and seller “meet up” on their own? I thought listing agreements only covered when the agent finds the buyer, or it comes in thru his or her marketing. But I agree it could be problematic to induce someone to breach a third party’s contract — you don’t want to do that.

  17. 17
    The Tim says:

    By Blurtman @ 12:

    RE: The Tim @ 9 – Tim, What is appropriate for the Open Thread. “You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.” Except economic or healthcare comments?

    That’s correct. Quoting from the comment policy, which is linked in bold, capitalized text between the comment box and the submit button:

    Comments relating to health care may be posted only on the Health Care Open Thread Smackdown.

    Comments relating to the global or national economy and not directly related to Seattle-area real estate may be posted only in the Global Economic Open Thread.

  18. 18

    By David Losh @ 15:

    RE: Kary L. Krismer @ 14

    It’s completely the point. As an unlicensed buyer a person can make any offer that they chose.

    No one is forced, by any measure of the law, into dealing with any one other than the principle. If that buyer feels that the listing agent is only entitled to whatever compensation, they can make that a condition of the sale. .

    Well, first we need to backtrack here and specify that we’re talking about an exclusive listing contract, which is about 99% of the listing agreements out there. Under such a contract the seller pays a commission if the property is sold within the time period, even if the buyer walks up to the seller and hands them a contract directly without an agent.

    So, if your buyer tries to make no commission to the listing agent a condition of the contract, they are interfering with the contract between the seller and the listing agent.

    Rebate brokers are not the same. When the listing agent puts the listing on the MLS they offer a commission to a competing broker. The competing broker can do whatever they want with that commission, including rebate all or part of it to the buyer.

  19. 19

    By Macro Investor @ 16:

    RE: Kary L. Krismer @ 11 – Kerry, how is it breach of contract if a buyer and seller “meet up” on their own? I thought listing agreements only covered when the agent finds the buyer, or it comes in thru his or her marketing. But I agree it could be problematic to induce someone to breach a third party’s contract — you don’t want to do that.

    No, an exclusive listing agreement, by far the most common type, covers any sale. That’s because otherwise it would be difficult to prove the listing agent was responsible for the sale. Without an exclusive listing agreement the agent wouldn’t want to even put a sign on the front lawn.

  20. 20
    Pierce Anon says:

    For Ray and other aficionados of the Claim Jumper.

    “Claim Jumper Restaurants LLC, the operator of a restaurant chain in California and seven other states, sought bankruptcy protection with a plan to sell the business to one of its investors.”

    http://www.bloomberg.com/news/2010-09-10/claim-jumper-restaurants-files-for-bankruptcy-with-plan-to-sell-business.html

  21. 21
    chrisM says:

    Can anyone guide me on how to appraise a hobby-farm property? I understand how to appraise “normal” houses/ where the lot size really isn’t a consideration. But how do you price a property where the lot size may be more important than the house itself? Thanks!!!

  22. 22
    David Losh says:

    RE: Kary L. Krismer @ 19

    Let’s start with it’s residential Real Estate. The seller can agree to a listing agreement, but the buyer may want to have that agreement voided, and not deal with the agent. It’s true that the seller can pay the listing agent, maybe even be obligated to pay a listing portion of the agreement, but an unrepresented buyer can ask for the commission to be reduced, or the price of the property to be reduced accordingly.

    To answer the question about why the commission is brought up, it has to be specifically mentioned in the buyer’s offer. There is that worthless listing agreement that some one was conned into signing. (sorry, I couldn’t resist the baiting) The part of that listing agreement concerning the commission has to be a part of the offer.

    Agency, agency law, is a way to collect a commission. All the legislation is about how an agent is compensated. The Purchase, and Sale Agreement is an instruction to escrow, the commission is a part of that. The Listing Agreement is all about the commission. It’s a promise to pay. An unrepresented buyer can ask for that listing agreement to be amended. Telling me it would violate a contract is just false.

    You may be an attorney in some other capacity, but when you fill out the boiler plate forms you aren’t even allowed to call it a limited practice of law. You’re a guy helping a couple of other people figure out how to instruct escrow. Your function is getting to mutual agreement.

    My point is, that just because some one puts pretty pictures on the internet, there is no reason a buyer should pay some one to write up the transaction.

  23. 23

    By David Losh @ 22:

    RE: Kary L. Krismer @ 19 – Let’s start with it’s residential Real Estate. The seller can agree to a listing agreement, but the buyer may want to have that agreement voided, and not deal with the agent. It’s true that the seller can pay the listing agent, maybe even be obligated to pay a listing portion of the agreement, but an unrepresented buyer can ask for the commission to be reduced, or the price of the property to be reduced accordingly.
    . . .
    Agency, agency law, is a way to collect a commission. All the legislation is about how an agent is compensated. The Purchase, and Sale Agreement is an instruction to escrow, the commission is a part of that. The Listing Agreement is all about the commission. It’s a promise to pay. An unrepresented buyer can ask for that listing agreement to be amended. Telling me it would violate a contract is just false.

    The buyer may want to not deal with the agent, but they can’t do anything to void the listing agreement. That’s interference with a valid contract. Also, if they go that route, and the seller sells to the buyer, the seller owes both parts (LOC & SOC) of the commission.

    Again I’ll go back to the pending sale situation. If what you’re saying is correct, a new buyer could walk in and say: “I’ll buy your property but only if you don’t sell it to the existing buyer” and the seller could say “Okay” without any ramifications. Clearly the seller would be in breach and could be sued, and I think the new buyer could be also. Just saying they can do it, as you are doing, doesn’t mean they can.

  24. 24
    David Losh says:

    RE: Kary L. Krismer @ 23

    A signed around deal is different.

    A rebate is directing the commission. A discounted commission is directing a commission. Every one is allowed to direct the commission. The commission is always, always has been, and always will be, negotiable.

    Realistically people do make offers on properties that have been sold, called back up offers. Directing that the first offer to be killed would be interfering, but offering more, as an inducement to kill a deal, gets complicated.

    My point will be that no one needs a Real Estate agent, or an attorney, to write up an offer on a property. Once you find the property, and presumably all the information you need about the property, there is nothing to say that you have to, or even should, use the service that provided the information.

    Real Estate is a one on one transaction. It’s two people, especially in residential Real Estate coming to a meeting of the minds agreement on the terms, and conditions, of a transfer of property. In most cases, and I mean most, it’s a one, or two time event.

    It’s not like stocks, or travel, or books, that can be multiple events. It’s a quarter, to a half, of a million dollars. You don’t dump that kind of money once a month.

    In the 1970s I made more than a couple of stops at JK Gills to pick up forms for a Purchase, and Sale Agreement before I got a Real Estate license. After three years of having a Real Estate license I set my license back to Olympia because it’s easier, and cheaper, to do a Real Estate transaction without a license.

    Now comes the part where everybody whines about the lack of information. If only we had the information about the houses then we could do the deals ourselves. If only those bad old Real Estate agents would share the information then we would be able to do things ourselves. Well, we are in those times now, so why aren’t more people writing their own offers? Why are people so upset about the commission when they can write an offer themselves and save all the commission they think they deserve?

  25. 25
    Willy Nilly says:

    RE: chrisM @ 21

    I don’t know about appraisal, but if you look at at lot of listings via RedFin you can quickly see how the land / additions is taxed (under the property tax section) is distributed. You can also go to the parcel viewer on specific properties of interest and see the tax history. You should be able to extrapolate (and at least compare similar properties in a general area) to see what is a better value versus what is overpriced. Good luck.

  26. 26
    Haybaler says:

    RE: chrisM @ 21

    Hi Chris,

    This question may be right up my alley. You haven’t provided any details so I’m forced to hypothesize a bit here.

    Most folks who talk “hobby farm” are looking at 5 or 10 acres of land with a home and various other structures. Maybe they plan to have a horse and a cow or chickens.

    Start with the “Zoning” of the property. Zoning restricts many types of activities.

    If your “hobby farm” is zoned “Residential” then you are dealing with a residential property that has enough dirt to do hobby ag activities….(a really big yard.) Look at comparable sized acres for sales comps. Then look at those comps for structures of a similar vintage and utility.

    On the other hand you could have land actually zoned “Agriculture”. A Whole different kind of property.

    In my neighborhood one recent 20 acre parcel with a deluxe large new house, covered riding arena, and horse facilities sold for $850K, … a different 20 acre parcel with an historical barn, numerous simple garages and a 70’s split level house sold for $300K.

    My point is that you need to compare apples to apples. It’s tough.

    What are you looking at?

  27. 27
    Haybaler says:

    RE: chrisM @ 21

    Hi Chris,

    This question may be right up my alley. You haven’t provided any details so I’m forced to hypothesize a bit here.

    Most folks who talk “hobby farm” are looking at 5 or 10 acres of land with a home and various other structures. …Maybe they plan to have a horse and a cow or chickens…. When you look at larger acreages you will notice more acres sell for fewer dollars per acre for the land.

    Start with the “Zoning” of the property. Zoning restricts many types of activities.

    If your “hobby farm” is zoned “Residential” then you are dealing with a residential property that has enough dirt to do hobby ag activities….(a really big yard.)… if those activities are allowed in that zoning or municipal jurisdiction.

    Look at comparable sized acres for sales comps. Then look at those comps for structures of a similar vintage and utility.

    On the other hand you could have land zoned “Agriculture”. …A Whole different kind of property…(Which, in my opinion, it should be a crime to NOT do Ag activities in but many folks use these acres as a residence only)

    Recently, In my neighborhood a 20 acre parcel with a deluxe large new house, covered riding arena, and horse facilities sold for $850K, … a different 20 acre parcel with an old barn, numerous simple garages and a 70’s split level house sold for $300K.

    My point is that you need to compare apples to apples. It’s tough.

  28. 28
    ChrisM says:

    Willy Nilly @ 25 –

    Thanks for the advice — I’m intimately familiar with the county’s website. One of my basic problems is that I believe the county (Clark) is not appraising correctly! 50k/acre is overblown, IMO.

    Seems like it probably is a basic 2 function algebraic equation, but if there is an industry standard I’d love to hear it.

    I’m interested, too, in how comps are calculated. For instance, for the land component, is a 5 acre property simply half the value of a 10 acre property? Is 20 acres of land just 4x as expensive as 5 acres?

    How do you factor in fencing, add’l structures, level lot (or better yet, slightly sloped to the south), etc.?

  29. 29
    ChrisM says:

    Haybaler @ 27 –

    Thanks for the good advice. I’m looking (as you predicted) at 5-10+ acres w/ probably mobile home in zoning that allow for ag activity. I had been avoiding Oregon due to their taxes & govt situation, but may revisit that. I’m interested in the ag tax deferral, and have some marketing ideas which would support the deferral.

    *However*, running the numbers on properties as they are currently selling for in WA/OR area that are within an hour of major metropolitan areas, I can’t make the ag operation pencil out. But if I go back to 2003 or earlier, then I can.

    The basic problem w/ comps is the lack of comps themselves!!! I don’t know how an appraiser is supposed to look at 3 ag properties, because the sales here are few and far between. And trying to find matching structures (30 year old mobile vs. 5 year old horse/McMansion) makes it even more difficult. Also, I’ve looked at properties in *really* rural counties, and I have no idea how the comps work there, since sales are *really* miniscule.

    I just watched a 20 acre parcel w/ 10 year old mobile home go pending for 240k, so maybe there is hope…

  30. 30
    Haybaler says:

    RE: ChrisM @ 29

    I don’t know anything about SW WA.

    I do know that some counties have minimum acre restrictions on Ag tax deferrals….for example: In Pierce county you are required to have a minimum of 20 acres to qualify and you need to do a minimum amount in gross sales per acre for so many years and when you stop then you owe back taxes for the last 7 years of deferment. These rules are a serious deterrent to most who consider participating.

    In my market area there are about 200 (maybe I exaggerate just a little)- (20 acre) parcels for sale. Only 4 or 5 actual sales have occurred in the last 12 months …the “comps”.

    Within these sales there are no strong similarities in structure style, size or age. Likewise, outbuildings vary in size, quality and utility. Some properties have cabins. Others, Mansions.

    You are absolutely right about the difficulty of getting a handle on what a place is worth….. but a good appraiser will come up with a number for you.

    They use a technique called “Bracketing”….. That is where they list the features and characteristics of the sale comps and “add” or “subtract” to make each comparable equal to a specific “subject property” (the one you are buying).

    The resulting appraisal is actually very satisfactory in my opinion.

  31. 31
    ChrisM says:

    RE: Haybaler @ 30

    Argh, just accidentally deleted my own post. Too much fruit wine.

    It has been interesting to see Realtors ™ misrepresent the tax deferral. Good thing I researched it myself, otherwise I would really have been screwed.

    Looks like Pierce is more strict than Clark. I’ve spoken w/ Clark county zoning people, and they are more than happy to reclassify a property as high density housing when it was originally ag. Really makes me dubious to buy in such an environment, since I’m looking for a place in the country, and want it to *remain* in the country! I’m currently renting an 8 acre parcel, and the neighbor to the south is trying to sell their 40 acre parcel to get subdivided into regular city housing.

    I fully understand that the county gets more property tax revenue from high density taxes, but geez, at some point don’t people understand where their food comes from???

    There’s a contingent of Realtor(tm)/speculators/developers here in Clark county (and pretty much everywhere) that gets to run rampant over everyone else. The three county commissioners are in the pockets of the developers. It gets a little tired…

    Since I telecommute, I can live whereever I want, and at this point I’m getting disillusioned…

  32. 32

    By ChrisM @ 28:

    Willy Nilly @ 25 – I’m interested, too, in how comps are calculated. For instance, for the land component, is a 5 acre property simply half the value of a 10 acre property? Is 20 acres of land just 4x as expensive as 5 acres?

    If you’re talking residential property, then no. I’ve seen areas where I could not determine a dollar’s difference between the price houses were selling for on one acre and two. But if you’re talking agricultural land I would suspect the answer would be different, unless perhaps the highest and best value was as residential land.

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