Monday Open Thread (2010-11-29)

Here is your open thread for Monday November 29th, 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.

42 comments:

  1. 1
    jimmythev says:

    Tim,

    Quick question for the Seattlebubble readers. I have a friend who’s been using a short sales specialist to go around and lowball short sales properties on the East Side. The way he explaines it to me is this specialist goes directly to the bank and offers 70% of the 2010 Tax assesed value of the property… it seems to be working. My understanding is if it goes directly between the bank and the individual that it somehow doesn’t show up as a comp on MLS? and therefore banks are willing to discount more heavily as long as it doesn’t bring down the value of their other properties in the area… does this make any sense? And is 70% of the 2010 Tax assesed value a good deal?

  2. 2

    RE: jimmythev @ 1 – That doesn’t make a lot of sense. For it to not show up on the NWMLS stats it would have to be an unlisted property. Maybe they’re going through expired short sales to find them, but I suspect your person is probably dealing with bank owned foreclosures.

    As to the percentage of assessed value, that would be rather foolish because tax assessments vary widely. You’d want to do your own assessment of value. If you’re dealing with a bank, it might be a strategy to focus on properties with low tax assessments to value, but I find it a bit hard to believe that banks would base their decisions on such a number.

  3. 3
    deejayoh says:

    RE: jimmythev @ 1 – It also doesnt make sense because short sales are used as comps for financing appraisals. Doesnt matter whether or not they are in the MLS. So the banks would just be making sure that the next house wouldn’t appraise for a loan.

  4. 4

    RE: Kary L. Krismer @ 2

    Exactly Kary

    Get your own assessor working for you to challenge a phony tax assessment that’s too high in court and all of the sudden those properties that are eliminated from the high county tax assessment average [like shorts] can be easily and mathematically put back in. It stands in court too from cases I’ve heard about.

  5. 5
    deejayoh says:

    By softwarengineer @ 4:

    RE: Kary L. Krismer @ 2

    Exactly Kary

    Get your own assessor working for you to challenge a phony tax assessment that’s too high in court and all of the sudden those properties that are eliminated from the high county tax assessment average [like shorts] can be easily and mathematically put back in. It stands in court too from cases I’ve heard about.

    Assessor /= appraiser.

    Tax assessments are not really relevant in financing.

  6. 6

    RE: deejayoh @ 3 – I’m not sure how many appraisers use non-listed properties as comps. It would be more difficult for them to get information about the property. If they could get sufficient numbers of comps through the MLS, I doubt they would look further.

  7. 7

    RE: jimmythev @ 1
    I’ll agree with everyone else here. Makes no sense.
    First of all, in a short sale, the house is not yet owned by the bank. The seller has to be okayed by the bank to proceed with a short sale, and has to agree on a price with the buyer before the bank gets in the act.
    Secondly, tax assessments are all over the map as far as accuracy goes.
    So I’m guessing that your friend might be dealing with bank owned homes that are not yet listed, and maybe offering 70% of current market value as determined by either an appraiser or real estate agent using a comparative market analysis.

  8. 8
    deejayoh says:

    By Kary L. Krismer @ 6:

    RE: deejayoh @ 3 – I’m not sure how many appraisers use non-listed properties as comps. It would be more difficult for them to get information about the property. If they could get sufficient numbers of comps through the MLS, I doubt they would look further.

    My last appraisal used 2 short sales and a foreclosure. They pulled from county records, not the MLS. I asked the mortgage broker about this. She said it’s quite common these days and that given the percent of the market that this type of transaction represents, using just the MLS would be basically irresponsible. Just one data point but seems like mortgage brokers would see a decent number of transactions.

  9. 9

    RE: deejayoh @ 8 – I would think it would be irresponsible to use data that you didn’t know was correct, and had no idea of the condition of the property, etc. Although I guess most of that would go the bank’s direction–e.g. county 1 bath, reality 2, etc.

    Also, how would they possibly track down the buyer? Do knock on the door? For the low fees appraisers get I really doubt that.

  10. 10

    I just came across a property that has had 5 Notice of Trustee’s Sale documents filed against it since 10/09. It’s still owned by the debtors today. That just shows how those recordings overstate the level of distressed properties a bit.

  11. 11
    Pegasus says:

    Why Rising Rents is Not Necessarily Good News for Home Prices

    For most of the past decade, renting a home has been a smarter move than buying one in most areas of the United States. The cost of renting a similar home has been far less than owning one, even after things like mortgage interest tax deductions are taken into account.

    http://www.cnbc.com/id/40419339

    Will Rising Rents Spur Home Ownership?

    A positive in the commercial real estate sector may be a sign of better things to come in residential housing down the road, or that’s the theory. “As rents rise and the cost of home ownership declines, owning is becoming more attractive,” notes California real estate analyst John Burns.

    http://www.cnbc.com/id/40417678

  12. 12

    Boeing and Seattle Homes Sales Has to Worry About the New Chinese Commercial Jet

    Add Microsoft and Seattle Home Sales has to worry about Kai-Fu Lee, from China too:

    http://seattletimes.nwsource.com/html/businesstechnology/2013540124_kaifulee29.html?prmid=obinsite

  13. 13
  14. 14
    Scotsman says:

    RE: gitano @ 13

    1986 is “historic?” Either I’m a lot older than I thought, or hyperbole is running wild in the streets.

  15. 15
    Chris says:

    Here’s a Seattle case by a homeowners association against a bunch of defendants regarding alleged problems with “Aspen Grove” apartment/condos. I wonder how many homeowner’s associations are going to be dealing with these water intrusion claims in the next few years.

    http://scholar.google.com/scholar_case?case=479814732382068566&hl=en&lr=lang_en&as_sdt=2002&as_vis=1&oi=scholaralrt&ct=alrt&cd=0

    Background:
    This case arises out of the 2005 conversion of an apartment complex into a condominium complex and the ensuing allegations of poor construction and insufficient disclosure. The facts of this case have been discussed at length and need not be repeated here. (Dkt. No. 54.) This motion concerns a set of defects in the Aspen Grove complex, specifically missing building paper or mislapped building paper, deteriorated gypsum sheeting below windows, and rotted stick framing (the Defects). Plaintiff seeks summary judgment on Defendants liability for the cost of repairing the Defects on three grounds: the Defects violate the Washington Condominium Act’s (WCA) warranty of suitability, the Defendants failed to inspect for the Defects in violation of the WCA, and Defendants deceived the unit purchasers in violation of the Washington Consumer Protection Act (CPA) by failing to disclose the Defects and by providing an artificially low estimate of monthly repair costs.

  16. 16
    Chris says:

    Here’s an easier URL:

    http://tinyurl.com/28xu7aq

  17. 17
    deejayoh says:

    By Kary L. Krismer @ 9:

    RE: deejayoh @ 8 – I would think it would be irresponsible to use data that you didn’t know was correct, and had no idea of the condition of the property, etc. Although I guess most of that would go the bank’s direction–e.g. county 1 bath, reality 2, etc.

    Also, how would they possibly track down the buyer? Do knock on the door? For the low fees appraisers get I really doubt that.

    I’m not sure I understand your view that the data may be incorrect. Which data? The sales price? The county has sales history, and in my case – they have the correct purchase price where the MLS does not.
    I’d assume the appraiser drove by the house just like they would have using MLS listings. I even think the appraisal mentioned that it was based on external view. I don’t know that where they pulled the data makes any difference in this case.
    And why do they need to track down the buyer? Does any appraiser do this?

    I’m missing the issue. But I am pretty sure that banks aren’t going to leave out 20% of transactions from their comps… not in today’s mortgage market.

  18. 18

    RE: Chris @ 15 – I’ve mentioned several times that there have been a lot of complexes up in Snohomish County that needed to be re-sided. I was seeing that over three years ago. Somehow, installing vinyl siding has become a lost art! ;-)

  19. 19

    RE: deejayoh @ 17 – I get calls quite frequently from appraisers asking for details on the sale–most notably seller financing concessions, number of offers, etc. With a sale that isn’t listed there’s always a concern it wasn’t arm’s length, and that would need to be checked out. Finally, with a listing you can usually get some idea of the condition of the property through the photos (or lack thereof). That’s not quite as good as going in, but it’s better than what Zillow does (base values off of county records).

  20. 20
    Chris says:

    RE: Kary L. Krismer @ 18 – Kary, I agree and think the inspectors and builders need to learn some basic skills about construction in this area. It’s strange inspections aren’t mandated for water intrusion or insurance companies don’t demand more before insuring. In the late 1990s I looked at a few condos in Seattle and within a few years most had water intrusion issues that required a lot of work. I lucked out and didn’t get a condo. Right after this, I saw three condo projects going up near where I worked and a coworker and I joked about taking pictures of the siding going up so we could sell the pictures back as evidence when the water intrusion suits were filed. Sure enough two of the three buildings had to have the siding redone within a few years. It’s an issue that seems particular to our region but some builders still think they can build with adobe like it’s San Diego.

  21. 21
    David S says:

    RE: Chris @ 20 – San Diego homes are getting the guts eaten out of them by termites. You might even call San Diego tent city because the problem is so prolific. They also have massive roach infestations (water bugs) but we have the rats. We have a climate that fails manufactured siding and I still see LP properties being snatched right up. Point is each city has its own set of unique problems.

  22. 22

    RE: David S @ 21 – Agreed, but as much as I dislike vinyl siding, there’s no reason whatsoever that it can’t be installed properly.

  23. 23

    Not directly related to real estate, but to the discussion of the over-use of the terms “fraud” and “criminal.”

    http://redtape.msnbc.com/2010/11/courts-using-anothers-ssn-not-a-crime.html

    Basically the courts are struggling with the issue of whether it’s criminal to use your own name and another person’s SSN to obtain credit, employment, etc. It’s not that it couldn’t easily be made criminal, but whether the fact pattern fits under the existing statutes. With criminal statutes it has to fit rather precisely.

  24. 24
    Chris says:

    RE: David S @ 21 – Yes I lived in San Diego and remember the tents up all over the place even years ago. There must be some way to account for local risks like that. When I was in SD no one was embarrassed when termites showed up – builder, manager and city inspectors. Same with water intrusion here. No one sees it as their responsibility, they are just throwing up the walls and it’s someone else’s department.

    Talking with some folks who’ve lived in both the US and Western Europe it appears residential buildings are better constructed there but cost a lot. Here housing is cheaper but falls apart earlier. When you see this happen so much it seems we’ve taking it too far and can do some simple adjustments where there are local issues. It doesn’t help any housing market when you see friends and relatives hit with assessments to cover this stuff. I’m much less likely to buy a condo here or in San Diego because of all the bad construction and lack of accountability.

  25. 25

    RE: Kary L. Krismer @ 22

    LOL Kary

    You can seal up glueboard and 2×6’s with vinyl and not experience mildew problems in the wet PNW….machine gun it full of holes first….but then it’s useless anyway.

  26. 26
    deejayoh says:

    RE: Chris @ 20 – I think that the number of condo builidings with water problems is directly correlated with the number of lawyers who specialize in water-intrusion lawsuits. There is much more money to be made on a lawsuit for a big building that there is a small one…

  27. 27
    sallybuttons says:

    RE: deejayoh @ 26 – nope – water intrusion has direct correlation with construction and the multiunit standard practice of general contractor restructure upon project completion..
    Lack of prof. accountability was (still is?) profitable and standard but requires the help of inspection blindness and a good restructure counsel to keep liability at bay.

  28. 28
    Chris says:

    RE: deejayoh @ 26

    Doing a search of reported appellate cases only in Washington involving “water intrusion” the list goes on and on (tiny link below). Many recent. Who knows how many hundreds of cases settled before they were appealed. Something is wrong and I don’t think the problem is homeowners associations getting bamboozled into lawsuits like River City was into getting a marching band. Everyone who I’ve known in these condos had legit problems. Why would anyone buy a recently built condo in this region?

    http://tinyurl.com/2vvf89j

  29. 29
    deejayoh says:

    RE: Chris @ 28 – I wasnt trying to imply that anyone was getting bamboozled. I just know that an acquaintance of mine that specializes in the field does very, very well.

  30. 30
    David Losh says:

    RE: sallybuttons @ 27

    Flat roof construction is what I say, along with roof top decks. Another thing is 16″ over hangs, which would solve a lot of problems.

    It rains in Seattle. Even a moderately pitched roof is better than nothing. I think the new style of over hangs on shed roof construction are a much better system.

  31. 31
    Chris says:

    RE: deejayoh @ 29 – It looks like your acquaintance has job protection for the next few years. That Aspen Grove apartment in Kent was built in 1991 and they didn’t find all this stuff (or so they claimed) till after 2005. It looks like over an over again supposed professionals miss this stuff in inspections. Why would anyone trust their own pre-purchase inspector who can’t look inside the drywall, especially when you could be on the hook for water intrusion into common areas? Buying a recently built condo in this region can be hazardous to your bank account.

  32. 32

    RE: Chris @ 31 – Not familiar with that project by name, but many of the converted condos were re-sided as part of the conversion. So they removed a system that worked and installed one that didn’t.

  33. 33
    One Eyed Man says:

    RE: Chris @ 28RE: sallybuttons @ 27

    If you’re going to buy a condo, my guess is that you’re better off buying a condo built after 2005. Washington State enacted legislation to deal with all the water intrusion defect cases in 2004 and 2005. The legislation includes provisions of the Washington Condo Act located at RCW 64.35 that mandate certain implied warranties for residential condominiums and provisions to improved multi-family construction at RCW 64.55. Among other things, RCW 64.55 requires construction inspections of common water intrusion points like windows. The Aspens condo conversion case Chris cited appears to rely upon these acts for the plaintiff’s claim.

    http://apps.leg.wa.gov/RCW/default.aspx?cite=64.55

    http://apps.leg.wa.gov/RCW/default.aspx?cite=64.34

  34. 34
    Chris says:

    RE: One Eyed Man @ 33RE: Kary L. Krismer @ 32
    Good points. Looks like when buying a condo you should mostly avoid the conversions and stick to post-2005. But even the post 2005 stuff is off-putting.

    On inspections, what is to keep the condo from hiring someone who will do like the appraisers did with subprime mortgages? We know the builders can get someone to agree to anything with a promise of future business. And it looks like they knocked out trial by jury with mandatory arbitration. That isn’t reassuring.

    RCW 64.55.070
    Inspector, architect, and engineer — No private right of action or basis for liability against.

    http://apps.leg.wa.gov/RCW/default.aspx?cite=64.55.070

    RCW 64.55.100
    Arbitration — Election — Number of arbitrators — Qualifications — Trial de novo.

    http://apps.leg.wa.gov/RCW/default.aspx?cite=64.55.100

  35. 35

    RE: Chris @ 34 – I think you need to balance the increased legal rights of a newer building against the fact that an older building has been tested by time (assuming not disturbed by a conversion). Also, a newer building would have more water problems of a different type–owners under water! ;-)

    There is no right answer. You just need to know the issues and balance them out.

  36. 36
    Chris says:

    RE: Kary L. Krismer @ 35
    Kary – are you seeing many conversions with problems caused by the new siding? I thought those conversions were mostly granite countertops in the kitchens and Ikea furniture in the common areas. I guess it makes sense that some of these projects hired unqualified workers to do the work during the boom. Odd the inspectors wouldn’t catch it.

  37. 37
    karl says:

    inspectors don’t (can’t) inspect for “craftsmanship”. As long as they comply with the engineering callouts and cuts there are no requiments unless spelled out by the product (IE. siding,window) OEM. After dealinging with years of legal disputes with my parents condo assoc Re: failures, maint issues(lack there of) it is best to stay away from condo living. they are a ticking time bomb

  38. 38
    Chris says:

    RE: karl @ 37
    I think you’re right. At least in this region. When the Carpenter’s Union can’t even agree who is to blame for water intrusion, what makes us think we know what we’re getting into if we buy?

    http://seattletimes.nwsource.com/html/localnews/2011585964_apartments12m.html

    It seems we have a unique problem with water intrusion in this area and it’s strange with all the horror stories it hasn’t been addressed in a comprehensive way. I understand why S.Cal has all the problems with termites because the problems frequently come up after construction. Hurricanes and tornadoes are common in some areas but the chances of a particular building being affected are small. The only thing close is earthquakes and they seem to do a good job with inspections here and even Chile seemed to come through their recent earthquake in good shape because of codes and inspections.

    With massive litigation for water intrusion as Deejayoh mentioned, why isn’t more done? Is the building lobby too strong? You would think just the court resources used would justify some action. Unless people avoid condos or demand vigorous inspections it seems safer to rent a condo than to own.

  39. 39
    One Eyed Man says:

    RE: karl @ 37

    I’m no fan of HOA’s. I live on an acre in Maple Valley. IMO condo’s are for people who want another layer of local government to tell them what they can do with their home. I was able to seceded from the HOA in the development I live in because they didn’t comply with the legal requirements when my property was annexed into the association by a prior owner. But to be fair, condos do provide some turn key maintenance for those who are willing to trust the association and they are a favored form of housing to avoid suburban sprawl and provide affordable housing under growth management.

  40. 40

    RE: Chris @ 36 – It’s been a couple of years, but yes I do recall seeing several projects where it included new exteriors, and I do recall one or two that had issues. I don’t recall the specific projects, but they were both in Snohomish County.

  41. 41

    RE: Chris @ 38 – Sort of a variation on what I said before, but I would stay away from new technology. And that goes for just about everything, not just the exterior. And yes, I still consider plastic pipe new technology, but that hose crap is really new.

  42. 42

    RE: One Eyed Man @ 39 – I like HOAs because they protect you from having the neighbor from hell moving in next to you.

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