Monday Open Thread (2011-07-11)

Here is your open thread for Monday July 11th, 2011. 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.

45 comments:

  1. 1
    Scotsman says:

    Gasp! Is this true?

    “Realtors ALWAYS GET FIRST DIBS AT EVERY HOUSE even before it is listed. Realtors always have a shot at the best deals. In fact, IF A LISTED HOUSE WAS NOT ALREADY PURCHASED BY A REALTOR OR one of their buddies—that means IT IS A BAD DEAL. If it were a “good” deal—they would have bought it. Under the REALTOR / MLS monopoly system— prospective buyers only get to look at the junk left over that Realtors and their “friends” do NOT want.”

  2. 2

    By Scotsman @ 1:

    Gasp! Is this true?

    “Realtors ALWAYS GET FIRST DIBS AT EVERY HOUSE even before it is listed. Realtors always have a shot at the best deals. In fact, IF A LISTED HOUSE WAS NOT ALREADY PURCHASED BY A REALTOR OR one of their buddiesâ��that means IT IS A BAD DEAL. If it were a â��goodâ�� dealâ��they would have bought it. Under the REALTOR / MLS monopoly systemâ�� prospective buyers only get to look at the junk left over that Realtors and their â��friendsâ�� do NOT want.”

    And what’s the average annual net income of Realtors around here, after the Mercedes payments and buying the shiny suit and the cologne?
    Not much. I know plenty of real estate agents who are renters. Even if a Realtor at a large brokerage saw the listing before it got inputted into the MLA system, how many of them could afford to buy it?
    Which is not to say there’s not a lot of junky houses on the market right now. But I’m not going to agree that it’s because Realtors and their friends are buying up all the good houses.

  3. 3

    RE: Scotsman @ 1 – What’s the source for that?

    I agree with Ira that it would need to be the agent’s friends buying the place, not only because of the income limitations of agents, but also because of the fact that what you describe would likely be fraud, and if they were buying it directly that would be too obvious. There might be an exception to fraud if the listing agent told the seller that they had a client who might want to buy the property at that price, but absent that, pricing a property at a low price specifically so that someone you know can buy it at a low price–that would be a licensing violation if not actual fraud.

    The quote is almost seems to be something from 5-10 years ago. Back then agents were buying property, and it probably wasn’t due to any wrongdoing, per se, or somehow knowing of the listing in advance. Agents just happen to be the ones who look at new listings closely and go in new listings first. Today many of those agents are the ones who have lost property to foreclosure and/or filed bankruptcy.

    In any case, I think that quoted material is fiction, similar to claims that agents will show their own firm’s listings prior to showing listings from other firms, or exclusively show their own firm’s listings.

  4. 4
    David Losh says:

    RE: Scotsman @ 1

    Yes, Real Estate brokers will always have first pick, unless the buyer is out beating the brush.

    There again it is in the sellers best interest to have the property exposed to the open market in order to get the most activity, and best price. The Real Estate agent can, of course, and the seller can of course, make any kind of deal that they choose.

  5. 5

    Effective August 11, REO agents must note in the agent only remarks that the bank has accepted an offer, even if the documents are not signed around. That will be a big help in saving time.

  6. 6
    Dirty_Renter says:

    Ira & Kary – I think you are overlooking something…back in the early 80’s, I was told by a realtor that 30% of MLS members, in the city I was living, used said membership for 1 purpose only…to have first dibs on real estate bargains.

  7. 7

    RE: Dirty_Renter @ 6 – That might have been true back in the 80s. Back then they probably still used listing books, and there was no Internet. Also, there are now rules against “pocket listings” which might not have existed back then (I have no way of knowing that).

    Note I said the comment seemed to be from 5-10 years back. Maybe I didn’t go back far enough?

  8. 8
    ChrisM says:

    RE: Kary L. Krismer @ 7 – Kary – are the rules against pocket listings limited to Washington state? I thought they were common back East.

    Also, an interesting post here:
    http://www.realtown.com/DiabloValley/groups/short-sale-strategies/view/34312/1

    about MERS & FNM suing buyer & seller in a short sale for incorrect recording documents???

  9. 9
    The Tim says:

    By Kary L. Krismer @ 7:

    RE: Dirty_Renter @ 6 – That might have been true back in the 80s. Back then they probably still used listing books, and there was no Internet.

    Yeah, the ‘first dibs’ thing made some sense when this was how listings were shared, but when listings show up on MLS-powered websites like Estately and Redfin within 15 minutes of hitting the MLS, that concept is dead.

    Dirty_Renter, a good example of what Kary’s talking about is in the clip I posted from the 1986 classic The Money Pit:

  10. 10

    RE: The Tim @ 9 – What I saw looked more like small phone books. I’m not sure how often new editions came out.

    Ardell might be able to shed some like on that.

  11. 11
    ChrisM says:

    Australia is often brought up when discussing selling houses via auction…

    http://www.theage.com.au/victoria/agents-withhold-house-price-data-20110709-1h859.html

    MELBOURNE real estate agents and vendors are increasingly withholding or manipulating data provided to the Real Estate Institute of Victoria, prompting calls for the mandatory reporting of all property sales to protect consumers.

    “A Sunday Age investigation has found that 27 per cent of all auction results published by the industry body in June were missing critical information – including the sale price, passed-in price or the reserve. Many auctions were not reported at all, distorting clearance rates that are used by buyers and sellers to gauge market strength.

    Nearly one in five properties sold at auction are now reported to the REIV with the price marked ”undisclosed” – a significant increase from last year’s property boom, up from 11 per cent then to 18 per cent now.”

  12. 12
    ChrisM says:

    Back on the cheapest houses sold last month, what an INSANE property tax appraisal:

    Sold last month for 91k,
    http://www.redfin.com/WA/Seattle/5121-NE-68th-St-98115/home/321187

    Land $624,000
    Additions $59,000

    The lot is 11k – pretty pricey! 2011 taxes were $6900 – probably more than a year’s worth of mortgage payments!!!

  13. 13
    mukoh says:

    RE: Scotsman @ 1 – Thats not absolutely out of realm. Every deal that I have seen close in the recent years that provided a solid return for the investor’s has been off market. I.e. realtor brought it to an investor before listing it.

  14. 14
    DanW says:

    RE: ChrisM @ 12 – Looks like it was not an arms length transaction…

    If so this really is not a “sale” in the traditional sense.and should have been excluded from Tim’s “cheapest” list

    Seller: STERN RICHARD M
    Buyer: STERN DANIEL J

    http://info.kingcounty.gov/Assessor/eRealProperty/Detail.aspx?ParcelNbr=8923600235

  15. 15

    RE: DanW @ 14 – Or might not have been of the entire interest.

  16. 16
    One Eyed Man says:

    RE: mukoh @ 13 – Were they commercial or residential brokers?

  17. 17

    RE: One Eyed Man @ 16 – Good question. If it was residential, I would ask how he knows.

  18. 18
    jfv411 says:

    Tim,
    I would be interested in looking at the history of the 20% downpayment. Could you put together some of your swanky graphs showing the market trends of the average downpayment for the last 10-30 years? If nothing else, your blog and the commentating class have severely reinforced the value of a healthy downpayment. After reading a recent article here:
    http://www.doctorhousingbubble.com/mortgage-downpayment-important-longterm-health-of-mortgage-marekts-90-percent-ltv-and-higher-financially-damaging/#

    I’m curious about possible long-term trends in real estate appreciation as related to the downpayment depreciation, and any correlations.
    Thanks for the continual good work on SB.

  19. 19
    mukoh says:

    RE: One Eyed Man @ 16 – Commercial and residential. But none of the deals were less then $1m+. For example 90%+ of land projects sold in the last two years are never on the MLS. Apartment complexes, and approved projects same.

    Knowing some of the discount/reo brokers in the area who handle the bulk of REO deals coming on the residential side all have their own investors/clients in tow before the listing hits the market already with full D/D pretty much to out compete any regular retail buyer. Things like 7 day closes, without inspections/appraisals are really common on that side. As the broker had their buyer do D/D before.

  20. 20
  21. 21
    David Losh says:

    RE: The Tim @ 9

    “when listings show up on MLS-powered websites like Estately and Redfin within 15 minutes of hitting the MLS, that concept is dead.”

    Yeah, right, wink, wink, nod, nod. Put the Kool Aid down, and step away.

  22. 22
    David Losh says:

    RE: Kary L. Krismer @ 7

    Back in the 1970s it was 3X5 cards that Craig referred to in his post comments about Real Estate agent representation.

    A company called Moore Data then got a contract to publish listing books for Multiple Listing Services in the 1980s. That was supposed to be a game changer. Moore Data was replaced by Rapatoni here in the NWMLS, and around the country. That’s what sparked the idea, and frame work, for a national listing service that Zillow was built on. The listing services objected, so we are where we are.

    Buyer Agency has been a part of our system of Real Estate here in the State of Washington since Jim Stacey introduced it in the 1980s. That is a game changer.

    When you sign a Buyer’s Agency Agreement with a working Real Estate agent they are bound to represent you. Most agents think that means to be snotty to the listing agent, but in fact it means the agent will beat the brush for you.

    If you were to ask me I can direct you to at least two properties a week that will be going up for sale. I can tell you on my street who a potential seller is. I can drive down most any street and point out a potential listing.

    As a Buyer’s agent I can talk with other agents, work neighborhoods my client may be interested in, or directly make offers on my buyer’s behalf. My job is to work in the best interest of my client, and follow through to a satisfactory result.

    If you are sitting in your room waiting for the magic listing to jump out of the computer at you, you are left behind.

  23. 23
    One Eyed Man says:

    RE: David Losh @ 20

    The CBA isn’t the same as the MLS. To my knowledge, it doesn’t have any provision for sharing commissions (that’s left to the brokers in the deal) and doesn’t have the rules regarding pocket listings.

  24. 24
    One Eyed Man says:

    RE: mukoh @ 19

    I knew that was true for plats and for commercial (including multi-family) but I hadn’t heard of it happening for single family rentals that are commonly sold thru residential brokers. I’ve always heard in recent years (even pre-recession) that the majority of commercial deals over 10 mil never hit the CBA listings. A lot of the commercial deals I was involved in over the years where put together by the parties or by the commercial broker without listing the property, but it was probably less than 50%.

  25. 25
    LocalYokel says:

    RE: mukoh @ 19

    Just a recent story I heard from a “friend”. ;)
    Funny how some real estate brokers act like their crap don’t stink and of course, they act oh so much above the fray.

    Casual acquaintance offered my friend a pocket listing for a commercial building. The friend asked how much and this broker replied, “we can work something out, but the owner is eager to move and is not f*cking around.” Fair enough.

    Crunched the numbers and the friend told CB, “Can’t make it pencil, better keep the listing in your pocket.” Hahaha.

    Great properties are almost never listed. You have to be lucky (right place, right time), beat the bush, great connections, and have the cash and credit to move quickly.

  26. 26
    David Losh says:

    There is a portion of the Real Estate community that only deals in dirt. There’s no reason to talk to the larger community about such a specific product for sale, they don’t get it, or understand it.

    Dirt has a determined value. As Yokel says, it has to pencil, and the agent has to know how to pencil it. It’s a specialty that has to do with land use, codes, mitigation, and thousands of nuances that are way overly technical, with sub specialties.

    There is a guy from Montana that bought only slopes because he liked putting in pilings. He learned how to do it, did it well, and the city really liked him because he was passionate about doing it right.

    It’s dirt. How much do you really know about dirt, other than location?

  27. 27
    mukoh says:

    RE: LocalYokel @ 25 – Oh. You are totally right. Just because its not on the MLS/CBA it doesn’t make it a good deal. There is plenty of garbage out there.

  28. 28

    By David Losh @ 22:

    When you sign a Buyer’s Agency Agreement with a working Real Estate agent they are bound to represent you. Most agents think that means to be snotty to the listing agent, but in fact it means the agent will beat the brush for you. .

    David, this is a consumer site. Don’t say false things about Washington real estate law that might mislead consumers. There is nothing magical about signing a buyer’s agency agreement that affects how much effort the agent will put into looking for property. The agent is under the same duty without a written agreement.

    Signing a buyer’s agency agreement can have other effects, primarily where the buyer happens to be interested in on of the agent’s own listings. But other than that, there really is little other difference. Don’t confuse consumers by saying things that simply are not true.

  29. 29

    RE: One Eyed Man @ 24 – I haven’t had a lot of dealings in that area, and nothing for about 4 years, but sometimes the agents will go to the commercial (or multi-family residential) property owner with a buyer in mind (or at least that’s what they claim).

    As to land sales, I think you might be seeing some of the same there, or perhaps an unwillingness to list due to concerns that listing would be futile.

  30. 30

    By LocalYokel @ 25:

    RE: mukoh @ 19

    Just a recent story I heard from a “friend”. ;)
    Funny how some real estate brokers act like their crap don’t stink and of course, they act oh so much above the fray.

    Casual acquaintance offered my friend a pocket listing for a commercial building.

    As noted by OEM, commercial is different. That’s why he asked the question, and why I responded that was a good question.

  31. 31
    DeeDee says:

    http://www.calculatedriskblog.com/2011/07/seattle-downtown-apartment-boom.html

    Supply and demand will probably have people converting the McMansions that aren’t selling into multi-unit rentals….property management opportunity

  32. 32

    RE: DeeDee @ 31 – I know you’re joking, but beyond zoning issues there may be covenant issues with even renting out rooms.

  33. 33
    softwarengineer says:

    RE: Kary L. Krismer @ 32

    Exactly Kary

    Add one kitchen and one driveway to the witches brew and the pipe dream of real estate being transformed into a higher priced multi-family unit in Seattle is ludicrous, IMO.

    Remodel and make it a duplex? Ask a contractor what that will cost, then throw a lit match into the McMansion to save money.

    If the McMansion is in Seattle City Limits, where’s all the multi family gypsies per McMansion gonna park their Kias? On the roof?

  34. 34

    RE: softwarengineer @ 33 – Seattle is rather friendly to “accessory dwelling units” or mother-in-laws as most people know them. They are also rather friendly to home businesses where you might have some traffic in and out (e.g. a massage therapist).

  35. 35
    David Losh says:

    RE: Kary L. Krismer @ 28

    Your comment, along with many Real Estate agent comments, about the Buyer’s Agency Agreement is exactly the problem.

    Just because you sign a Listing Agreement doesn’t mean you’ll get equal representation.

    My oponion is that the internet tech community benefits greatly by this free roaming buyer system that Craig attacked.

  36. 36
    David Losh says:

    RE: The Tim @ 9

    Thanks for doing the post here about Real Estate agency. I won’t muddy it up for at least a day with my opinions, because you’re right, it’s a matter, I think, of perception by the buyer.

  37. 37
    bingo says:

    RE: David Losh @ 26

    Nicely put David.

    “It’s dirt. How much do you really know about dirt, other than location? ”

    If I had dirt to sell, I would ditch the realtor and put together a marketing program aimed towards the most likely buyers. There are probably 20 buyers of residential property in the Puget Sound looking to buy over 15 acres of developable land and the same amount of commercial property buyers for .5+ acres in a CBD. They all have staff to determine the feasibility of developing a property. Why would you hire an agent? I think that’s why you rarely see large parcels being listed on the NWMLS. Why would you pay the commission? You know who the likely buyers are.

  38. 38
    David Losh says:

    RE: bingo @ 37

    Not quite, but close.

    There is a small group of agents that just do dirt. They are usually better informed than the buyer. Some buyers will only talk with you through an agent. They will just tell you to talk with them because they have a reciprocol relationship with that specific agent.

    After the dirt is developed the agent that brought the dirt is expecting to get the listing on the end product, or units.

    It’s a weird little world.

    Commercial is another little world.

  39. 39
    David Losh says:

    The comment editor won’t give me access, so I wanted to add about the Real Estate agent commissions, that it is a package deal, some times.

    The agent will give a developer, or builder a commission price based on the over all package. So if you are selling 15 acres the buyer, developer, or builder, may ask the agent to run the Comparative Market Analysis, then do projections, then ask for, or negotiate the commission on the dirt, and Listing the end units.

  40. 40
    David Losh says:

    RE: Kary L. Krismer @ 28

    OK, Kary, I have little more time now, so you tell me when a buyer agency relationship is established.

    Am I a buyer’s agent because I opened a door for them, or met them at an open house? Am I the buyers agent when talking with some one at a cock tail party for an hour discussing Real Estate? Are you and I in an agency relationship for the amount of time we discuss Real Estate?

    When is that agency relationship established? You tell me, and clear it up for the consumers here.

    “commence at the time that the licensee
    undertakes to provide real estate brokerage services
    to a principal”

    I just threw that in to help you out here, because that is a little ambiguous.

  41. 41
    ricklind says:

    I have skimmed the open thread to see if this has been posted and I don’t see it.

    http://online.wsj.com/article/SB10001424052702304259304576375323652341888.html?mod=googlenews_wsj

    Here is the Wally Wally Journal weighing in, belatedly, on why real estate has not been a particularly high yield investment. I have mixed thoughts on this article. On the one hand it is good to see the WSJ do an analysis and write an article. On the other hand, they are kinda, sorta, late to the game.

    (Insert Murdoch joke here)

    If I were a pure contrarian I would vote that we are at or near the bottom when all the media is negative, and I think that pretty much all the media is negative right now.

    The real me thinks we have another major leg down. And if not, then it will not be too late to catch an upward trend, but I have not seen any evidence whatsoever of any upward trend.

    A sincere thanks to folks here (esp The Tim) from from an amateur who just follows events and macroeconomics. I learn a lot from reading this site.

    Best,

    Rick

  42. 42

    By David Losh @ 40:

    RE: Kary L. Krismer @ 28 – OK, Kary, I have little more time now, so you tell me when a buyer agency relationship is established.

    It’s not always clear, nor is the creation of an attorney relationship always clear. That’s why Craig often starts out his responses with “This is not legal advice . . ..”

    In the case at hand though you had an agent who was not the listing agent showing a house to a buyer. Under state law they do not represent the seller, absent their designated broker having a policy that specifies that (e.g. Team members of the listing agent represent the seller), but in this case the agent wasn’t even with the same designated broker, so that exception wouldn’t apply. The agent therefore represented the buyer.

    So, you have an agent who’s not saying anything, and a buyer who’s not saying anything. One is showing a house to the other. Under state law that agent represents the buyer. That might not be what at least one of them intended, but neither let their intentions be known. In that regard it’s sort of like dying intestate, where the distribution of property is not what the decedent intended, but they didn’t let their intentions be known.

  43. 43
    David Losh says:

    Craig’s example is a load of crock. He screwed up.

    The person opening the door was asked to provide a Real Estate service, and Craig is right to point out the “trap” that he let his buyers walk into.

    The example of being intestate is a complete diversion that has nothing to do with Real Estate.

    The monetary consideration is only in play when there is pen to paper. In Craig’s case it’s a Purchase, and Sale Agreemt.

    What I’m saying is that it would be better for the buyer if they chose to enter into a relationship with an agent, working for them, than play what amounts to games, that could end in the trap Craig describes.

  44. 44

    By David Losh @ 43:

    The example of being intestate is a complete diversion that has nothing to do with Real Estate.

    Google the phrase “definition analogy” (without the quotes).

  45. 45
    bingo says:

    RE: David Losh @ 38

    Not that it matters…but. I work for one of those top 20 buyers of residential land. Do you know how much land we bought thru agents during that time? Zero.

    What you are referring to is the 2nd and 3rd tier builders that don’t have the staff to do due diligence on a piece of dirt. For them, they need an informed agent. If I had ground to sell I would present it to the top 20. If that didn’t work, I would hire the agent you are referring to.

    I agree that there are synergies available for many third parties involved in the transaction.

    “After the dirt is developed the agent that brought the dirt is expecting to get the listing on the end product, or units.”

    Same goes for the title company. They do the initial work on the plat and get paid for every closing henceforth. Same for escrow. They close the initial purchase and get to close the subsequent home sales.

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