November Reporting Roundup: Distressed Edition

It’s time once again for the monthly reporting roundup, where you can read my wry commentary about the news instead of subjecting yourself to boring rehashes of the NWMLS press release (or in addition to, if that’s what floats your boat).

To kick things off, here’s an excerpt from the NWMLS press release:

Home sales outpace number of new listings for first time in five years
Last month’s total number of mutually accepted offers was 22.4 percent higher than the same month a year ago. It also marked the first month since December 2006 that the number of pending sales surpassed the number of new listings (6,043), prompting discussions of possible inventory shortages.

“As we head toward the end of the year, it’s certainly good to see a healthy number of buyers relative to the available inventory for sale,” said Mike Grady, president and chief operating officer of Coldwell Banker Bain. “In fact,” he noted, “there are some desirable neighborhoods in urban core areas where the case could be made there are too few homes currently for sale.”

“Entering the New Year, the Seattle metro area will start off with a shortage of inventory in both the more affordable and mid-priced ranges,” suggested J. Lennox Scott, CEO and chairman of John L. Scott Real Estate. He noted a high percentage of sellers are receiving offers within the first month or two of listing their homes.

For homes and condominiums that sold last month, the median selling price was $225,000, down 10 percent from the year-ago median price of $250,000. Single family home prices were off 8 percent from a year ago ($234,612 versus $255,000), while condo prices slipped more than 17 percent ($169,000 versus $204,500).

Brokers point to distressed properties, which tend to be deeply discounted, as a primary cause of lower prices.

"Who Is Home Will U Steal Today"“Home prices continue to get dragged down by foreclosures and short sales, which is disappointing given how strong home sales are,” said OB Jacobi, president of Windermere Real Estate. “We probably won’t see drastic changes in prices until the banks work through the distressed inventory,” he noted, adding, “but we expect the pace of this process to pick up over the next several months, so hopefully by this time next year we’ll be singing a different tune.”

If we just ignore the inevitable fallout of the massive housing bubble (bank-owned homes and short sales), we can almost pretend as if prices aren’t falling!

Read on for my take on this month’s local news reports.

Eric Pryne, Seattle Times: Prices dive as “distressed” home sales rise in King County

Rising demand — sales — coupled with reduced supply — inventory — ordinarily is a recipe for higher prices, OB Jacobi, president of Windermere Real Estate, told an industry gathering last week.

Not this time. Distressed properties are keeping prices down, Jacobi said, and they are unlikely to increase much soon.

“The worry is, what do the banks have in their shadow inventory” of homes in foreclosure that haven’t been put back on the market for resale, he added.

More foreclosures are on the horizon.

The number of Washington homes whose owners were delinquent on their mortgage payments has increased in the past year, according to the Mortgage Bankers Association.

And, at their current pace, it could take banks nearly four years to work through the current statewide inventory of properties whose owners are at least 90 days delinquent on their mortgages, [WCRER Director Glenn] Crellin added.

This would seem to back up what I’ve been saying about the apparent dramatic drop in foreclosures: it’s just the pipeline clogging up due to legilative meddling in Olympia. If that four years number is accurate, it’s a pretty good bet that we won’t see price increases for at least that long, as well.

Aubrey Cohen, Seattle P-I: Home sales up, prices down in November

“Entering the New Year, the Seattle metro area will start off with a shortage of inventory in both the more affordable and mid-priced ranges,” J. Lennox Scott, CEO and chairman of John L. Scott Real Estate, said in the release.

But Crellin rebuffed talk of a shortage, saying that the listing service’s inventory numbers miss many of the lender-owned homes already on the market. He added, “If the inventory gets much shorter we’ll start to see the lending institutions putting more of their product out there.”

Crellin vs. Scott: FIGHT!

Michelle Dunlop, Everett Herald: Home sales increase in Snohomish County; prices fall

“We probably won’t see drastic changes in prices until the banks work through the distressed inventory,” Jacobi said, adding, “but we expect the pace of this process to pick up over the next several months, so hopefully by this time next year we’ll be singing a different tune.”

Brokers are optimistic about the potential benefit a tentative labor agreement between the Boeing Co. and the Machinists union could have on the real estate market. Union members vote Wednesday on a contract that secures future 737 work in Renton and ensures labor peace until September 2016.

With that news, combined with momentum from other major area employers, “we are seeing solid, renewed demand for local housing,” J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, said in a statement.

If you say it often enough, you can make it true.

Kathleen Cooper, Tacoma News Tribune: Home prices still falling in Pierce County

Distressed properties are to blame for the falling prices, brokers said, because they sell at a discount.

“Home prices continue to get dragged down by foreclosures and short sales, which is disappointing given how strong home sales are,” said OB Jacobi, president of Windermere Real Estate, in a news release. “We probably won’t see drastic changes in prices until the banks work through the distressed inventory.”

It’s unclear how long that will take, and how far prices will fall until then. The MLS, which represents 21 counties in Western and Central Washington, classifies distressed properties as those that are bank-owned, and its data showed that almost 38 percent of the single-family homes that sold in Pierce County last month were in that category.

You can really tell how much care and effort went into this article.

No story on the NWMLS November numbers in The Olympian this month, but they did post this yesterday:
C.R. Roberts, The Olympian: Negative equity on the rise locally

Eighteen percent of homeowners in Olympia and the Thurston County area owed more on their mortgages than their homes were worth in the third quarter this year, according to the analytic and business-services company CoreLogic.

That compares with 18.2 percent in the previous quarter. Nationwide, 22.1 percent of mortgaged properties were in negative equity.

“I think it’s certainly a trend that’s going in the wrong direction. It’s probably as much a reflection on the overall economy as anything else,” said Mike Larson, owner-broker at Allen Realtors and president of the Tacoma-Pierce County Association of Realtors.

Statewide, 245,694 mortgages were in negative territory – from a total of 1.42 million mortgages overall in the state. Across the country, 10.7 million mortgages were underwater, from a total of 48.5 million mortgages.

“As long as there’s a reluctance or a hesitation to buy, the values are going to continue to erode. As values erode, the number of people who are upside-down will increase,” Larson said.

If only someone could have foreseen this vicious cycle before prices got so out of control!

(Eric Pryne, Seattle Times, 12.05.2011)
(Aubrey Cohen, Seattle P-I, 12.05.2011)
(Michelle Dunlop, Everett Herald, 12.05.2011)
(Kathleen Cooper, Tacoma News Tribune, 12.06.2011)
(C.R. Roberts, The Olympian, 12.05.2011)

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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.

213 comments:

  1. 1
    Scotsman says:

    “a high percentage of sellers are receiving offers within the first month or two of listing their homes.” JLS

    Yup, it’s a real feeding frenzy out there. (Slams head on desk.)

  2. 2

    I Saw a 3 BDRM 1 1/2 Bathroom Home in Tacoma for $89K Last Week Listed in the Tacoma Tribune Real Estate Section

    And from the nice exterior and good roof, didn’t look like a tear down….no not at all….

    I imagine it got multiple offers too, like, $79K, 69K, 59K, etc….

  3. 3

    By Scotsman @ 1:

    “a high percentage of sellers are receiving offers within the first month or two of listing their homes.” JLS

    Yup, it’s a real feeding frenzy out there. (Slams head on desk.)

    For November King County, SFR, about 40% of the solds got an offer in 30 days and about an additional 20% within 60 days. Note that’s not 40% of all new listings, but instead, 40% of the ones that did sell. Surprisingly, that’s true of both all listings and non-distressed listings.

    So I guess if I were to re-write that, I would say that a high percentage of sellers with homes in good condition and priced right receive an offer in the first month or two . . . .”

    Percentages from NWMLS sources, but not compiled or guaranteed by the NWMLS.

  4. 4
    CCG says:

    Heh, “the case could be made there are too few homes currently for sale”. I.e. I’m sure as hell not going to make it, but y’all can if you want.

  5. 5

    RE: CCG @ 4 – If you back out the short sales, there are barely over 5,000 SFR active listings in King County. That’s a pretty small amount. If you’re a buyer, more selection is better.

    Estimate from NWMLS sources, but not compiled or guaranteed by the NWMLS.

  6. 6
    David Losh says:

    RE: Scotsman @ 1

    Well, actually, it really is. I’m referring to it as the idiot factor. People have to buy for a variety of reasons. Lot’s of people get on line and get frustrated. When something half way decent comes up they are like sharks on blood in the water.

    Just ask Glenn Kelman of redfin. He has over $5billion dollars worth of Real Estate transactions under his belt. redfin is the ETrade of Real Estate. Glen says that it is an excellent time to buy.

    You can trust Glenn because he has dedicated his life to making the Real Estate business safer for all of us. When he was a kid he did nothing else but work on properties until he was old enough to get his Real Estate license. Glenn was then the Top Producer of Century 21 back in the day when it was tough to get a deal together. Glenn worked tirelessly until he could open his own Brokerage and mentor a hundred agents into being thier own, stand alone, millionaires.

    You can trust Glenn, he is a life long, dedicate Real Estate professional. It’s just too bad that this site doesn’t give Glenn the same recognition that we give to Lennox Scott or OB Jacobi. I mean, Glenn is one of the top three, isn’t he?

  7. 7
    Scotsman says:

    “Careful, son- the snark is thick on that one . . ”

    It’s the almost passive/aggressive tone of the reporting and the seemingly conflicting logic of the perspectives that gets me. Inventory is low, yet it still takes months to get an offer. Sales are up, but prices are down. Distressed properties drag the market down, yet the pace of clearing them out is expected to pick up- that helps how? Stupid foreclosures are killing the market- yet they’re the main course when it comes to feeding realtors by keeping their pockets full. I don’t know, it just seems funny and twisted in a dark NW winter way.

    Truth be told, the only thing I’ve been thinking about for the last couple days is BOA’s assertion that we’re less than half way through the foreclosures in the pipeline and the expectation that eventually 1/4 of all mortgages will default for one reason or another. Now, BOA is THE expert on bad loans given that they have so many, so who’s going to argue with their own analysis?

  8. 8

    RE: David Losh @ 6

    Glenn doesn’t need recognition. Red Fin will continue to tweak its model to survive while the conventional Brick/Mortar continue to close offices across this nation with NO chance of survival without drastic change involving Buyer Rebates and Discounted Seller Services. Zipr will join the demise of the Brick and Mortar as well because their VC is nearly gone. Expect Zillow to be around for awhile while exploring MANY opportunities that will make them a survivor but a HORRIBLE investment at current PPS.

    In the end the MLS( as we know it) will also meets its demise and a new entity of real estate sales will emerge powered by the BIG G or another powerful Engine that will FINALLY put an end to this 6% SHAM.

    We will all look back and laugh at how Real Estate was done for so long and shake our heads in amusement..

  9. 9
    David Losh says:

    RE: raymond pepper @ 8

    I’m hoping for a bluey.

  10. 10
    ARDELL says:

    Just an anecdotal reference regarding activity in the last 30 days, FWIW. I put 3 properties in escrow for buyer clients within the last 30 days. The two single family homes priced at $420,000 and $615,000 were not short sales or bank-owned, both in excellent showing condition, and sold within 30 days. The one short sale was a condo, also in excellent showing condition and sold in 40 days, just past the 30 day mark when we made the offer. Seems to match what “people” are saying.

  11. 11
    David Losh says:

    RE: ARDELL @ 10

    It’s another testimonial, can I get an amen?!

  12. 12

    What happened to Glenn Crellin? Didn’t he used to be Lennox Scott’s ideological soul mate? He’s sure been sounding reasonable lately.

  13. 13
    Jonness says:

    Distressed properties are to blame for the falling prices, brokers said, because they sell at a discount.

    Distressed properties aren’t to blame for anything. They are a symptom of the bursting of a massive housing price bubble spurred by unsustainable market interference. Despite the massive price drops so far, the King County median house price are still about 25% too high compared to its historical relationship to the Median Household Income of King County homeowners.

    Falling house prices are a good thing! When prices get low enough, buyers rush in to snap up bargains. Artificially raising house prices only prolongs putting everyone back to work again so they can feed and clothe their families.

  14. 14
    ARDELL says:

    RE: David Losh @ 11
    Haha! I was thinking “Can I get a witness?” when I wrote it. :)

  15. 15
    Macro Investor says:

    RE: Scotsman @ 7

    Let’s try some more snark… because BofA would never have an ulterior motive in their public statements. I’m sure they would NEVER try to paint a negative picture so more bailouts are justified. Oh no. The friendly bank. Every one an honest Abe.

  16. 16
    Jonness says:

    I’m seeing a large number of homes selling in this market. I mean, they are really flying off the shelves, but they are flying off at extreme discount rates. People are starting to smell blood, and they are bargain hunting in addition to getting greedy over the permanently low rates.

    I think this is typical of what happens when the market starts to plummet. It happened in Vegas where people started rushing in to pick up the bargains, but prices just kept falling and falling. The further down they go, the more people get caught swimming naked when the tide goes out. These nudists become the next round of foreclosures, and the downward spiral continues. It’s a “downward feeding frenzy.”

    Here’s how it has turned out in Vegas:

    http://housingcorrection.com/images/lasvegas2011.jpg

    And here’s Seattle’s version, which started correcting about a year later than Vegas:

    http://housingcorrection.com/images/Seattle2011.jpg

    It appears most people just can’t understand that you actually have to have a little money in the bank and a steady job these days before you can qualify for a loan. Once they finally get this, they will finally understand why Seattle-area house prices are falling and will continue to fall for the foreseeable future.

    At best, we are halfway through the foreclosure crisis. There’s still plenty of time to save a nice down payment and set you and your family up financially for life. Or, you can buy now and risk losing it all. :)

  17. 17
    David Losh says:

    I met a couple in about 2008. They owned their home free, and clear. They saw the collapse so refinanced the house to take the maximum cash out, in 2008. They figured they had paid the house off once, why not do it again.

    Well go figure, first we have the tax credit, and the Real Estate market goes nuts. Then we had 2011, and all heck has broken lose.

    They started back in the Spring to get the house ready for sale. Spring wasn’t so hot, then August comes around and the Real Estate market gets frenzied, again. They just closed asking 20% more than the refinance amount plus $27K.

    So essentially the buyers, in a multiple offer situation, paid 2008 pricing for a home of, in my opinion, questionable value. The house is super cute, it photographed well, but I have been through every inch of the house, and it looks like a lot of work.

  18. 18
    David Losh says:

    RE: Jonness @ 16RE: Jonness @ 16

    I don’t get the part about having money in the bank, and a job. I don’t get the loan part.

    If you’re saying we should all go back to the bank, that won’t fix anything.

    In Las Vegas, the same as we will see here, Investors buy for cash, then RE Contract with a seven year cash out. They get 6% or better.

    We tried to do that here, but way toooooo many idiots keep paying bank pricing for property.

    We need to get past the foreclosure stage to houses sitting empty.

  19. 19
    Jonness says:

    RE: David Losh @ 18 – Hi David:

    Sorry for being so unclear.

    I’m saying the peak prices in the charts I linked were achieved, in part, by banks approving families for mortgages who had no money and very questionable incomes. Now that you actually need a little money in the bank and a steady job, there is no way prices can be sustained at the current levels.

    The reason people are buying now is because they can’t understand that those peak prices were the result of a massively unsustainable housing bubble. People want to believe that those prices were fairly valued, and if they buy in now, prices will soon return to peak levels.

    But, as you can see in the charts, the price does not go back up. It continues to go down, and the people that bought into the raft of BS end up underwater wishing they had waited for prices to stop falling.

    People need to view the charts from the bottom up and wait for prices to return to historical levels. But out of pure ignorance, they continue to view the charts from the top down waiting for prices to return to unsustainable bubble levels.

    Market psychology has shifted and dictates that prices must continue to adjust downward. Note how the slope of the downward trend line at this point in the Japanese housing correction matches the current slope in my charts above. Everything is occurring exactly as planned and exactly as it should. The U.S. housing correction pattern is as classic as they come.

    https://seattlebubble.com/blog/wp-content/uploads/2011/09/Japanese-US-Housing-Bubbles_2011.png

  20. 20
    Pierce Anon says:

    RE: Jonness @ 16
    Jonness,
    That is certainly what we are seeing in Tacoma, a very large number of properties under $100k have gone pending within the last 60 days. Some are showing pending on Redfin even before the photos are up.

    I’m not sure that this is a sign that markets are going to plummet from here. In the long term, low interest rates and carefully doling out the foreclosures along with the proposal to sell blocks of foreclosed homes to investors may actually accomplish what the government and bankers want, ie, to stabilize the market.

    Those who were willing to buck the trend in 2005 and 2006 may now need to start rethinking their paradigm. Barring a major economic downturn, prices will stabilize within a year or two and go sideways from there.

  21. 21
    ARDELL says:

    RE: Jonness @ 19

    Are you Sniglet?

  22. 22
    David Losh says:

    RE: Pierce Anon @ 20

    You are proving his point. I said to Ray a week or so ago that I had always had the ability to buy houses in Tacoma for $50K.

    My wife, and I put an offer in on a commercial property, corner lot, owned by a construction company, I think a main office, work shop and three out building for like $350K to be sure. It was close to the University.

    I was stoked until I talk with a guy I knew who had sold some down town Seattle property to “invest” in Tacoma. He said wait until after 6PM, then you tell me.

    It was like something out of Escape from New York. First you saw one person dart back, and forth across the street. Then there was a group of young people coming from the other direction. All the shops were closing, and people were scurrying out of there.

    It wasn’t wild west like in parts of White Center, but it was enough to make me rethink the strategy. His advice was “to stick with what you know.” We bought in Seattle instead.

  23. 23
    Jonness says:

    By Pierce Anon @ 20:

    Those who were willing to buck the trend in 2005 and 2006 may now need to start rethinking their paradigm. Barring a major economic downturn, prices will stabilize within a year or two and go sideways from there.

    I think you are being quite observant when you say you think prices will drop for a year or two and then go sideways. This is because sideways momentum, when adjusted for inflation, is the same as dropping at the rate of inflation.

    However, I think the only way prices will stabilize is in Tacoma within two years is if the area experiences meaningful new sector employment growth.

    In the latest national jobs report, 315K people gave up searching for work, and 120K new jobs were created. Unfortunately, it takes perhaps 140K new jobs each month to keep pace with population growth. And most alarming is, wages are not meaningfully increasing.

    The last point is important, since Tacoma house prices are still about 20% overvalued compared to historical relationships to incomes.

    IMO, house prices might steady in Las Vegas over the course of the next year or two, due to having massively overshot the bottom. But Tacoma stands much less of a chance of seeing prices stabilize until high paying jobs are created.

    But you could be right. Tacoma might see sideways prices until they inflation adjust inline with area incomes. Either way, people who don’t have a meaningful down payment saved up will most likely be served well by living frugally and saving as much as they can. I expect those sub $100K homes will become quite plentiful in the not so distant future.

  24. 24
    ARDELL says:

    RE: Jonness @ 19

    Your charts regarding historical values don’t seem to match mine…http://bit.ly/t5duPk. Mine don’t bear any resemblance to Japan.

  25. 25
    Jonness says:

    By ARDELL @ 21:

    RE: Jonness @ 19

    Are you Sniglet?

    No. His predictions were far too aggressive (the Ray Kurzweil of economics). So far, my predictions have proven to be far more accurate than either you or Sniglets? Hopefully you guys are learning from your past mistakes.

    Expect lower prices in the near future. :)

  26. 26
    Jonness says:

    By ARDELL @ 24:

    RE: Jonness @ 19

    Your charts regarding historical values don’t seem to match mine…http://bit.ly/t5duPk. Mine don’t bear any resemblance to Japan.

    That probably explains why I’m still batting a 1000 when it comes to predicting the overall price trend over these last years, and you are still batting 0. Perhaps you would have a better track record if you would start using meaningful charts and data.

    The sources of my charts and data are clearly revealed on my website and are free to use.

  27. 27
    Scotsman says:

    RE: Pierce Anon @ 20

    “Barring a major economic downturn”

    It’s coming, right after Europe, China, and Japan go first.. Another 20% over 3-5 years.

  28. 28
    ChrisM says:

    RE: Jonness @ 26 – I like your charts, and would like to subscribe to your newsletter.

    :-)

    Seriously, though, could you do a similar chart for Portland OR? I played around in 2007-2008, and expected to return to 1998 pricing. I’m interested in seeing your results.

  29. 29
    ARDELL says:

    RE: Jonness @ 26

    That may be true…but they don’t seem to be particularly relevant to real estate locally. Every day we hear that there are plenty of houses for people to buy…and we also hear people saying that is not true. My charts are more relevant to people who want to buy houses in good areas HERE…vs in Vegas or Japan or Phoenix.

    I’m batting 1000 for the Seattle Area in the best of areas…you are batting 1000 for Japan and the most distressed of areas. Which is more relevant to people buying locally?

  30. 30
    Scotsman says:

    Feeling positive about the future? Think we can keep this going? Listen to the first 10 minutes, then decide:

    “We are not going to grow”

    http://www.youtube.com/watch?v=5V3kpKzd-Yw&feature=player_embedded

  31. 31
    Scotsman says:

    RE: above- housing discussion starts at 25 minutes.

  32. 32

    By Jonness @ 13:

    Distressed properties are to blame for the falling prices, brokers said, because they sell at a discount.

    Distressed properties aren’t to blame for anything. .

    Technically correct. It’s the banks that are to blame. Even once the loan is on the books, you can blame them for not processing short sales in a reasonable manner and for not marketing REOs properly.

    The latter has fortunately been improving. I went in a house the other day where the prior owner’s possessions were still present in the house. I hadn’t seen that for a long time, but it used to be the norm.

  33. 33
    David Losh says:

    RE: Jonness @ 25

    Actually sniglet’s predictions are turning out to be closer to truth.

    No one, no corporation, is going to provide decades worth of job security. You retirement plan will be gutted at the first opportunity. Your hard dollar asset is going down in price like the mill stone it is around the neck of your family.

    Save? What for? Bank loan? What for?

    We are in a period of massive deflation that is masked by low interest speculation in commodities.

  34. 34
    David Losh says:

    RE: Scotsman @ 30

    Epic proportions, but Kyle will help you invest your way to financial freedom with his proven 10 disc set of audio that you can listen to in your car.

    Come, on, you have better things to do than listen to an old news hack.

  35. 35

    RE: David Losh @ 18

    And the Idiots See a Light at the End of the Tunnel to Possibly Rescue Them from Their Idiocy

    Only problem is the light is a price collapse train comin’ to run ’em over…

  36. 36
    ricklind says:

    From current issue of The Economist.
    In the US Price to Income and Price to Rent ratios are low, but they comment that markets often overshoot so still downward pressure on US housing market.
    The more interesting part is that much of Europe is still overpriced. Match this with the Euro issues and the probability of global downward price pressures is high.

    http://www.economist.com/node/21540231

    Also somewhere in the paper edition I drove past a comment that there are 40 million homes in the foreclosure pipeline in the US. I this true? It seems incredibly high to me but I can’t quickly find a reference.

  37. 37

    RE: Scotsman @ 27

    No Scotsman

    According to MSM America will rescue Europe, Japan and China from their inevitable demise….now who’s gonna rescue America?

    Hey where’s the popped bubble heads wildly allegating against SWE years ago and that incorrectly predicted America would tank first and the rest of the world would prosper [remember me saying when America catches a cold the rest of the world catches pneumonia?]….buy foreign stocks and currencies….like the Euro? The foreign stocks and Domestic Investment report for November 2011:

    Nov 0.14% 0.01% (0.21%) (0.51%) (2.46%)
    YTD 2.30% 6.80% 1.06% (3.35%) (9.98%)
    Last 12 mo 2.51% 5.68% 7.82% 3.78% (2.67%)

    The numbers are in order as longterm CDs, Longterm Bonds, American Stocks, Foreign Stocks, Foreign Stocks….geeeee the Last 12 month American stocks shot up almost 8%, the best foreign stocks could do was about 4% or -3%. Guess you pro-foreign enthusiasts better find another Vikings football team to root….

    Christians 1
    Lions 0

  38. 38

    RE: ARDELL @ 29

    It Only Goes to Show

    Quality realtors can make lemonade out of lemons, if they’re good at sales techniques and you appear top notch in that area.

    I can speak for myself too, hades I know I could easily sell a Chevy to a rabid Toyota enthusiast….that’s what scared me out of sales, I could talk hoards of people into just about any sales transaction [even ones they could barely afford]…same thing with being an attorney, I know I could win cases for guilty people [like nuclear waste corporations] and the pay is great, but sleeplesssness and guilt isn’t. I switched to just Nuclear Engineering and later Systems Engineering management….I put my head on the pillow and bam, I go right to sleep :-)

  39. 39
    David Losh says:

    It’s fun to watch the true believers trying valiantly to make sense out of how all the ratios work.

    The fact is that the value of Real Estate never changes. The price goes up, and down, but the core values remain the same.

    So comparing 2004, to 1998 prices means just that, comparing prices.

    Wages have not increased. As a matter of fact I’m pretty sure the case can be made that much of the past consumption was done with credit. That money has to be paid back, and that is a further drain on present, and future incomes.

    Most emphatically the price of property will go to 1998 levels. if you paid a price above that you need to plan on being there for a long time, and pay down the principle balance. That’s a further drain on present, and future income.

    Short sales have to follow policy, and procedure. That means the seller has to Prove a financial hardship, like death, divorce, or medical condition. Banks are never in distress so those short sale properties are selling as Fair Market Value.

    Foreclosures sell for a cash discount, but bank owned sell for whatever the market will bear.

    To put plainly, “distressed” today is tomorrow’s full retail.

  40. 40
    David S says:

    I have to say that the exclusivity of distressed properties be not limited to only short sales, foreclosures and REO’s but to also include conventional listings as well. Has anyone been out looking at the conventional listing crap that’s for sale recently? Good grief. A great deal of the non short, bank owned REO properties are looking pretty distressed to me these days.

  41. 41

    RE: David Losh @ 39

    You Got It David

    My 1999 home purchse in SE King County went up 50% at the 2006-2007 peak, then plummetted around 30% to 1999 levels.

    From reading the Tacoma Tribume real estate section last week, it looks like the hotshot realtors are talking just like us too….if they want to keep hamburgers on the plate selling real estate…

  42. 42
    ARDELL says:

    RE: softwarengineer @ 38

    I can’t disagree with that. Not sure it’s a sales “technique”, but I’m getting a home ready for market. I look at the “lemon” issues. Now it’s time to clean that, paint that, move half of the stuff OUT. Move things around to maximize the square footage and its visual impact on potential home buyers. So yes in that regard it is my job, not to make lemonade by glossing over the lemons…but to eradicate or at least reduce the number of lemons that would inhibit the home selling at the highest possible price.

    When I represent a buyer, it’s quite the opposite. Being an expert in how to accentuate the positive and de-emphasize the negative, I often have to point out things to clients they would otherwise miss due to the good efforts of the seller and listing agent.

    Contrary to Ray’s “They’re all coming back”, many quality areas have very few upside down homes when comparing current value to current loan amount. That because areas where most buyers today are putting at least 20% down, also had many buyers who did that when they did not have to. If a buyer is looking for a distressed opportunity in a given area, getting email alerts for the next “opportunity” is not the way to proceed. It’s very easy to take those 205, as in my example http://bit.ly/t5duPk, and determine who is and who is not upside down.

    If no one is upside down, sitting on your thumbs waiting for an email alert isn’t going to get you anywhere. Some areas have already worked through their distressed inventory. The % of homes sold that are distressed is decreasing, not increasing. All of the “builder’s left at 96% complete” homes are gone. All of the “flip project gone bad” homes worth having are gone. Those projects were abandoned by early 2009.

    Most people are not going to chase distressed property bargains into the bowels of hell where they are still available in quantity. They are going to buy a home where they want to live and they are going to buy a home they can see themselves living in for 10 years or so. In most cases…that does not = a distressed property.

  43. 43
    ARDELL says:

    RE: David S @ 40

    Agree. “I don’t want your stinking house at any price” is clearly a factor. Not merely due to condition either. When the majority of home buyers will only buy a home they can see themselves living in for at least 10 years, some of the inferior products can’t spruce up and spit shine enough to make people want them. So better course of action is to sell it for less and as-is. No use throwing good money after bad.

    We don’t talk about condos much on SB, but that market is clearly a blood bath of “opportunity”. Using a condo or townhome as a “stepping stone” property is no longer in the cards. One monster special assessment or lawsuit and the whole complex drops to “can’t give it away”.

  44. 44

    RE: ARDELL @ 43
    Good point Ardell. That’s why you can find 90,000 dollar , two bedroom condos even in some decent neighborhoods. Because they’re a mine field.You might get through it. Or it might blow up in your face.

  45. 45
    ARDELL says:

    RE: Ira Sacharoff @ 44

    I just put one that fits that description almost to a T into escrow. Short Sale. Buyer’s are relocating to retire here and in their 70s. Cash purchase…so no danger of “needing” to sell in their lifetime from here out. Worst case is they have to rent it out at some point, and as a cash purchase they can easily cash flow if they find the need to vacate. Unit completely remodeled…needs no upgrades for the forseeable future.

    I’m pouring over the Resale Certificate documents looking for potential special assessments. I wouldn’t call the Reserve Position skimpy or excessive. No pool…no elevators…no major “amenity” replacement costs in the future. New Roofs were just put on and not needed again for at least 15 to 20 years. The exteriors are wood and will need to be painted in the near future…like yesterday, but they have more than sufficient reserves to cover that expense including fixing any wood rot issues that were not addressed when they did the roofing job.

    My primary concern is the amount of delinquencies. Not the # of units that are delinquent, but the massive balances that low % of owners have run up. Borrowing money from reserves to make up the shortfall.

    Being too kind to the neighbors who are hitting hard times is showing…in the Financial Statements. They would be wise to let the Management Company dictate to the Board in that regard…and let them play “Bad Cop”.

  46. 46
    seattle says:

    I was wondering what everyone’s thought were on the snoqualmie ridge’s future? I have been looking at listings recently and see that EVERYONE is selling below their purchases value because it was during the bubble. I have also noticed that the market is all over the place in terms of what people think they will get out of their homes/condos. Some major differences in property and price.

    I will be a future buyer (am saving right now for that Big down payment) and am not a realtor. I do regularly visit this site (as well as others) and enjoy reading all of the comments in an attempt to educate myself on the market.

    I realize this spring will probably also see sinking prices in that neighborhood but was hoping for any other comments/thoughts.

    Thanks!

  47. 47
    David Losh says:

    It’s not like when I was growing up and the same guys, had the same jobs, from college, or university, to retirement.

    Those retirement accounts are looking as shaky as residential Real Estate equity.

    Ten years ago it was a smart thing to buy a house for your child while they went to college. They could rent rooms, learn the business, maybe do some improvements, then sell at the end of four or five years. If you were lucky you cash flowed.

    Now those properties have a net loss of equity to add to the student loans.

    You have to look at debt as the problem. In the past your debt for a housing unit was off set by appreciation, even if it was by inflation. We no longer have enough growth to call inflation anything more than rising prices.

    We don’t have more, we don’t have more wages, we don’t have more equity, or savings, we just have debt.

    Now that housing units are just debt, without being off set by appreciation, we just add it to the debt load. We have to pay that back.

    Corporations aren’t going to give you job security. Your government is trying to do away with social programs. You are left with the debt, and taxation.

    How are you going to fix that?

  48. 48
    David Losh says:

    RE: ARDELL @ 45

    Of course we can’t discuss a Real Estate transaction in progress, but when it closes….

  49. 49

    It will still be another 5 years before we start to see home values rise. Then another 5 to have enough equity to sell. The home is now a long term investment or if you treat it like a care salesman your equity is made at time of purchase.

  50. 50
    ARDELL says:

    RE: David Losh @ 48

    I sold the one next to it twice. Once in 2004 and again in 2006. My client got a 50% return on it in 2006. This one is WAY nicer…remodeled…and selling for 35% less than the 2004 price of the one next door. Not sure it will get short sale approval…so call that IF it closes. :) Has one of those Short Sale Super Star listing agents doing the negotiation…so maybe.

  51. 51
    Jonness says:

    By ChrisM @ 28:

    Seriously, though, could you do a similar chart for Portland OR? I played around in 2007-2008, and expected to return to 1998 pricing. I’m interested in seeing your results.

    Chris:

    The chart for Portland is on my website.

    http://housingcorrection.com/medianpricechart/caseshillerAbsoluteVsMHICensus.aspx

    In the dropdown, choose Portland, OR as the city.

    Here is a link that explains the chart if you need it:

    http://housingcorrection.com/medianpricevsmortgagerate/pricetoincometutorial.htm

    There are some other charts on the main page: http://housingcorrection.com

    Keep in mind, some people argue that comparing median household income to median house price is not useful because median household income includes the incomes of non-homeowners. However, I’ve ran the numbers using only the incomes of homeowners against median house prices over time, and the relative outcome is very similar.

  52. 52
    Jonness says:

    By ARDELL @ 29:

    RE: Jonness @ 26

    That may be true…but they don’t seem to be particularly relevant to real estate locally. Every day we hear that there are plenty of houses for people to buy…and we also hear people saying that is not true. My charts are more relevant to people who want to buy houses in good areas HERE…vs in Vegas or Japan or Phoenix.

    I’m batting 1000 for the Seattle Area in the best of areas…you are batting 1000 for Japan and the most distressed of areas. Which is more relevant to people buying locally?

    IMO, you sound like someone who sells houses for a living who is trying to pump the area you sell homes in.

    My charts are of the Seattle metro area. In case you haven’t noticed, prices here have declined about 30% so far and have traveled well below your last bottom call. Your strategy of throwing up a chart of the strongest area in the region is pointless. All metros have areas of strength and areas of weakness, even Detroit. You can’t simply cite a single area as having more strength than another area and claim it proves anything other than you are a RE agent who needs to sell houses in order to eat.

    Anybody who is serious about studying the data knows that you have to look at the big picture. Putting on the blinders and only focusing on the areas you sell in cuts you off from seeing all that’s meaningful.

    In order to start making correct calls, you will have to start looking at the big picture. How is an area moving as a whole? What’s happening in Europe that will affect prices in the area that you sell? What will the U.S. governments fiscal policies be? How will the Fed respond to differing rates of economic growth? You have to look at it all, or it’s like driving with a blindfold on. Simply clinging to the strongest area in the region and burying your head in the sand might sell houses to the unsuspecting, but it won’t allow you to understand what is occurring in this world, country, or city.

    Look. I like you Ardell, and I really don’t like to rake on you too much. But I strongly disagree with your tactic of cutting yourself off from the big picture. To make a statement like “Japan isn’t meaningful” only shows ignorance. Of course Japan is meaningful. It went through a similar financial crisis as the U.S. It’s important to understand that financial recessions take a long, long time to heal and place heavy deflationary pressure on overblown asset prices. The previous recessions you have gotten used to in your lifetime have been business cycle recessions. The two types of recessions are completely different. You can’t simply take your past experiences and extrapolate them forward in order to understand where we are and where we are headed. You have to study patterns outside of your normal box, or you will never understand what is occurring.

  53. 53
    Jonness says:

    By David Losh @ 47:

    We don’t have more, we don’t have more wages, we don’t have more equity, or savings, we just have debt.

    That’s it exactly. I’m uncertain why so many people can’t see that? And it’s not just households that are experiencing this problem. Our government is going to have some very tough decisions to make in 2013. Do we allow our debt to increase well above100% of GDP, or do we attempt to force it down to 80%?

    Reinhart-Rogoff showed that when a nation’s debt to GDP ratio goes above 90%, it has a very harmful effect on growth.

    http://blogs.ft.com/gavyndavies/files/2011/05/IMF-graph-26-May-11.jpg

    http://upload.wikimedia.org/wikipedia/commons/6/64/Dept.svg

    Debt is not a free ride. This brings new meaning to the phrase, “buy now, and pay later.”

  54. 54
    Hugh Dominic says:

    RE: Jonness @ 51 – In order to start making correct calls, you will have to start looking at the big picture.

    Don’t encourage her. She has no background in statistics, no expertise in economics, and an inherent conflict of interest. Kary and I both would like to see all agents refrain from market predictions. Ardell is among the worst examples of why.

  55. 55
    Scotsman says:

    RE: Jonness @ 51

    ” you will never understand what is occurring.”

    Frustrating, I know. But the reality is she doesn’t need to understand economics- she sells houses. And she seems to do an above average job of it. To put three deals together in a month is tough in this market.

    Does the average car saleman understand the advantages of a multi-link front suspension, the thermodynamic gains from turbo charging or why direct injection is better than multipoint? No, but they don’t need to. All they need to know is how to sell the “sizzle” of the latest and the greatest, or in this case the “benefits” of home ownership.

    What irks me, and I suspect you, is the idea that potential buyers might be looking to Ardell for more than just neighborhood information. They might think she should have an informed opinion on where housing prices are going, or why. Well, she has an opinion, we can say that. But what she really has is the need to sell that house.

  56. 56
    MichaelB says:

    RE: Macro Investor @ 15

    Not so sure. BofA’s prediction of only a 8 or10% fall from current prices seems a bit optimistic.

  57. 57
    MichaelB says:

    RE: Hugh Dominic @ 53

    What’s with the high bar for Ardell to post here? Now she has to be a professor of statistics?

    Hugh & Kary sitting in a tree….pissing on Ardell…

    Give her a break. She adds more value and less arrogance per comment on this site than you and Kary together and I”ll bet she sells more houses, too!

  58. 58

    RE: MichaelB @ 56 – I call out Ardell when she is wrong, which is quite frequently. If you think her comments add value, it’s only because you’ve been fooled by her. I’ll admit she often sounds quite reasonable, if you don’t understand the issues.

  59. 59

    By Hugh Dominic @ 53:

    RE: Jonness @ 51 – In order to start making correct calls, you will have to start looking at the big picture.

    Don’t encourage her. She has no background in statistics, no expertise in economics, and an inherent conflict of interest. Kary and I both would like to see all agents refrain from market predictions. Ardell is among the worst examples of why.

    So what’s that supposed to mean, “Kary and I would like to see all agents refrain from market predictions.”?
    That you and Kary are the ultimate authorities? That you guys have the right to stifle my first amendment rights? Why should your and Kary’s opinion carry weight on this, other than that two people agree on something?
    I’m not defending Ardell here, but I’m going to continue to make market predictions. A lot of people on Seattle Bubble make market predictions, and a lot of people here making predictions are full of crap, whether they’re in the real estate industry or otherwise. I don’t have a history of accuracy, and I’m a commissioned real estate sales person. People ought to be smart enough to realize that predictions from a commissioned real estate salesperson are likely to be biased in favor of whatever they’re selling. For the record, I predict that local home prices will continue to drift downwards. My rationale is that income and employment levels can’t support existing home prices except at the lowest tier, so maybe the low tier will bottom out first.
    I will continue to make predictions, (and those predictions will likely be wrong a majority of the time), until they come and take this laptop from my cold, dead hands.

  60. 60
    Pegasus says:

    By Kary L. Krismer @ 57:

    RE: MichaelB @ 56 – I call out Ardell when she is wrong, which is quite frequently. If you think her comments add value, it’s only because you’ve been fooled by her. I’ll admit she often sounds quite reasonable, if you don’t understand the issues.

    Thank you Kary for your candid and unbiased opinion.

    http://caveofknowledge.com/wp-content/uploads/2011/02/pinocchio.jpg

  61. 61
    ARDELL says:

    RE: MichaelB @ 56

    The reality as to differences between agent “predictions” and observations, is that we work in different markets. Clearly the case between Ira and I and he is likely spot on for his market…but not mine.

    I’m doing one now “down his way” South of the I-90 Bridge :) and I’m grateful for his observations and input.

    Seeking out the opinions of others as to differing market conditions in different neighborhoods and service areas is a mainstay of real estate, and has been for many years. I have to “buck the trend”…because the neighborhoods I work in “buck the trend”. I can’t pull in the direction of worst case scenario…because my market does not fall in that category.

    Even Kary has to “predict” what home buyers may do, and what the market will bear, when he lists a home. If we are not on top of the market in each area where we work…we would be quite useless as a resource to our clients.

    I take no offense to the “pot shots”. My clients are primarily high earning (not wealthy) and at least 20% down as the majority. Consequently that becomes my perspective. I don’t care what happens in Pierce County…have no intention of ever working there. That’s why I have to do my own stats, and so does every other agent, as to his area of expertise. Case Shiller can be quite meaningless…and most times is, for anyone who is actually buying or selling a home and the professionals assisting them in that endeavor.

    I’m used to Kary running around the internet saying I’m wrong…in fact it’s become somewhat of a testimonial that he does not agree with me most times. Obviously the things he disagrees with…work well for me and my clients. What he thinks is of little importance to me. It’s like the kid in grade school who used to pull my pony tails…annoying at times, but not life altering.

  62. 62

    By ARDELL @ 60:

    I’m used to Kary running around the internet saying I’m wrong…in fact it’s become somewhat of a testimonial that he does not agree with me most times. Obviously the things he disagrees with…work well for me and my clients. What he thinks is of little importance to me. It’s like the kid in grade school who used to pull my pony tails…annoying at times, but not life altering.

    You’re right. Telling an escrow that they have to give the earnest money back to your client, because your client signed a document, that works well for you and your client. But it’s wrong, and it could lead to you, your client and the escrow being sued. Then it won’t work so well.

    Sometimes though, your positions only work well for you. Like when you think that a bank document requires you to spy on your client. Actually, I’m not even sure how that works well for you, but it clearly is not in your client’s interest.

  63. 63

    By ARDELL @ 60:

    Even Kary has to “predict” what home buyers may do, and what the market will bear, when he lists a home. If we are not on top of the market in each area where we work…we would be quite useless as a resource to our clients.

    That’s totally different. First, agents do have training as to that. Second, that is something that agents are supposed to do. Third, that has a very limited time frame.

    The problem I have with your predictions of the overall market are that that market is based on far too many variables, and you have no basis to make predictions of most of those variables. For example, what do you think the unemployment rate in Washington will be 6 and 12 months from now? What do you think will happen in Italy, Greece, Spain and to the Euro in general?

  64. 64

    RE: Pegasus @ 59 – And thank you for yet another useless post.

  65. 65

    By Ira Sacharoff @ 58:

    By Hugh Dominic @ 53:

    RE: Jonness @ 51 – In order to start making correct calls, you will have to start looking at the big picture.

    Don’t encourage her. She has no background in statistics, no expertise in economics, and an inherent conflict of interest. Kary and I both would like to see all agents refrain from market predictions. Ardell is among the worst examples of why.

    So what’s that supposed to mean, “Kary and I would like to see all agents refrain from market predictions.”?
    That you and Kary are the ultimate authorities? That you guys have the right to stifle my first amendment rights? Why should your and Kary’s opinion carry weight on this, other than that two people agree on something?.

    I’ve said I’d like to see it either as an ethical violation (for NAR members) or a licensing violation (for all agents).

    When people may incur six figures of debt as the result of a baseless prediction, it becomes something more than a harmless parlor game.

  66. 66
    Pegasus says:

    By Kary L. Krismer @ 63:

    RE: Pegasus @ 59 – And thank you for yet another useless post.

    And thank you Kary for another blog dominating string of useless posts.

    http://1.bp.blogspot.com/-4CKDHyBaOGg/Ti7k_E12d3I/AAAAAAAAAFs/uNC1NGA6KSk/s640/inflated-ego-mug_LRG.JPG

  67. 67
    ARDELL says:

    RE: Jonness @ 51

    I clearly admire those who incorporate Japan, and make it a point to read everything that is being said. I read all comments on Seattle Bubble and in the Redfin forums and track the stock market and, and…

    But 30% down means someone is 20% down and someone else is 40% down.
    I don’t have the luxury of ignoring that fact and averaging the two together. If I did, my 20% down seller would be leaving money on the table if I priced at 30% down and my buyer client would either be missing all the best homes in his area of interest…or overpaying in some cases.

    I don’t call a 1% or 2% change…a “change” in market conditions. In my everyday “job”, my market call continues to be relevant and spot on. I WISH it were not…and there were plenty of good single family home options for much lower than 2009 prices. But the truth is there are almost NO good homes at below 2009 prices for my clients.

    In that regard…no, I have no bias to be “right” about that. I truly wish I were wrong…as it would be better for my clients if I were.

  68. 68

    By Kary L. Krismer @ 65:

    By Ira Sacharoff @ 58:

    By Hugh Dominic @ 53:

    RE: Jonness @ 51 – In order to start making correct calls, you will have to start looking at the big picture.

    Don’t encourage her. She has no background in statistics, no expertise in economics, and an inherent conflict of interest. Kary and I both would like to see all agents refrain from market predictions. Ardell is among the worst examples of why.

    So what’s that supposed to mean, “Kary and I would like to see all agents refrain from market predictions.”?
    That you and Kary are the ultimate authorities? That you guys have the right to stifle my first amendment rights? Why should your and Kary’s opinion carry weight on this, other than that two people agree on something?.

    I’ve said I’d like to see it either as an ethical violation (for NAR members) or a licensing violation (for all agents).

    When people may incur six figures of debt as the result of a baseless prediction, it becomes something more than a harmless parlor game.

    Good thing you don’t make the rules, Kary:)
    Still, when people engage the services of a real estate agent, if they incur six figures of debt because they believed the baseless predictions of a real estate agent, don’t they deserve their fate for putting their full faith in a salesperson? When people buy a used car, don’t the smart ones research the car or take it to a mechanic rather than simply taking the word of the used car salesman that it’s a great car?

  69. 69
    David Losh says:

    RE: ARDELL @ 67

    The weird thing is that I agree that prices, for all the Case Schiller reports, really haven’t shown the declines.

    In my opinion it’s a bizarre phenomenon.

    For all the statistics, or data that is thrown around people are still paying ridiculously high prices for property.

    Not that I mind, or care, our businesses are a boomin’. About a year ago, after the tax credit went away, it was a shock to my way of thinking that we had a drop in price, only to regain it.

    I read this blog, and some others, to learn stuff. It’s interesting that so much is going on in the world that can effect us, or not, as the case may be.

  70. 70

    RE: Ira Sacharoff @ 68 – Call me crazy, but I’d like the standards to be a bit higher than car salesman. ;-)

  71. 71
    Mike S says:

    When people are greedy, be fearful and when people are fearful, be greedy.

    We are there in some areas of the real estate market.

    Its a proven entity, and by the time you hear about it being a good deal again, it will be too late.

    In some areas we may have 30% to hit bottom, in others 20%, in other 10%, in some its at its bottom, and a select few there are deals out there NOW.

    As a whole the US housing market will still have some decline.

    Its all about where you are buying, and I think its the point that Ardell tries to make.

    As a whole Im kind of surprised at the negativity of this message board.

    I think it summed it up well for me when one of you said that you were surprised that people were making more than they were 5 years ago, or whatever the timeline was for the recent poll on here.

    The money is out there, and once the fear subsides, and the reorganization takes place, you will see growth in strong markets sooner than later.

  72. 72

    By Kary L. Krismer @ 70:

    RE: Ira Sacharoff @ 68 – Call me crazy, but I’d like the standards to be a bit higher than car salesman. ;-)

    I’m sure that you conduct yourself with high ethical standards as do I, but I think that as long as real estate agents get paid only if someone is buying a house, ethics for a lot of agents is just going to be thrown out the window, and looking out for the client’s best interest is going to play second fiddle to earning that commission.

  73. 73
    David Losh says:

    RE: Ira Sacharoff @ 71

    I met my first group of Real Estate agents when I was 16 years old. They were a bunch of old guys in suits. There were some woman over at Century 21 with big hair that would go to garden club, and help other wives settle in. There was a distinction between commercial, and residential, but the two went hand in hand. If you got a job at Boeing this is where you lived, if you worked at Todd Shipyards you lived over there, if you fished you lived there, and if you couldn’t afford to live in Seattle you lived in Bellevue, only kind of kidding, but Microsoft changed that. It’s kind of funny right now that if you get a job at Microsoft they have a bus that will pick you up, no matter where you live.

    No one was selling you anything, because there was no money it, there still isn’t. Residential Real Estate sales was for wives to get house hold money. Through the 1970s most people who were involved in Real Estate were business people. They bought sold, and traded in commercial properties, and residential was an add on. Well at $25K to $50K there wasn’t a lot of commission dollar to get.

    Banking, recession, and inflation in the 1980s lead to a residential Real Estate viability as a way to make a living. It was a golden era of a mix between old, and new. The National Association of Realtors were all driving Jaguars because for the first time they were in the money. The Multiples were publishing the books of Real Estate listings, and everything went sideways.

    You’d get people asking for the book, or an agent would make copies of the book, or they would hand out a list of addresses. Then you had mom, dad, and the kids driving around, and knocking on doors. By the mid 1990s every one was a Real Estate expert, they had the book.

    The Real Estate book is when we got the rules, regulations, classes, and membership drives in the “professional” organizations.

    Nobody needed to know anything. No one needed to look at property. Some one would call on the phone, from a sign, or an ad, and the “agent”/sales person would jump in the car and live with you until you bought something.

    We have the same thing today, ten times worse with the internet, but hey, let’s take a few more NAR classes, and we’ll be more “professional.”

    The problem is that the home buyers today probably know more than the vast majority of “agents”/sales people they talk to. Agents have absolutely no, none, nada, oversight, regulation, or accountability. Any moron can get a Real Estate license and get into an office. No Brokerage cares. Brokerages, all of them, are hemorrhaging money. If you come in with a good story, if you can put deals on the table, hey buddy, you’re hired.

    More “education” isn’t going to do it. We need people who know the product, the area, and the economy. We need people who care about the profession.

  74. 74
    ARDELL says:

    RE: Kary L. Krismer @ 62

    Haha! You are like a dog with a bone.

    NO buyer should need the seller’s PERMISSION to cancel on inspection and get their Earnest Money returned in the legally allowed time frame. Mine do not. Why SHOULD your buyer clients need the seller’s permission to not be satisfied with the home inspection?

    I don’t know ANY buyer who would agree with you on that. Most buyers need that money back, without the seller’s permission, so they can make an offer with that money on a different home.

    Why do you continuously hold yourself as “right” and anyone who disagrees with you as “wrong”? When you represent a buyer…you should not let the seller hold your client’s money hostage, when the buyer has every legal right to cancel…without the seller’s permission.

    Got Forbid you personally would be the seller we needed to “release the Earnest Money” to the buyer. The buyer does NOT have to explain to the seller WHY they are cancelling on inspection. It is not part of our Standard Contracts to require that of a buyer.

  75. 75
    Mike S says:

    RE: Kary L. Krismer @ 62

    You can back out at anytime up until the inspection, and you get your earnest money back.

    What are you talking about?

  76. 76
    Hugh Dominic says:

    By Ira Sacharoff @ 72:

    By Kary L. Krismer @ 70:

    RE: Ira Sacharoff @ 68 – Call me crazy, but I’d like the standards to be a bit higher than car salesman. ;-)

    I’m sure that you conduct yourself with high ethical standards as do I, but I think that as long as real estate agents get paid only if someone is buying a house, ethics for a lot of agents is just going to be thrown out the window, and looking out for the client’s best interest is going to play second fiddle to earning that commission.

    I don’t know about that. I think if I were an Ardell client from 2009 and somehow was forced to take a loss, I would investigate suing her over her bad advice and bottom-calls.

    On what basis? On the basis that asset vendors (e.g. mutual funds) are regulated and held liable if they make statements about future performance:

    1. She represented herself on her blog and in other media in a manner as a professional advisor, with a license to practice Real Estate agency;
    2. A portion of her services to me was advice concerning the future performance of the value of my home;
    3. I was influenced to buy due that advice;
    4. She acted as my agent and was compensated as a result of my purchase;
    5. Her advice was inaccurate and she failed to adequately disclose the risk of loss

  77. 77

    By Ira Sacharoff @ 72:

    By Kary L. Krismer @ 70:

    RE: Ira Sacharoff @ 68 – Call me crazy, but I’d like the standards to be a bit higher than car salesman. ;-)

    I’m sure that you conduct yourself with high ethical standards as do I, but I think that as long as real estate agents get paid only if someone is buying a house, ethics for a lot of agents is just going to be thrown out the window, and looking out for the client’s best interest is going to play second fiddle to earning that commission.

    That brings up the second difference. With the car salesman situation it’s pretty clear the salesperson is representing the seller. They are not the agent of the buyer.

  78. 78

    By ARDELL @ 74:

    RE: Kary L. Krismer @ 62

    Haha! You are like a dog with a bone.

    NO buyer should need the seller’s PERMISSION to cancel on inspection and get their Earnest Money returned in the legally allowed time frame. Mine do not. Why SHOULD your buyer clients need the seller’s permission to not be satisfied with the home inspection?

    I don’t know ANY buyer who would agree with you on that. Most buyers need that money back, without the seller’s permission, so they can make an offer with that money on a different home. .

    We’ve gone over this before. To get your money back you have to have complied with the requirements to get your money back. That includes sending your inspection response to the listing agent’s office. If you failed to do that, you don’t get your money back.

    When we argued about this before you didn’t even understand what portion of the contract controlled. You thought it was Form 35R, when really it’s whatever version of Form 21 is used. Since our original argument they’ve amended form 21 to provide a new procedure. In addition to getting the seller’s signature, there’s an option for the escrow to send a notice to the seller’s agent and wait 10 days. Even with that clear procedure the form notes that the escrow may require the seller’s signature, as many will do.

    Don’t you keep up on forms? They change them in a way that indicates you were clearly wrong, and you don’t know about it? Maybe you should spend less time blogging and more time keeping yourself informed about the profession.

    This is exactly why you’re dangerous. You don’t understand simple contracts and you think the result is whatever is best for you or your client. It’s not, and thinking that way will eventually get you and/or your client sued.

  79. 79
    David Losh says:

    RE: Kary L. Krismer @ 78RE: Kary L. Krismer @ 77RE: Hugh Dominic @ 76

    Wow, you really are dense.

    Yeah Hugh, I included you.

  80. 80

    By Mike S @ 75:

    RE: Kary L. Krismer @ 62

    You can back out at anytime up until the inspection, and you get your earnest money back.

    What are you talking about?

    It arguably isn’t an absolute right (good faith is involved), but in any case you do have to follow the procedure. If you fax the inspection response in an untimely manner, or to the wrong place, or only send it by email when email is not authorized, the buyer doesn’t get their earnest money back. Well they do, but it’s from their agent when they pay off on their malpractice claim. The seller gets to keep the earnest money in that situation, unless there’s another contingency they can rely on.

    Escrows are not likely to accept just the buyer’s signature claiming they are supposed to get their money back because there’s no guarantee that the seller agrees with that position. It’s possible the seller hasn’t even been informed that there’s an issue with the inspection.

  81. 81

    RE: David Losh @ 79 – I don’t understand why you so blindly accept anything Ardell says.

    But in any case, why can’t you refute what I just said? The best you can do is an insult?

  82. 82
    David Losh says:

    RE: Kary L. Krismer @ 81

    It’s your insult.

    The forms change constantly because somebody at Demco gets a request from some idiot agent who can’t figure out what to do next.

    The system has gotten so bad that a Glenn Kelman can set up a Brokerage, to use the term extremely loosely, that has a glorified, or in fact, secretarial staff “writing up” what you call contracts.

    He can do that because it is next to impossible to have anybody get sued over a Real Estate transaction that any one can walk away from at any time over a thirty day period while financing gets put in place.

  83. 83

    By David Losh @ 82:

    <The forms change constantly because somebody at Demco gets a request from some idiot agent who can't figure out what to do next.

    The forms change because they deal with issues as they arise. Here apparently they were having problems getting the seller’s signature, so they provided a new alternative for the escrows to use if they want to do so. Even in providing that procedure though, they acknowledge that it’s something the escrow might not be comfortable doing.

    I am a bit surprised that escrow companies are not a bit better at getting buyers and sellers to sign their escrow agreements ASAP. That could easily have provisions that deal with the issue. The escrow is not technically a party to the purchase and sale agreement, but all three parties are part of the escrow agreement.

  84. 84

    By David Losh @ 82:

    He can do that because it is next to impossible to have anybody get sued over a Real Estate transaction that any one can walk away from at any time over a thirty day period while financing gets put in place.

    The financing contingency is hardly an iron clad out. Also, it doesn’t typically expire in 30 days.

  85. 85

    RE: Kary L. Krismer @ 77
    Right. If you were looking to buy a car, and employed someone to help you find the car best suited to you, the most reliable, the best fit, etc, you can be sure they wouldn’t get compensated by the car dealer after the sale was made.

  86. 86
    David Losh says:

    RE: Kary L. Krismer @ 83

    The system is set up with Johny Demco making all the rules. John Jacobi was never a Real Estate agent, but he had a lot of ideas about the way things ought to be. In comes Johny Demco who has made a fortune playing with the paper work.

    You go to court and you better have Johny on your side.

    Welcome to brokerage.

  87. 87

    RE: Ira Sacharoff @ 85 – I think I’d worry more about how much they need the money, rather than who is paying it. Paying someone directly doesn’t guarantee you anything. As I’ve mentioned before, your attorney could be affecting settlement negotiations to make it more likely that you go to trial, so that you pay them more money. In the case of an agent, if they need the commission to make their house payment or pay their taxes, they’re probably more likely to push you into a transaction.

    Fortunately there are some things you can do to investigate the people you are dealing with. The King County Recorder’s site has information about foreclosures, tax warrants, some judgments, etc. Also, there is a state site where you can look for actions against the attorney, agent, doctor, etc. that you might be considering using.

    http://dw.courts.wa.gov/index.cfm?fa=home.home

    There are also some more specialized tools, like the Department of Licensing’s site regarding contractors.

  88. 88

    I almost forgot–for attorneys you can find most recent disciplinary matters, limited I think to where sanctions were awarded, here:

    http://www.mywsba.org/default.aspx?tabid=177

  89. 89
    ARDELL says:

    RE: Kary L. Krismer @ 80

    …and maybe the seller died in the interim and consequently could not receive the notice to cancel.

    …and maybe the buyer’s agent slipped in the shower that morning and never delivered the notice to the agent for the seller.

    …and the buyer can’t cancel on inspection 5 years after he buys the house and lives in it. Let’s not forget that one.

    It’s pretty simple Kary…until you start grasping at straws to make yourself right and me wrong.

    Buyer can cancel on inspection within the contract time frame. It’s a simple check of a box. No EXPLANATION needed. No reason for the seller to agree with the buyer’s decision. No need for the buyer to list the reasons why they are not satisfied with the inspection. No obligation to send the Inspection Report to the seller with the cancel notice.

    Bottom line is we don’t agree on this issue and have not agreed on this for years. Why do you keep dragging this dead horse, in an off topic manner, into blog comments?

    I am clearly not wrong. You clearly believe I am. I know I’m not wrong because my client who is in escrow cancelled on inspection on the previous house…and got their Earnest Money returned, so that they could buy the house they are now buying. Not ancient history. No change in the way it was handled due to “new forms”. The seller did not need to agree with the buyer’s position in order for that to happen.

    Real and Relevant – What I say is true for MY clients. Now you tell me the last time your client couldn’t get their Earnest Money back when they cancelled on inspection, because the seller would not agree that YOUR buyer COULD cancel on inspection. Let’s leave out the hypothetical drama…do you seriously have this problem when representing a buyer client? I don’t.

  90. 90

    RE: ARDELL @ 89 – Ardell, not only are you wrong, but you’re incapable of understanding when you are wrong.

    Do you really think that an earnest money can be put in place to protect the seller, and then just yanked out of escrow without the seller having any say in that? That’s just incredibly amazing that you would even think that would be the case. No system would ever be set up that way. Most people wouldn’t even need to read the contract to know that wasn’t how things worked.

    That you convinced some escrow to put themselves at risk doesn’t mean you are right. It just means that you are willing to place others at risk to suit your own needs.

  91. 91
    ARDELL says:

    RE: Hugh Dominic @ 76

    My clients are keenly aware of what the potential for gain or loss is when they purchase a home. That advice varies…depending on the home. Your point #5 is your opinion…not a proven fact as to my clients. How general market conditions impact each client is different. Do you really think you can KNOW what I advise my clients…individually…by reading “a blog”. How naive.

    I once had a client who wanted a house with some specific parameters. It took me about a year to find it…and it was 10% overpriced at the time, and I told him so. That 10% was $20,000. I said “Jim, here it is…but it’s $20,000 more than it should be. We can wait for another house, but we both know that with your list of parameters, that could take another year. We can hope no one buys it before the seller reduces the price.” He elected to buy it for $20,000 more than it was “worth”. It appraised, so my standard of current fair market value is pretty stringent, and not as generous as an appraiser’s standard, even to this day.

    Your blanket statement regarding gain or loss does not include the specific decisions made by each client. Some elect to overpay at time of purchase. The issue is “informed consent”. If and when my client elects to overpay, he knows he is doing that…at the time that he is doing it.

    There are places where my advice does not apply. I don’t work there.

  92. 92
    ARDELL says:

    RE: Kary L. Krismer @ 90

    Kary…you know I’m right. Give it up. I DO it. That makes me right…for me and my clients. Right for your clients?…that’s up to you.

    If you want to subject your clients to needless red tape to cover your ass…it is your right to do so. As long as your clients know that your primary objective it to cover your ass first and escrow’s ass 2nd…and your client’s ass last…go for it.

    I will never be wrong on this…as the day you become right I will simply write something into the contract to protect my client’s interest better than the standard form allows at the time. What good is an Inspection Contingency if you negate the buyer’s UNILATERAL right to Cancel on Inspection?

    If you were selling your house…got forbid a buyer would have to convince YOU to agree with why they want to cancel on inspection. They could argue with you until they are blue in the face and the cows come home…and you would insist on being right that they should not be allowed to cancel. In fact you are the poster child for WHY a buyer should not need a seller to AGREE with their decision to Cancel on Inspection. (One of the reasons it should be a required disclosure that the seller is a lawyer. It appears to be 2nd nature for a lawyer to pretend they are right…and hope to convince others of same or at minimum wear them out by declaring it ad nauseum…even when they are dead wrong. I do not fault you for that…I simply view you as an attorney vs a peer in my profession of Real Estate client advocacy.)

    You are clearly not advocating well for your buyer client if you subject your buyer clients to having to ask the seller “Mother May I” when they want to Cancel on Inspection and get their Earnest Money Returned. If I were you, I would not continue to repeat that professional inadequacy over and over again in public. #justsayin

  93. 93
    David Losh says:

    Thank you Ardell, as always you are more eloquent than I would be.

    Let me throw the client, the consumer, into the mix, because they are the ones in the transaction. It’s a quarter to half of a million dollars with a thirty year mortgage. What do you think? You think a $10K Earnest Money with an idiot, I mean brain dead, incompetent, untrained, unsupervised, moron, of a Real Estate agent means anything? in a court of law?

    I have more of a chance of ending up in court being sued for the comments I made about Johny Demco than I do by writing up a Real Estate Purchase, and Sale Agreement.

    That’s the system we have in place today.

    Oh heck why not, as long as I’m at it. The only reason Glenn Kelman gets away with his redfin carpola is because he is here in Seattle Washington, the home of brain dead Real Estate professionals.

  94. 94
    ARDELL says:

    RE: David Losh @ 93

    I have been asked to participate in a National Real Estate “blogswap” on what we think Real Estate Companies will be like in 2030. That will be fun. Of course I’ll be 75 in 2030. Picturing me in 2030 is scarier than picturing Real Estate Companies in 2030. :)

    Getting ready to be on Brashenomics (radio show) this afternoon. Not sure what the topic is, they’ve changed it a couple of times. Whatever I am asked to speak on…I’m sure Kary will think I am “wrong”. LOL! At least he’s predictable…even if the market isn’t.

    I totally agree that people who don’t bring the actual buyers and sellers “into the room” when making decisions that will impact buyers and sellers greatly…will need to be eradicated from the business. If not now…then clearly by 2030.

    Not sure why, but our area is particularly lax in protecting consumers vs protecting brokers and escrow companies, etc… You likely know that better than I. It has something to do with lawyers being hired to protect the Brokerages moreso than the Brokerage Clients. But I’m not quite sure how they have gotten away with that for all of these years.

    No Rate Cap in the Finance Contingency is a glaring example that differs from most areas of the Country. But why? You’ve been around here way longer than I have. Why do all of the form changes seem to benefit the Brokerage vs the Broker’s Clients?

  95. 95

    RE: ARDELL @ 92 – This isn’t about the right to cancel. It’s about the right to get the earnest money back, and the need to follow the proper procedure.

    It’s amazing that you are willing to post on a public website facts which indicate you don’t understand the most basic forms used by real estate agents.

  96. 96

    By ARDELL @ 94:

    Not sure why, but our area is particularly lax in protecting consumers vs protecting brokers and escrow companies, etc… You likely know that better than I. It has something to do with lawyers being hired to protect the Brokerages moreso than the Brokerage Clients. But I’m not quite sure how they have gotten away with that for all of these years.

    You and Losh have both been hitting on this to some extent. The forms are written to avoid lawsuits. One could argue that’s good for everyone, because the only winners in lawsuits are the attorneys, especially if you’re talking about a $10,000 earnest money issue. At some point though, you’re talking about real losses, like say the septic tank issue in the Bull decision which brought us the stupid Form 17 liability choices. The forms don’t necessarily do away with those larger issues.

    Also to some extent the forms are the result of our system where agents are given very little oversight by their managing/designated brokers. It would probably be good for the industry if there were a bit more liability for brokers. Then, for example, you wouldn’t have agents overstating the square footage of a house. The forms now (22D) generally protect the managing/designated broker from liability for such actions by their agents, so they don’t stop their agents from doing that.

    Edit: BTW, I suspect the reason we no longer have the stupid Form 17 choice is because they finally realized that increased the potential liability of brokers. I haven’t heard of any such suits, but it wouldn’t surprise me that they are out there.

  97. 97
    ARDELL says:

    RE: Kary L. Krismer @ 95

    Consider “the REAL” of real estate…for just a minute. Your client narrowed down to two choices. The first one did not inspect as well as the buyer hoped it would when comparing the two homes. OR the inspector found a problem that the seller obviously tried to conceal, causing the buyer to be rejecting the seller vs the house itself. Your client decides to cancel on inspection and buy his 2nd choice home.

    Your client needs that Earnest Money to make the offer on his 2nd (now 1st choice) home.

    That is the ONLY thing you need to be worried about. Not escrow’s potential future hypothetical wild-ass guess, worst case scenario “problems”. My concern is my client being able to achieve the objective they hired me to assist them with. That is what they hire and pay me to do.

    No close secondary considerations to that Numero Uno objective.

  98. 98
    ARDELL says:

    RE: Kary L. Krismer @ 95

    Lawyers like things to be all about “the paper”. David and I know it isn’t.

  99. 99

    RE: ARDELL @ 97 – You’ve nailed the potential problem. A buyer not getting their earnest money back when they need it to proceed with another property.

    Too bad you don’t understand what’s going on so that you can give your clients proper advice about what their risks are of that occurring. The escrow you managed to twist the arm of before may come to their senses and not give it back the next time. So where will you be when you have incorrectly told your client that the escrow will give their earnest money back just based on their signature? At that point you should be on the phone to your malpractice carrier.

  100. 100

    So others can follow along with my dispute with Ardell, here is what the current Purchase and Sale provisions provide regarding the return of the earnest money:

    Upon termination of the Agreement, a party or the Closing Agent may deliver a form authorizing the release of Earnest Money to the other party or parties. The party(s) shall execute such form and deliver the same to the Closing Agent. If either party fails to execute the release for, the other party may make a written demand to the Closing Agent for the Earnest Money. If only one party makes such a demand, Closing Agent shall promptly deliver notice of the demand to the other party. If the other party does not object to the demand within 10 days of the Closing Agent’s notice, Closing Agent shall disburse the Earnest Money to the party making the demand. If Closing Agent complies with the preceding process each party shall be deemed to have released Closing Agent from any and all claims or liability related to the disbursal of the Earnest Money. The parties are advised that, notwithstanding he foregoing, Closing Agent may require the parties to execute a separate agreement before disbursing the Earnest Money. If either party fails to authorize the release of the Earnest Money to the other party when required to do so under this Agreement, that party shall be in breach of this Agreement.

    Clearly this doesn’t just allow one party to sign a form and get the money back. If requires one party (or the Closing Agent) to give the other party a form to execute. Both parties need to sign, and if one won’t there’s now a process for that.

    When this dispute first arose with Ardell, this was the language:

    The parties instruct Closing Agent to: . . . (2) commence an interpleader action in the county in which the Property is located within 30 days of a party’s demand for the Earnest Money, unless the parties otherwise agree in writing.

    Here if the escrow didn’t get both parties to agree in writing, the only remedy was to start an interpleader action.

  101. 101
    David Losh says:

    RE: Kary L. Krismer @ 100RE: Kary L. Krismer @ 99

    How many times have you been sued, been threatened to be sued, or had a broker threaten to sue you? It’s like a daily occurrence.

    Johny Demco of Windermere has made up this bizarre set of circumstances where we aren’t lawyers, but we, well, he, keeps adding more, and more insipid language to the Agreement, then calls it a contract, but in reality all of the language is at cross purposes.

    The paper is designed to protect Windermere Real Estate Incorporated rather than the client, agent, or any other brokerage. John L Scott climbed on board because they were forced to. The Northwest Multiple Listing Service, and NAR are powerless against this daily assault by a single law firm that works for one Brokerage, and one brokerage only.

    It’s a bizarre situation that was furthered by Microsoft being the basis of the Real Estate revolution of Web 2.0. It’s all viral now.

    The paper work can say anything it wants, but it will change next week, or next time there is a Windermere company meeting.

  102. 102

    RE: ARDELL @ 98 – By David Losh @ 101:

    How many times have you been sued, been threatened to be sued, or had a broker threaten to sue you? It’s like a daily occurrence.

    The paper work can say anything it wants, but it will change next week, or next time there is a Windermere company meeting.

    Threats of lawsuit are a daily occurrence? Maybe if you don’t understand the paperwork or think it doesn’t matter.

    As to changes in the forms, you deal with them. But for any given transaction you’re typically only dealing with one set of forms. Even when they change something like the Form 17 Disclosure Statement, the old one is typically sufficient if it was sufficient at the time of mutual acceptance.

  103. 103
    Mike S says:

    RE: Kary L. Krismer @ 90

    Kary-

    Are you trying to be this stupid?

    I have never heard of anyone not being able to back out at inspection.

    Every Agent I have dealt with has explained this clearly.

    Again to have any examples of someone not being able to back out before inspection was over?

    Thats why there is an inspection, to make sure you are getting what is advertised, what is paid for.

    Are you always this dense?

  104. 104
    ARDELL says:

    RE: Kary L. Krismer @ 100

    Who are you talking to, Kary? Every buyer already knows they can cancel on inspection WITHOUT the seller’s permission to do so. Who are you trying to convince that is not the case?

    The Form to Cancel on Inspection DOES NOT require the Seller’s signature. Stop trying to drum up a case for something that just isn’t true.

    You are talking about “possible” escrow policies…not an agreement between a buyer and a seller. It says “may” do…or not do, and is referring to what escrow “may” do or not do. Not any agreement between the buyer and the seller, and no requirement that escrow “must” actually do that. Go look up the word “may”.

    By the way…you may want to read the mls rules. It’s a violation to quote those proprietary documents in public as you are. #justsayin Kind of funny to see you breaking the rules…while accusing me of something that doesn’t make any sense. You may want to take a class on what you aren’t allowed to do instead of wasting your time standing on that soap box to nowhere.

  105. 105
    David Losh says:

    RE: Kary L. Krismer @ 102

    You’re almost there, it’s a Catch 22, Demco tells us we are not attorneys so we can’t write language into a Purchase, and Sale. Then a single law firm, Demco, who represents one Brokerage in the State of Washington, throws in a bunch of language into a boiler plate form, it’s a form.

    The agreement is between a buyer, and a seller. The agents, the forms, the paper, are to establish a meeting of the minds.

    A buyer goes into inspect and asks the inspector a question, and they think the answer is different than what they were told; the deal can die. There is no more meeting of the minds. There is no more agreement.

    Just because on law firm, that represents one Brokerage in the State of Washington, has language inserted into a form contrary to that agreement, doesn’t give the form more weight than all other Real Estate precedent back to the beginning of time.

    Yes Brokerages, Brokers, throw around this threat of lawsuit all the time. You are doing that here.

  106. 106
    Hugh Dominic says:

    RE: Kary L. Krismer @ 100 – I had read the standard form contracts a few months ago, and your interpretation is correct. Ardell and Losh are wrong (big surprise). The legal agreement can allow the buyer, I think, 3 days to back out without cause if they check the correct box. (Neighborhood evaluation or some such)

    After that, the buyer at least has to submit the appropriate response related to the inspection. I don’t think that there are any rules about what counts as an inspection; meaning, the buyer could inspect the front porch by looking at it, and for no stated reason, fail based on the inspection. He can then refuse the sellers offer of corrective action, if any.

    For practical purposes, that’s just a formality of swapping papers. Ardell may have found that she can take informal shortcuts and the other brokers (etc) just go along with it and skip the paperwork. I certainly would not risk the buyer’s earnest money and a malpractice suit over it.

  107. 107
    Hugh Dominic says:

    By ARDELL @ 91:

    RE: Hugh Dominic @ 76

    My clients are keenly aware of what the potential for gain or loss is when they purchase a home. That advice varies…depending on the home. Your point #5 is your opinion…not a proven fact as to my clients. How general market conditions impact each client is different. Do you really think you can KNOW what I advise my clients…individually…by reading “a blog”. How naive.

    It is my opinion. But that is how legal cases are handled. You’d present your opinion, and I’d present my case. My case is that you were acting as my broker of a financial product, made assertions about future performance, and failed to disclose the risk of loss. The court would decide. I would use any private conversations as evidence, but certainly I would use your public statements on your blog to show that you were making forward-looking predictions. The burden would be on you to prove that you disclosed the risk of loss.

    I once had a client who wanted a house with some specific parameters. It took me about a year to find it…and it was 10% overpriced at the time, and I told him so. That 10% was $20,000. I said “Jim, here it is…but it’s $20,000 more than it should be. We can wait for another house, but we both know that with your list of parameters, that could take another year. We can hope no one buys it before the seller reduces the price.” He elected to buy it for $20,000 more than it was “worth”. It appraised, so my standard of current fair market value is pretty stringent, and not as generous as an appraiser’s standard, even to this day.

    Your blanket statement regarding gain or loss does not include the specific decisions made by each client. Some elect to overpay at time of purchase. The issue is “informed consent”. If and when my client elects to overpay, he knows he is doing that…at the time that he is doing it.

    There are places where my advice does not apply. I don’t work there.

    Yeah, see, this again shows that you don’t know what you’re talking about. There is no liability having to do with looking backwards or on making a current appraisal. The liability is when you make forward-looking predictions (which, incidentally, you are horrible at). Do you see the difference?

    Mutual Fund –
    “In our past ten years our fund returned 10.8% average yield. Past performance is not a guarantee of future results.”

    Ardell –
    “Look at all of these contrived statistics. Therefore, I conclude that housing prices have bottomed and will remain stable or rise from here.”

  108. 108

    RE: Mike S @ 3 – Are you functionally illiterate? I’ve explained that not only does the buyer have to have the right to back out, but they have to have followed the proper procedures to back out. If the seller doesn’t sign the notice timely, they lose. If their agent does something wrong (e.g. faxes the inspection response to the wrong number), then the seller is entitled to the earnest money, and they lose.

    If that occurs, it’s not the listing agent’s decision as to whether to return the money. It’s the seller’s decision. If the seller decides not to, then the buyer can talk to their agent about compensating them for the agent’s mistake.

    What is not proper is for the agent to pressure the escrow to return the money. If that occurs when the buyer is not entitled to their money, then the buyer could arguably be subjected to increased damages beyond their earnest money. And the agent involved could be sanctioned by the Department of Licensing. Neither is a good thing, and simply saying the paperwork doesn’t matter is not going to get you very far.

    Is that clear, or do I have to use smaller words so that you can understand simple concepts?

    But go ahead. If you want an agent that doesn’t know squat and places herself, her broker and you at unnecessary legal risk, hire someone who doesn’t agree with me.

  109. 109
    David Losh says:

    RE: Hugh Dominic @ 106

    When you make broad statements then I would like some definitions of your terms.

    “The legal agreement” Can you quote me the laws?

    “I don’t think that there are any rules about what counts as an inspection” You are probably correct on this one.

    “I certainly would not risk the buyer’s earnest money and a malpractice suit over it.” Again some laws to associate with this assertion would be great.

    I am here to learn.

  110. 110

    RE: ARDELL @ 4 – Ardell. I am also deal-ing with pro-ced-ure. If the agent does not follow pro-ced-ure to can-cel in time, then the buyer loses their earnest money. If the agent send the notice to the wrong place, then the buyer loses.

    There, that is about third grade level English. Can you under-stand, or were some of the words too big for your limited comp-re-hention?

    Seriously, I can’t believe you’re being this pig-headed and not realizing that a buyer can think they are entitled to their money back when they are not. How would you feel if some buyer’s agent convinced an escrow to release your client’s earnest money when they were not entitled to it?

  111. 111

    By David Losh @ 5:

    RE: Kary L. Krismer @ 102

    You’re almost there, it’s a Catch 22, Demco tells us we are not attorneys so we can’t write language into a Purchase, and Sale. Then a single law firm, Demco, who represents one Brokerage in the State of Washington, throws in a bunch of language into a boiler plate form, it’s a form.

    The agreement is between a buyer, and a seller. The agents, the forms, the paper, are to establish a meeting of the minds.

    A buyer goes into inspect and asks the inspector a question, and they think the answer is different than what they were told; the deal can die. There is no more meeting of the minds. There is no more agreement.

    You are almost there, you’re right. The last sentence is wrong. There’s still a meeting of the minds, but the buyer can back out on the inspection assuming they give proper notice (and there are no bad faith issues).

    I think you’re giving Demco way too much credit, however. He may have had a lot of power in the past (it’s before my time), but I don’t think he calls the shots by himself any more.

  112. 112

    By Hugh Dominic @ 6:

    After that, the buyer at least has to submit the appropriate response related to the inspection. I don’t think that there are any rules about what counts as an inspection; meaning, the buyer could inspect the front porch by looking at it, and for no stated reason, fail based on the inspection. He can then refuse the sellers offer of corrective action, if any.

    For practical purposes, that’s just a formality of swapping papers. Ardell may have found that she can take informal shortcuts and the other brokers (etc) just go along with it and skip the paperwork. I certainly would not risk the buyer’s earnest money and a malpractice suit over it.

    I once had a property where the buyer’s inspection was driving family members by. They didn’t even go inside. There was nothing I could do about it because the proper notice was given. BTW, the default is 10 days for an inspection response, but that can be changed.

    As to your second paragraph, if I were the listing agent I would probably just let Ardell’s method pass if the buyer did have the right to back out and exercised it properly. If they didn’t then Ardell would be facing the Department of Licensing, if not worse. And the escrow company would pay my client the earnest money.

  113. 113
    David Losh says:

    RE: Kary L. Krismer @ 8

    “Is that clear, or do I have to use smaller words so that you can understand simple concepts?”

    I guess it’s no surprise that you need to use smaller words with me.

    “the buyer could arguably be subjected to increased damages beyond their earnest money.”

    Prove it.

  114. 114

    By David Losh @ 109:

    RE: Hugh Dominic @ 106

    When you make broad statements then I would like some definitions of your terms.

    “. . .
    “I donâ��t think that there are any rules about what counts as an inspection” You are probably correct on this one.

    “I certainly would not risk the buyerâ��s earnest money and a malpractice suit over it.” Again some laws to associate with this assertion would be great.

    I am here to learn.

    As to your first quoted question, the purchase and sale agreement does not require a licensed inspector. So just about anything passes as an inspection. Bad faith can come into play, however. The best hypothetical I’ve heard is where a neighbor has a friend make an offer on a house, so that they can keep that house off the market for the first week of their own listing. If the seller discovered that, I suspect the seller would be able to retain the earnest money, notwithstanding the inspection contingency.

    As to the second question, there are lots of potential adverse consequences. I’ve mentioned the Department of Licensing, because you’re practically stealing money if the procedure was not correct. Beyond that, the earnest money is a substitute for actual damages, as liquidated damages. If I were a seller I would argue that by taking the earnest money back, the buyer opened the door for actual damages. Thus a $5,000 loss of earnest money could turn into a $30,000 loss for the client if the seller cannot sell for the same price in a declining market. Whether that theory would fly is questionable, but it’s more likely that the agent and her broker would be found in violation of the consumer protection act, and responsible for 3x the amount of the earnest money and attorney fees. Other than that, Ardell’s ignoring the language of the purchase and sale agreement is perfectly fine. ;-)

  115. 115

    By David Losh @ 13:

    “the buyer could arguably be subjected to increased damages beyond their earnest money.”

    Prove it.

    I don’t have a case citation, but as I just mentioned, the earnest money is supposed to be the seller’s liquidated damages. If the buyer wrongfully takes that source of funds, and that remedy, I don’t think it’s a great stretch that some judge in Superior Court would hold that they opened the door to actual damages. My guess is it would fly about half the time.

    Again though, this assumes that the buyer or their agent did something wrong in cancelling based on the inspection.

  116. 116
    David Losh says:

    RE: Kary L. Krismer @ 11

    It’s the precedents.

    A buyer, as Hugh is trying to say, can claim they were told any number of things. The problem with boiler plate forms, and not allowing agents to draft specific language, leaves way toooo much unwritten.

    Sellers make claims all the time. When they are proved to be misstatements many sellers, or some, may refuse to sign paper work that gives up “their” Earnest Money.

    Pressing the issue isn’t in any one’s best interest.

    In addition you would have to prove the damages.

  117. 117
    David Losh says:

    RE: Kary L. Krismer @ 15

    “My guess is it would fly about half the time.”

    Well, you guessed wrong.

  118. 118

    By David Losh @ 117:

    RE: Kary L. Krismer @ 15

    “My guess is it would fly about half the time.”

    Well, you guessed wrong.

    Although you are apparently threatened with suit daily, seemingly you’ve not been in court much. A good theory in Superior Court might only fly about 70% of the time. A bad one 30% of the time. Even some really good judges make bad decisions.

  119. 119

    By David Losh @ 16:

    Pressing the issue isn’t in any one’s best interest.

    In addition you would have to prove the damages.

    I would agree pressing the issue isn’t typically good. I think that part of the reason why the listing agent get’s half the earnest money is that if a deal falls apart they can more easily convince the seller to give it all back!

    If the agent though pressures the escrow to give the money back when the buyer is not entitled to it, it would be much more likely the result would be pressing the issue. This is an instance where an agent pressing the issue in the wrong way is bad for her and her client.

    But you wouldn’t have to prove actual damages. The earnest money is liquidated damages. If there’s not a validly exercised contingency and the buyer doesn’t perform, the seller gets to keep the earnest money even if they later sell the property for 110% of the original purchase price.

  120. 120
    David Losh says:

    RE: Kary L. Krismer @ 18

    This is Real Estate. Washington State is an Agency State.

    Real Estate is a self regulated industry. There is Policy, and Procedure.

    Obviously you don’t get to court much about Real Estate matters. The judges looks at everybody, and asks why they are wasting his, or her time. Why isn’t this settled?

  121. 121
    David Losh says:

    RE: David Losh @ 16RE: Kary L. Krismer @ 19

    The earnest money is liquidated damages. If there’s not a validly exercised contingency and the buyer doesn’t perform, the seller gets to keep the earnest money even if they later sell the property for 110% of the original purchase price.

    “In addition you would have to prove the damages.”

  122. 122
    ARDELL says:

    RE: Kary L. Krismer @ 108

    Kary,

    It’s atrocious that you would call Mike S. “functionally illiterate”. I know it’s Friday…and the Holidays and all that. But I think it’s time to put down the beer bottle and take a chill pill.

  123. 123
    ARDELL says:

    RE: Kary L. Krismer @ 15

    Kary you are confusing people unnecessarily.

    The Inspection Response that ALLOWS the Buyer to Cancel on Inspection and clearly says “The Earnest Money SHALL BE REFUNDED TO THE BUYER, does NOT require anyone to sign it except the BUYERS. No Seller’s Signature Required. That Form has not changed.

    You are spreading misinformation…to what purpose…I haven’t a clue.

  124. 124

    By ARDELL @ 22:

    RE: Kary L. Krismer @ 108

    Kary,

    It’s atrocious that you would call Mike S. “functionally illiterate”. I know it’s Friday…and the Holidays and all that. But I think it’s time to put down the beer bottle and take a chill pill.

    Did you read the post I was responding to? “Functionally illiterate” is nice compared to what he was calling me. And it describes how he was acting, because I’ve clearly spelled out what I’m talking about.

    I’m sorry, but if someone is too limited to understand simple English, I have little patience with them, especially after they insult me.

  125. 125

    By ARDELL @ 23:

    RE: Kary L. Krismer @ 15

    Kary you are confusing people unnecessarily.

    The Inspection Response that ALLOWS the Buyer to Cancel on Inspection and clearly says “The Earnest Money SHALL BE REFUNDED TO THE BUYER, does NOT require anyone to sign it except the BUYERS. No Seller’s Signature Required. That Form has not changed.

    You are spreading misinformation…to what purpose…I haven’t a clue.

    LOL. You don’t have a clue. Talk about stating the painfully obvious.

    In post 100 above I quoted the language which specifically deals with how the earnest money is to be returned. If your simplistic and incorrect analysis were correct, then the buyer could sign Form 35R at any time and get their earnest money back. Clearly just signing Form 35R is not sufficient.

    If your simplistic and incorrect analysis were correct, then Form 21 wouldn’t warn people that the escrow might not even be comfortable with the new 10 day notice provisions.

    But out of curiosity, in your world why did they add that language about the 10 day notice if merely signing Form 35R was sufficient? Did they want to add a bunch of language to the form that would never have any application?

  126. 126

    RE: Kary L. Krismer @ 24 – Also, out of curiosity, Form 21, paragraph k provides:

    Notices to Seller must be signed by at least one Buyer and shall be deemed given only when the notice is received by Seller, by Listing Broker or at the licensed office of Listing Broker.

    In your world is this language also irrelevant, such that all that need to happen is the buyer signing form 35R? If not, how do you propose that you would show the escrow that you complied with this requirement?

  127. 127
    David Losh says:

    RE: Kary L. Krismer @ 126

    And let me quote you here, from the quote that you chose:

    “Notices to Seller must be signed by at least one Buyer and shall be deemed given only when the notice is received by Seller, by Listing Broker or at the licensed office of Listing Broker.”

    Define Notice.

    Let me save you from yourself, because even though what you say might be correct, and Ardell might be wrong, you have to prove it, like in a court of law, that you keep threatening the publc with.

    I’ll also say that I for one would always have the seller sign. I would drive to the listing office, or to the house of the seller, if there is no response. I would fax it, send an e-mail, certified letter, if need be, so that escrow can say they are doing a good job.

    I also prefer to present my own offers to the seller, hand deliver most documents, and sit in escrow a half hour before a signing to make sure the documents are there, and remotely look like what was agreed to.

    I spend a lot of time with title reports.

    We each do what we do, but the fact you refuse to see these simple points is odd.

  128. 128

    By David Losh @ 127:

    Define Notice.

    I’ll also say that I for one would always have the seller sign. I would drive to the listing office, or to the house of the seller, if there is no response. I would fax it, send an e-mail, certified letter, if need be, so that escrow can say they are doing a good job.

    Form 35R is actually an interesting document, because depending on which choice the buyer makes after the inspection, it’s either a notice (requires one buyer’s signature) or an addendum (requires all buyers’ signatures).

    Also, while I would say your practices sound good, it’s not really the agent’s practices at issue here. It’s the escrow’s practices, and what they can and should require.

  129. 129
    David Losh says:

    RE: Kary L. Krismer @ 128

    Like I said it would be so that escrow can say they are doing a good job. It would be for the benefit of the escrow company to have all forms signed.

    They are forms.

    I’ve given you the history why these forms are open to interpretation “in the field.”

    Covering the Brokerage ass, and protect from liability, is what these forms are all about.

    The agent doesn’t go to court, the Brokerage does.

    You can do, and say whatever you want, you do repeatedly. It’s not good, it’s not right.

    Ardell has presented all of the facts concerning these forms, and the function, as her interpretation. She is given that latitude, it’s in the forms. It’s in the language of the forms.

    I don’t get the discussion to this point.

  130. 130

    RE: David Losh @ 29 – The point is to inform consumers reading this site that there are possible adverse consequences to their giving earnest money to a closing agent. Handing over a check for thousands of dollars to a third party is not a transaction free of risk, and having some agent claim that they can just sign something to get their money back doesn’t change that. I quoted the applicable language in post 100 above so that those here who are not agents could read the applicable language. That really should have been the end of it, but unfortunately it wasn’t.

  131. 131

    One of the most appreciated services Washington Realtors provides its members is the “Legal Hotline.” There agents can ask questions and an attorney (Annie Fitzsimmons) will answer it. I just checked and on 11/27/11 someone asked about the return of earnest money after termination pursuant to an inspection contingency. Part of that answer was:

    If the EM [earnest money] is held by an escrow agent, then it will be almost impossible to gain release of the EM without seller’s signature. Escrow companies do not, typically, allow themselves to be placed in the middle of a dispute between buyer and seller and if seller will not sign a document agreeing to release of the EM to buyer, then escrow typically concludes that seller harbors some claim against buyer for the EM. Accordingly, escrow companies typically require a writing, signed by both buyer and seller, before releasing EM.

    The answer then mentions the new ten day rule and also addresses a question I’d always had about what happens with the selling brokerage is holding the funds? There the broker would presumably have all the information necessary to make a decision, but what if the seller contacts them and says not to disburse?

  132. 132
    David Losh says:

    RE: Kary L. Krismer @ 130

    I’ve read some of the stuff you write, but you are wrong most of the time.

    The consumer could believe you, which isn’t a benefit to them.

    This is the Web 2.0. This is what the Real Estate sales business has become. It’s all about sales. The consumer has lost hundreds of thousands of dollars by making believe that all of these assertions, charts, graphs, and legal wranglings are giving them some insight into the, now, multi Trillion dollar industry of Real Estate.

    The consumer is the little guy who is sending hard earned dollars up the internet pipe line like an ETrade account. I couldn’t resist that one, because it shows how absurd the internet Real Estate sales business is.

    When I work I take my profession very seriously. I only take three clients at a time in my pipeline because that is all I can personally handle. Of course for $300 I can have a virtual assistant do everything the way redfin does, but I’m a micro manager.

    I am a pit bull. My client, and the interests of my client are all that matter. Those three clients have my full attention until after closing.

    Maybe you missed my comment about that I used to have a policy that if you were unsatisfied with your purchase using me as your agent I would buy it back at what you paid for it. I got back one that we resold for a $40K profit.

    I’m an idiot who has more useless knowledge about Real Estate than any one needs.

    You’re just wrong on this issue, and many, many others. You are not Real Estate people. You’re one of the new guys who wants to tell me the way things should be. Well, they aren’t that way. You gotta play the ball where it lies.

    Now you have asked, and I did some calculations about why I’m here, on this blog. I get paid. I figure about $15 per hour on average. When I first started it was a higher dollar amount, now it’s much, much less.

    I can tell the bubble heads when I go to bid a job. For the low, low price of $30 per hour per person for a team of three or four you get me to come to your home so it can be prepared for sale.

    This is the internet. The internet is a part of my business model.

  133. 133
    David Losh says:

    RE: Kary L. Krismer @ 31

    Hilarious, you should be an attorney.

  134. 134

    RE: David Losh @ 133 – Actually, real estate agents should quit pretending that they are attorneys, because they’re not qualified (and it’s illegal).

    BTW, I found another topic on the legal hotline, from 11/1/11 for those of you who are members of WR. There the fact pattern was very similar to one which Ardell argued with both myself and Craig Blackmon. In addition to asking for some repairs, the buyer also attempted to renegotiate the terms, including non-monetary terms. The question was whether the buyer could still get their money back, based on the inspection. The answer was “probably,” but that is was not clear how a judge would decide and that an agent should advise the seller to get legal council if they want to retain the earnest money. Yet another example of how the ability to back out on the inspection might not be as absolute as what some agents claim.

  135. 135
    David Losh says:

    RE: Kary L. Krismer @ 134

    I’m going to say it again. Washington is an Agency State.

    Yes, I have an attorney I work with, actually a couple.

    What the consumer needs to know is that and agent “in the field” can make a lot of decisions, and they need an agent who will make the correct decisions.

    Having a guy looking for the “legal” pit falls, in an Agency State, is detrimental to the clients best interest.

    Everything you do is a legal pit fall. You, in particular you, create more legal pit falls than is good for your client. In your case you should refer every client to an attorney.

    I was horrified when I first read Ardell’s posts. I used to argue with her all the time. Then I met the Web 2.0 crowd and realized Ardell is one of the very few who was, or is, a working Real Estate agent. Ardell puts out much, much more good, and useful Real Estate information than most all site bloggers combined.

    You don’t get that because Real Estate isn’t in your thinking. You don’t get it. There’s nothing wrong with that, but you don’t get it.

  136. 136
    ARDELL says:

    RE: David Losh @ 135

    Thank you, David.

  137. 137
    ARDELL says:

    RE: Kary L. Krismer @ 30

    Kary…the language you quoted in your comment 100 said that a Closing Agent “may” not give the buyer their money back, and was not specifically referring to cancelling “on inspection”.

    The point of your comment is very important, I agree. But the point is to choose an escrow company who will follow the terms of the contract, and not hold the buyer’s Earnest Money for longer (or shorter) than the actual contract dictates. There is a huge difference in how that language applies if the Buyer is validly cancelling on Inspection or Resale Certificate, than if they are cancelling based on the Finance Contingency, as example. On Inspection or Resale Certificate, the issue is unilateral on the buyer’s side. On Finance Contingency I would venture to say that 10 days is not nearly long enough, and should always require the seller’s signature. So your pulling language out of context to the issue, cancelling on inspection, clouds the issue more than it clarifies, and does more harm than good for readers.

    You say I “bully” escrow…I call that choosing your closing agent wisely, as all buyers and sellers should, and in a manner that is in the best interest of your clients. That actually can vary from one client to the next and one house to the next. I don’t use the same Closing Agent (or mortgage person) for all clients. Every selection is custom to the client and house at hand.

    Have I ever “bullied” an escrow into complying with the terms of the contract between the buyer and seller? Yes…once. But that was a long time ago and the first time I saw an Escrow Company put their best interest ahead of the contract terms. I never had to do it again…there’s always a first time and a lesson learned. It was also the last time a “had to” do that and it was at least 4 or 5 years ago. I now make sure I know when an escrow company is not using the contract as the basis for their actions, and instead supersedes the contract terms based on their own internal self protection policies.

    As to your question as to why the 10 day language was added, clearly that was to pull in the reins on Escrow Companies who were defying the contract terms for their own reasons, and to restrict their ability to no more than 10 days of holding up the buyer’s money for their own self-interest reasons. That does not mean that 10 days is optimal…only that 10 days is the limit to how long they can choose to act in a manner that is contrary to the terms of the contract between the buyer and seller.

    As I said earlier, 10 days is too long for cancelling “on inspection” or cancelling “based on the Resale Certificate”. But it is not nearly long enough for “cancelling based on the Finance Contingency”, in my opinion.

    Sticking to the topic at hand…cancelling on the inspection…the contract does NOT REQUIRE that the seller agree with the buyer’s decision. Consequently the escrow holder should not impose a stricter criteria.

    My $.02.

  138. 138
    David Losh says:

    And I will add that each agent has an escrow company they work with. A listing agent can choose an escrow that will hold Earnest Money until their client says so. Many times the seller doesn’t want to return the Earnest Money which is why the language is deliberately vague.

    Most listing agreement do try to direct Title, and Escrow which I have found to be a complete waste of every one’s time. The Title I understand. You need to pull a complete Title package at the time you list a property. I think that should be paid up front, by the seller, then bought at closing.

    Escrow I think should be a neutral third party, and not tied to Title.

    Also, some escrow companies are inexperienced, or working for just one client. Some escrow companies are under staffed, or are cheaper than others. Of course escrow companies never give kick backs, but Title and Escrow together can offer a discount.

    Escrow is another mine field, just like choosing an agent. Your agent should be able to navigate both Title, and Escrow.

  139. 139

    RE: ARDELL @ 137
    Enough already. It doesn’t matter who’s right or wrong here. We just don’t need to keep reading this Hatfield and McCoy feud, it gets old.
    In practical terms, when you agree to buy a house, the agreement will call for a certain number of days for the inspection period. It will be in your best interest to schedule and complete that inspection sooner rather than later, and to communicate with the listing agent your intentions as soon as you know, using the proper forms, within the time limits, crossing your t’s and dotting your i’s. If you’ve done everything properly and decide to back out of the deal based on the inspection, your earnest money will be returned to you. Or can we talk about this for another couple of hundred posts?

  140. 140
    ARDELL says:

    RE: Ira Sacharoff @ 139

    Ira …the question is…following everything you said and assuming everything was done timely and in accordance with the process you outlined…does the buyer need the seller’s PERMISSION and signature in order to get his Earnest Money Returned?

    I say no. Kary says yes.

    It is not a minor issue and it appears you have missed “the point”. If the Seller does not WANT the buyer to Cancel on Inspection…can the seller hold up the return of the buyer’s Earnest Money?

    I say no. kary says yes.

    Weigh in, Ira.

  141. 141

    By ARDELL @ 40:

    RE: Ira Sacharoff @ 139

    Ira …the question is…following everything you said and assuming everything was done timely and in accordance with the process you outlined…does the buyer need the seller’s PERMISSION and signature in order to get his Earnest Money Returned?

    I say no. Kary says yes.

    It is not a minor issue and it appears you have missed “the point”. If the Seller does not WANT the buyer to Cancel on Inspection…can the seller hold up the return of the buyer’s Earnest Money?

    I say no. kary says yes.

    Weigh in, Ira.

    In my always humble opinion, if , following everything I said, and assuming everything was done timely and in accordance with the procedures I outlined, the buyer does not need the seller’s permission and signature to get their earnest money returned.

    I have had clients cancel due to inspection, and had the earnest money promptly returned from the escrow company who was holding the earnest money.
    But I’m no lawyer, and no escrow agent. Have we had escrow people weigh in on this one?

  142. 142
    MichaelB says:

    By ARDELL @ 122:

    RE: Kary L. Krismer @ 108

    Kary,

    It’s atrocious that you would call Mike S. “functionally illiterate”. I know it’s Friday…and the Holidays and all that. But I think it’s time to put down the beer bottle and take a chill pill.

    Kary is “Disfunctionally Literate”

  143. 143

    Reading all these posts and watching you all Slam each other I find as intriguing as this guy: http://www.youtube.com/watch?v=8jgGK4NJ8Hk&feature=related

  144. 144

    By ARDELL @ 37:

    As to your question as to why the 10 day language was added, clearly that was to pull in the reins on Escrow Companies who were defying the contract terms for their own reasons, and to restrict their ability to no more than 10 days of holding up the buyer’s money for their own self-interest reasons. That does not mean that 10 days is optimal…only that 10 days is the limit to how long they can choose to act in a manner that is contrary to the terms of the contract between the buyer and seller.

    As I said earlier, 10 days is too long for cancelling “on inspection” or cancelling “based on the Resale Certificate”. But it is not nearly long enough for “cancelling based on the Finance Contingency”, in my opinion.

    Sticking to the topic at hand…cancelling on the inspection…the contract does NOT REQUIRE that the seller agree with the buyer’s decision. Consequently the escrow holder should not impose a stricter criteria.

    My $.02.

    The reason for the 10 day rule is to provide a faster, cheaper alternative to an interpleader.

    The escrow is not a party to the contract, so they are not defying the contract terms by refusing to pay the money out. They are simply covering their own backside by making sure that both sides agree as to the disposition of what is likely thousands of dollars. They are charged with holding the money for the interests of both sides of the contract, and they are typically going to want to make sure both sides agree. They are not some sort of arbitrator, where they would review the contract and make their own decision.

    BTW, regardless of what any contract says, they are not going to give the money back until they are 100% certain that the check has actually cleared. That’s true even though the check deposited was likely a cashier’s check.

    You’re right that the seller does not have to agree with the seller’s decision to cancel based on inspection. That does not mean though that when the seller makes that decision that they had the right to do it, or that they did it properly. The form is not like some computer program where the choice to cancel is grayed out if it’s too late. I could fill out a form today on a closed sale that purports to cancel a contract based on the inspection. It would have no effect.

  145. 145

    RE: Ira Sacharoff @ 41 – As I think I mentioned above, I once had a client back out based on what they considered a serious structural issue discovered during the inspection (something I pointed out to the inspector). The seller was very upset and at first was not cooperative. Eventually their agent straightened them out, but I didn’t complain to the escrow when they were wanting the seller’s signature to return the money.

    There’s a difference between having the right to something and having it actually happen. If the seller doesn’t sign, they are in breach. If the escrow doesn’t use the 10 day process, they will start an interpleader action, and the matter will be decided by a court.

    Let’s use an analogy. Let’s say your debit card is mis-used and $5,000 is sucked out of your bank account. You have the right to get that money put back into your account. But until the bank agrees, the money is not there. If they don’t agree to put the money back, you cannot go into the bank with a gun and demand your $5,000. Your remedy is to go to court or possibly complain to some government entity.

  146. 146

    By Ira Sacharoff @ 39:

    RE: ARDELL @ 137
    Enough already. It doesn’t matter who’s right or wrong here.

    BTW, I would argue that it is critically important that a client understand the risks they are taking in making an earnest money deposit. If the agent has the money to loan at 0% interest to the client while the dispute is resolved, and their lender doesn’t care about the source of funds for a future transaction, then maybe it doesn’t matter.

  147. 147

    “There’s a difference between having the right to something and having it actually happen.”
    Let me get this straight. You are suggesting that a termination of contract due to inspection, with earnest money deposited at an escrow company, requires a seller’s signature.
    And that even though the seller is supposed to sign, it can result in a long delay and possible involvement of the courts if the seller doesn’t sign?

    Supposing that is true, what I’d like to know is: Of all the contracts with earnest money deposited at escrow, what ratio of contracts canceled due to inspection result in either the seller not signing or long delays in earnest money being returned?
    If it’s 1 in 50,000, I’ll maintain that it’s a risk people might want to be aware of, but that it’s a tiny, tiny, risk and that a mountain is being made of a mole hill, and not worth hundreds of vitriolic angry posts.
    Which is why I’d like to hear more from escrow people about this. We know that lawyers and real estate agents can’t be trusted.

  148. 148

    RE: Ira Sacharoff @ 147 – I have no idea how often it happens. As I mentioned, I’ve only had the issue come up once, and there the seller did eventually concede. Still later they called and offered to pay for an engineering study and lower the price.

    But it apparently the seller not signing happens enough that they recently added the ten day procedure to avoid that result. The changes to the forms are made in response to things happening.

    Also realize that this is a transaction the escrow will not make any money off of. How much risk do you think they are willing to take in return for $0.00?

  149. 149
    David Losh says:

    RE: Kary L. Krismer @ 146RE: Kary L. Krismer @ 145RE: Kary L. Krismer @ 144

    Your response is the problem. This is Real Estate.

    You are throwing a bunch of stuff in here that has no place in the discussion.

    If we are here to inform the consumer they would need to know there are actually policies, and procedures in place that circumvent every point you are trying to make.

    Even that was a lot to say, to address a completely meaningless set of comments.

    This is the Real Estate business. We are not attorneys. I have pointed out repeatedly to Craig that being an attorney, and being a Real Estate agent is a bad combibation for his clients.

    You did a good thing by pointing out to Ray the Heritage House case, but here you are way off base.

    Another red herring you threw into the mix on another thread is about REO comments requesting excise tax being paid. It’s an REO, they can ask for anything they want. It’s called the cost of doing business.

    You are either a Real Estate agent, or an attorney, make a choice then get on board whichever train you choose.

  150. 150

    RE: Ira Sacharoff @ 147 – Try searching this site, the bottom search, for King County, and the name First American.

    http://dw.courts.wa.gov/index.cfm?fa=home.superiorSearch&terms=accept&flashform=0

    I limited my search to 2010 and later and found several that were seemingly interpleader actions, either because they mentioned the word interpleader or because they ended with an order to disburse funds. (Only look at the ones where they are plaintiff and the cause is listed as miscellaneous).

    I only looked at about 4 and didn’t see any that were actually contested. That’s probably because although the seller was willing to go as far as not signing a release, they were not willing to actually pay an attorney a retainer to fight a matter that the attorney said they would probably lose.

  151. 151

    By David Losh @ 49:

    Your response is the problem. This is Real Estate.

    You are throwing a bunch of stuff in here that has no place in the discussion.

    If we are here to inform the consumer they would need to know there are actually policies, and procedures in place that circumvent every point you are trying to make.

    I’ll agree that the listing agent would typically tell the seller they should sign the release. In doing so, however, they are probably going too far giving legal advice, and at a minimum they should also advise the client of their right to seek legal advise prior to signing.

    As to the procedures, those are the 10 days process and the filing of an interpleader action, both of which I’ve discussed. What other procedures do you think there are?

    Also, if this does turn into a dispute, do you think the judge will be an attorney or a real estate person? Saying “this is real estate” won’t get you too far in court.

  152. 152
    David Losh says:

    RE: Ira Sacharoff @ 47

    When the Real Estate market is going up, it’s not that big of a deal. In today’s market it’s more important.

    Some buyers will bail on a transaction when a better one comes on line. They need that earnest money that is already in play in a matter of a couple of days. Some sellers want to try to keep a buyer in the deal by holding the earnest money. That’s just broad strokes, but it happens.

    We are Real Estate agents and we have nothing really to say about anything. The Brokerages are the ones who would Arbitrate the way the earnest money is handled.

    Most escrow companies want to continue to do business. They want to play along, they want to do what’s best. Brokerages want to do business seamlessly with most escrow companies.

    That’s the deal, we all try to do what’s best.

    The entire idea that attorneys will be involved, or some body is going to court is always a possibility. It’s rare in residential Real Estate that any one is going to court.

    We keep the threat of court out there to make a consumer aware that they are involved in a serious business, but the reality is the Brokerages will keep the wheels greased, and get on to the next deal some one “wants” to do.

  153. 153

    By David Losh @ 152:

    The entire idea that attorneys will be involved, or some body is going to court is always a possibility. It’s rare in residential Real Estate that any one is going to court. .

    I would agree with that for a number of reasons. First, as you’ve mentioned, the forms are designed to prevent lawsuits. Second, in most real estate transactions both sides want the same thing–a closed transaction. Third, in many real estate transactions neither party has a lot of funds they want to devote to litigation, and most attorneys will not take a case without a sizable retainer.

    If those three things were not true, then the cost of malpractice insurance for real estate agents would be much higher.

  154. 154
    David Losh says:

    RE: Kary L. Krismer @ 51

    It’s not going to court. It will be arbitrated according to the policies, and procedures of the Brokerages, NWMLS, or NAR.

  155. 155
    ARDELL says:

    RE: Kary L. Krismer @ 150

    How many of those few Interpleader Actions you could drum up were about cancelling ON INSPECTION?

  156. 156

    RE: David Losh @ 54 – There’s nothing that provides that sellers have to go through arbitration. You’re thinking of disputes between agents.

  157. 157

    RE: ARDELL @ 55 – I didn’t look at the underlying paperwork because that costs money. Electronic filing save courts a lot of money, but they still charge to look at the pleadings.

    But it really doesn’t matter. If a seller is an unreasonable person, an interpleader is what will typically happen. Are sellers who lose out on inspection more likely to be unreasonable than sellers who lose out on financing? That’s anyone’s guess. Some might think they win because 30 days has past.

    The risk here is the escrow being sued by the party that does not get the money. If the person that does not get the money demonstrates themselves to be an unreasonable jerk, the chance of a lawsuit is increased dramatically.

  158. 158
    David Losh says:

    RE: Kary L. Krismer @ 156

    No Kary, this has to do with a self regulated industry that pays Errors, and Omissions Insurance.

    The agent has nothing to do with the dispute it is between Brokerages. Agents don’t go to court, the Brokerage does. That’s why there is arbitration, but the fact is that Earnest Money disputes would probably be “worked out” long before that.

  159. 159
    David Losh says:

    RE: Kary L. Krismer @ 57

    Oh my God in heaven protect us from attorneys.

    This is why we have the “new” 10 day rule?

  160. 160

    RE: David Losh @ 158 – I don’t see the brokerage even being a necessary party to such a lawsuit. It would be the seller as plaintiff and the escrow agent as defendant. I don’t even think the buyer would be a necessary party.

    Back in my law days we had a tenant who had their place of business burn down. The insurer paid the landlord on the tenant’s real estate coverage portion of the insurance, wrongly claiming a tenant has no insurable interest in real estate. We sued the insurer. The landlord was not a party, even though the landlord got our client’s money. When we won summary judgment for the amount of the policy, the insurer’s attorney asked the judge why they weren’t getting a credit for the amount paid the landlord. The judge responded: “You paid the wrong party!” The same thing would happen here to an escrow that paid the wrong party. They would be sued and they would end up with a judgment against them for the amount of the earnest money.

  161. 161
    ARDELL says:

    RE: Kary L. Krismer @ 157

    haha…that is too funny. Let’s call it NONE then…because…the seller’s permission is not required for the buyer to get their Earnest Money returned. It is not part of the contract between the buyer and the seller for the seller to agree with the buyer’s decision to Cancel on Inspection.

    What a hoot.

  162. 162

    RE: ARDELL @ 161 – You’re never think you’re wrong because you don’t listen and then merely declare yourself the winner.

    It’s become clearly apparent that you don’t even know what an escrow is! That’s the hoot! A real estate agent that doesn’t even know the role of one of the major parties to a transaction. And demonstrates that publicly!

    You are right though that it’s not part of the purchase and sale contract that the seller has to agree. I’ve never said it was. That would be a stupid provision, because then the right to the earnest money would be left up in the air. Also, as I’ve noted, the escrow isn’t even a party to the purchase and sale agreement. The escrow is not bound by the purchase and sale agreement, and possibly they are not even protected by it. That’s why there’s concern that some escrows might not use the 10 day process in lieu of interpleader.

    You really need to quit expressing your opinions on legal matters, because you’re even worse at that than at predicting future real estate prices. I’ve never seen anyone with so great of an ability to not understand and get things completely backwards.

  163. 163
    RT says:

    You all should be embarrassed, you are completely off topic and provide nothing of value. I am a buyer that uses this site to evaluate the market and I really enjoy the format Tim has provided. When I find a home to but I would never call any of the realtors on that post on this site (except for maybe Ira). What do you think the potential buyers that read this blog think of your ridiculous rants? Please, go work with your clients. Stop spending 10 hours a day posting your repetitive views, once is enough!

  164. 164

    By David Losh @ 59:

    RE: Kary L. Krismer @ 57

    Oh my God in heaven protect us from attorneys.

    This is why we have the “new” 10 day rule?

    As I think we’ve both said, the standard forms are designed to prevent lawsuits. You can think of the new 10 day process as being yet another way that they do that.

    Just because I said that a brokerage wasn’t a necessary party, it doesn’t mean they couldn’t become a party.

  165. 165
    David Losh says:

    RE: Kary L. Krismer @ 162

    “That’s why there’s concern that some escrows might not use the 10 day process in lieu of interpleader.”

    You don’t have a source for that.

    What bothers me is that you are interjecting wild sets of circumstances for reasons I don’t understand. If a consumer were to buy into your way of thinking it would be my opinion your brokerage could be sued.

    You are showing a callous disreagard for agency, or care in the service to a consumer by these absurd assertions that court action would be even a remote possibility.

  166. 166
    David Losh says:

    RE: Kary L. Krismer @ 64

    The Brokerages are the parties.

    The escrow is a third party.

    The agent took the check, delivered the funds. The Brokerage chose the escrow unless the buyer, or seller, in fact showed a prior history of a relationship with the escrow company.

    Washington is an Agency State. You have more than enough documentation at the point of wrangling over Earnest Money to establish that an Agency releationship exists.

    I mean, if you want to be technical about the inner workings of the Real Estate industry, in the State of Washington, let’s be correct.

  167. 167
    David Losh says:

    RE: RT @ 163

    You should read the comments, get with an agent, and stop wasting your time on line.

  168. 168
    RT says:

    RE: David Losh @ 167 – That is exactly what I would expect from an agent. Please, take your own advice get off the Internet. Go work with clients……….wait……..if you had any you wouldn’t be here……………….I am done.

  169. 169
    David Losh says:

    RE: RT @ 168

    You’re done because you aren’t following. I can recommend many agents to you, but you are correct, you won’t find them on line.

  170. 170

    By RT @ 168:

    RE: David Losh @ 167 – That is exactly what I would expect from an agent. Please, take your own advice get off the Internet. Go work with clients……….wait……..if you had any you wouldn’t be here……………….I am done.

    The thread is supposed to be about the November reporting roundup, and has devolved into a very old Kary/Ardell argument about the return of earnest money after a buyer decides to cancel the deal following the inspection. Maybe it is an important item to discuss, but I think for the vast majority of people who read this blog, they wish it would have stopped 100 posts ago.
    It doesn’t make real estate agents or lawyers look like helpful, informative folks. It makes them look argumentative and stubborn.

  171. 171

    RE: Ira Sacharoff @ 170

    There is only one way this issue can EVER be resolved………..

    Kary and Ardell must have sex while David watches.

    There is simply no other way!!

  172. 172
    Scotsman says:

    RE: raymond pepper @ 171

    They could never agree on a position.

  173. 173
    David Losh says:

    RE: Ira Sacharoff @ 170

    Actually there is a lot of information in this thread.

    If some one were inclined they would get a much better insight to what the Real Estate industry is like in the State of Washington.

    This is a classic example of an attorney, and a Real Estate agent approaching the same problem.

  174. 174

    By David Losh @ 65:

    What bothers me is that you are interjecting wild sets of circumstances for reasons I don’t understand. If a consumer were to buy into your way of thinking it would be my opinion your brokerage could be sued.

    You are showing a callous disreagard for agency, or care in the service to a consumer by these absurd assertions that court action would be even a remote possibility.

    I’m not sure why you think I’m throwing a wild set of circumstances out there. How wild is it that an agent faxes something to the wrong number, or a day too late? With the new email transmission some agents use, the chance of problems is greatly magnified.

    But to be clear, I was saying I didn’t think the brokerage would be a necessary party. The might be joined at the option of the plaintiff, but I don’t think their not doing so would make the suit defective.

    And I really disagree with your last paragraph. What is doing a disservice is an agent claiming that a buyer can pay in an earnest money and get it back quickly if they back out based on inspection. It’s better to warn consumers what might happen, while disclosing that such things are extremely rare, than to falsely claim that nothing bad will happen.

  175. 175

    By David Losh @ 66:

    RE: Kary L. Krismer @ 64

    The Brokerages are the parties.

    The escrow is a third party.

    The buyer and seller are the parties. The brokerages and escrow are both third parties.

    The buyer pays in their earnest money. The seller is relying on that earnest money deposit. If the escrow starts an interpleader, they will name the buyer and seller, and probably the listing brokerage. If the buyer was told by their agent that they would get their earnest money back without issue the buyer will likely name their brokerage as a third party defendant.

  176. 176

    By RT @ 63:

    You all should be embarrassed, you are completely off topic and provide nothing of value. I am a buyer that uses this site to evaluate the market and I really enjoy the format Tim has provided. When I find a home to but I would never call any of the realtors on that post on this site (except for maybe Ira). What do you think the potential buyers that read this blog think of your ridiculous rants? Please, go work with your clients. Stop spending 10 hours a day posting your repetitive views, once is enough!

    I’m sorry if you don’t find this interesting, but I can understand why you wouldn’t want to follow this thread after post 100 which sets forth the language which clearly controls.

    That said, I would think a consumer reading this site would want to know what risks they face in purchasing real estate. This isn’t a site for topics such as the best color for granite countertops.

  177. 177
    David Losh says:

    RE: Kary L. Krismer @ 175RE: Kary L. Krismer @ 174

    Washington is an agency State. The buyer, or seller doesn’t have control at this point. They turned everything over to the agents.

    Before anything gets interpleaded it will be settled between Brokerages, or escrow for that matter.

    You are talking about one in a million cases where a seller can prove they were damaged by a frivolous offer. Isn’t that it? Wouldn’t the offer itself have to be proved to be intentionally damaging?

    Ardell’s right, she can walk into escrow and demand the funds be returned to the buyer. In today’s market especially if that buyer misses an opportunity they may be the ones who can prove they were damaged.

    It just goes on, and on. There is a thousand what ifs, but the bottom line is that most people would move on.

  178. 178

    By David Losh @ 177:

    <Washington is an agency State. The buyer, or seller doesn't have control at this point. They turned everything over to the agents.

    That’s not how agency works. Agents work at the direction of their clients, not the other way around. The clients are always in control, subject to ethical and legal limits (e.g. the client cannot tell their agent to kill the seller). That’s why they’re called agents and not guardians or trustees. Those type of entities control transactions, but agents do not.

    Somewhat related, I mentioned above that Ardell doesn’t even know what an escrow is. They are not given any authority over either the buyer or the seller, unless that authority is somehow granted in the joint escrow instructions. And as I mentioned early on, those instructions are not likely even signed at the time an inspection response is given. Assuming they had been, about the only authority that comes to mind, other than the right to close the transaction when conditions are right, would be the right to start an interpleader action, and withhold their costs from the earnest money if they do so.

    Putting those two things into the context of what we’re discussing, here’s how things work. Buyer backs out based on inspection. It’s the seller’s right to review the facts and make a decision about the effect of what the buyer did. The seller never signed anything giving the buyer the right to make that decision for them. The seller never signed anything giving their agent the right to make that decision for them. Finally, the seller never signed anything giving the escrow the right to make that decision for them (the possible exception being the new 10 day process).

    Hopefully the buyer had the right to back out and the seller will recognize that. But things don’t always work out that way. When that happens, the entity deciding who gets the funds will be the court in an interpleader action. If the escrow does make that decision, they do so risking being sued, and if they are sued, not only might they have to pay out the money they paid to the wrong party, but they’ll also may have to pay their attorney fees even if they win. Rather obviously, they’d like to avoid that result.

  179. 179
    David Losh says:

    RE: Kary L. Krismer @ 178

    OK, that’s funny, but you are missing the point that Ardell is an agent of her Brokerage.

    The people who get sued are the Brokerages. The Brokerages have the deeper pockets, and are held to the higher standards than the buyer, and seller.

    Escrow is a third nuetral party. Now escrow could for sure be sued by the seller. That’s why you have the 10 day rule, I would suspect.

    As I said, I personally would always want both buyer, and seller to sign off on the disposition of the Earnest Money.

    Reality is that all Brokerages, and escrows want to get along. They have more to do than this one transaction.

  180. 180

    By David Losh @ 179:

    RE: Kary L. Krismer @ 178

    OK, that’s funny, but you are missing the point that Ardell is an agent of her Brokerage.

    The people who get sued are the Brokerages. The Brokerages have the deeper pockets, .

    That’s correct. Likely both the agent and her broker would be sued if either is brought into a lawsuit. If you want to get down to it, the real party in interest at that point is probably the broker’s insurer. ;-)

  181. 181
    interested says:

    Okay not to start this up again, but if a house doesn’t pass inspection — and the seller has to sign off on the buyer getting their earnest money back — what is the incentive for the seller to do so? I mean as a seller it sounds like what Kary is saying they could keep the money — and even use it to make the repairs that the buyer found during the inspection the buyer paid for — something doesn’t make sense there.

  182. 182

    RE: interested @ 181 – They don’t get to keep the money without consequence. In fact, they don’t even have the money–the escrow does. But if you read the language of the contract I quoted in post 100, it says:

    If either party fails to authorize the release of the Earnest Money to the other party when required to do so under this Agreement, that party shall be in breach of this Agreement.

    One of the consequences of being in breach is that there is an attorney fee provision in the purchase and sale agreement. While recovery of attorney fees is never ironclad, a court is much more likely to award them when there is a contractual basis for doing so (a situation which probably doesn’t exist if the escrow is sued).

    Keep in mind most people are reasonable. They will sign the release if the proper notice was given within the time frame. But not everyone is reasonable.

  183. 183

    By Kary L. Krismer @ 176:

    By RT @ 63:

    You all should be embarrassed, you are completely off topic and provide nothing of value. I am a buyer that uses this site to evaluate the market and I really enjoy the format Tim has provided. When I find a home to but I would never call any of the realtors on that post on this site (except for maybe Ira). What do you think the potential buyers that read this blog think of your ridiculous rants? Please, go work with your clients. Stop spending 10 hours a day posting your repetitive views, once is enough!

    I’m sorry if you don’t find this interesting, but I can understand why you wouldn’t want to follow this thread after post 100 which sets forth the language which clearly controls.

    That said, I would think a consumer reading this site would want to know what risks they face in purchasing real estate. This isn’t a site for topics such as the best color for granite countertops.

    Nobody has even been here, as far as I know, asking about suggestions for what color granite they should get for their countertops. This site is not simply in existence for real estate professionals to bicker at each other, it feels rather exclusionary. There’s a big gap between being on here to get credible information and wondering about which color countertops. But to wade through 150+ posts in which agents and lawyers are calling each other idiots and illiterate and stupid? It detracts from the subject, which is in the wrong thread anyway.
    I do realize that an online persona and how one is in real life can be completely different. I like to think that I’m the same, but how would I know?
    I’ve met Ray, and David, and Ardell in person, and they’re all much saner seeming, perfectly nice folks, in person, and I’m reasonably certain that Kary would be as well.

  184. 184
    David Losh says:

    RE: Kary L. Krismer @ 180

    Absolutely, and that’s what we pay Errors, and Omissions Insurance for.

    And believe me,as has been pointed out to me several times, it’s the Brokerage that gets sued. They have the deeper pockets.

  185. 185
    ARDELL says:

    RE: interested @ 181

    That is why it is VERY important that you make sure your professionals, agents and escrow both, are on the same page with you as to your RIGHT as a homebuyer to Cancel on Inspection, without your needing the seller to agree with your decision to cancel.

    The Purchase and Sale Agreement does NOT require the Seller’s signature when you Cancel on Inspection and CLEARLY states that the Earnest Money is to be returned to you, the buyer, without the need for a seller to sign that cancel form (called a 35R).

    There is a movement to negate…or at least dilute, the buyer’s right to Cancel on Inspection. I am fiercely opposed to that, as you can tell. My feeling is once you ASK the seller to sign to release the Earnest Money, you are giving the seller the impression that the seller has the right to disagree with the buyer’s election to Cancel on Inspection, which is not the case. It sends the wrong message to the seller of the home, and puts the buyer’s Earnest Money at risk to even suggest to the seller that the buyer may not be able to Cancel on Inspection without the seller’s express consent.

    No small matter to me, as it is one of the few rights a Buyer has gained over the last 20 years since Buyer Agency, and seeing it “pulled back”, in whole or in part, is huge to me.

    I’m sorry if that offends someone…or many someones. But “Seller Rules” has been prevalent for 100 years in real estate transactions, and small gains for Homebuyer’s Rights need to be guarded and retained. Rights disappear in the quiet backrooms while no one is looking. I am looking and I am vocal, and have been as to more rights for Homebuyers since 1996.

    This is not about Kary…this is about all of the Kary’s who seek to quietly steal the rights of homebuyers by trying to add superseding policy decisions that are contrary to the contract between the buyer and the seller. This is HUGE as most every major escrow company is doing this, and someone has to Just Say NO. Kary calls that my “bullying” escrow and for some reason greatly upsets him. I call it fighting for the rights of all homebuyers generally, and my clients specifically.

    As to your specific question, Home Inspections are not “Pass/Fail”. Every homebuyer has a different take on what they feel is important. One buyer may need to cancel on X defect and another not. That is why it is important that the reason to cancel not be carved in stone as to why, nor should the seller be the one who can dictate to the buyer what he can and cannot cancel about as to the inspection result.

    Kary and I have had some huge knock down drag out fights over issues like whether the buyer can cancel if the roof needs to be replaced SOON, but is not currently leaking or defective. If the buyer does not have an extra $10,000 to $15,000 laying around to put on a new roof in a year or two, it doesn’t matter if the roof is leaking or not right now on the day of inspection. THAT buyer will likely need to Cancel on Inspection, or work out a way to get a new roof sooner rather than later, inside the transactions vs after closing. Another buyer may say, no problem. I’m going to put on a new roof anyway, and I have the money to do that.

    That is why there cannot be a seller side to this story. The resources of all homebuyers is not the same the day after closing. The roof condition may be the same..but each buyer’s ability to deal with that is NOT the same.

  186. 186
    ARDELL says:

    For those who think this issue is “off topic”…consider this. MOST “distressed properties” (topic of this post is “Distressed Edition”) are “AS-IS” sales. It is often MORE difficult for a buyer of a distressed property to get the Seller to fix anything as a result of the Home Inspection. It is also more difficult to get a Bank Owner to sign…well just about anything and quickly.

    Consequently the right of a buyer to Cancel on Inspection, without the express consent of the seller, is often MORE important when buying a “distressed” property…which is the topic of this blog post.

  187. 187

    By ARDELL @ 185:

    RE: interested @ 181

    That is why it is VERY important that you make sure your professionals, agents and escrow both, are on the same page with you as to your RIGHT as a homebuyer to Cancel on Inspection, without your needing the seller to agree with your decision to cancel.

    Finding an agent that will blow smoke up your butt (tell you what you want to hear), is not the solution.

    Finding an agent who thinks she knows what she doesn’t know, and thinks she can do what an attorney does, is not the solution.

    Beyond that, as you know from our past discussions, this is not even an area that it is legal for you to discuss with your client, except in the context of advising them to get legal advice. It’s the unauthorized practice of law.

    Issue 1. May the inquirer [a real estate agent who happens to have previously been an attorney in California] explain the meaning of provisions in a standardized real
    estate contract to his real estate clients?

    Response. No. To “explain the meaning” of contract terms would constitute
    “giving advice or counsel to others as to their legal rights or the legal rights or
    responsibilities of others for fees or other consideration.” GR 24 (a)(1). The Supreme
    Court has held that licensed real estate brokers or salespersons are permitted to
    complete simple printed standardized real estate forms, approved by a lawyer, in
    connection with real estate transactions actually handled by the broker or salesperson,
    without charge for completing the form. Cultum v. Heritage House Realtors, 103 Wn.2d
    623, 694 P.2d 630 (1985). They have also held that lenders are authorized to prepare
    legal documents ordinarily incident to their financing activities, whether or not a fee is
    charged, so long as the lay employees do not exercise any legal discretion. Perkins v.
    CTX Mortgage Co., 137 Wn.2d 93, 969 P.2d 93 (1999). The Supreme Court has not
    permitted such nonlawyers to give legal advice.

    Therefore, a licensed real estate agent may not “explain” the meaning of
    provisions in the standardized real estate contract to his or her real estate clients.

    http://www.wsba.org/~/media/Files/Legal%20Community/Committees_Boards_Panels/Practice%20of%20Law%20Board/Advisory%20Opinions/04-02%20Real%20Estate%20Agent.ashx

    You are the best example of the reason for this rule. You don’t know what you’re talking about.

  188. 188

    By ARDELL @ 86:

    For those who think this issue is “off topic”…consider this. MOST “distressed properties” (topic of this post is “Distressed Edition”) are “AS-IS” sales. It is often MORE difficult for a buyer of a distressed property to get the Seller to fix anything as a result of the Home Inspection. It is also more difficult to get a Bank Owner to sign…well just about anything and quickly.

    Consequently the right of a buyer to Cancel on Inspection, without the express consent of the seller, is often MORE important when buying a “distressed” property…which is the topic of this blog post.

    The bank will typically have an addendum which controls over and overrules the standard language we have been discussing. In such cases there typically is not the unilateral right to cancel based on an inspection. For example, the buyer driving her family by the house would probably not fly.

  189. 189
    ARDELL says:

    RE: Kary L. Krismer @ 78

    Kary says: “Hopefully the buyer had the right to back out and the seller will recognize that.”

    Why do you think “the seller will recognize that” right of the buyer…but escrow is too stupid to recognize that provision in the contract? Why would you think escrow professionals…who do thousands of real estate transactions, would not be able to “recognize that”. But the seller, who has a vested interest in NOT understanding that, will or should and better than a neutral 3rd party Escrow Company?

    Why would you let your client hire an Escrow Company who can’t “recognize” your buyer’s UNILATERAL right to cancel on inspection, as clearly noted in the contract?

    David is right…this is about “agency”, and your obligation to represent your clients well. If you feel you represent your agency obligations to your buyer clients better and best by subjecting them to that extra risk of losing their Earnest Money, that is your prerogative. I, personally, do not subject my clients to that risk, if and when possible.

    A wise Broker once told me: “Ardell, we cannot ELIMINATE risk for our clients. We can only help them manage that risk well, and to the best of our ability.” Recognizing that my buyer client has the absolute and unilateral right to Cancel on Inspection, as part of the real estate transaction they enter into, is how I personally choose to assist my clients in “managing the risk” of losing their Earnest Money.

    There is no reason we cannot disagree on this issue…without your need to call my stance “wrong”. My clients CLEARLY do not agree with you, that I am “wrong”, on this issue.

  190. 190
    David Losh says:

    RE: ARDELL @ 186RE: Kary L. Krismer @ 188

    This discussion is another reason that I am horrified that Real Estate agents are routinely doing short sales, REOs, and going to foreclosure auctions, or are told they can swim with sharks.

    A buyer should know the risks to the Earnest Money, and they should be advised against making a frivolous offer, and no they can’t just decide to walk away. Once you advise them though they make the call. If the call they make is to go get the Earnest Money from escrow that’s what we do.

    If escrow refuses we have our Broker handle it.

    Should we try to get the seller to sign, sure, after we have the Earnest Money in hand. Ardell is right, it’s not in the buyer’s best interest to ask permission from the seller.

    Bottom line is Kary has to talk, and act as an attorney, but a client would be better served by an agent.

  191. 191
    ARDELL says:

    RE: Kary L. Krismer @ 88

    I would never advise a client to “cancel on inspection” without first having an inspection by a qualified Home Inspector. That said, I have hired an inspector to come in at 20% of the total and normal inspection cost to check one “deal breaker” thing and leave. I have also done that in a no-cost way for my buyer client. But…I would not have a client “cancel on inspection” without a written report on that issue in my file at the time we cancel, even if that report is a one paragraph report on that one major issue.

    Had that once on a foundation issue in Queen Anne. The seller and seller’s agent swore up and down that a previous foundation issue had been rectified. It did not look that way to me…but my clients loved the house. So we went into contract and got the inspector out immediately, within 12 to 24 hours of acceptance. Inspector agreed with me. The foundation issue was not corrected in the manner indicated by the seller and seller’s agent. We then asked the seller via the seller’s agent to provide the documentation for the “fix”, recognizing that maybe…just maybe…they were correct. Their response? “My seller’s attorney has recommended that we not provide that documentation.” :)

    It cost the buyer $100 for “the inspection” which took about 15 minutes…and that $100 was refunded to the buyer when they used the same inspector on the house they eventually purchased.

  192. 192
    ARDELL says:

    RE: David Losh @ 90

    The more critical phase of an REO transaction for the buyer is when the buyer’s lender requires repairs in order to fund the new buyer’s loan. Very hairy! If you stand around with your thumb up your butt waiting for a clear green light from the seller…it will not close. The buyer cancelling on inspection is sometimes easier than the buyer needing to have something fixed in order to close…when the buyer does NOT cancel on inspection. It’s a dance few can navigate successfully for their clients.

  193. 193

    By ARDELL @ 89:

    RE: Kary L. Krismer @ 78

    Kary says: “Hopefully the buyer had the right to back out and the seller will recognize that.”

    Why do you think “the seller will recognize that” right of the buyer…but escrow is too stupid to recognize that provision in the contract? Why would you think escrow professionals…who do thousands of real estate transactions, would not be able to “recognize that”. But the seller, who has a vested interest in NOT understanding that, will or should and better than a neutral 3rd party Escrow Company?

    You’re getting to be just as annoying as Pegasus–having to explain the same things over and over and over.

    How is the escrow going to know you properly delivered the notice to the listing agent’s office? How is the escrow going to know there are not some other facts like in the Legal Hotline question I mentioned above? How is the escrow going to know that the seller isn’t just some unreasonable jerk who will sue them anyway?

  194. 194

    By David Losh @ 90:

    This discussion is another reason that I am horrified that Real Estate agents are routinely doing short sales, REOs, and going to foreclosure auctions, or are told they can swim with sharks.

    As soon as some things get finalized, I’m going to have a great story about one of those topics!

    One thing I will say now on the topic of escrows, is really beware of escrows on REOs and new construction. The REO escrows are often incompetent or worse, and hardly independent (which makes Ardell’s comments about an REO situation even more absurd). And even on new construction with a major local title company acting as escrow, I once had one clearly demonstrate that they were not acting as an independent third party. They ordered the wrong level of title insurance, contrary to the terms of the policy, and then tried to make up a bunch of BS about why they had done that.

  195. 195

    By ARDELL @ 92:

    RE: David Losh @ 90

    The more critical phase of an REO transaction for the buyer is when the buyer’s lender requires repairs in order to fund the new buyer’s loan. Very hairy! If you stand around with your thumb up your butt waiting for a clear green light from the seller…it will not close. The buyer cancelling on inspection is sometimes easier than the buyer needing to have something fixed in order to close…when the buyer does NOT cancel on inspection. It’s a dance few can navigate successfully for their clients.

    And then even when they agree to do the repair, actually getting it done can be problematic. I once had two distinct type of repairs claimed to have been completed repeatedly, but each time I went out to inspect neither was done. For the electrical I had to actually drag their electrician out there, because a picture of an exposed 110 volt wire and describing its location apparently wasn’t good enough.

    Fortunately the property was not too far out of my way. Unfortunately one of those trips I was attacked by two dogs and one of them “accidentally” bit me, which required the involvement of Animal Control.

  196. 196
    David Losh says:

    RE: Kary L. Krismer @ 193

    Escrow doesn’t know that notice was given, they don’t have to know. You can take in something signed, or the escrow can call the other party, which would be a bad move for escrow. It doesn’t matter. Escrow either releases, as they should with the agent, or buyer asking, or they don’t. That would be a matter for an escrow compay’s policy, and procedure.

    It really doesn’t matter, and you pointing out a builder’s chosen escrow company is a good example why.

    The listing agent usually puts a title, and escrow request into the listing. What Ardell is saying is that some sellers, if not most sellers, think that escrow company is working for them. The seller can randomly, and in my opinion, many times does, make the statement that they don’t want to return the Earnest Money.

    Sorry buddy, but we aren’t going to court, the buyer is moving on, there isn’t a lot you can do about it.

  197. 197

    By David Losh @ 196:

    Escrow doesn’t know that notice was given, they don’t have to know. You can take in something signed, or the escrow can call the other party, which would be a bad move for escrow. It doesn’t matter. Escrow either releases, as they should with the agent, or buyer asking, or they don’t. That would be a matter for an escrow compay’s policy, and procedure. .

    If you delete the part I highlighted, I would mainly agree with that. The escrow can do whatever they want! Whatever their policies dictate. It has little to do with the purchase and sale contract to which they are not a party.

    To the extent they release funds without some proof both parties agree to the release, they are taking a risk. BTW, I agree a phone call would be a bad idea as proof, but it’s possible some escrows might rely on that.

  198. 198
    interested says:

    RE: Kary L. Krismer @ 193 – Kary may I ask why it would matter if you delivered the document on time to the listing agent if the seller could still say “nope I won’t sign”. I mean if I get into this situation the first thing I would do is to put a lien on the sellers property.

    I always thought it was a given if you cancel upon inspection within the given agreed upon time frame you get YOUR money back. But this has educated me I will say, because the next offer I make I will have an explicit addendum stating such.

  199. 199
    David Losh says:

    RE: interested @ 198

    You don’t get an adendum, and if you did you probably wouldn’t have a Real Estate transaction to talk about.

    The Earnest Money is not YOUR money, it shows your interest, or level of interest, or is put in escrow as a remedy.

    A good example, an inspector drills holes in the stucco to check for rot. He doesn’t have permission from the seller, but the listing agent did authorize it. The holes were patched, and painted, but the seller refused the inspection, and wanted to retain the Earnest Money for damages.

    Both Kary, and Ardell are wrong in this dialog for different reasons. It just demonstrates that Real Estate is a complex business. When things go good it’s great, when they go bad, it can be very bad.

  200. 200
    ARDELL says:

    RE: interested @ 198

    The issue is not about the contract, so an addendum won’t necessarily help you. It is about the Escrow Company or your Agent’s Company requiring the seller to sign for the return of Earnest Money to the buyer to protect themselves, regardless of the contract terms. Consequently I don’t think adding clearer contract terms is the answer. You need professionals who understand your rights and who will accept the small business risk of complying with the terms of the contract.

  201. 201
    ARDELL says:

    RE: David Losh @ 99 – ”

    Old Italian Proverb: “A bad agreement is better than a good lawsuit”.

  202. 202

    By interested @ 198:

    RE: Kary L. Krismer @ 193 – Kary may I ask why it would matter if you delivered the document on time to the listing agent if the seller could still say “nope I won’t sign”. I mean if I get into this situation the first thing I would do is to put a lien on the sellers property.

    I always thought it was a given if you cancel upon inspection within the given agreed upon time frame you get YOUR money back. But this has educated me I will say, because the next offer I make I will have an explicit addendum stating such.

    As I mentioned, there’s a difference between having the right to something and actually getting it. When you sign the purchase and sale agreement, you have the right to buy the property. Even so, you could still get to closing and have the seller refuse to sign the deed. They would be in breach of contract at this time, and you could bring suit. And if you brought suit for specific performance, I believe you could file a lis pendens on the property and tie it up.

    In the situation we’re discussing, it’s pretty much the same only the escrow would start the lawsuit to get the funds out of their account. You wouldn’t have a right to file a lien on the property, and I sort of doubt you would even due a pre-judgment writ because the funds at issue would already be on the court registry.

    I also don’t see how you could do an addendum to prevent this, other than the obvious which hasn’t been mentioned. That’s because the escrow is not a party to the purchase and sale agreement, so to a great extent they don’t care what the agreement says.

    There are a number of ways to avoid the problem. This is one of those areas where I’m not going to disclose what I do, but you could have the earnest money in the form of a note which isn’t due until after the removal of the inspection contingency. Alternatively, you might prepare limited escrow instructions, which the seller would have to sign, specifically authorizing the release on certain conditions. I’ve never tried that, so I don’t know how an escrow would react.

    There’s apparently been some discussion of eliminating earnest money altogether from the purchase and sale agreement. I assume it would be replaced with an optional clause for liquidated damages. I don’t think that would be good for either buyers or sellers, but I presume the reason they’re considering the change relates to earnest money being sent interpleader actions. I assume escrows hate having to do that.

  203. 203

    By David Losh @ 99:

    A good example, an inspector drills holes in the stucco to check for rot. He doesn’t have permission from the seller, but the listing agent did authorize it.

    I’m not sure if you’re talking about a specific transaction, but the standard inspection agreement would not authorize that. Any alteration of the property would require the seller’s approval. To the extent the listing agent authorized it without approval, that would be a problem for them.

  204. 204

    By ARDELL @ 100:

    The issue is not about the contract, so an addendum won’t necessarily help you. It is about the Escrow Company or your Agent’s Company requiring the seller to sign for the return of Earnest Money to the buyer to protect themselves, regardless of the contract terms. Consequently I don’t think adding clearer contract terms is the answer.

    Did someone hijack your account? That’s almost exactly what I’ve been saying–that the contract language doesn’t control how you get your money back.

  205. 205

    By ARDELL @ 1:

    RE: David Losh @ 99 – ”

    Old Italian Proverb: “A bad agreement is better than a good lawsuit”.

    Attorney Proverb: “A bad agreement leads to expensive litigation.”

  206. 206

    Since this thing won’t die, I’ve continued to look into it. Escrows are also licensed, and also governed by the Washington Administrative Code (WACs). WAC 208-680-410 provides:

    (b) [Authorized disbursals do not include:] To any person or for any reason before the closing of an escrow transaction, or before the happening of a condition set forth in the escrow instructions. You may make a disbursement before the closing of a transaction or before a triggering condition if you receive a written release from all principal parties of the escrow transaction or collection account. Unless the disbursement is disputed under WAC 208-680-560, you are permitted to disburse earnest money funds without a written release if the earnest money agreement terminates according to its own terms prior to closing and provides for such disbursement.

    http://search.leg.wa.gov/pub/textsearch/ViewRoot.asp?Action=Html&Item=0&X=1213102624&p=1

    Note that if the escrow instructions say to disburse, they can, but the purchase and sale agreement are not escrow instructions, IMHO. Also, if the purchase and sale (“earnest money”) agreement terminates per its own terms, they can disburse. But for that to apply here, they would have to know proper notice of the inspection response was given, for otherwise the purchase money agreement did not terminate. The more common time that would apply would be if the transactions doesn’t close by a certain date and the P&S agreement provides that the money will be disbursed to one of the parties if that occurs.

    Another applicable WAC would be 208-680-560.

    http://apps.leg.wa.gov/WAC/default.aspx?cite=208-680-560

  207. 207
    Chris Dowell says:

    Sales up, inventory down. That sounds like a great problem to have. Hopefully home values will start going up.

  208. 208
    interested says:

    hmmm, would i buy a car this way — NO, so the bigger transaction – not spelled out clearly – well that won’t go. Yes, I can have any add on I want if the person want’s to sell they will sign I will protect me. I have to thank Kary for giving me something extra to think about and deal with.

  209. 209
    interested says:

    simple solution to this problem for a buyer — ” I won’t put any money down for escrow in a crap market — unless YOU the seller agree if I find something wrong I get my “– and yes it is my MONEY back — hello it is the buyers money. geez just when I thought certain things were a given. Additionally I will say an addendum to a CONTRACT signed by both parties will protect you that is why they call it a CONTRACT — yes I took first year law — and then decided I wanted to do other things with my life.

  210. 210
    David Losh says:

    RE: Kary L. Krismer @ 203

    It’s a real deal, did happen, and the buyer did get the Earnest Money back. A year later the holes were visible once again, Same seller had to explain time, and time again about why he was upset with the listing agent, no recourse.

  211. 211
    David Losh says:

    RE: Kary L. Krismer @ 206

    Let me give a WAC in that. I quote ” any principal party that the ownership of the funds is in dispute” and “Upon notification of a bona fide dispute”

    Best of luck with either of those.

  212. 212
    David Losh says:

    RE: interested @ 9

    Washington is an Agency State that deals in forms of agreement, it’s different than first year law.

  213. 213

    […] 212 comments, 12/06: November Reporting Roundup: Distressed Edition […]

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