March is behind us, so let’s take a look at the local housing market stats for the month. Short story: Despite listings 20 to 30 percent lower than last year, sales are coming in at or above where they were last year. Looks like spring is shaping up to be a ridiculous homebuying frenzy.
Here’s the snapshot of all the data as far back as my historical information goes, with the latest, high, and low values highlighted for each series:
Sales shot up nearly 40 percent between February and March in both counties. Listings also increased month-over-month, but by far less.
Next, let’s look at total home sales as measured by the number of “Warranty Deeds” filed with King County:
Sales in King County rose 39 percent between February and March (a year ago they rose 38 percent over the same period), and were up just slightly year-over-year.
Here’s a look at Snohomish County Deeds, but keep in mind that Snohomish County files Warranty Deeds (regular sales) and Trustee Deeds (bank foreclosure repossessions) together under the category of “Deeds (except QCDS),” so this chart is not as good a measure of plain vanilla sales as the Warranty Deed only data we have in King County.
Deeds in Snohomish also rose 39 percent month-over-month (vs. a 30 percent increase in the same period last year) and were up seven percent from March 2016.
Next, here’s Notices of Trustee Sale, which are an indication of the number of homes currently in the foreclosure process:
Foreclosure notices in King County were down 32 percent from a year ago and Snohomish County foreclosure notices were down 28 percent from last year.
Here’s another measure of foreclosures for King County, looking at Trustee Deeds, which is the type of document filed with the county when the bank actually repossesses a house through the trustee auction process. Note that there are other ways for the bank to repossess a house that result in different documents being filed, such as when a borrower “turns in the keys” and files a “Deed in Lieu of Foreclosure.”
Trustee Deeds were down 34 percent from a year ago. Still basically bouncing along the bottom.
Lastly, here’s an update of the inventory charts, updated with previous months’ inventory data from the NWMLS.
Inventory rose 20 percent between February and March in King County, but was still down 20 percent from a year earlier.
In Snohomish County it was the same basic story: Listings up 6 percent month-over-month but down 30 percent year-over-year.
At least it’s not another new record low.
Note that most of the charts above are based on broad county-wide data that is available through a simple search of King County and Snohomish County public records. If you have additional stats you’d like to see in the preview, drop a line in the comments and I’ll see what I can do.
Stay tuned later this month a for more detailed look at each of these metrics as the “official” data is released from various sources.
I’m getting a record high median, but the late reported sales could drag down the official number.
The median for active listings is about $150,000 higher, but part of that is likely just the longer list times of high priced houses. Part of that though is unrealistic sellers.
Numbers from NWMLS sources, but not compiled by or guaranteed by the NWMLS.
I still don’t understand why builder don’t build more homes. With the historical lack of inventory and homes flying off the shelves as hot pies, why don’t they double the output? I feel it is the government policies to blame for this otherwise why not build more?
RE: sleepless @ 2 – Part of it is the time lag between buying property and being able to sell the first house. Not my area, but I suspect that lag is probably at least three years for a major development. Part of it is just that the good lots were taken years ago, leaving only difficult to build lots, less desirable lots (e.g. near power lines or busy roads) or lots further out.
But don’t worry, they’ll probably start building way too many houses at some point.
RE: Kary L. Krismer @ 3 – Homes became extremely unaffordable for the “middle” class. Also, rents are extremely unaffordable as well. Instead of making loans cheaper and make people borrow money to the eyeballs, the government should make policies to incentivize construction of more homes. Infrastructure development, make more land available for builders, reduce bureaucracy for new construction, simplify permitting process, loosen zoning requirements (more density construction), etc. What I see is the opposite, the government makes everything ever harder to build new homes with anti-gentrification laws, restricting heights and zoning. If we have such a high demand, we need more supply… Housing is just important as food. It is more important than even education. You can go about your business without school or other life necessities, but food and housing, you have to eat something and live somewhere – as simple as that.
RE: Kary L. Krismer @ 3 – Agreed…At least in the greater Seattle area I have yet to really see “difference making” buildable lots. Faster $$ to be made in expansions, or teardowns.
Seatac, Shoreline, Renton, even southwest Seattle have more space. But courtesy of our terrific mass transit options, nobody wants to commute.
RE: Nick @ 5 – Yes, but expansions and teardowns don’t add to the overall supply–just the supply of higher priced properties.
Zumper April apartment stats have Seattle 2 bedroom rents down 6.6% YOY.
https://www.zumper.com/blog/2017/03/zumper-national-rent-report-april-2017-2/
@Sleeless #2: I tend to agree, government here doesn’t lean towards free market supply and demand policies to say the least. And lots of homeowners have fought for and benefited by the lack of housing, building restrictions etc.
By Kary L. Krismer @ 6:
Partially disagree – in the Rose Hill area of Kirkland/Redmond, virtually all new homes are on short-plats formerly occupied by a single home, adding to the net supply. I do agree that the new homes are higher priced – no question about that.
I am a builder and can tell you that builders are expanding their businesses as fast as they can, but there are real constraints.
The first is land. People who are selling developable land want not just top dollar, but beyond top dollar. The goal posts keep moving in a way that makes no sense to me. Eventually some young guy with family money or a risk-insensitive builder with overseas equity money will come in and buy those high priced lots. If the whole market continues to rise, those jokers will be bragging about how macho they are. If the market even has a pause or a hiccup, they will end up working for free. If the market drops a bit, even for a few months, they could not only go bankrupt but take several of their subs with them.
But there are other constraints. Permitting just keeps getting more complex, expensive and time-consuming. In 2012, I bought a project and began construction six months later. Right now, that same project would take a year before permits issued.
Good supervisory labor and good crews are not easy to find. Many people left the area or left the trades during the downturn. The good ones who are left are raising their prices pretty dramatically– and I really can’t blame them.
But ultimately we have so many people moving to the area for the tech economy here that it is difficult to keep up by just building more single-family housing unless we have real changes in land use and zoning. And we will need as a society to get a handle on the absurd restrictions on condo building.
Of course, that also means that people will need to get used to living in multi-family structures like in other large cities. No question, this will require a change in expectations.
By Kary L. Krismer @ 1:
Median sales figure? What is $150,000 higher than what?
Could you expand on this and explain please?
By Deerhawke @ 8:
Trust me. They will have issues. I absolutely HATED being in escrow seeing subs and spec builders get their ***es handed to them. Foreclosure, BK, Short Sales and breaking up families due to divorce etc. Some extremely hard working people.
I cannot emphasize more that subs had better have a plan this round and watch the market like a Hawk. I see a lot of contractors driving around with very expensive and customized trucks being used as a work/household vehicle. I know what financing people are using for purchases and their debt loads to buy today as well as during the 07 crash. All I had to do was ask my Banker if they knew what financing was buying out their builders inventory. They said, ‘oh no, the market is so strong and we are in a new “paradigm” and the new Boeing Dreamliner was coming on- line (we know how that turned out). ” Several mos. later their stock tanked and they had to utilize TARP funds.
CNBC had an article about refinancing yesterday and cash out for a variety of things like remodeling (staying put –not selling…a topic for another time), etc. While not at the volume level of the 07 ‘bubble people are moving debt onto housing. High CLTV’s is not where you want to be if the market just plateau’s. It’s all good, until it isn’t.
Also, IMHO people are underestimating the FSBO market going on under the NWMLS “data” radar. We cannot be the only escrow office closing these.
Anyone in the car biz? I’m reading about current rising defaults and huge lease returns coming online in the next couple years. However, Jamie Dimon of JP Morgan Chase Bank says it’s not “systemic.” We will see. When 40% of the auto market is to subprime borrowers that’s not a real recipe for stability. Let me say that again: 40%.
~ S-Crow
RE: Deerhawke @ 9 – Sorry if that wasn’t clear. The median asking price of current active listings (as of earlier today) was about $150,000 higher than the median sale price of the houses that sold last month. I’m not sure that tells you as much as the median asking price of pending listings, but I saw the number and reported it.
I was never much impressed by the Harley Davidson edition luxury pickups, the Lariat Special Edition trucks, etc. Everybody I know who bought one of those in 2006, lost it in 2008 or 2009. I am the guy who is still driving the 2003 truck that kept rolling right through the recession. I figure it has another 8-10 years on it.
It is a good deal easier to get money now than in 2011 or 2012, but it is not at all like 2006. Even the banks who are really trying to grow by chasing fast-growth builders know their way around a balance sheet and ask tough questions about your financials.
But I am a conservative guy. I have three banks I have dealt with. Two are smaller and community based. They really know your financials and like to see a great profit margin on your P&L. One is now chasing the medium-sized Eastside builders who they say have “a synergistic business model”. I have no idea what that is and don’t know anybody who does. That is the bank that is going to be the first to have trouble and so I have let it go.
RE: Kary L. Krismer @ 11 –
I thought that is what you meant, but it doesn’t seem possible. Really? $150K higher in one month?
That seems like it has to be some kind of statistical anomaly. Sounds like a sofware glitch. It is too big a number to simply be caused by a lack of inventory playing havoc with the averages.
By S-Crow @ 10:
The NWMLS recently started having agents report the transactions that they were involved with–either representing a seller or a buyer. Not sure how well they can possibly enforce that since they would have no real way of knowing that an agent was involved. Anyway, I think they’ve had about 500 of such sales reported so far this year. Those do not become part of the official statistics. It is though useful that those are tracked to the extent that they can be.
“About 500” from NWMLS sources, but not compiled by or guaranteed by the NWMLS.
By Deerhawke @ 13:
Not necessarily in one month, but instead for earlier today. The active listings could always run that much higher for all I know–it’s not a stat I regularly check. And remember, these are not yet under contract. They may never turn into sold listings. To the extent they don’t then the number is due to unrealistic buyers.
The pendings by my count are running only about $35,000 higher, and most of those will turn into sold listings, but sometimes even that number is deceiving. That that has been something I’ve followed in the past to see if it would help predict the direction. Sometimes it would and sometimes it wouldn’t.
Same disclaimer about number not being guaranteed or compiled by the NWMLS.
RE: Deerhawke @ 12 –
Median Sold Price King County YTD. I only count Single Family Homes and not condos, townhouses, houseboats, double wides etc. $561,000. A few Seattle townhomes might slip in if they call them “multi-level single family home” vs “townhouse”, but those would likely be sizeable enough to deserve the upgrade. There were 4,464 sales with 2,232 being over $561,000 and 2,232 being at or under.
Doing the same thing for since March 1 we have 1,840 sales posted as of today the median comes in at $593,500 with 921 selling at or over $593,000 and 919 selling at or over $594,000.
Hmmm thinking I need to exclude the 2nd set from the first set and do 1/1/2017 to end of Feb to compare to since 3/1. There were 2,624 sales with a median price of $540,000.
So the median price change after March 1 is $594,000 less $540,000 or $54,000 increase. 10% increase. Sounds right to me.
Required Disclosure: “Stats in this comment are hand calculated by Ardell and not compiled, verified or published by The Northwest Multiple Listing Service.”
By Ardell DellaLoggia @ 16:
What sounds right about that? That the yearly 10% increase has already occurred in the springtime like previous years?
The real B.S. part for mortgage buyers is that prices are really up 20% since the election.
RE: Deerhawke @ 12 – Deerhawke, are you a spec builder? Do you build on your own lots? Do you build on East side? What do you have in your pipeline? What is your current prace range for new constructions?
By Deerhawke @ 8:
condominiums also add to the housing pool. I have no probs living in condo. We have lack of housing in general, not just SFHs. I agree, in the cities, especially in DT area, I would expect more multifamily construction. But again, the problem appears to be the government, business as usual, make everything I their power to screw the little guy.
Amazon up to $917 a share, wow.
By Kary L. Krismer @ 14:
Actually all of the escrow offices are closing their share of what you call FSBO sales. This is probably a misnomer though. I think of a FSBO as when one neighbor decides to move out of the area for retirement and so sells his place to another neighbor as a rental (we did one of those last year). Or maybe someone sells via the internet or by putting a sign in front of the house. In its most sophisticated form, someone canvasses the neighborhood to buy a house for themself in the neighborhood they want (I have a new neighbor who did this). In those cases, maybe the parties rope in another neighbor or someone else with a license to write up the forms. But I think this is a small part of what is occurring off-market.
The bigger action is really what we could call “non-MLS sales” or just “private sales”. Some realtors have sophisticated operations to find developable properties. They build databases, they send out mailers, they send out door-knockers– you name it. I know of 50-60 agents in the city for whom finding “dirt deals” is the bulk of their business. They make their money on the listbacks. I am not in touch with it, but I know that the same kind of operations operate on the East Side.
So when you see a whole neighborhood developed (like the Roosevelt District) and a couple of dozen townhouse projects and mid-rise apartment buildings suddenly come out of the ground, do you ever wonder who was out talking to the owners of the bungalows that were torn down? Same people. Do you ever see that activity on the MLS. Highly unlikely.
There are no good estimates of how large a percentage of the overall sales are accounted for by off-market sales, but probably 90% of the new construction that you see on the MLS started as an off-market deal.
By Deerhawke @ 21:
That is what they are now supposed to report. Do all of those transactions get reported? Probably not. Do they show up in the monthly data that the NWMLS reports? No, but there is good reason for that. They don’t want to affect the comparison to historical numbers.
RE: sleepless @ 2 –
They Build Plenty in SE King County
Large energy eating glueboard Houses for like $400K+ on postage stamp size lots, 5 feet from your neighbor….no one wants to live there for the high costs.
Its time to downsize, depopulate and breath in Seattle….something the architects of Seattle will never grasp. Spread less people over more space instead of cramming them in like rats. Did anyone say Earthday?…..LOL
By Deerhawke @ 13:
I’ve been doing some more thinking about this, and I’m not really sure $150,000 means much, due to the nature of the way the median works. As I’ve mentioned before, three additional sales of $10,000,000 each would probably move the mean, particularly during a low volume month, but it might not move the median at all. When your dealing with the pending sales, there most of those properties will be moving into the sold status, and if they all happened to move into that status the next month, without any others coming into sold, they still would not predict next month’s median with 100% accuracy. That’s because most will be selling for a number different than the list price.
But with the active listings you’re looking at an entirely different grouping of properties. As I’ve mentioned, some of them may never sell. But beyond that you have different groups of property that sell at different rates of speed. Ignoring the overpriced properties, anything under $500,000 will probably have a median DOM of 7 days or less. Anything over $1,000,000 maybe over 30 days. But this is where it gets hard to explain. Where the median falls in that mix of active listings probably isn’t really important. First, it’s just a median of list price, and list price is just a number picked by a seller. Second, not all of these properties will end up in pending or sold status. Third, some of them (mostly higher priced properties) will remain in active status for much longer than the others, meaning individual higher priced properties will have a greater impact on the median than lower priced properties.
Maybe the easiest way to think about this is an absurd hypothetical. If there were no new listings under $750,000 for a period of 7 days, virtually all the listings under $750,000 would sell in that period, and the median of active listings would shoot up dramatically to something above $750,000. But all that could occur without the median sales price budging at all (ignoring the impact that not having any new listings for a week could have).
By softwarengineer @ 23:
I prefer larger lots, but there are people who prefer smaller lots.
If there weren’t people who wanted to live there, the properties wouldn’t be built that way. But it is sort of a culture shock, because you have these fairly high density projects being built out were many of the current neighbors have strong preferences for lower densities.
RE: Brian @ 17 –
We live in an area that is in the middle of a growth boom. A range of companies (most notably tech companies) are opening offices or satellite offices. People are moving here for the jobs and for the political outlook and lifestyle. The fact that Bertha finally emerged yesterday is a sign that the very useful but ugly viaduct will now give way to a waterfront esplanade. Seattle will become even more attractive to wealthy people (including retirees) who want the beautiful downtown West Coast lifestyle. We will be even more swamped by tourists. Everyone who visits will be thinking about moving here if they get a chance.
Someone posted this really useful link exploring demand factors for the region. I will repost it here.
https://www.seattletransitblog.com/2017/03/30/2016-growth-outpaced-housing/#more-87590
Meanwhile since prices have been moving up so briskly, there is zero urgency for people to sell. Unless there is a major life change (death, retirement, BK) there is no pressure to make a decision to sell. In fact, a lot of people who would normally decide to sell go out of their way to hold on. I have seen people who have elementary school -age children who are holding on to a family home in the area so they can preserve options for their extended family in the future. Let’s call it what it is. Hoarding behavior.
I lived in Japan in the 80’s and the story got around that there was going to be a shortage of toilet paper. Suddenly all the stores were sold out for weeks. Our friend had 500 rolls of toilet paper stockpiled in her shed. But we couldn’t buy any in the store so we had to get some from our friend. Classic hoarding behavior.
But this situation is not like Japan in the 80’s. Eventually the manufacturers ramped up production and there was plenty in the stores. People who bought on the rumor felt pretty silly.
In this case, we have a growth management act that constrains horizontal sprawl. And we have a transportation system that is going to get worse before it gets better. And we have a political process that puts a priority on consensus. So any change in zoning, land use, permitting, condo insurance, etc. is going to take quite a while to work its way through to reality.
So we see inventory down by about 25% year-on-year. New inventory is probably also flat or down from last year and throughput is really fast. Virtually everything is selling quickly — even true garbage that should not sell.
So why should we be surprised that prices are up YOY 10%? Brian I think you are right. In the neighborhoods that I follow, prices seem to be moving up by more than 1 percent a month, with certain months being closer to 2%.
I sat in a real estate presentation in the first week of March in which the speaker said something like, “I think we all know that central core neighborhoods moved up 4% or so since the beginning of the year. ” I seemed to be the only one who was surprised by this.
So the question again is — bubble or structural change?
My perspective on it that we will see some correction periods and times when the market seems to come back toward balance. But longer term, I think we are in a period of structural change.
RE: Deerhawke @ 26 – Is it a structural change to have too much liquidity in our financial system and interest rates (for savers) of zero? We are seeing the mother of all bubbles right now, in equities, housing (globally, not just Seattle), and in tech/startups. Why? Too many Helicopter Ben Yellenbucks looking for a place to get a return.
What will cause the Seattle housing market to turn is a collapse in the tech/startup sector, which will quickly let the air out of high real estate prices as people see prices turn, and then everybody who has been waiting to sell for the past several years piles onto the market, further driving prices downward.
Were you living here during the first tech bubble? Or the first housing bubble? Nobody saw it coming! This time is no different, except for the fact that we have simultaneous bubbles in every sector as described above, combining to form one massive bubble over us that is so large that nobody can even imagine it to be true. A new tunnel under downtown Seattle won’t change that (except for the increase in the number of luxury condos that will be built there).
When will it happen? That is the operative question . . .
I see structural change in our future, but it looks the opposite of your view: my neighbor, a highly-paid senior techie at Microsoft, freely admits that he is working to automate everything, including in tech itself, which will result in the elimination of countless jobs – even in the tech sector. Over the course of modern history, every area of our economy (agriculture, manufacturing, service industries, information/knowledge) has been radically changed by technology resulting in the need for far fewer workers, and this exact same effect has and will continue to impact the technology sector itself.
You don’t need several hundred people working at a company trying to figure out how to write an app to deliver a sandwich to you – that is just not sustainable. See above – too much free money floating around in the system causes inefficient use of capital, hence all of these ‘bring me a sammich’ and ‘walk my dog for me’ startups.
RE: Kary L. Krismer @ 25 –
Yes Kary
But the old fashion large lots were the zoning rule back then. It sure prevented traffic congestion….a horrifying chronic Seattle problem that won’t get solved by that car tab tax they’re gouging us with now…
King County thinks we’re all made of money, then tag us with useless taxation, it reminds me of the old drug war, completely useless. It just got worse anyway…
RE: softwarengineer @ 28 –
Good News from Kansas City to SWE In Comparison to Seattle Gouging
My property tax went down and car tabs down there go for like $100+, not King County rates $300+.
Prices on everything are far less in Kansas compared to Seattle….from restaurants to half priced car repair, MUCH CHEAPER. Its like retiring in Mexico.
RE: softwarengineer @ 23 – What about jobs. I am fine to pass on Seattle and to the flyover country. The problem is – no jobs and meth addicts. The reason people move to Seattle is because Amazon, MS, Google, Starbucks, Facebook and alike keep hiring in Seattle. They like it here and keep expanding their business. The housing affordability is the least of their concerns. It is more affordable than the sily valley, it is good enuf for them.
RE: Brian @ 17 –
Not sure if that was a request for a comparison to last year, but here it is just in case, as I’ll be on vacation come Friday until after Easter.
YOY 1/1 to end of Feb. (last year was a leap year) median $500k vs this year $540k
YOY 3/1 to 4/4 (keeping yesterday as end point) median $545k to $594K
So 9% last year to 10% this year, but if the bump median went higher after end of March last year (and it likely did) it also came back down before going up again. 1/1/2017 to end of Feb. median this year is only 5K more than March numbers of last year.
I don’t really understand your question “What sounds right about that? That the yearly 10% increase has already occurred in the springtime like previous years?” I was talking about “the math looks right to me” as in if it was not in line with what I would expect I would dig deeper to see what was causing the numbers to be out of whack. If it “sounds right to me” than I stop running numbers.
But I don’t think that is how you took what I said. Are you saying the market shouldn’t go up by the same or roughly the same as last year?
If you don’t like that is is up 10% in March alone, then think of it as up 10% from last year at this time, as the numbers are about the same even though there is a year of difference time wise. Markets don’t move on a “per month” basis. They bang up and then flatten and swing back a bit. A 12% increase in a year is never 1% per month.
Not uncommon for the sustainable increase to happen early and the bigger bump period moving toward summer highs to be unsustainable. Mainly because early year list prices are often based on last Spring comps. Then the next listings are basing their prices off the higher 1st Quarter comps and consequently have less bang up or less sustainable bang up moving out toward year end.
Or perhaps you were just hoping that this year would not be a repeat of last year?
Required Disclosure: Stats in this comment are hand calculated by Ardell in real time and not compiled verified or published by The Northwest Multiple Listing Service.
RE: redmondjp @ 27 –
curious to see responses to this comment. i, too, fear these things and could see the party ending in dramatic fashion, especially when we start a nuke war with n. korea…
By Deerhawke @ 26:
I agree with much of this…but how do you explain 25% YOY drops in inventory in Spokane (Certainly not jobs) or Minneapolis. Isn’t it the same as Seattle, we went from too much inventory to too little along with investors getting into real estate big time. Won’t it swing back when investors go chasing the next hot sector.
Recently I read that consumer debt is at 2008 highs and subprime auto loan defaults are also at 2008 highs. High debt levels can really turn ugly when the economy eventually turns.
By Deerhawke @ 26:
I agree with much of this…but how do you explain 25% YOY drops in inventory in Spokane (Certainly not jobs) or Minneapolis. Isn’t it the same as Seattle, we went from too much inventory to too little along with investors getting into real estate big time. Won’t it swing back when investors go chasing the next hot sector.
Recently I read that consumer debt is at 2008 highs and subprime auto loan defaults are also at 2008 highs. High debt levels can really turn ugly when the economy eventually turns.
By softwarengineer @ 29:
What would prevent traffic congestion is building more residential real estate next to the commercial real estate. if you look at DT Bellevue / Seattle construction, it is mostly commercial real estate. What we need is more DT living, building more dwelling units next to the office units so people can actually live close to work.
I think that a lot of career/family minded people would prefer to take the risk of overpaying for a house than have to rent and thus risk being forced by increasing rent to give up their job and other connections. So they drive until they qualify, which currently takes most people out to Snonohomish or Pierce counties. If the laws on condos were designed to favor owners instead of trial lawyers then those people could live much closer to work.
As it is, may middle class people are being driven out of Seattle and even King County and so they no longer matter politically here.
RE: redmondjp @ 28 –
So to answer your questions, yes I was here for the first tech bubble bursting (not that big an effect overall) and I was here (with a front row seat) for the real estate meltdown.
Yours is a valid perspective and unlike most people who have a pessimistic perspective, you forecast a valid route that the meltdown could follow– a tech/financial meltdown followed by a rush for the exits in Seattle real estate.
Indeed, I think what you are talking about is a virtual certainty at some point.
But I think that what you are talking about is the cause for a real estate recession that lops 10% off the market and makes everything slow down for a year or 18 months.
And then I see things shifting from neutral back into gear again. Markets do not move in straight lines. They need periodic corrections, even substantial ones.
You may very well be right that technology will transform a variety of industries. I think that in the next decade we will have self-driving cars and trucks. I think we will have a lot of automation making on-shoring possible, but the jobs will not come back. In highly automated mills and factories, there are remarkably few humans walking the floor to keep an eye on things. And some of those humans monitoring things now are hundreds or thousands of miles away.
I am pretty confident that diversified tech economies like Seattle will continue to thrive. But for people out in the flyover zone, life could just get more desperate.
We have recently seen the result of the anger in the heartland caused by future shock and the pace of technological change. The November election was really a political hissyfit by those who felt that “attention must be paid”. I think it should be. But do you really think that this political leadership is capable of righting the internal balance of power? Do you really think this political leadership even cares? Remember that once you get beyond the populist posturing, this is the party of laissez faire capitalism.
As in so many things, we live in an era where the middle is being hollowed out. We live in a time where there are increasingly a few winners and lot of losers. Much of this change in the distribution of rewards is the result of new technology and much of that technology is being created here. As a result, Seattle will see some nasty bumps in its real estate market along the way. But longer term, I think we will see structural change in this market and Seattle will be a winner.
But given the prices for home buyers, it sure may not feel like winning.
RE: sleepless @ 36 – Aren’t you assuming cost/sq ft are the same or at least reasonably close? Are all those folks buying the 4/3’s in Covington, Marysville, Auburn, Bonnie Lake, etc going to move their families into units 1/2 the square footage, no room for a playset and no room for the dog? All so one member of the family can shave 40 minutes off their commute…?
I can understand why Seattle has a drop in inventory with net people moving in, tech boom – the fundamentals of the city has and are changing, hard to build here, not to mention how many homeowners are running into long term capital gains? Realtor fees, excise tax, and capital gains = stay put! What I don’t understand is why inventory is down across the nation. Seattle at some point will have adown turn – its economics but there will be a new bottom. The nation wide lack of housing is what makes me nervous. Can anyone explain that?
RE: Anonymous Coward @ 39 – I can think of at least one client who made the opposite decision. Moved further out despite the longer commute, just to get a nicer place and more space.
RE: Deerhawke @ 38 – RE: redmondjp @ 28 –
I agree with Redmondjp. The amount of quantitative easing and expansionary monetary policy in the past 7-8 years has been so incredibly massive that it’s effectively beyond comprehension in real time. Of course, that shouldn’t be surprising since it is the grandest monetary experiment in the history of mankind. The markets and many experts point to the relative absence of “inflation” as proof positive this time is different and all is well but I disagree. I think traditional notions of inflation being the costs of goods and services as measured by CPI, etc. do not capture the true picture. Rather, the inflation we’re experiencing is that all asset classes have been flooded with liquidity and their prices have soared far beyond any semblance of fundamental value.
I also think people are overlooking many important considerations not the least of which is the decline in the price of oil over the past couple of years. The price of oil has a tremendous impact throughout the global economy both in terms of fuel for moving people and goods and the myriad of products it goes into.
I think low oil prices have served as a crutch for the global economy and helped it limp along a lot farther than it otherwise would have. Fortunately, oil consumption probably won’t change dramatically in the near term but as it’s base effect fades, the underlying weakness in the global economy will become more and more apparent. And, as the Trump honeymoon expires and the “animal spirits” he engendered get vaporized by his failure to pass significant legislation, that’s when the tide will begin to roll out and we’ll see who’s been swimming naked.
RE: Marc @ 42 – Oil is somewhat complicated. The drop in price due to the poor economy is normal, and part of the balancing process (less demand results in lower prices which helps the recovery).
But oil also dropped because of increasing efficiency (lower demand–e.g. cash for clunkers), more production (increased supply), and increased alternative power choices (lower demand). That last one will probably continue into the future as alternative technologies improve.
http://www.marketwatch.com/story/americans-are-taking-out-the-largest-mortgages-on-record-2017-04-05
“The 20% down payment is a relic: the median down payment in 2016 was 10%. For first-time buyers, it was 6%. First-timers and other buyers of less-expensive homes are more leveraged now than they were at the height of the housing bubble a decade ago.
Home loan sizes aren’t the only things that have changed in the years since MBA started its survey. Back at the start of the survey, the median mortgage size was only about 3.3 times the median annual income. It’s now over five times as big – though buyers get bigger homes and lower interest rates.”
By Merritt4 @ 40:
Landlording, it’s the hot thing these days. Everyone is doing it. Get rich off the bank’s money while some poor bloke makes the payments for you. What could go wrong?
http://wolfstreet.com/2017/02/23/whos-driving-this-new-normal-housing-market/
RE: redmondjp @ 28 –
RE: Sea @ 34 –
RE: Marc @ 42 –
It is good to see so many people concerned about the same things that I am concerned about.
I hope that this doesn’t serve as confirmation bias on my behalf.
The mood on Seattle Bubble doesn’t seem so bubbly anymore.
But……… What????…….I keep hearing that the economy is going gangbusters??????????????
Are we still in the recovery stage?
I think increasing efficiency is playing a very minuscule, albeit ever increasing, part in the lower demand for oil.
Best dialogue on here in a while. Thanks for everyone sharing their different viewpoints.
RE: WS @ 35 –
I agree with much of this…but how do you explain 25% YOY drops in inventory in Spokane (Certainly not jobs) or Minneapolis. Isn’t it the same as Seattle, we went from too much inventory to too little along with investors getting into real estate big time. Won’t it swing back when investors go chasing the next hot sector.
____________________
Honestly one of the things that makes me feel better about what is going on in Seattle is what is going on in the rest of the country.
The only thing I can imagine that is causing the serious shortage of inventory in Spokane and the rest of the country is that nobody really built anything from 2008-2013. And during that time, as you mentioned, thousands of single family homes went into foreclosure and were bought up by large investment companies. Now that they are stabilized in their portfolios, I doubt that they will dump them all at once. But we are starting to see a real surge in millennials wanting to settle down and buy their own homes.
I have a question that I hope will be met kindly (real estate is not my forte, which is why I look to the opinions of people more knowledgeable than myself…). While I understand that there are a huge array of factors that come into play when asking the question of whether or not it’s a “good” time to buy, I’ll ask it anyways: is now actually a good time to buy a house in the Seattle area, if I can afford it? I am not planning on living in the area much longer than another year or two at most, but I am interested in purchasing on the rural Eastside, both to have place to live right now, and then rent out when it’s time for me to move on. I figure if the area continues to grow and develop, I could possibly have a decent rental property on my hands.
Ok here is my entry for most head-scratching sale so far this spring .
https://www.redfin.com/WA/Seattle/418-N-61st-St-98103/home/299523
Nice location on Phinney Ridge, but come on. I saw this go on the market a while back and thought the sellers were smoking crack. It is on an undersized 3300 sf lot and it is tiny– a small place for small people with a finished basement. It is not clear how many square feet it actually had but felt like 2000 or less. No views. Yes it got all the cutesy treatment, but how the heck do they have the nerve to ask for $865K?
Oh well, what do I know? Multiple offers and it sold for $1,150.000.
Wha….?
RE: Deerhawke @ 48 –
Not sure why that surprised you. It sold for over 700k in 2013. The asking 865k was underpriced based on the medians we follow here. In that neighborhood, you are looking at more than 10% YOY average since 2013.
RE: Deerhawke @ 48 –
Most if not all of that remodel as to the main floor was done prior to the sale in July of 2013 for $706,100. So most of that 63% price increase is just the market in less than 4 years and not improvements. Exterior was a different color and some other painting, but most of the “remodel” was already in place at the time of the prior sale. Would love to see how the appraisal treated the basement improvements since 2013 since most appraisers don’t put much ppsf on the basement level.
When the lot is that small it’s better to improve it to the max because the tear down value alternative doesn’t work well, and that’s why it makes you shake your head. But as long as the main floor footprint is over 1,000 sf it can be maximized and the mffp on this one was 1,140. Would you even have wanted it with only 33′ frontage if it had fallen into full deferred maintenance over the years? Seems a fully remodeled in place was highest and best use.
Not sure why you question the total sf since the mls listing and the tax record are in agreement.
RE: sleepless @ 4 – You ought to head over to West Seattle. A developers wetdream and density galore.
Hi Ardell. I have another theoretical question for you. If a seller plans on a second price drop is it better to drop it slightly above where they expect the offer to be since a lower offer is likely, priced exactly at where you would expect a full price offer since the market is efficient for now at least, or slightly below that price to see if you could get multiple bidders? Thanks Ardell.
By Deerhawke @ 47:
That certainly didn’t help! And the fact that fewer people were buying during that same time also has increased the current demand. Demand is the other side of what causes reduced active listings, and that delay in buying was maybe more pronounced in the areas that currently do not have such strong employment numbers.
One other thing I’ve been wondering about, but not enough to look at any statistics, is whether birth patterns are impacting the supply. I know we’re nearing the end of the baby boom, so we’re getting to the point where fewer people will be retiring and moving out to other areas. We’re not quite to the end of the baby boom yet, but we may be at a point where there are fewer of those. No idea at all on the other end–how many people are in their late 20s-early 30s relative to historical norms. But given the delay in buying referred to above, maybe the relevant range would be all the way to late 30s.
I currently own a home that I’m not particularly happy with. It isn’t bad but it isn’t my “forever home”. I am debating if I should sell it in the upcoming year and just rent it out for a little while until the market crashes. I wonder if anyone else is thinking the same thing? The biggest fear is that if I sell and then just rent, I can be priced out of where I want to be.
RE: Kary L. Krismer @ 52 – As a cohort the millennials are larger than the baby boomers. And they’re just starting to hit their prime child bearing and home buying years.
RE: Anonymous Coward @ 53 – Thx–so the combination of the two situations . . ..
RE: Deerhawke @ 48 –
I remember going into some houses in that area a few years ago when the market was first recovering and asking the real estate agents – did they really think they could get the prices they were asking? Apparently yes, and a great deal more. That was my first hint that the market in that area was taking off. But I never dreamed that these houses would sell for more than a million dollars. Imagine – paying half a million dollars for a small house with a view of Greenlake? Absurd!
There were a number of offers on this house. What becomes of the other folks who were trying to buy? How long do they attempt to purchase in the area before they give up? Will the same folks who lost out on this house end up bidding against each other for houses in the area? Are they do dedicated to that one area that they just continue to rent if they give up buying, or do they expand their search? How far are they willing to go out of the area? Are these the folks that will inadvertently cause housing prices to increase in other areas if they do look elsewhere?
Apparently there were a number of all cash offers. Apparently there is still quite a bit of money available for housing in these areas, and there is still the perception that prices are not high enough not to put in offers.
RE: screenname12345 @ 54 – That doesn’t sound so theoretical. ;-)
RE: Ron @ 56 – This thing could run on a lot longer if long term interest rates stay somewhat low. If you look at the affordability index, inflation adjusted housing prices, etc we are nowhere near where we were in 2007. If the 10 year treasury goes above 3.5% then we could have a serious downturn, but most predictions I see are for only a modest increase in long term rates.
http://www.calculatedriskblog.com/2017/01/real-prices-and-price-to-rent-ratio-in.html
Also, the exotic loans that defined the 2007 bubble are much, much less of an issue. And we don’t have a bunch of excess inventory and vacancy that we saw in the last bubble. The longer prices outpace wages the more we’re setting ourselves up for a downturn, but it doesn’t seem like we’re there yet.
RE: Jadecat @ 49 –
No. Doesn’t seem like a wise decision.
RE: screenname12345 @ 54 –
hmmmm…may I say “wrong” thinking? It is not your job to second guess what buyers will do. It is your job to do YOUR stuff WELL and it is your agent’s job to help you be your best self as to doing your stuff WELL and effectively well.
At the onset a list price is based on how well it supplements your other marketing efforts which these days is mostly online display. In that regard you want to focus on double “hit” count numbers like $1,000,000 that reaches people looking up to that number and people starting at that number. Even before people used the internet, rule of thumb is that there are only 4 list prices per $100,000 encrement. $900,000, $925,000, $950,000 and $1,000,000. “Don’t mess with Mr. In-Between” without VERY good reason why. The positions with the most zeros are the most important. Never be “Mr. $909,500” or “Mr. $959,000”. Even MORE important with instant alerts at preset values.
When an original list price is wrong, doesn’t bring offers at all, it is usually at least 5% off. So a price reduction of less than 5% is usually equally “off”. Several small and frequent reductions are worse than one big one as it leads people to believe that if the wait a couple more weeks the price will be even lower. It also makes you look desperate.
I still think your problem is in your online photos display. As example, there is one house not selling that I call “The Stairway to Heaven” house. The main photo brings up images of carrying a car load of groceries up 20 or more steps to the front door. Now there may in fact be another way to get those groceries from the car into the kitchen, but one peek at Main Photo #1 sends buyers screaming off into the night.
Take the time to write down your 5 biggest strengths AND your 5 biggest weaknesses. Make sure your photos display your strengths adequately and DO NOT SHOW even a glimpse of your weaknesses as in 20 steps from street to front door. There are other ways to take that shot or crop that shot.
A price reduction is something you do immediately AFTER fixing everything else that is wrong. It doesn’t work the other way around. If you fix the presentation on condition issues after the price change, the price change does you no good and you end up having to reduce it further just to get the eyes back on you.
That answers Deerhawke’s pondering of why a seller would jump down $10,000 and up $5,000 and back and forth. Those aren’t price changes. Those are manipulations to get the eyes back on you by getting on the agent “hotsheets” and the buyers’ instant alerts. Likely an mls violation but I still see it happening. Moving $1.00 is more obvious. I don’t do that at all, but I see it.
As to your specific question NEVER, ever list at a price you are not willing to take! Never list at a price that would cause you to counter at more than asking if you only had one offer AT asking. That’s a violation as well for obvious reasons.
Look at your house on Redfin being signed in to the site so you can see any comments made by their agents.
Look at your “stats” on Redfin. (The Listing Agent gets internals every morning that are used differently but of value as well). I’m looking at one as to real example.
Not sold in many days:
1) Over 10,000 Views (PLENTY of people want to live THERE)
2) Less than 1% of the people who viewed it saved it as a Favorite (10% NET favs = at least 1 to 3 offers, 15% = 6 to 9 offers, 20% or more = a crap-load of offers. My own tested formula.) The longer the home is on market the harder it is to evaluate as the first 3 to 7 day stats are more accurate.
3) X-outs = to 30% of Favs. That in and of itself is bad but back to “net favorites”. You subtract the x outs from the Favorites to get net favorites and then that sum needs to be 10% of views or more. At 5% or more you have a shot at one less than asking offer. At only 1% as in the instant case, no chance in hell without a significant price drop.
All of the agent remarks on the site from in person tours are extremely positive, so it’s not something the seller can do as to presentation AT the property. The bedroom positions are good with at least two bedrooms on the same level as the master. The school rank is extremely low and the house is priced too high for where it is and the school rank is too low to be hopeful for a positive change. Only remedy is price reduction.
OK…this is fun. In several months only one price change and that was an INCREASE in asking price because it DID get offers when it first listed, but then fell out. The seller increased the price to where the buyers bid it up to the first week on market and now can’t bring himself to let go of the price he almost had.
Likely the best thing you can do is bring it down to the lowest price you are willing to accept and then round it to a hard number that has the most zeroes you can live with. $1,200,000 is better than $1,225,000 as example. Both fit the $25,000 rule BUT clearly in that price range people tend to look in $100,000 increments and not 25s.
You may not understand anything I am saying, but be methodical. Have a strategy. Don’t try to guess what buyers are going to do. DO your very best at what YOU are going to do.
RE: Ardell DellaLoggia @ 61 –
You’re good.
I might look you up next time I am looking to sell something.
RE: Kmac @ 64 –
Too many typos but I was rushing out to an appointment and couldn’t do the edit. :)
RE: Ardell DellaLoggia @ 63 –
Hi Ardell. Thanks for the detailed response as always. I get what you are saying about pricing at round numbers, that is along the lines of what I was thinking. The practical reasoning behind it was not something I considered though. I don’t think you are looking at the right house btw from your comments. I have no doubt my broker listed way high and put us in much higher end category and I am zeroing in on what is right $ since another large drop is potentially needed. Trust me I did not sign up for this and don’t want to meddle also trying to avoid the added stress of terminating a certain someone so early on. It sounds like you don’t think listing too high completely poisons my sale since I was starting to think to delist and wait until next spring and start appropriately low to get multiple bidding. Cheers.
RE: Kary L. Krismer @ 60 –
Kary I’m asking for a friend.
RE: screenname12345 @ 67 – The point is we all know it’s about a property listed by another agent. That means it’s not hypothetical.
Thanks for the report. We’re seeing a very strong spring market here in my area of Florida as well.
RE: Kary L. Krismer @ 68 –
The property is unknown and the advice is general to all who read it. We have so many tools at our disposal these days . It’s a lot easier to be right than back when I started and we only had “MLS books” once a week. :)
This lists the top ten states with the highest RE tax rates, and of course Washington isn’t one of them. But if you scroll down there’s an interactive map where you can move it to see Washington. We are in their lowest grouping (blue).
http://realtormag.realtor.org/daily-news/2017/04/06/10-states-highest-property-tax-rates?om_rid=AADdSv&om_mid=_BY5okwB9ahlVBH&om_ntype=RMODaily
RE: ARDELL DellaLoggia @ 70 – Whatever. Not sure what modern tools has to do with it, but another area where we disagree. /shocked /sarc
By Kary L. Krismer @ 1:
It looks like the median will be just a hair shy of $600,000, so the late reported sales didn’t have much impact, because I was showing $600,000 back when I wrote this.
Active listings apparently less than 90% of the number of sales in March (King County, SFR), so we’re below one month of inventory.
Numbers from NWMLS sources but not all compiled by or any guaranteed by the NWMLS.
RE: screenname12345 @ 66 –
Try to be right by May 15 and you should be OK. Change the price to what you should have done in the first place. Do it once and stick with it through Sept. 1 before giving up. Just pretend it’s day 1 today. It’s still early enough to get it right before it’s too late. By April 15 even better than by May 15. Do it right, right now, and then have some patience. No one knows if not getting it right the first time is a death knell or not for this season. Shouldn’t be though. Best of luck!
By Ardell DellaLoggia @ 63:
This is genius btw. So we are at 7% and there is a lower verbal offer so far. It’s still there but thinking ahead in case its officially not.
The subsequent info on dates is also very useful. You have definitely earned my respect on here Ardell.
RE: screenname12345 @ 75 –
Good news about the ember in the fire. If you have to go with the price drop try a “will look at offers on” with it. I have seen that work on a 2nd or even 3rd go round. Creates a sense of urgency even if it only works on someone you already have in your sights.
At this point if you get one good offer…make the most of it. More than one usually needs 10%+ net favs. At 7% don’t sweat the small stuff. Don’t screw it up over something you will look back at regretting “negotiating” about. Give the current ember a week to 4/15 to get it on paper before going the price reduction route.
I appreciate the kudos from both you and kmac, but honestly I haven’t managed so stay in this for 27 years by being wrong much, even though Kary thinks I’m always “wrong”. LOL! Clearly my clients don’t feel that way at all.
Do keep us posted and put up a link or send it to me after it closes.
RE: Ardell DellaLoggia @ 76 – Leave it alone Ardell. No need to mention me by name. You are often wrong, but you don’t understand even basics and in any case you really want me to go into the many different examples.
This morning I received one of those emails some agents send to other agents, and the focus of this email was somewhat refreshing. It specifically mentioned that the seller wouldn’t be trying to force inspection practices, and also mentioned no transfer of earnest money prior to closing. I was a bit shocked by that last one, particularly given the price range of the property. It was well below median.
I must admit I’ve never seen some of the most risky practices others claim exist, such as a seller expressly prohibiting a buyer doing their own inspection. But on the topic of earnest money transferred prior to closing, that would be an area ripe for agent error.
RE: screenname12345 @ 75 –
I am writing one that is currently at 18% net favs. It takes the guess work out for buyers as well. Bears repeating.
Favorites minus x outs divided by total views.
5% but not 10% hopefully one not full price offer negotiated to conclusion by day 30.
10% = 1 to 3 offers in first few days
15% = 5 to 9 offers
20% or more net favs = a crap load of offers in the first 72 hours twisting your arm not to wait until the review date to respond.
There is no exact science but this method has worked with almost 100% success for me for the last few years, both when I’m on the seller end and when I am on the buyer end as to setting appropriate expectations and writing and responding to offers accordingly.
Internal stats tell me how many agents are sending the listing to active buyer clients and how many of those took the time to look at it and how many times they looked at it.
In both cases the stats daily for the first few days are more telling than looking back at the stats for a stale listing. Zillow view stats are meaningless, but I look at them anyway.
Important NOT to use a Redfin link on facebook. It screws up your stat count and I make my sellers promise not to do that! OK to use a Zillow link to share with friends and family and post on facebook, since the result is of no value anyway.
It’s not “a crystal ball” but close! :)
RE: Kary L. Krismer @ 78 –
The last time I saw the seller say they were going to allow inspection contingency and not consider no inspection a plus…I wrote it with no inspection contingency and won.
Be careful what you wish for…sometimes the seller agrees with their agent…until push comes to shove.
By Ardell DellaLoggia @ 80:
Okay, so you did something very risky for your client, and the seller did something very risky for their client. Is there supposed to be a message there somehow?
And you’re admitting to that publicly? Wow. You really don’t understand risk at all do you?
Per this NWMLS page, both King and Snohomish are below one month of active listings, but that throws in both SFR and condos.
http://www.nwmls.com/library/content/marketupdates/NewsRel2017/PRTables_Mar17.pdf
Same disclaimer about numbers not being guaranteed, and in this instance I have nothing to do with them either.
By Ardell DellaLoggia @ 76:
My thinking is to take off market and wait for better weather in a few weeks since that matters for us. Will def do the “taking offers on X date” as you suggest this time since I intend to do an aggressive price drop so we are under the market like everyone seems to be doing on the houses I see under $1.5million.
Your experience is shining through in your suggestions! Cheers.
Hot off the press – going to need to reach deeper into the old piggy bank to buy digs around here.
http://www.seattletimes.com/business/real-estate/seattle-home-prices-hit-700000-for-first-time-after-doubling-in-five-years/
RE: Kary L. Krismer @ 71 –
Just because our property tax is comparatively low doesn’t mean that it isn’t too much.
And don’t forget that many of the other states make up for it with the sales tax and income tax.
RE: Kmac @ 85 – It is not really useful to compare tax rates anyway. What matters is the actual tax paid. Areas with high real estate prices are going to be able, if they choose, have lower rates generally, because the overall cost of government depends on many other factors besides real estate prices.
RE: jon @ 86 – Yes, but also higher tax rates will result in lower prices–all other things being equal.
RE: Kmac @ 85 -Yes, but we don’t have an income tax. So a relatively low RE tax rate and no income tax. Those two factors should be important for high income/high net worth individuals.
This kind of sums it up.
http://www.seattletimes.com/business/real-estate/seattle-home-prices-hit-700000-for-first-time-after-doubling-in-five-years/
——————–
“King County’s median single-family home hit a new high of nearly $600,000 in March — about double the prices seen at the bottom of the housing bust five years ago, according to monthly figures released Thursday.
Prices jumped more than 7 percent from just a month prior, the second biggest increase in the last three years.
In Seattle, the median price for a house hit $700,000 for the first time. Prices in the city have also doubled in the last five years, and have climbed $60,000 in the last year.
——————–
How is that even possible? Seven percent in a month?
More detail on page 2 here:
http://www.northwestmls.com/library/content/statistics/KCBreakouts.pdf
It seems to me that with the very limited number of listings that we are seeing a shift in the mix. The older houses are sold off-market directly to builders, and the resulting new or renovated homes are driving the median MLS prices higher. The houses in the middle are stuck in seller gridlock.
RE: jon @ 89 –
I am not sure what being stuck in seller gridlock means.
But today I got one of those, “Look what I did for my clients!” letters that crowed about selling for above asking price. The first one was $100K over, the second one $200K over and the third one $300K over. And they all started from what seemed to me as reasonable asking prices.
Seems like that is more of a racetrack rather than gridlock.
RE: Deerhawke @ 88 – 18% in a year on the Eastside. Hard to believe.
RE: jon @ 89 –
“The older houses are sold off-market directly to builders…”
That has always been true for as far back as I can remember, except for the years when builders weren’t buying anything.
RE: Kary L. Krismer @ 81 –
The kids don’t like it when Mommy and Daddy “fight”. 27 years…I think I know how to “manage” risk for my clients. A wise broker once told me it is not our job to “eliminate” risk. It is our job to “manage” it for our clients. I do that very, very well.
By Deerhawke @ 90:
Those types of bidding wars are happening because there are so few sellers. The reason there are so few sellers is that they don’t want to be a buyer in this market, or worse yet a renter. Hence gridlock.
RE: Kary L. Krismer @ 77 –
kary = dbag
how many properties did you sell in 2016, mr. right?
By kenmorem @ 95:
Define sell–buyer side or seller side? Number of transactions or dollar amount? Any way though, my wife and I (you need to look at both together) probably do better in that regard than any other agent who posts here even semi-regularly, except probably Marc. That WaLaw model is a fantastic model for listings, particularly in this market.
But what does quantity have to do with quality? If your criteria for looking for an agent is quantity of sales (either number or dollar volume) you’ve got the wrong criteria. So that is all I’m going to tell you, even though I do well in that regard. It’s irrelevant.
Buy hey, how do you think Ardell protected her buyer client having them buy a property without an inspection? How do you think she “managed” that risk to use her terminology? We’ve only had one buyer go without an inspection in over 10 years, and fortunately that buyer’s lender required one. A buyer not having an inspection is incredibly risky. Even relying on a seller’s inspection is risky. But Ardell comes in here and brags about it, and then claims she managed the risk. She just doesn’t understand the risk.
I think we’ve only had two seller transactions where the buyer didn’t do an inspection. One was before the Douglas v. Visser case and the buyer was a contractor who wanted to tear the place apart. The other the buyer had an inspection contingency, but didn’t do an inspection. Nothing we could do about that.
Ardell doesn’t even know how to protect her seller clients. She thinks removing the low appraisal language from a financing contingency eliminates the seller’s risk of a low appraisal. She claims she has an attorney’s opinion on that matter. That is not impossible, but very unlikely, and almost certainly not the opinion of a real estate attorney. What you have in that situation is a transaction with a financing contingency and no pre-agreed terms on how to possibly save the deal if a low appraisal prevents the buyer from getting financing. No big deal–the parties can always agree to something after the fact. But Ardell’s thought that the seller doesn’t have to worry about the appraisal is just plain wrong. Too low of an appraisal and the buyer cannot buy the property because they cannot get financing, and they get their EM back under the financing contingency (assuming no other issues).
Here’s a clue. Why do you think Ardell blew up after that first video on risky buyer/seller/agent behavior? Do you think it’s maybe because she went over her past year or two of transactions to see what was risky by that criteria? That’s what I did, and I was pleasantly pleased. I suspect if Ardell did that she would be shaking in her boots, but for the fact that she is incapable of understanding or recognizing risk.
But hey, let me turn it around. What do you think I’ve said here that has been wrong? Give one example (one where I haven’t already admitted error).
By jon @ 94:
I would agree that there are so few sellers due to some of the things you mention. But I put bidding wars occurring on the buyer side.
We’re down about 450 active listings from the March stats of last year, but had about 450 more sales so far in 2017. (Both King County SFR). That’s coincidence, but I think it shows this is more a problem of too many buyers than too few sellers (although changes either way would obviously help).
Going back to 2016, we lost about 1,750 units of inventory over the course of the year. But during 2016 about 6,000 more houses sold. (Again King Cty SFR). So again, buyer pressure was what’s driving things.
The thing is, we pretty much know how many sellers there are, as well as the number of sellers who sold and buyers who bought. What we don’t have a good handle on is how many buyers there are who have not bought. All we have for that is stories of how many buyers bid on certain properties. I suspect the number of buyers who look at a minimum of at least two houses in a given month would be shocking if we knew what it was.
Numbers from NWMLS sources, but not guaranteed or compiled by the NWMLS.
RE: Deerhawke @ 88 – That MLS table explains part of it. Condo sales are a lower median price and they went down in sales while sfh went up. So sales mix is playing a part. This is why case Schiller is a better measurement than median price
RE: S Sounder @ 98 – Most of the NWMLS stats posted here are just SFR, not SFR & condo. I would agree the combined stats are not that useful, but the NWMLS had a link to it, and it showed the less than a month’s supply of inventory figure, so I used it.
FWIW, there is well less than a month supply of condos in King county, so both SFR and condo are below a month. I haven’t looked at the break down in Snohomish.
As to C-S, it is still affected by some types of mix, but perhaps not a mix in the price range of properties sold. But it was clearly affected by the mix of short sales and REO transactions.
RE: Kary L. Krismer @ 99 –
If the contract removes the appraisal language it is somewhat ambiguous, but the court will ask what was the intent of removing the language. With the court understanding the appraisal language was deliberately removed, and agreed upon by buyer and seller, without coercion or undue influence it could be seen as consideration from buyer to seller for accepting their offer in multiple offer transaction. Instead of providing more money buyer provides less risk to seller and thus consideration exists for removal of contingency. Appraisal contingency seen in light of its deliberate removal and acceptance by seller and buyer could require the buyer to come out of pocket with whatever is the difference to secure the loan. The buyer would likely be required to forfeit ernest deposit if they didn’t come up with the required 10 or 20 percent down for loan. The court could decide that by buyer consideration of removing appraisal language and then not supplementing the difference between appraisal and contract amount buyer is in breach of contract. No differently than not putting the required 10 or 20 percent down to secure the loan or not providing documents required to secure the loan, or anything else the bank requires of them to secure the loan. That is certainly one way the court could decide. To decide the opposite would require the court to interpret that removal of the appraisal language had no substantive meaning and no consideration was provided. I”m not an attorney or a real estate broker but i find that conclusion difficult to reach from the facts as provided.
RE: Kary L. Krismer @ 96 –
And they say one can’t argue with success. You could argue with a brick wall. What the heck is your problem? Do you really have so many transactions failing on home inspection? Failing on appraisal? I certainly don’t. Your life must be a nightmare of terrible things ready to leap out at you if you don’t heavily arm yourself to protect against them. Are the areas you sell houses in such terrible dens of massive problems? Find better neighborhoods to work in man. You’re trembling in your boots.
I’m going on vacation…to the beach. Talk to the hand.
I don’t necessarily buy into the importance of “transparity” in taxes, but this study lacks Washington as next to last, primarily because it’s difficult for people to know how much they pay in sales tax each year.
http://www.seattletimes.com/seattle-news/data/washington-state-ranks-nearly-last-in-new-tax-transparency-index/
RE: Panda @ 100 – I wouldn’t necessarily disagree with all of that, and as I’ve often noted with most legal issues you’d come up with different results if you argued the situation in front of ten different judges. This is probably one of those. But the problem is if you’re talking about “the court will decide” the parties have already lost. Being involved in litigation is stressful, expensive, and with the attorney fee clause, very risky. So perhaps I did overstate it in claiming that the buyer could get their EM back, but I don’t think I did overstate it by claiming it does not eliminate the seller’s risk. If anything it increases their risk because it increases the chance of costly and stressful litigation.
That is one possible interpretation, but unless the buyer has enough funds to buy the property for cash, it’s difficult to believe the parties intended the buyer to put up whatever cash is necessary at any appraisal value. But I think that is exactly the interpretation of the agents who remove the language.
Not quite. It just means that they didn’t agree to the process that occurs if a low appraisal occurs. It’s exactly the same thing as what happens when people use the new low appraisal form. Those exact same provisions are eliminated and different terms are agreed to. Removing the language clearly means those terms are not agreed to, but it does not mean something else was agreed to (buyer loses EM if appraisal results in their not performing). If that was the parties’ intent, it should clearly be spelled out to avoid the costly litigation situation I spoke of first.
And finally, don’t forget the contract still clearly says that it is contingent on the buyer being able to get financing. The seller will need to get around that language. And they’d probably have to also counter the expert testimony of the attorney who is clearly one of the most respected experts in the area of what the forms mean.
https://www.youtube.com/watch?v=ME6g-BnmnVo
By ARDELL DellaLoggia @ 101:
LOL, you must have a different definition of success! But I guess you have to keep up appearances for your followers, right?
I guess I would have ask you how you would possibly have many transactions fail on inspections when it appears you don’t frequently do inspections? I looked for that transaction you mentioned where the seller said inspections were okay, but you didn’t do one, and I couldn’t find one but it was in part because you seemingly go straight to pending a lot! An incredible percentage. Now maybe there are pre-inspections, I’d have no way of knowing that. But to the extent you’re relying on seller inspections, or allowing your seller’s buyers to buy without any inspection, that is very risky.
Seemingly I need to spell out what risk is for you. Risk is the consequences of something happening multiplied by the chance that that something will happen. And the risks you want to avoid are the risks that are the most expensive, even if the chance of their occurring is low. So a 70% chance that a water heater will need to be replaced in the next two years isn’t the biggest concern in the world, unless maybe the water heater is in a location where it leaking would cause significant damages. It’s a couple thousand dollar item. But items like defective roofing, siding or mold in the attic can be much more expensive to fix. In the Douglas v. Heller case the defects were so significant they apparently made the house a tear down. Those are the types of risks that need to be avoided, and the types of risks that a proper inspection is likely to find. And a buyer being present at that inspection, to see exactly what the inspector is pointing out (e.g. failing composite siding) is going to leave the buyer much better informed than merely looking at a seller’s inspection that shows one or two pictures of the failing siding.
I’m proud of the fact that virtually all my buyers have done inspections and that I’ve been able to get buyers into contract in this market with inspection contingencies. You’re proud that you got a buyer into contract without an inspection contingency. That’s the difference between you and me in a nutshell.
RE: Panda @ 100 – Panda, one more point on that. Agents are authorized to select and fill out standardized forms prepared by attorneys. They are not authorized to create their own forms or to modify the existing forms. At one of my prior offices an agent during an office meeting suggested adding or deleting the word “not” to/from a form in an attempt to reverse its meaning. The person conducting the meeting practically jumped out of their skin to emphasis that was not allowed. That was for one word, not multiple paragraphs.
The consequence of that though of that behavior is that in the event of the lawsuit between the buyer and seller, the agents on both sides will almost certainly be either included from the beginning or brought in as additional defendants. So the removal of the low appraisal language doesn’t just increase the risk to the buyer and seller, but also to their agents. And perhaps that’s for the good, because it’s the agents’ questionable practices that got the clients into that situation in the first place. So hopefully the agent will either be covered by insurance or otherwise not judgment proof. So possibly the agents’ questionable practices could conceivably allow both the buyer and seller a complete recovery (less compensation for the stress).
I interrupt a number of great posts to bring you…….the Kary and Ardell show!!!
It would be better to put the affirmative language in contract that it is not contingent upon appraisal. If it went to court it could likely be determined the buyer is in breach of contract if they do not provide difference just like the requirement of the down payment to secure the loan. The bank isn’t saying you cannot get the loan and you don’t qualify anymore than saying you don’t qualify for the loan if you don’t provide required documents or down payment. The title companies job is to execute the contract as written. So it is important for the real estate agent to provide the title agent explicit language so they don’t punt the ball with transferring the ernest money to seller immediately upon breach. If that occurs the burden is on the buyer to prove in court that they should get the ernest money back.
RE: GoHawks @ 106 – Maybe I mis-counted, but I think only four of my posts were in response to an Ardell post, and one of those was asking her not to call me out by name when it’s not necessary.
I don’t enjoy dealing with the nonsense that is Ardell, but I don’t want gullible people to fall for her nonsense. It bothers me that I feel constrained not to respond to Screenname too, because he/she is clearly in that camp that believes Ardell’s sales spin. But by countering her nonsense I don’t want to be creating a situation where I am interfering with another agent’s listing (something which Ardell is clearly comfortable doing).
When the market was in the dumps in 2008-2011, it seems like appraisers were gun-shy about valuations. The reason? Instead of taking responsibility for their own actions that led to the crash, the banks blamed the appraisers for it. Not our fault– it was the appraisers and the builders and ..ummm…. the consumers. So the banks really leaned on appraisers to be conservative or else lose their business.
Coming out of the recession was a bit worse. The market had fallen pretty far and so backward- looking comps from the past 3 or 6 months were out of touch with the reality of a moving market. We heard a lot about the problem of low appraisals in 2012 and even into 2013.
But since then, even in a rapidly moving market, it seems to have become less of a problem. I talked to my favorite mortgage guy last week about this and he said he agreed with this assessment. Is that the way others in this market see it?
By Panda @ 107:
Agreed. Or alternatively I recently used rather simple language which said the low appraisal provisions wouldn’t kick in until a price of X, and that the buyer would bring in additional funds. If that’s what the parties were intending, that would be fairly easy–although still subject to the unauthorized practice of law concerns.
Not sure how likely, but certainly possible.
I would agree with the first sentence. I haven’t thought about who would have the burden of proof–but it may not matter. Unless the court gets into parol evidence of what the parties intended (looks outside the contract language) the court is going to interpret the contract as a matter of law based on the contract language. There won’t be any disputed relevant facts. If the court interprets the contract the same as Annie Fitzsimmons and myself, the seller would lose as a matter of law.
I say burden as a practical matter, not a legal one!
RE: Deerhawke @ 109 – It really is situational dependent, and that makes it necessary to identify the situations where appraisals will be a problem. Preferably before listing a property or a buyer writing an offer.
I’ve noticed that appraisals seem to be more of an issue with certain condominiums. Within a condominium you can have very similar units and also an identical HOA financial situation (appraisers can and do ask for resale certificates). So if you have two recent sales of similar units in the complex the appraiser may be very reluctant to make adjustments up to the contract price from the price those comps would indicate, but they will make greater adjustments to the comps outside the complex (or select other outside comps that are more likely to support that value). I even saw one appraisal where the appraiser used a transaction that was almost a year old as a third comp, because it was in the same complex. That’s the only time I remember seeing an appraiser use such an old comp. Surprisingly though, they didn’t adjust that value due to market changes over the period of a year. I don’t want to go into too much detail on that transaction, but it was one where we saw the issue with the appraisal in advance of making an offer. It wasn’t a surprise and the appraiser’s value was exactly $1,000 different than the value we told our buyer prior to the time they made an offer, and over 10% below the seller’s original list price.
What that means is that if appraisers are consistent, it will be more difficult to get increased appraised values on condo complexes where there have been two or more sales of similar units within a year, unless the buyer(s) of those other units either paid cash or had additional funds such that appraised value wasn’t a big concern.
With houses there are typically a lot more items that the appraiser can adjust on the comp, AND the appraiser may be able to look at comps where the buyers were putting down more money than necessary to get financing. So they are going to be more willing and able to find comps to support the contract price because there will be properties out there that sold for crazy prices. They basically have more latitude in selecting comps.
RE: sleepless @ 31 –
Kansas City Has a Smaller Unemployment Rate
Than Seattle.
RE: Panda @ 111 – Okay. I will say that earnest money fights are a burden for both a buyer and seller, and something to be avoided! ;-)
By Merritt4 @ 40:
Because it is a global RE bubble. Look at Canada, China, Australia, UK, etc. RE bubbles everywhere, it is not just Seattle and SF, even Spokane is in bubble, if you take into consideration their incomes and lack of jobs. We live in a global debt bubble, this is what drives the demand thru the roof, it is not real people buying.
RE: softwarengineer @ 113 – The jobs report today was pretty bad. So much for the Trump bump. Dismal is the word to describe it.
By Ron @ 56:
The higher home prices not only bad for new home buyers, but also for existing home owners as it makes harder to move up. Even if you are not a move up buyer and just want to sell, unless you sell not your main residence, you need to move somewhere. Higher home prices usually drive rents prices higher, meaning you are still worse off paying higher rent. Ever increasing home prices is a zero sum game. It is not good for the economy.
By Kary L. Krismer @ 116:
It looks like actually quite a strong jobs report that was affected by a statistical anomaly that was due to a a snow storm.
http://abcnews.go.com/Business/wireStory/us-employers-add-98k-jobs-rate-falls-45-46647845
RE: sleepless @ 115 – The “debt bubble” your referring to is not the same as 2007. Mortgage debt is actually trending down.
http://www.calculatedriskblog.com/2017/02/mortgage-debt-as-percent-of-gdp.html
House hold debt is also still trending down.
https://fred.stlouisfed.org/series/HDTGPDUSQ163N
The debt increase is on the business and government side. Don’t expect a repeat of 2008. History doesn’t repeat, but it does rhyme.
https://www.forbes.com/sites/johnmauldin/2016/04/18/us-nonfinancial-debt-rises-3-5-times-higher-than-gdp/#2fef82b17f40
By Deerhawke @ 109:
Not just gun shy but being monitored closely by the feds with a lot of new restrictions after the massive appraisal fraud that occured during the boom last decade. Not sure how it is now but in those years you heard alot about it.
RE: jon @ 118 – I don’t generally buy weather related excuses, but that article is not clear. It almost makes it sound like the weather affected the survey itself, not that the jobs were low due to snow. I guess if that’s the case there will be adjusted numbers in the future????
RE: sleepless @ 117 – And that is a truth that is rarely mentioned here. Over the long run, real estate is a mediocre investment at best, especially when one properly tracks all maintenance and improvement costs – something that people tend not to do.
The real financial benefit of owning one’s personal home is that it does act as an inflation hedge and precludes the owner from paying rent, the latter is sometimes a good thing, and sometimes not so good. I do feel a modest amount of real estate belongs in any portfolio.
The problem with high home prices is that you have people forced to go “all in” on their primary residence. At the end of the day, they have little left to invest in other areas, especially retirement. They are stuck with a single monolithic investment that barely beats inflation over the long run.
Don’t believe me? Ask the millions of Baby Boomers who are reaching the end of their working lives and wondering how they will make ends meet in retirement. The went all-in and it failed them.
By wreckingbull @ 121:
Did they really go “all in” as much as people have to now days? If the majority of them bought in the 80s/90s, then I’d say they probably fared pretty well in the house purchase, just didn’t save the rest of their money wisely.
RE: wreckingbull @ 121 –
Don’t believe me? Ask the millions of Baby Boomers who are reaching the end of their working lives and wondering how they will make ends meet in retirement. The went all-in and it failed them.
__________________________________________________________________________________________________________
Wreck – I think you make a valid point about some baby boomers. It depends how they went about it.
If a typical baby boomer couple or individual had bought a “normal” or “average” house some 25 – 35 years ago, held on to that house over the years, didn’t use their house as a personal bank account, and made other reasonable and responsible investments for retirement over the years, then they will have made out well. Their monthly mortgage payments are reasonable compared to the present expense of a house or rent, and their property has increased in value.
If a typical baby boomer couple or individual had bought a “normal” or “average” house 25- 35 years ago, pulled money out of it each time it increased in value to pay for all sorts of other goodies, remodeled it to the hilt with the latest remodel schemes to the point the house can be in a magazine, or move up from the “starter” house to a much bigger (with bigger mortgage and taxes) house (with the need to buy more “stuff” to fill it with} then perhaps some of these folks will have an issue of being house rich and cash poor in their “golden” years.
While dropping fifty to one hundred thousand dollars on a new kitchen sure makes it look nicer, the tastiness of the dinner is still dependent on the one who is cooking it, not how pretty the kitchen is. But paying for that kitchen in retirement does decrease the number of dollars available for other things.
At least inventory is starting to recover and make it’s annual trek back up. Estately now says we’re at 1681 units for sale, up from the low of 1329 in February.
RE: Deerhawke @ 109 –
If the house doesn’t bid up excessively it’s a non issue. Often when it does bid up excessively it’s either all cash with no appraisal done or a high cash down buyer who doesn’t have to come up with additional money to compensate for the shortfall of appraisal. If the buyer is 35% down but approved at 20% down, you strike out the must appraise clause and have the leeway to be 15% short.
On my four so far this year, Jan. condo in SLU vicinity slight bid up, it appraised. Feb Bellevue $215k bid up, took the cash buyer who was also highest. No appraisal. Sammamish $107,500.00 bid up struck must appraise with a $100,000 commitment to shortfall. Needed $22,000 of that $100,000. Listed at 900k figured it would appraise at $965k to $985k. It appraised at $985k.
The fourth one is the exception and the hardest to appraise. A flip. Kirkland. Won’t have the appraisal until the 12th or so. No bid up. No alteration of must appraise contingency. Appraisers have trouble with flips if they use the same house purchase as one of the comps as in “you are your own comp at half the price”.
If the appraisal on your new construction had the tear down you purchased as a comp , is a good way to explain it. Flips are often short term enough for the cheap purchase by the flipper to be one of the comps on the appraisal.
Apologies if typos. On my way to the airport posting from phone.
RE: Panda @ 107 –
Panda, as an attorney, I think you’ve written a good synopsis in comment 100 of how such a case might go and if I were a betting man, my money would be on the seller. However, Kary is also correct that litigating that fact pattern is risky for both sides due to the inherent uncertainty of litigation and the presence of an attorney’s fees provision. As a result, a common and reasonable (but unsatisfying) resolution is a split of the earnest money.
My bet would fade to the buyer in at least one circumstance that your comment 107 touches upon. IF (1) the contract contains a 22A financing contingency with the appraisal contingency verbiage crossed out and initialed by both parties and (2) the property does not appraise for the purchase price and (3) the buyer is willing to cover the short fall BUT (4) the lender determines the additional funds depletes the buyer’s reserves such that the underwriting guidelines are no longer satisfied and therefore (5) the buyer does not qualify for financing and the loan is declined. In that scenario, the buyer was willing to and made a good faith effort to perform but could not obtain financing, the overarching financing contingency would arguably be triggered thereby protecting the buyer’s earnest money, i.e., it wasn’t really about the appraisal or at least not only about the appraisal.
The trier of fact (whether judge or jury), does not get to split the baby in these cases and must choose a winner and a loser. So, in your scenario, both parties might be sympathetic but only one would be losing cash directly out of pocket. Yes, it’s possible the seller will or has lost money because the next deal was for a lower price but that’s slightly more abstract than $20,000 sitting in an escrow account or the court registry. Further, if the seller went on to sell the property for the same, let alone a better price, then the seller is even less sympathetic.
I will say that I have routinely struck out the appraisal contingency when representing the buyer. It conveys a significant message to the seller and listing agent but leaves the door open a crack if things go sideways. For sellers, more specific language about the low appraisal short fall is valuable. Of course, as an attorney I can draft such language if needed and, more importantly, I can explain the risk to them and help them get a sense of the probability of the risk occurring. To that end, this is one reason why a buyer with 25% or 30% down is more valuable than one with just 20% down. There’s usually little pricing difference on the loan between 20% to 30% down payments and if debt to income ratio is reasonaly solid, it becomes more likely that such a buyer can incur a low appraisal without derailing the deal, i.e., they turn the original 70% or 75% LTV into an 80% LTV and allocate some of their originally committed down payment towards covering the short fall.
RE: Marc @ 125 – I also tell my seller clients that we don’t want earnest money – we want a deal that will close. To that end, vetting the preapproval letter, buyer’s agent, and loan officer as well as one can is very important.
Federal banking privacy laws restrict how much a loan officer is permitted to say but some aren’t too up to speed on those laws and will open their mouth pretty wide. And even those who know better can be presented questions in such a way as to allow them to convey quite a bit about the buyers’ financial and credit capacity. I have the advantage of being an attorney, a broker, and a former loan officer so I know those questions and more importantly, how to interpret the responses. Often times what they do not say is as or more important than what they do say. Thus, follow up questions are key and knowing when to be specific and when to be open ended.
RE: Deerhawke @ 109 – – I rarely fear low appraisal as there are some good ways to mitigate that risk even when the house gets bid up a substantial amount. First and foremost, remove the keybox and tell the buyer’s agent to tell the lender that the appraiser will need to call the listing agent for access. This provides the listing agent the opportunity to speak with the appraiser and find out what he or she already knows about the subject property and what she doesn’t know.
I have noticed two significant things one is pretty obvious and the other has a more subtle yet significant nuance. First, is that appraisers across the board are overloaded and have far more on their plate than they should. Every appraiser I meet or speak to by phone tells me that and that’s my first opportunity to get a good appraised value – I encourage them to tell me how busy they are because everybody loves to talk about themselves with anyone who will listen. Appraisers are no different and they’re accustomed to agents being jerks so I’m a pleasant change. I give them exactly what they want – you want go by a 8 pm Saturday night when I know the sellers are hosting a wedding party? Absolutely! I’ll confirm that time with the sellers so they know you’re coming – what number should I call you back at? This changes their whole tune because I’m not fighting them and I know I can always call them back to reschedule if the time really doesn’t work.
Then I ask if the lender sent them a good copy of the contract “because I know a lot of the time they don’t.” That’s true surprisingly often and it segues perfectly into “did they also send you the competing offers – we got four, and all of them escalated substantially over list.” Never mind that appraisers aren’t supposed to use competing offers as evidence of market value (which is ridiculous). I don’t need it in the report – I just need them to know that we got them and that I’m a good guy. One thing I’ve learned is that if an appraiser wants to hit a number, they will hit the number. My job is to help them want to hit my client’s number.
More often than not they’re telling me their life story and I’m oohing and aahing. Fortunately, I like hearing people’s stories so I don’t mind a bit. Ultimately, I end the call with “if you have any trouble getting in or with comps or anything, you’ve got my cell number, just give me a call.” If it’s going to come in low, I want to know before the report is sent to the lender so I have a chance to help him see the light. I don’t get that call very often but I have and more importantly, they almost always respond with “thanks a lot, I really appreciate your help.”
Bam! Now I’m a guy he’s inclined to help rather than hurt.
RE: Panda @ 100 – Ardell wrote:
Panda, this is a perfect example of what we were discussing earlier today. Here Ardell is claiming that the intent of striking the language is to have the leeway to be 15% short, because the buyer is putting 35% down. So she is saying that striking the language does not apparently mean to cover any shortage. The problem is if you merely strike the language the contract doesn’t say that.
But let’s say miraculously the buyer, seller and both their agents say that’s what was agreed. What does that mean? On a $1,000,000 property (number used to make math easy), does that mean that the appraised value can go down to $850,000? That’s 15% off of $1,000,000. That seems to be what Ardell said above. Or does it somehow mean an appraisal down to $812,500, which is the lowest appraisal value that a $350,000 down payment would support on a 20% down loan? Ardell’s comment doesn’t make that clear, and it’s probably not clear because 90% of buyers, sellers and agents wouldn’t think about that when they were making their deal. They think about the amount down, not the trigger price, which is the same mistake the drafters of 22AD made.
You know who is going to think about it and when? A buyer who gets cold feet when the appraisal comes in at only $825,000. They suddenly may not want to pay $1,000,000 for a house that only appraises at $825,000. And a seller at that point is going to think that they were agreeing to a price down to $812,500, because they will do the math and figure out that was the buyer’s real threshold on ability to perform. And thus you’re going to end up with a dispute over earnest money, particularly if it’s a large amount. Interestingly, the buyer there would be better off if the court did not agree with Annie Fitzsimmons and myself, and wanted to hear testimony of the parties intent. Because that’s the only way they would win is if the court believed them that it was intended to cover a price down to only $850,000.
Think those facts are unlikely? I’ve had a bid up transaction where the buyer couldn’t have performed at that same ratio of appraised value to contract price with 35% down, but fortunately the buyer was putting down about 50%, so even a significantly lower appraisal wasn’t an issue.
The point is, these things can and do happen, and you need clear contract language to cover all likely situations. If you don’t have that clear language you can end up in court. And simply striking the low appraisal language doesn’t make things clear. A couple of lines though would–simply indicating at what appraisal price the existing low appraisal provisions would kick in.
Got me another rental condo! I got pushed into shoreline near a strip club because of this low inventory.
RE: Kary L. Krismer @ 126 –
I thought we weren’t supposed to use each other’s names. :) My way works really well. Yours has a problem by your own account which is why you keep ragging about the deficiencies of the new form. Try my way. It works every time for me. The new way leaves the seller with less money in most cases. Not a good “fix” to a problem that didn’t exist in the first place. That’s why Annie refused to write the form for 18 months and someone else got suckered into doing it.
Some day after three decades my way may not work for me, but I doubt it unless I start going senile by then. It’s bound to happen eventually.
RE: ARDELL DellaLoggia @ 128 – Seriously? I just pointed out in detail how it doesn’t work and you still claim it works?
But the reason I used your language is it fit exactly in with my back and forth discussion with Panda earlier. Your language put in the context of an email to the opposing agent explaining how an agent thinks crossing out the language works is the perfect hypothetical showing why it doesn’t work. And it created yet another alternative result that neither Panda or I discussed.
Also, don’t call 22AD my way. I won’t use 22AD, and part of the reason for that is that it doesn’t clearly address who gets the earnest money in all situations. I’ve set forth one of the things I do, which is to specify a lower trigger price for the low appraisal provisions to kick in. That works, and doesn’t have the issues either your way or 22AD have. And with the new financing contingency form, which allows the option of the seller specifying a new price, it works even better than before.
I have often said that with the possible exception of the financing contingency form, that the statewide forms are fairly balanced between buyer and seller, but that they are also designed to prevent lawsuits. Part of the reason I won’t use 22AD is that I think it will lead to lawsuits–I don’t think that form was well thought out at all. But your system of removing the appraisal language also can lead to lawsuits because it creates multiple possible interpretations of what the form means, and possible situations where the result is unclear.
I know you almost certainly didn’t think of just striking that appraisal language yourself, but saw some other agent do that and thought: “That’s a good idea.” That’s the difference between you and me. I see agents do things like that and I think: “That’s incredibly stupid and ignorant.” It’s the difference between “monkey see monkey do” and actually understanding what you’re doing. Unfortunately far too many agents are in the see and then do camp, and that doesn’t serve their clients well at all. It does though provide Annie Fitzsimmons with more topics for her emails and videos.
RE: Kary L. Krismer @ 129 –
I’ve told you many times that I consulted an attorney very well known as a brokerage expert.
You keep talking about “seller specifying a new price”. There should be NO renegotiation of price in a multiple offer “win” situation. The seller keeps the Earnest Money and moves to second highest bidder.
If your end result is “winner” ends up at a lower price…wrong answer for the seller. From the buyer side I have done that, but clearly not better for the seller.
By ARDELL DellaLoggia @ 130:
For the benefit of others I’m not going to waste my time explaining why you’re wrong and what you don’t understand. I only used your language because it clearly showed the types of misunderstandings that can occur by agents doing things they don’t understand and then trying to explain what they think they’ve done.
kary. stop. you are annoying.
For those of you interested in foreign money washing into US markets, this article in the NY Times was informative:
http://www.nytimes.com/2017/04/07/opinion/offshore-money-bane-of-democracy.html?action=click&pgtype=Homepage&clickSource=story-heading&module=opinion-c-col-right-region®ion=opinion-c-col-right-region&WT.nav=opinion-c-col-right-region&_r=0
I am not sure how much of that money is coming to Seattle, but the East Side has seen its share of Chinese purchasers of high-end properties. I think most of the large-scale action is in NYC, Miami and LA.
For those of you interested in the direction of interest rates, there was this article in the NY Times a day or so ago.
https://www.nytimes.com/2017/04/05/business/economy/fed-minutes-interest-rates.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region®ion=top-news&WT.nav=top-news&_r=0
By kenmorem @ 132:
Right back at you.
But you still haven’t told me something that I’ve said that is wrong. Or said anything of any that is of any interest to anyone. But hey, don’t let the lack of any ideas stop you from posting.
RE: Deerhawke @ 133 – I can see that there would be money coming into the country, but “greedy rulers” doing that would seem to be rather risky. If I were a greedy ruler stealing money I’d probably put it in something that the US Government couldn’t freeze if discovered. And also some place I could quickly move it out of would also be better.
But clearly foreign money coming into the country could be yet another reason for rising prices.
RE: Kary L. Krismer @ 134 –
Kary, I’d appreciate if you can stop, I’m sure it’s not your intention but you’re destroying a good forum here.
I read this morning that Trump wants to repeal the Dodd Frank act. I don’t watch the news, so this was a couple months ago. I thought it was hilarious. We are repeating the same cycle again. We will have another bubble and collapse. I still think we will peak in 2024, but it really depends how long it will take to get rid of that bothersome Dodd Frank act. I think some people are smart enough to see that we are repeating the same cycle. Bubbles make people rich. That’s why I think trump is repealing the Dodd Frank act and others support him. Greed.
RE: Kary L. Krismer @ 138 –
Kary as a newcomer to this blog I would also appreciate it if you would stop. While you do add some informative information once in a while your childish non stop arguing is just too much. Relax please!
By Kary L. Krismer @ 139:
I doubt many here are interested in your view above. Perhaps the thread will still be well under 100 comments if you and Ardell just hold back a little or meet up at a Starbucks. Thank you.
RE: DBGT200 @ 142 – RE: AJ @ 140 – To state the obvious, once you read my name you can stop reading at that point. That’s pretty basic stuff.
To state more obvious, neither of you contribute anything to this site. So I don’t really know that it matters what you think. I certainly don’t care what people incapable of thought think. That would be rather pointless.
And to repeat myself, I do not enjoy dealing with Ardell’s nonsense either. I’d love it if she would just shut up on the legal and practice topics that she doesn’t have a clue about. So how about complaining about her? Or are you two one of the gullible ones who fall for her nonsense?
RE: Erik @ 141 – I also read that the administration may consider breaking up TBTF banks. So don’t jump to conclusion so fast. I notice that the press lately has difficulty reporting news and instead putting out too many opinion pieces.
Sleepless @ 115 and Deerhawke @ 137
http://www.economist.com/news/finance-and-economics/21718511-bolthole-money-welcome-comes-unintended-consequences-foreign-buyers
RE: Kary L. Krismer @ 144 – Kary, as you said yourself, risk is the value of some bad thing occurring times the probability of it occurring. Thanks to you, everyone on here gets that there’s some theoretical risk regarding the new form. Ardell, and many of the other readers, disagree with you on the probability. Simply repeating yourself over and over again with some corner case of a corner case to point out the size of the risk isn’t changing anyone’s mind on the probability of the risk. You’re just wasting your (and everyone else’s time). If it helps you, just think of teaching a pig to sing and from this point on we can all talk about things other than the risks of 22AD.
They Think We’re Made of Money
Property taxes up.
Car tabs tripled in cost for transit waste of money [the clogged freeways will get worse anyway]
Kent sales tax went up.
etc, etc…
Now interest rates going up too:
https://www.yahoo.com/finance/news/fed-rate-hike-affects-mortgage-credit-cards-student-loans-140524936.html
The following article is about the Canadian housing market. There are signs of bubble everywhere. Stretched market has a tendency to go further than most expect until it doesn’t. The end is usually abrupt and painful. Put on your seatbelt.
http://www.theglobeandmail.com/real-estate/toronto/canada-would-pay-the-price-if-torontos-real-estate-bubble-burst/article34639772/
P.s. The foreign money is moving east following the 15% tax hike in Vancouver.
RE: Marc @ 127 –
Good morning Marc. Catching up on reading comments with my morning coffee. Agree 100% and likewise agree with Panda’s comment. #100.
WA Assoc. of Mortgage Professionals is planning a BarCamp in July with agents invited. Will be interesting to get their take on how they are dealing with things from the inside.
Hope you are doing well and maybe see you there.
This is a few months old now, but interesting statistics on leverage at different price points in 2000, 2005 and 2015. 2015 is a mixed bag as compared to 2005, but we’re more leveraged now than 2000.
http://www.marketwatch.com/story/at-the-low-end-homeowners-are-even-more-leveraged-than-they-were-during-the-bubble-2016-10-17
By Anonymous Coward @ 147:
Well clearly you don’t understand risk, or even what I said above in post 104. It’s not the probability!
So apparently I do need to say it over and over again just to get you to understand. It’s not the probability, it’s the consequences if it does occur! It doesn’t matter that there’s probably well less than a 1% chance of ending up in litigation that will cost you six figures just in attorney fees, it’s that you don’t want to be in that situation (or even involved with any litigation) and want to lower the chance of that occurring as much as possible.
BTW, this is virtually identical to the insurance analysis. The risks you most want to insure are those which are very low risk but high cost if they do occur. Risks that are very likely to occur (e.g. going to the dentist twice a year) are going provide you little benefit in insurance because the cost of the insurance will be close to the damage.
Having clear language which covers situations is a way to avoid that risk. Having that clear language doesn’t cost you a thing. And removing clear language is pretty cheap too, until it comes time that the situation occurs where that language would have been applicable.
But hey, the choice is yours. You have go use an agent to buy a house who doesn’t understand that and enters into more risky transactions, or you can use an agent who does understand and doesn’t. Or you can carry that even further and remain totally ignorant if the issues using a “what you don’t know can’t hurt you” theory. Rational people though will want to be informed and want to lower their risk as much as possible, particularly when the cost of that is low.
By ARDELL DellaLoggia @ 126:
As much as I hate to link to another Ardell comment, this is not true. The last transaction I had with an appraisal issue my buyer was in contract well under the list price. The seller was completely unrealistic on price.
As I’ve said before, buyers should try to determine what they are willing to pay for a property without regard to the list price. They should base their offer on the comps, and then factor in what the list price is. List price is just a number the seller picked. Buying something for 5% under list doesn’t matter if the list price was 10% too high.
It’s similar with appraisal risk. You don’t base what you think the appraisal will come in at on what the list price is. You base in on the comps that you see.
By Marc @ 127:
Marc, I didn’t see your comments earlier. Why would you, as an attorney, do such a thing when you could easily write up a sentence or two specifying what price the low appraisal provisions would kick in? I could see if maybe your buyer was only putting down an extra $10,000 the lower price wouldn’t look all that impressive, but the lower the extra money down the greater the chance of a problem. Was it just because your buyer was willing to walk from the earnest money if the property didn’t appraise? If that’s the case, the litigation risk would be zero.
I must admit I once was involved on the listing side where the language was crossed out, but the loan amount was very low relative to the purchase price–less than 50%. Based on the comps there was basically no chance of a low appraisal that would affect the deal. And given the circumstances of the negotiations between buyers, that was the easiest thing to do, and not terribly risky.
By softwarengineer @ 148:
A couple of bright spots in the above report:
– if interest rates are going back up, the Fed will have more options the next time the economy slows and they need to lower interest rates to tweak the economy. Historically the Fed has usually kept interest rates higher – perhaps we are returning to normal times. Normal is good.
– a large percentage of older Americans are going to benefit from higher interest rates. Retirees often obtain much of their investment income from instruments that pay more when interest rates go up. For many retirees, the difference in their monthly income from higher interest rates from their CDs or bond ladders will be substantial.
-perhaps higher interest rates will encourage Americans to take on less debt. Too bad the federal government won’t get that message.
As to taxes always increasing – perhaps they will reach a tipping point that a significant number of voters will refuse to vote for any tax increase – no matter how noble the cause. I think ST3 has people thinking really hard.
Here’s a link to the fourth video in the series of risky practices, and if I had not posted the other three I would probably not post this. Probably more of interest to agents than buyers/sellers.
https://www.youtube.com/watch?v=yDRHzj7gOuc&list=PLsU-Dcv-PIXZ1SxR0yfh1mwOIoNN3V9ah&index=4
The topic is the offer not containing a certain five contingencies: (1) Title; (2) HOA review; (3) Insurance; (4) Septic; and (5)Well.
As Annie notes, these are not the biggest issues and don’t apply to every buyer. For example, most buyers don’t need a title contingency because they can rely on the standard language of the main contract. HOA review is a bit more problematic because all sorts of different issues can arise, but her example of the HOA having a special assessment for attorney fees is rare. It’s a complex topic I don’t want to get into. Insurance is also a rare situation where there would be problems, and I don’t want to state what our practices are there because I don’t want to be giving legal advice.
Obviously the well and septic only apply to certain properties. I’m not even sure you can transfer property in King County without a septic inspection that is current within the past year, so the video may not apply to King or other counties at all. The bigger issue on septic for me is the seller who has done the septic inspection prior to listing. That doesn’t allow the buyer to attend the inspection and doesn’t allow the buyer to know how bad the contents of the tank were before pumping. From the seller’s side the fact that there was a septic inspection saved the seller in the Alejandre v. Bull decision from having to pay over $30,000 of damages, and the seller was apparently also awarded their attorney fees. http://caselaw.findlaw.com/wa-supreme-court/1140990.html
RE: Eastsider @ 145 –
This is different eastsider. Replacing the Dodd frank act is necessary to have another crash. Deregulation of the lending rules is what caused the last crash. Trump wants to deregulate the lending rules. This is a big deal in terms of another bubble.
RE: Erik @ 157 –
Eric, I don’t think we will need to change Dodd Frank for another major correction to occur. The weight of household debt will work just fine.
By softwarengineer @ 30:
And your Roi in KC is? Prices are far less in KS, but sorry, I need the higher paying salary and possibilities in a city like Seattle to cover my wife’s student loan. That student loan rate and amount is the same no matter where you go in the country.
Mexico has oceans and fairly friendly people. Lived in kS for 5 years and it was close to unbearable.
By Deerhawke @ 9:
Do builders work with transit agencies and city planners to open up potential new areas? A large part of the problem in and around Seattle is efficient commuting out of Seattle to cheaper areas.
South Hill is being rezoned into high density and we’re just inside the rezoning. None of the information I have received about it gives a thought to people who live here at commute into Seattle each day. All they talk about are great neighborhoods, local transit, and lots of jobs from the commercial area which dont pay much, and may even wane in coming years because of automation. It all seems awfully short sighted.
RE: Kary L. Krismer @ 116 –
The Establishment GOP is Not Used to Real Work
They better be careful….including NWO slanted Progressive employees in Seattle….left slanted Rolling Stone recently accused Trump of draining the Swamp in Wash DC. True News….he is…its called, “You’re Fired” if you’re a Clinton Sanctuary City type.
The game is totally reversed now….support establishment amnesty and your career is short.
The victim is now the one who won’t work hard for skills and experience, not like the recently [before Trump], where the victim is identified as the one who lacks skills and experience….we need skills and experience to destroy the NWO establishment.
Yes Kary….until the establishment cowards are fired the Health care and tax reform is being obstructed by the open border Progressives and IMO the stealth Rinos too…
By ess @ 155:
RE: Kary L. Krismer @ 154 – In short, not all risks are equal and tradeoffs sometimes need to be made. Most of my clients are buying in prime neighborhoods of Seattle and the Eastside so multiple offer situations are common and the buyers they’re competing against routinely waive one or more contingencies. I don’t think most agents understand the risks their clients are taking and don’t explain those risks to their clients even if they do so the buyers are proceeding out of ignorance. That is a recipe for disaster for a certain percentage of buyers.
I, on the other hand, take the time to explain the significance of any contingency that gets waived and alternatives to waiver then let my client decide if the risk is acceptable. As for waiving the financing contingency and/or the appraisal component, I’m able to discuss it in great detail and in a manor specific to my buyer clients’ situation thereby helping them have a good understanding of the risks. Most of my clients have large down payments and significant financial capacity so their risk is not as great as a first time buyer using a 3.5% down FHA loan. I also strive to develop a good understanding of the comps and an educated guess on how low an appraisal might come in and how that would impact their financing. Again, the client is then able to decide if the risk is worthwhile or not. I treat every client and every individual offer as a unique entity that requires specific advice. As a result I’ve had clients waive financing and/or appraisal on some houses but not others.
One thing Ardell seemed to say that I don’t necessarily agree on is that appraisal gets waived in any multiple offer situation with escalating price. When I represent the seller I do see that frequently but not always. If a financed buyer with a compelling offer has the highest price, I don’t automatically toss it just because the buyer insists on keeping the appraisal or financing piece. Again, I try to fully assess the probability of the risk of the deal falling apart on that basis and let the client decide if the extra sales price is worth it. Often it is not but sometimes it is.
RE: Marc @ 163 –
“One thing Ardell seemed to say that I don’t necessarily agree on is that appraisal gets waived in any multiple offer situation with escalating price. When I represent the seller I do see that frequently but not always. If a financed buyer with a compelling offer has the highest price, I don’t automatically toss it just because the buyer insists on keeping the appraisal or financing piece.”
From the seller side (not the buyer side) yes. Highest offer with a must appraise clause doesn’t beat a lower cash offer or a lower offer without a vetted no appraisal contingency and no other legal outs. But usually it doesn’t hinge on that one factor, as the one with the “must appraise” still in usually has a crap-load of other legal outs…along with highest price. And yes, I do usually “toss” it, literally, out of the pile sorted down to “top 3”. But I give the buyer the benefit of the doubt as it could merely have been “the way their agent always does it”, so I don’t want a buyer to suffer unnecessarily for an agent’s inadequacies. Often I cover that before the seller is reviewing offers vs waiting for that to be a problem while we are reviewing offers.
From the buyer side, back in 2012 and 2013 it was more common to never strike the must appraise clause until the seller countered it out as part of the conditions for acceptance. But last year and this year that has not been as good of a strategy unless there are fewer than 5 offers. When I know it will appraise, taking out the must appraise is a no cost way to win, in fact more often than not that is the case. I don’t think knowing where it will appraise is a mystery within a reasonable margin.
It isn’t possible to always do it the same way as in always removing the must appraise clause, as not every buyer has the ability to waive a finance contingency. Some want to in order to win, but I can’t allow that if they don’t have the means to follow through with what they are committing to. Even if a buyer would instruct me otherwise, I won’t write an offer with a higher down payment than they actually have. Striking the must appraise clause for someone without the means to back that up is virtually the same problem.
Maybe, legally, I am “obligated” to write what my client wants me to write, but no. I won’t say they have the extra money if they don’t.
I never recommend taking out the Finance Contingency unless they could buy all cash, if needed. That does happen sometimes but rare. To me no Finance Contingency is reserved for cash offers. Pretending to be all cash by having no Finance Contingency doesn’t work for me.
To me no Finance Contingency and Non-Refundable Earnest Money deposit are far worse than no “must appraise” clause. Reserved for only if seller counters in that manner, which has happened. I’m sure we all differ somewhat and in multiple offers doing what others do as in “monkey see monkey do” is the exact opposite of what we do, since we are more in “differentiate or die” mode.
RE: Marc @ 163 – I think that’s one of the few posts here I could probably agree with every word of. Given of your attorney status I don’t have an issue with you striking the entire paragraph because: (1) You are licensed to do so; and (2) You are obviously in a position to assess the risks and convey that information to your clients.
But that still doesn’t answer my question. When representing a seller I consider it much better to pin down exactly what the buyer is required to do. So for me, assuming all other offer terms equal, I would view the offers to be preferable in the following order for $1,000,000 offers with 40% down:
1. No financing contingency at all.
2. A custom low appraisal form that properly identifies the trigger point at $750,000, but then gives the seller the option to accept a lower price at the correctly calculated value. (And deals completely with what happens to the earnest money in every situation.)
3. A financing contingency where there is separate language indicating that the low appraisal provisions don’t kick in unless the appraisal is below $750,000, but then reverts to the standard 22A language.
4. A financing contingency that strikes the low appraisal provisions.
Stated differently, I’m not seeing why you would ever think just striking the low appraisal language would present your client’s offer in a better light than the other three options which give the seller more information, more rights, and creates less uncertainty.
By Ardell DellaLoggia @ 164:
You are correct that you can’t just not use a financing contingency on a transaction that will be financed. There are easy options. You could use Form 22EF (Evidence of Funds) disclosing the loan your client intends to get, or simply disclose that in 22D. Failing to do that would place your client in immediate breach of contract and arguably be fraud.
That lets the seller know that your client needs a loan, but that the transaction is not contingent on the loan. You probably should add in additional terms that allow a lender required inspection if your offer does not have an inspection contingency, and if using 22EF deal with the timing of receipt of funds issue in some manner. There may be other things you would need to do, but I don’t want to think about that further at this time.
You also need use 22EF if your client is going to use a fully approved HELOC or even sell stock for part of their down payment.
RE: Kary L. Krismer @ 166 –
I don’t need to change what I do at all Kary, but thanks for trying to be helpful. Never in my FORTY Seven years of working in Banking and Real Estate combined have I seen a lender required Home Inspection.
I appreciate your clarifying in your comment 165 that how I do things is perfectly fine when Marc is doing it. I always suspected your arguments have been misogynistic or merely not wanting agents to be agents…unless they are also an attorney. But in all these years you have never been quite as clear about that.
Much appreciated.
Dear buyers:
please make sure you can produce valid ID at the time you sign your closing documents. If you can’t you won’t be able to buy your home. Your agent and loan officer should never neglect to inform you of this.
By ARDELL DellaLoggia @ 167:
Adrell, do you keep getting older and older at an exponential rate? In any case, I obviously have seen more things than you, probably due to the number and type of transactions.
Yes, part of it is due to Mark being an attorney. You are violating your licensing restrictions when you strike entire paragraphs or even words. I explained that above.
The other reason it’s fine when Mark does it is because he understands what happens and can explain that to his client (and also can convey the correct information to the agent on the other side). Basically he knows and understands what he is doing and you do not. It’s as simple as that.
I know this had been beat to death, but recent comments resulted in my thinking of yet another possible result option if the matter is litigated.
If it’s the buyer who strikes the low appraisal language in their offer that would more likely be construed to mean that the buyer loses their EM at a very low appraisal, than if it’s the seller that strikes the language as part of a counteroffer. It’s basically the rule that an ambiguous contract is construed against the party who made the proposal.
RE: Kary L. Krismer @ 23 – Right you are!! Spot on:) -RE Appriaser from Poulsbo