{"id":288,"date":"2006-07-12T22:07:00","date_gmt":"2006-07-13T05:07:00","guid":{"rendered":"http:\/\/seattlebubble.com\/blog\/?p=288"},"modified":"2006-07-12T22:07:00","modified_gmt":"2006-07-13T05:07:00","slug":"housing-appreciation-the-dirty-little-secret","status":"publish","type":"post","link":"https:\/\/seattlebubble.com\/blog\/2006\/07\/12\/housing-appreciation-the-dirty-little-secret\/","title":{"rendered":"Housing Appreciation: the dirty little secret"},"content":{"rendered":"

\"\"<\/a>First, I’d like to thank Tim Ellis for inviting me to discuss housing and escrow topics on this blog as a guest. Being that many readers of this blog want to demystify home ownership and aspire to become homeowners in a meaningful way, my hope is that our collective experience (wife and I) will be a resource of good, relevant and neutral information regarding buying, selling, fixing up property and escrow issues, our profession. We do not sell property or earn commissions, not that there’s anything wrong with that. The bulk of work sent our way is from Realtors and FSBO transactions.<\/p>\n

About us:<\/span> We have purchased three homes together since we were married, all fixers of various degrees. (ok, our first in Ballard was a tear down the size of a garage, but we had to start somewhere) We also have had the perspective of selling homes both as licensed Realtors a long long time ago and currently own Legacy Escrow Service, Inc. located in south Everett. My wife Lynlee and I met just after college where we attended at Seattle Pacific University. We have three kids and live way out in the sticks at a place the locals call Snohomish. There are a lot of trucks around here and cows and horses. My wife is much smarter than I am, but at least I don’t do silly things like pick Cherries on the 2nd- to- top rung of a ladder and break ribs because the ladder kicks out and she falls down on the ladder, like she did this past Friday evening. She reminds me that she’s really not talking in a sultry manner, it’s just that she’s having a tough time breathing.<\/p>\n

Moving along, we were discussing today’s work this evening at dinner and my wife reminded me of this oft forgotton but important topic. So, if you don’t like it then throw tomatoes at her. On a serious note, this is a very interesting topic and does have serious implications. So let’s get to it and debate it.<\/p>\n

Housing Appreciation: the dirty little secret<\/p>\n

<\/span><\/div>\n<\/div>\n

We’ll it’s not really a dirty little secret, but like my mother-in-law says about certain things taboo, “we just don’t talk about that.” One of the least talked about facets of home price appreciation and what we see on the majority of the purchase transactions we close that were 100% financed, is this little secret: It’s simply sellers jacking up the sales price to cover the buyers request for paying closing costs. The cause and effect: artificial appreciation and compounding that spirals house prices upward absent of fundamental economic drivers.<\/p>\n

Ok, fine you say. What’s the big deal. What’s the big deal??? Let’s discuss the ramifications of this because it is quite remarkable. In a recent transaction at our office a home (numbers are for example only) was listed for $450,000. It was sold for $458,000. The seller was quite happy with just accepting a full price offer, but here comes a very enthusiastic buyer that is qualified to purchase the home, but like many buyers, is cash poor. So the buyer and seller agree to artificially increase the appreciation of the home via a sales price increase that covers the closing costs for the buyer. While this appears to be somewhat routine, the inertia from compounding price appreciation from this sale and others identical to it, creates a domino affect that is hard to stop. Think about this. If our firm has closed 75 of these transactions (and we have) in 2006 alone, imagine what the title companies who dominate the market must be closing, in each county (King, Pierce, Snohomish etc…). Now think all across the state. Now think all across the country. The numbers could be staggering.<\/p>\n

Was the true market price of the home really nearly $460,000? The seller boasts that he got over the asking price and the neighbor down the street named Ted, says, “boy, since Roy got $460,000, I’m going to ask $465,000. The appraiser and\/or comparative market analysis (CMA) from the local Realtor shows only the sold prices, not<\/span> how they achieved the price. And, there we have it. All those homes that sold for over asking or were they? Not exactly.<\/p>\n

When Ted the excited neighbor lists his house with Mary, the local Realtor, for $465,000, they expect a quick sale. Just as they thought, here comes Joe & Jill Buyer, and they do the same thing and ask for the seller to pay closing costs and they increase the sales price to $475,000. Tongue-in- cheek, Voil\u00e0! the appraisal comes in at exactly $475,000. And this cycle goes on and on.<\/p>\n

A recent comment I placed on a post at the Seattle P-I Real Estate professionals blog<\/a> discussed this very scenario and the reasoning why my wife and I pulled out of a multiple bid situation in the late Summer\/early Fall of 2004.<\/p>\n

Regards,<\/p>\n

S-Crow<\/p>\n

Please read the rules<\/a> before posting a comment.<\/div>\n
\n
Seattle Bubble Tip Jar<\/a><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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