Seattle Real Estate Bells

The Short Sale Process

A Short Sale is where the market value of a home is less than the actual mortgage amount owed to the lender. How does this happen? In several ways actually. Because Seattle's Real Estate Market has been so strong the past few years and prices have increased so quickly that many people got into bidding wars and bid the price of a home up, something by as much as 10% to 20%. Then when the market recently corrected the home wasn't "owned" long enough for the usual appreciation to catch up with what was paid for the home. And in fact, the Seattle Real Estate Market has actually declined by an average of about 8% to 10% since September of 2007. So that $450,000 home that got bid up to $495,000 is now worth about $400,000. If the buyer did a zero down or a 5% down mortgage they are underwater so to speak with the property at this time. Also when you sell there are selling cost that can range from 2% (if you do everything yourself) to 9% of the selling price.

Now, if the homeowner has financial problems, like they loose their job, they get sick and can't work, or they got one of those very low introductory adjustable rate mortgage programs and have seen their mortgage payments increase substantially they are in trouble if they can't make their house payments. When this happens the home owner needs to contact their lender and try to work something out immediately. They need to try to re-finance or modify the mortgage program if they can but that can be a problem if the home value today is substantially less, or they can't qualify for a new loan because of new tighter lender requirements.

Basically what happens now is if the homeowner has lost their job and they can't re-finance and they can't make their house payments they will be in default of their mortgage when they become 30 days past due. At 30 days past due the homeowner will get a phone call from the lender telling them they are late with the payment and that there are now "late charges' they need to pay as well. After 60 days past due the home owner will get a certified letter telling them that they are in default of their mortgage and they need to bring their account current or the lender will Foreclose on the property. At 90 days past due the home owner will be served with a notice that they are in Foreclosure and this notice is now of public record and a Auction date will be set. The Auction date will usually be about another 60 to 120 days out. The last date the home owner can come up with the money to cure the past due mortgage and penalties and legal fees accrued by the lender is 11 days prior to the Auction date. At the 10th day before the Auction the homeowner has to pay the entire mortgage off plus penalties to keep the home. If nothing can be done by the homeowner their home will go to auction where about 20% to 25% of homes in Foreclosure actually sell. The homes that don't sell go back to the lender and the lender will then put the home back on the market to sell. The homeowner is out of the home, their credit is severally damaged and situation and consequences can just be miserable.

What are the options?

1. As mentioned earlier try to work out something with the lender right away

2. Try to re-finance the home with a different lender (that can be pretty difficult however)

3. Try to find the money from a family member to stay current on the mortgage

4. Try to sell the home, but if the home value is less than the mortgage amount then you need to orchestrate a short sale and they work about 50% to 60% of the time

5. Talk with an Attorney that specializes in Bankruptcy

6. Talk with a credit counselor to try to work out a solution

7. You need to take action and not be embarrassed, everyone has problems at on time or another

Everyone situation is different and the solutions may be different and difficult. Getting professional advise can save people a lot of problems in the long run. This is where people need to make sure they are working with people that know how to actually help. As we've said before, people don't go out and buy a home so they can get foreclosed on, but things happen and we need to make smart and timely decisions to obtain the best possible outcomes. If the home owner can't work out the situation with the lender (and that happens most of the time) they need to try to protect their credit as much as possible. While a short sale does have a negative impact on a credit rating in most cases it's much less of an impact than being foreclosed on or filing for Bankruptcy.

Got 5 Bedrooms?

This Rare 5 Bedroom Home in the close-in area of Olympic Hills in North Seattle is the best priced and best value home in the area. Built in 1998 by a well know and respected bulider, Kohary Construction.  This very large 2740 Sq Ft home is located close to Schools, several Bus Lines, Shopping, and Golf.  The Kitchen is huge and filled with light.  It has tons of storage and counter space and best of all...Gas Cooking.  The LIving Room is warm and inviting with Vaulted Cielings and a Gas Fireplace.  This home has a very functional floor plan with a Dining Room and 3 large Bedrooms and 2 full Baths on the Mian Floor.  The Lower Level is has a large Family Room that has been set up for a Media Room with a Large Screen and video projector.  Also you have two large Bedrooms down, a huge 3/4 Bath and a large Laundry Room.  The back yard is very private with a patio area, garden area, a hot tub, and a great play area.

This home was constructed using quality materials and workmanship and has been very well maintained.  There isn't anything to do to it except move in! 

 

13528 20th Ave NE - Olympic Hills,    Seattle

Bedrooms:  5

Baths:        2.75

Heat:         Gas Forced Air

Year Built:   1998

House Size:  2740 per KCR       Lot Size:   7200 per KCR     Garage:   2 Car Attached

Asking Price:   $479,000  that's just $174.82 a Sq Ft

Call or email us today for a private showing or with any questions on this great Home!

Short Sales and Foreclosures...Are They the Same?

Sometimes YES, and sometimes NO.

Lets start with the Short Sale. The term "Short Sale" is used to describe a sale of a home that is in a situation where there is more owning on the home than the property's market value. Depending on the circumstances of the homeowner (borrower) , a lender may be willing to agree to allow the property to be sold for less than the loan amount, or what is owed on the property. The homeowner may or may not however, be in a position of default with the lender, but there isn't any equity in the home.

A Foreclosure on the other hand is when the homeowner falls behind on their mortgage payments. After 30 days late, the home owner will receive a letter from the lender saying that they are in default of the terms of the loan and the payment with late fees are due now. If that payment is not made, then in 60 days, the home owner will receive a notice of Trustee Sale of the property if the back payments and late fees are not brought current and a Public Notice is issued and a Auction Date to sell the property is set, usually 120 days from the first notice of default.

People get into these situations for a variety of reasons and things just happen. People loose their jobs, they get sick, they got mortgage loans with adjustable rates that have gone up so high that they can't make the payments. All this, coupled with the fact that we are seeing property values drop and mortgage loan programs requirements tighten up, it's put some people in a very difficult situation and it's not always the persons fault, stuff just happens in life. But there are some good options out there.

Here are some Frequently Asked Questions about the Short Sale Process:

How Long Does a Short Sale Take? The process can take time. It can be several weeks or several months to get a short sale approved. Most lenders have several layers of management, insurers, and investors that will have to be dealt with in order to get a short sale approved. It can be a very time consuming and complicated process, especially if you don't do it a lot.

Is There Enough Time to Do This Before A Foreclosure? Maybe and maybe not. Just starting a Short Sale will not automatically stop the foreclosure, sometimes you can get postponements of the auction date however, to give you time to get the property sold.

Does This Always Work? It doesn't. No promises or guarantees can be made that it will work all the time. Once you fall behind on your loan the lender can proceed to foreclosure if they want to. But Lenders usually don't want to foreclose and , if effectively presented with smart, complete paperwork and good alternatives, Lenders will often agree to a Short Sale rather than foreclosure.

Will I Get Any Money From the Short Sale? NO! When a Lender agrees to a short sale, they require that the Borrower (home owner/seller) not receive any money from the sale of the propety as the Lender is going to take a loss on the loan.

What Is A "RELEASE?" A Lender may offer to "release" its security interest against the property in exchange for less than the total amount of the loan. A release will allow the home to be sold without paying off the obligations of the note. However, the note is not Satisfied. Advantages: This successful Short Sale will allow the home to be sold and thus avoid foreclosure. Disadvantages: The remaining debt on the property (usually called a "Deficiency") still exists. The homeowner is still liable for the note and still owes the money. Reality: It is not likely that the Lender will pursue to get a "Deficiency Judgment" against the seller unless they have other significant assets. And if you don't try a Short Sale and the property goes to foreclosure, you are likely to have a "deficiency" on any junior (2nd) mortgages you may have anyway.

Are There Any Tax Consequences? There may be if its an Investment Property, but most principal residence homes, with a mortgage under 2 million, may not have any tax consequences. You should always consult your tax professional on tax matters however. In December of 2007 the US Congress passed the Mortgage Forgiveness Debt Relief Act of 2007. Here is a link to the act: Mortgage Forgiveness Debt Relief Act of 2007

In closing today, Short Sales can work and work well if you know what you are doing, and you should alway seek professional advise to make sure you do. You also need to be aware that there are some people out there looking to take advantage of this bad situation...so do your homework! More to come on Short Sales and Foreclosures.

The Foreclosure Issues Facing Seattle Homeowners

It was reported last week that foreclosures have exceeded the 1 million mark nation wide. A vast majority of those however are located in just 4 states, California, Nevada, Colorado, and Florida. Washington State has less than 1% of all foreclosures nationally. But don't be fooled there are still people in Washington State that are at risk of foreclosure. Most of the foreclosures nation wide have been blamed on adjustable rate mortgages, when the buyer was offered a "teaser" rate then saw their house payment increase significantly over the next couple of years. We believe that some foreclosures in the Seattle area have and will be the result however of buyers paying too much for the home when they bought it over the last couple of years.

Seattle has been one of the last areas in the US to see any downturn in the real estate market. In the fall of 2007, we started to see our real estate market change and prices have fallen some and inventories have increased since then. There is still good activity however, and there are buyers ready to buy but sellers have to go about selling their homes much differently now. The latest foreclosure statistics have Washington State in about the middle of the pack in the US, ranked No. 27 for foreclosure filings in May 2008 according to RealtyTrac, which tracks default and auction notices and bank repossessions.

Washington State has seen almost an 18% increase in foreclosure filings compared to the same time in 2007 however, according to the report. Nationwide, RealtyTrac said foreclosure filings rose year-over-year for the 29th consecutive month and in May 2008 record the highest foreclosure-filing rate since the report began in 2005. One in every 483 households received a foreclosure filing during that month, according to RealtyTrac.

The Tacoma area, Pierce County, is #1 in the state for foreclosure filings, according to the report, with one in every 574 households going into foreclosure. Interestingly, though, that number was a 6% decrease from the same time period in 2007. The Seattle area, King County is #2, Clark County is #3, and Snohomish County is #4 in the state, as of April 2008.

A new law (in Washington State) took effect on June 12, 2008 intended to protect homeowners from foreclosure scams. See Washington State Adopts a New Statue that May Harm Distressed Homeowners

While this new law has many good parts to it, and will help protect people form equity skimming scams, it will also, most likely, discourage many real estate agents from helping homeowners facing foreclosure sell their homes. The new law also effects home buyers and depending on the situation the buyer may not want to buy a home that is within 20 days of the foreclosure date because of unnecessary but real liabilities.

There will be real estate agents in the Seattle area that will see an opportunity created by this new law and increased number of people going into foreclosure that will get involved with foreclosures, now called distressed homesellers. Some of these agents will do a fine job and others won't...so business as usual I guess!.

Stay tuned for several more articles on Foreclosures and Short Sales and some of the Do's and Don'ts to this very complicated process.

5 STAR BEST IN CLIENT SATISFACTION for 2004, 2005, 2006 & 2007

       

                                                

    

David & Karen Bell Voted Seattle Magazine’s “5 Star Best In Client Satisfaction” Selected By The End Consumer, for 4 Straight Years

"Your Clients Identified You As The Best!”

“David & Karen Bell are among less than 1% of Realtors in the Greater Seattle Area to have been awarded by Seattle Magazine the FIVE STAR Real Estate Agent “Best in Client Satisfaction” for the first 4 Consecutive Years this award was given. In 2003 Seattle Magazine hired a marketing and survey company out of Minneapolis Minnesota to determine which Seattle Real Estate Agents provided the best customer service according to the clients and others in the Seattle market place. How they determined who was chosen was by surveying:

1. Over 33,000 Consumers were Surveyed each year for 2004, 2005, 2006, & 2007
2. 31,000 Home buyers were Surveyed for each year
3. 1,500 Readers of Seattle Magazine were Surveyed each year
4. 1,000 Mortgage and Title Company Offices were Surveyed each year

Then Each Agent Was Scored and Rated for:

Customer Service
Integrity
Market Knowledge
Communication
Negotiation
Closing Preparation
Finding the Right Home
Marketing of Home
Overall Satisfaction

We are obviously very proud of this Achievement Award and we believe that the level of service and degree of knowledge we provide to our clients is unique and the Best in the Business.  Buying or selling a home today can be a very complicated thing, and people stand to make some serious mistakes if they don't have all the necessary information and insights.  While we ranked very high in all the categories, our highest rankings and that averaged well over the national and local averages were in "Market Knowledge" and "Negotiating" with "Integrity" and "Communications" a very close second. We want to make sure that our clients find the best possible homes to buy at the very best price and ones that will be a good investment over time.  We want to make sure our clients sell their homes for the highest possible price with the least amount hassle and expense.  We would look forward to discussing any of your real estate goals with you, just call us direct at 206.283.9100, email us at [email protected].  Success is a proven track record not just promises!

New Listing on Magnolia Understated SOPHISTICATION

Born in 2006 with the perfect marriage between Dovetail Construcon, Broderick Architects and David
Ohashi Landscape Design.  This is a very special custom home. Understated elegance with attention to every single drtail and designed with many Feng Shui elements that lead to a very vary warm, relaxed and peaceful feeling in the home. This is a true Custom
 Home, engineered and built to the very highest standards for design,livability, enginerring and most importantly...peace of mind!  Well Planned Custom Lighting throughout the Home is used to highligh Art Work and create a
wonderful inviting atmosphere when the sun goes down. Every light switch is on a dimmer to be able to dial in the exact ambiance desired.  The Kitchen has over head lighting and under counter lighting and wine glass cabinite with a window in the back of it also has lighting to created dramic effects in both and day and evening. The two Bosh dishwashers in the Kitchen areso quite you don't they they are running and having two dishwashers is wonderful when entertaining or just keeping all the dishes out of the sink and off the counters.  The Custom Built Double Pantry is huge and holds everything a gourmet chef could ever use and the cupboards and counter space are a delight to  have and...you have Sweeping views of Downtown Seattle, The Cascades and Mt.Rainier from the Kitchen Window.  The Kitchen is an impressive gathering place toped with Honed Sea Foam Grabite when entertaining or just sipping a cup of tea and watching the humming birds that live year around in the beautifully landscaped and light back yard.

Originally built in 1949 the brick rambler was completely torn down in June of 2005 except for the two brick walls  that now
accent the back patio off the Living Room.  The new home was expanded from 2800 Sq Ft to 4100 Sq Ft per the Architects Plans.  The Existing foundations were reinforced and new foundations were poured utilizing pipe piles every where the home was extended.  The home is virtually brand new with new everything.  The engineering of the home is impressive and the earthquake measures are extensive.  The finest materials were used from the framing to the stunning finish work and the builder, Dovetail Construction, painstakingly made sure everything was the wayit was supposed to be on absoutly everything.  Not details were too small.  No corners were cut anywhere with anything.  Dovetail holds a reputation as one of the finest quality builders in the area and they deserve that reputation.

Details, Details and Details everywhere. Pella Architectural Windows were used throughout.  They are metal clad outside and all wood inside.  Hand picked Cherry was used for the Custom Kitchen Cabinets and Den/
Office wainscoting.  The finish carpetner thgat did all that work was outstanding, a true craftsman.  A small but telling detail that is indicative of the quality is that the top drawers in the kitchen cabinets are cut from a single plank of cherry so the grains matches from drawer to drawer. Clear Cedar was used for the exterior with each end of the siding sealed and the top of every exterior surface has metal
flashing on top of it.  Brazilian Cumaru Hardwoods were used throughout the main and second floors.  This is extremely rich and dense hardwood that adds incredible warmth and personality to the home and really sets off Persian rugs beautifully.  Baldwin Hardware was used throughout the home.  The Powder Room is stunning with a Wall of Zen Glass, Light Fixtures from Italy, hand made Marble Sink from Israel that sits on a slab of Basalt that sits on a custom cabinet made from Wenge.  1 inch thick honed Granite was used in the Kitchen and the Living Room Gas Fireplace with remote starter.  The tile work in the Upstairs Bathrooms is as stunning as you will find and interior rooms are expertly painted utilizing a palate
of soothing colors that flow peacefully and beautifully from room to room.

New Construction Completed in May 2006
Builder: Dovetail Construction
Home: 4100 sq. ft. per Architect Plans
Lot: 6630 sq. ft. per KCR
3 bedroom on Upper Floor
Sweeping Views From West Seattle to Mt Baker, Downtown Seattle, Elliott Bay & Mt Rainier
2 Full Baths Up, 1/2 Bath on Main
3/4 Bath in Lower Level
Two Gas Furnaces one with AC
Large 2 Car Garage plus Storage
Private & Peaceful Japanese Garden
19 Amazing Colors in the Home
Custom Design Lighting
Brazilian Cumaru Floors Throughout
7 Patterns of Carrara Marble in Master
Zen Glass & Hand Made Marble Sink

          Offered at $1,950,000

David & Karen Bell
RE/MAX Metro
206.283.9100
[email protected]

Washington State Adopts a New Statue that May Harm Distressed Homeowners

Home Foreclosures Reach an all time high in the US

It was reported this week by CNN Money that Home Foreclosures in the U.S. has toped 1,000,000 with Nevada, Arizona, California, and Florida accounting for 89% of the total of all Foreclosures. California, Nevada, Florida, Arizona and Michigan exhibited the greatest price depreciation in all transactions in the first quarter. While Wyoming, Utah, Montana, Texas and Alabama saw prices for all transactions increase the most. According to the NWMLS the Seattle market also saw a slight increase in sale prices as well over the last two months.

And as people were loosing their homes at the highest rate on record for the first three months of this year, there are new scams popping up everywhere to rip off and take advantage of stressed out, non English speaking, and unsuspecting homeowners that are willing to do almost anything to save their home. The worst of these scams is called Equity Skimming. The simplified version is : A Buyer will write an offer (below market value) for the home and then promises to rent the home back to the seller so they can stay in their home and when their fiances improve they can buy the home back. This Buyer then resells the home for a higher price and keeps all the equity that the seller had in the home and the seller has no place to live and has lost all their equity.

To help protect these vulnerable homeowners 17 States have passed new legislation pertaining to foreclosures and short sales. The State of Washington passed the new law that took effect Thursday June 12, 2008. And while the law has good intentions, many believe that it will end up hurting those it was intended to help. Apparently, Washington's new law was copied from the State of Wisconsin and there are many contradictions in this new law with our already existing Agency law. There is also so much vague language in the law that it’s impossible to interpret. Of the 17 states that passed a similar law, Washington is the only state that is holding Realtors responsible if something goes wrong. The law exempts financial institutions, mortgage brokers, mortgage loan servicers, credit counselors, and licensed attorneys, not real estate licensees. All the other state exempt real estate agents. The law also awards attorney fees and damages up to $100,000.

Now, I’m sure there are people out there that would say well those blank blank Realtors are a bunch of crooks and make too much money anyway so they deserve huge fines. And I agree…if we do something wrong or take advantage of some unsuspecting seller we should be responsible. And while I think that many Realtors don’t do that great of a job representing their clients best interests, I also don’t believe there are very many Realtors that are dishonest or would knowingly take advantage of someone or create an Equity Skimming scam of some sort.

But what this new law will do, in my opinion and many others, is force most Realtors to “stay the heck away” from Foreclosures and Short Sales. All a Realtor has to do to become a Distress Property Consultant and be subject to all the new laws and liabilities is to basically try to help sell that distressed property, as a Listing Agent of a Selling Agent. A Distressed Homeowner is the owner and occupant of a dwelling who is: 1. at risk of loosing the home for non-payment of taxes. 2. are in default under a mortgage. 3. are 30 days behind on a mortgage or 4. believes he or she "could" default on the mortgage within 4 months and tells a lawyer, real estate agent, lender, mortgage or credit counselor. But the Distressed Homeowner has NO duty to notify the real estate agent that they are a Distressed Homeowner, there doesn’t need to be a public notice of mortgage default to become Distressed, and the owners may not even know they are a Distressed Homeowner. Yikes! If they don’t know how are we supposed to know? Fortunately the NWMLS has just provided us with a new Listing Agreement that will hopefully cover this part somewhat.

Now the new law also defines what a dwelling is. A dwelling is a single, duplex, triplex, or four-unit family residential building. Condominiums in building more that 4 units are not subject to this statue…maybe they don’t have condos in Wisconsin. So if you don’t live in the home or if your unit is in a condo of 5 or more units this statue doesn’t apply to you. OK?

So how does a Realtor become a Distress Home Consultant? It’s pretty easy. They solicit or contact Distressed Homeowners and offer to perform any service that will:
• Stop or delay a foreclosure sale (try to sell the home)
• Assist a Distressed Homeowner to Obtain a loan (try to help refinance)
• Save the home from Foreclosure (sell the home)
• Close the sale within 20 days of the foreclosure (stay away from this one)
• Systematically contact distressed homeowners (mailings, phone calls, Blogs or ads)
• Draft a seller lease-back or an option to buy the home back

From what we have been told, one thing an agent should never do under any circumstances is draft or arrange a lease-back or buy-back for a distressed homeowner.

Let’s talk about another huge flaw in this statue. If a transaction to purchase a distressed property closes within 20 days of the foreclosure date then both the selling agent (that's the buyers agent) and the actual buyer become Distressed Home Consultants and owe fiduciary duties to the seller that are above their own. WOW! You have to be kidding me. If a buyer makes an offer on a home that will close within 20 days of the foreclosure date they have to put the sellers interest above their own or they can be held responsible for non-compliance and if found that they “got too good of a deal say” they can be sued for actual damages, plus double or triple damages of up to $100,000 and attorney and court costs. That’s has to be a pretty good home to buy. Under those circumstances we certainly wouldn’t want to be that selling agent and we would most likely advise our buyer client not to buy the home.

So how does a smart Realtor avoid all this? They don’t get involved with distressed home sales at all. This law was written to help protect the homeowner but instead we believe it will greatly hurt the homeowner because most realtors will not be willing to take on such risks. These Distressed Homeowners really need our help. Their best chance of getting out of all this is to sell the home before foreclosure. Maybe the credit counselors or attorneys can market and sell their homes? Do you think we need a revision to this law? Do you think we need a totally new law? But that can’t happen until about this time next year! So instead of getting many of these homes sold the banks will be taking them back and then selling them most likely in bulk, flooding the market and eroding home prices even more. Do you really think it matters whom we vote for?

Seattle/Bellevue Luxury Home Sales Have Increase Every Year Since 2001

Luxury Home sales in the Greater Seattle Area from 2001 to 2007

A Luxury home is valued at 1 million or more
*Source: NWMLS

Year........................Number of Sales..............................*Average Sales Price

2001..................................291.........................................$1,557,002
2002..................................453.........................................$1,508,945
2003..................................598.........................................$1,511,012
2004..................................933.........................................$1,642,545
2005................................1,601.........................................$1,619,431
2006................................2,093.........................................$1,585,985
2007................................2,290.........................................$1,616,722

Top 10 Luxury Real Estate Markets in the US
According to the U.S. Census, the number of homes in the U.S. valued at 1 million or more have increased 470% between 2000 to 2005.

State.............................# of Luxury Homes...................% of Total Homes

1. California...............................619,170................................8.76%
2. New York...............................165,641................................4.21%
3. Florida...................................102,010................................2.08%
4. New Jersey.............................61,523.................................2.91%
5. Massachusetts.........................54,156.................................3.45%
6. Illinois....................................43,533.................................1.33%
7. Connecticut.............................40,578.................................4.41%
8. Virginia...................................38,725.................................1.92%
9. Maryland.................................35,835.................................2.49%
10. Washington..............................28,704................................1.81%

Between 2000 and 2007 housing prices in the greater Seattle area increased by close to 100% in some areas, while some waterfront and high-end trophy homes increased by even more, 200% to 300% in some cases. In some areas in the U.S. like the wealthiest parts of Manhattan, along with parts of Boston, San Francisco, and parts of Florida for example, some properties have increased by as much as about 500% over that 7-year period. And still, in 2008, the condo and co-op prices in Manhattan have continue to appreciate by about 5%.

In the Seattle/Eastside markets the high end market has been affected much less than the rest of the market. Prices have not really fallen and the number of sales actually went up a little over 9% from 2006 or an additional 197 homes were sold in the over 1 million price range in 2007.

The Seattle area has the same characteristics as other strong high end markets. We have a scarcity of land close to the city. We have a robust population growth, a strong and diverse economy, and good income growth by the highest earners.

Almost 80% of the high end homes in Washington that have sold over the past few years have been in King County, with about 60% of those sales being on the Eastside, Bellevue, Kirkland, and Mercer Island. We think there could be a shift in demand over the next couple of years however, to more close-in Seattle city properties. Raising fuel prices and of course traffic congestion will continue to temp homebuyers to live closer in to the city placing higher demand for those properties as well. While many areas of this country are really hard hit with Foreclosures and falling prices, Seattle is one of the few that is holding it’s own. This is one of the best times we have had in Seattle for Byers in many years and there are some great deals to be had on many high-end homes right now.

PART 2 - How David & Karen Bell Work with Buyers to Purchase Good Homes in the Seattle Real Estate Market

This is Part 2 to our Post of June 9 on what we do to help people buy good homes in Seattle

We also go back and look at all the Expired and Cancelled Listings that fit our client’s requirements. At some point these people wanted to sell their homes. The home didn’t sell for some reason; usually it was priced too high. We talk with these homeowners and let them know that we may have a client that could be interested in their home and would they be interested in letting us take a look at it. If they are interested we’ll go and look at the home and at that time talk to them about why they thought it didn’t sell and try to determine how motivated they might be to sell. By looking at it we would then also know ourselves why it didn’t sell. If they are still interested is selling it and are motivated and realistic about the price and it’s a good home in a good location then we would set up a time to show it to our client. We would also expect to buy the home for a little under market value as well, and one of the incentives to the seller would be that only one real estate commission would have to be paid so that additional saving should be passed on to our client, the Buyer.

The next thing that we do for our clients is to call other homeowners in various neighborhoods that our buyers would be interested in. We ask them if they know of anyone in the neighborhood thinking of selling. We often find very good homes for our clients this way. We just don’t sit and wait for homes to come on the market and show up the NWMLS. We believe that we need to be very proactive to fully help our clients. But it just doesn’t stop here either.

We think it’s very important to look at the big picture when buying a home. We are very concerned with good resale value and that is determined by several factors. First of all, are you paying the right price for the home? Is the style, location, and quality of home such that when you go to sell, will it sell for a good price and sell quickly given the current market conditions? One of the “tests” we use is how many buyers out of 10 potential buyers would be interested in the home if it were on the market? If the home would only appeal to 2 or 3 out of 10 then it may not be the right home to buy, but if 7 or 8 out of the 10 would buy the home, then it’s usually a good home to buy. What we have found over the past 20 years however is that only about 2 or 3 homes out of every 20 listed homes are in fact good homes to buy in the Seattle Real Estate market.

We analyze the appreciation potential of a home and that’s a function of several things as well. There are homes with good bones (quality of original construction) and homes with OK bones, and then homes with just plain bad bones, chicken bones. Original building quality is very important. Many homes that were built at the turn of the century (1900’s) were really good and some were really bad, with pillar and post foundations for example. The good homes hold up very well but the bad ones are very expensive to fix and consequently worth a lot less. When the market slows people just won’t buy homes with bad bones. Homes that were built in the 1920’s to 1950’s in many cases have very good bones. Quality of materials used, the finish work, the plumbing and electrical systems all have their differences and challenges, but some are much easier to fix than other. We understand building quality and what the ramifications and cost might be for fixing poor construction or bad plumbing and every situation is different.

Finally, we look very closely at the location of a home. Remember what they say…the three most important things is buying real estate is location, location and location. It’s true! There are good parts of good neighborhoods and bad parts of that same good neighborhood. If the home is in the good part of that good neighborhood it will appreciate faster than if it is in the bad section of the good neighborhood. Now if it’s in the better section of a bad location it may not be as good as the bad part of a good area. Here is when it can get complicated and we have to take every case individually but an informed buyer should have an agent that knows how to evaluate all this. The agent really need to know the city and the all the neighborhoods. They need to know the history of the neighborhoods and where that neighborhood is going. Many of the people that are upside down today with their home is a direct result of making a poor buying decision. Getting caught up in a “hot sellers” market and paying way too much for a home in a bidding war or buying a home in a bad location that will only sell in a white hot market. Buying a home can be very emotional for many people but we make sure our clients have at least one foot firmly planted in Reality!

So in conclusion, experience, knowledge, and honesty are critical attributes in any Seattle Real Estate Agent you may hire. If your not are represented and represented well you could make a buying decision that could cost you 10’s or even 100’s of thousand of dollars in just a few years. One of the main reasons so many people are in financial problems today and can’t sell their home for what they paid for it is a bad buying decision…don’t let that happen to you!

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Those greedy lenders - they are the reason I can't afford my house payments

Some say that lenders may be at fault for our tight Mortgage Credit crunch right now, and for all those poor people that got loans that were interest only or zero down, and are now underwater on the property because prices have fallen so much they can’t sell the home for what they bought it for.

It’s a lot more completed than that!

Let’s take a look at this from the perspective of two Realtors that have been doing business in the Seattle real estate market for about 20 years. First of all, a little over half of our business is working as Buyers Agents in the Seattle area. On average, we help about 25 buyers a year buy homes that amount to about $12 million in home sales a year. We also work with many sellers as well, and that balance helps us understand both the buying side and the listing side of the market. For the past several years the Seattle real estate market has been a very strong sellers market, but that all changed in September of 2007. The interesting thing however, is that Seattle home sales stayed strong despite a turndown in home sales and home prices in most all of the rest of the country starting about two years ago. The Seattle economy is strong, people are moving here, businesses are expanding and hiring, there is a short supply of good homes in the close-in Seattle neighborhoods, but the national news and uncertainty has finally affected our housing market here is Seattle. Recent numbers from the NWMLS have stated that prices in the Seattle area have fallen by less than 5% on average, and that the number of new sales has recently increased by about 2.5% over the past couple of months. This is all good news for our market but then why are people unable to sell their homes for what they paid for them?

In the words of our 15 year old daughter, Dah! They paid too much when they bought the home. Here is what we think has happened mainly since 2005 (well, it happened in 1989, 1995 and 1999 as well) in the Seattle real estate market: In the early spring of 2005 Seattle was in another “White Hot” sellers market. Inventories were very low and there were lot of new buyers in the market and some of these buyers were in the market for the first time because on new creative loan programs, others had moved here and many were being relocated here of a new job in one of those high paying high-tech businesses.

Now, with regards to home inventories, we think that about 3 to 4 out of every 20 new listings are actually good homes to buy. The rest maybe OK, but only if you can buy them at much reduced price. So what happened was we would see 7 to 10 offers on a really good home that was priced at say $500,000. Only one buyer would get that home and usually they had an escalation clause saying that they would pay about $1000 over what the highest offer was, up to a limit of say $510,000. OK, know you have 6 to 9 buyers that lost out on the house and they would then go after the next best house, but this time some one would increase their limit to $515,000 (because they don’t want to loose another home for just $5000). On and on this would go and then after about 3 or 4 times that "not to exceed" went form an extra $10,000 to $15,000 to $20,000 to $30,000 to $50,000 and sometime even $75,000 over the asking price. Then to compound the matter the new homes that came on the market were coming on at even higher prices because “the home down the street sold for $540,000", but it was actually only worth $500,000. Buyers just got completely carried away and unfortunately their real estate agent didn’t help keep them very realistic in many cases.
The next thing that was happening was that buyers would not want to get caught up in bidding wars anymore so they would buy homes that came on the market that were not holding offers to a specific date to encourage a bidding war. They would buy homes that were in bad locations and they would buy homes that were of poor building quality and design. These homes are usually very hard sell even in an average market. This is a huge problem when they go to sell. Some homes only sell during a “white hot sellers market” so if you are not in that “hot” market condition when you need to sell then you most likely can’t sell the house unless it’s a total bargain.

Now some of these people are really paying the price for making all these poor buying decision. If you paid $550,000 for a home that’s only worth $500,000 in 2006, and the market went up by only 3% in the first half of 2007, and then back down by 5% by mid June 2008, you are underwater, and again, we don’t think it was these new creative loan programs that caused all of our current home and credit problems.

Sure people shouldn’t get low introductory loans that will adjust upwards in two years especially when the current interest rates are at all time lows and they only get cost of living increases at work. But if they paid the correct price for the home they would most likely be able to sell it two years later and come out at least close to break even. But if they paid $50,000 too much to begin with, Gad Zooks…we have a problem!

Now the lenders made some very bad decision as well and some were based on greed, but most were based on helping the average person buy the American Dream! Lenders relaxed their standards of debt to income ratios, they opened up a lot of new products for zero down buyers, and to avoid PMI (private mortgage insurance) the came up with second mortgages that would cover the 20% down payment requirements to avoid PMI. Should lenders go back to requiring the same debt to income ratios they years ago? Yes and No, it depend on the people and their situation.

I bought my first home in Madison Park about 37 years ago( I was really young). To qualify I had to have a total debt to income ratio of 32% and my mortgage had to be 28% of my gross income or less and they required a 20% down payment. Here is deal though…that great bungalow I bought in Madison Park only cost $39,000 then so a 20% down payment was only $7,800. Today that very same home in Madison Park would cost $650,000 and 20% down would be $130,000. That’s tough for a young couple or single person buying their first home to come up with. Or maybe they shouldn’t even think of buying anything? We don’t think that’s right either.

Should the lenders require a maximum of 38% total debt to income like I had to have back in 1971? I think I was making about $30,000 a year then so that would be about $950 a month for bills, school loans, and a mortgage payment. My mortgage was $473 (I remember thinking I’d never be able to make the payments) a month and boy would I love to have payment amount again today! So it worked, I was able to get into a home, save a little money, and then 4 years later when I sold that home for $92,500 I was happy. Today if a person is making under say $60,000 a year, having a conservative debt to income ratio makes more sense, but if they are making $600,000 a year having a 38% ratio is silly, because they have so much disposable income it may make better financial sense to invest that additional income elsewhere, not in a down payment for a home. So maybe their debt ratio should be 50% or even 60%. Now, most all zero down loan programs are gone, kaput, extinct. But what about all those people that have good stable jobs, have been working in the same place for a longtime and want to use their money for something other than putting it down on a house. Maybe they own their own business and want to invest in their business to grow it, to expand it, to hire new people, you know the things that help the overall economy grow. If they have excellent credit and have not just changed jobs going from an ice-cream scooper (OK, I’ll get letters on this one) to a Nuclear Physicist they should have the option to buy something they can afford with no money down. Will bad things happen? Sure, sometimes they do, and they are out of our control sometimes, but the majority of people I don’t buy a home so they be foreclosed on.

Why do we always have to make such drastic swings when something bad happens? Sure the credit industry has been hit hard but it’s partly their fault. They sent out their appraisers to these homes that people paid way too much for, and somehow the appraisal came in on value. So now they are hurting and in some case hurting bad. It’s affected our economy seriously, but why swing so far to the opposite side? Making those extreme swings in credit policy will also have long term effects in slowing our housing market to the point that the whole economy is negatively effected, and so on and so on. Soon, hopefully, the lenders will see that they aren’t making as much money as they “should be” in the home mortgage market and they’ll start to relax the credit standards but how much more harm will they cause in the mean time?
And you home buyers out there…work with an Agent that’s knows what they are doing and won’t let you make bad buying decision because no loan program can compensate for that!