Real Estate - page 3

Most cities are having more apartment construction projects. There is a demand for housing, and buyers are a little concerned about entering into a 30 year mortgage commitment. There are many buyers squabbling over a low inventory of properties for sale, but sales of low end rental type properties are brisk.

I have always advocated home ownership until now. It just so happens that this housing market crash came at a time when I was in my 50s and have very little need of a house to call my own. I can rent, save, and travel. Some young couples may still have a future of kids, dogs, schools, and family, but many are increasingly interested in saving money in more secure investments.

The family home has traditionally always been a secure part of a portfolio. Recently that idea has been questionable. My personal opinion is that the cost of housing will continue to decline. There are many ways to build a community with density, just like most city planners have promised. In keeping with that, as long as you would consider a town home of condo, the idea of an apartment isn’t too far off, especially if your town home, or condo is going down in price.

Procuring Cause is a Real Estate term. Rebate Brokers have thrown the term around a lot because they write up offers, then give a rebate of the commission. In some cases, other agents have shown the buyer houses, some times several houses, helped line up a mortgage, and worked with the buyer until the buyer finds a house they want to make an offer on. The buyer, in some cases, has gone to the rebate broker after spending hours working with a full commission agent. When the buyer, under these circumstances, writes the offer with the rebate broker, the other agent can, in some cases, claim the commission.

There are things an agent can do to protect themselves, like having a Buyer’s Agency Agreement, but many buyers want to keep their options open, so they are reluctant to sign a Buyer’s Agency Agreement. There are pros, and cons to having an Agreement, but that is an article for another time. The fact is many agents are wiser now than when rebate Brokerage was a new idea.

Rebate Brokers have also cautioned buyers about Procuring Cause, that’s how the subject came up.

It’s a complicated process to claim a commission. It’s done by arbitration, and usually is done between the Brokers. The buyer can do what ever they want. The buyer isn’t obligated, legally, to write up an offer with the agent who showed them a property. Just because some one is there doesn’t mean they are contributing to the buying process. The other thing that is very true is that most buyers use online searches, and so the Brokerages that provide those services should probably claim procuring cause.

This article is just a caution to make buyers aware that there is this issue, but it is a minor part of the home buying process.

From time to time I forget to mention some of the best Real Estate agents in Seattle. Today I ran into Cathy Cowan who I haven’t seen in about two years. She’s been busy helping clients who are referred to her.

She admits she is low key, but diligent, as well as honest. People refer to her, other agents refer clients to her. She has a wealth of experience for multi million dollar homes to helping to sell a town home for a professional couple who has been transferred to another state.

Offering that range gives agents an advantage. I first met Cathy when she partnered with another agent to sell a view property that had some quirks. She took the lead in all of the preparation, and marketing, because she had a feel for the clientele who would be making an offer. The property got offers that Cathy fielded beautifully.

It’s grace under pressure that can get some properties the best price, or get a buyer a better price than a less skilled agent can.

– David Losh

We have a low tech remodel company. Nothing is fancy, everything is functional. It hasn’t done too much in the past three years, but we still prepare properties for sale. In the past we did kitchens, bathrooms, and basements. I have a $10K rule that if you are spending more than that you’re wasting money. You’d be surprised what you can get done.

Yesterday I was in a home that is the middle of a $120K remodel. It’s beautiful. They did everything. What I have been wondering is if there will ever be a return on this obvious investment.

This isn’t the first time in the past two years that I’ve wondered about remodels that made sense five years ago. In the past there was a set of rules about if you invested in a bathroom you could expect a return. Now I look at adding a bath room may get a return, but pretty much maintaining what you’ve got makes more sense. Maybe a new tub surround, or vanity, but gutting a place doesn’t seem to pencil.

The same with the kitchen. No one is going to pay for some one else’s vision of a gourmet kitchen. You can do it for yourself, and that is getting to be more popular, but you have to figure it’s a loss.

Even flippers are starting to cut corners on what they spend, except on system upgrades. Plumbing, and electrical are pretty safe bets for resale. It’s not so much profitable, but buyers are getting pretty savvy about big ticket expenses.

The property at 5656 36th Avenue SW http://www.redfin.com/WA/Seattle/5656-36th-Ave-SW-98126/home/470556 has been on the market for 254 days. It is the best property I have seen in a very long time. It is dated, and has aluminum siding, but you can tell the people who had it build had money.

It sits up off the street with South West exposure. The listing agent makes a lot about the view, but the value is in the structure. When you jump on the second floor it feels like concrete. The foundation may have been added later because it is thick and has structure that for 1940 construction would have been ahead of it’s time. The aluminum siding I would bet is covering the original siding that must be in pretty good shape, because that siding would only have been exposed for about 20 years.

Yes the kitchen, and bath could be remodeled, or they could be refurbished. The bath room looks to be in good shape. I would add a bath to the second floor. I’m sure the structure can handle it.

For $450K this seems like a great place to hold onto. It might even take an offer. It is an estate sale. To me though I can see it selling again for more than this asking price. It may just need a little more love.

I have discussions about Real Estate Agents a lot. Everybody has an opinion about Real Estate Agents, and the consensus is usually that Real Estate Agents are bad, and the commissions they charge are outrageous.

The Real Estate commission is always negotiable, but most Brokerages hold the line at full commission pricing. There are desk fee Brokerages that allow agents to have more latitude in what they charge. The fact, however is that Brokerages bring stability to the Real Estate industry, and it is a multi billion dollar industry.

Let me start by saying that the Real Estate commission is the cost of doing business. No matter how much time you spend on the internet doing “research” it will never compare to the time an agent spends building a viable commission based Real Estate business model.

You need some one who has been in business, just on a commission basis, for three years. That person should have at least twenty to thirty successful Real Estate closings. Because you pay the same, in most cases, for full commission brokerage, you should probably ask people with more experience to help you.

This is where it gets tricky. Most high performance agents are picky about the clients they work with. If you go in with an attitude that these people should be nice to you because you pay them, and they work for you, you probably won’t get far. Most Top Producers also invest, and have an income stream. They are there to help you. They are in business for an extended period so they want you to be happy.

It’s good for you to be informed, but at some point it’s also good to trust another person to help you make the decisions.

I saw a house today that is a pretty good deal. It was an Open House on my way home from church. The house has been on the market for a while judging by the stack of cards there on the entry table. It is an original owner home from the 1950s that is solidly built. It’s 3600 square feet, and priced at $399,950.

OK, it’s a good price, in a good location, in good shape, so why is it sitting there. I asked where the electrical box was, and the agent, who has had the listing for a month looked confused. I asked because the original Square D electrical box had been converted to a junction box.

Now I had already spent enough time in the house, and the agent was there talking with another guy. I seemed to be intruding even though the agent, and I know each other.

So I came home, and looked at the listing on the North West Multiple Listing Service. Holy Cow, it was one of those things that described the other flaky buyer who had backed out. The original listing was intact, but just an agent comment. The picture at least could have been changed.

I think an agent should know all about the house. The cards sitting in the hall way looked bad. It looked as though a whole stack of agents had given the property a pass, for no reason, and surely no explanation to a potential buyer. The house smelled, and an agent, and especially one in the business for as long as this one, would have an air freshener.

It’s a good listing, a good purchase for some one, and some one will buy it. I just think it could have been presented today with more feeling.

Multiple offers are something to avoid.

I was researching some properties today, mainly getting a sense of how much of the market is short sales, and bank owned properties. The below $350K price range is mostly short sales here in Seattle. In Everett, and Burien the price point of short sales is lower, and in the $200K range. Many of the out lying areas show short sales in the $100K range, but those are for properties that sold for $200k in 2007. That’s where the big price drop statistics come from.

My next search, in Seattle, was in the $350K to $500K range. To my surprise I was finding new listing with comments that offers would be reviewed at some later date. Some listings were to be viewed over this week end, with offers to be submitted on Sunday evening. We haven’t seen that in a while, but it is a standard trick to generate interest.

The same warning should be taken now, as it has been given in the past ten years. The buyer never wins in a multiple offer situation. No matter how good the property looks, there is something wrong with a tactic that creates hype. Make an offer if you want, there is no rush, and even make a low offer. Chances are that in a contrived hysteria the offer that gets accepted will be from some one who is responding to pressure. The chances are very good that the buyer will back out.

Just wait it out, there is something better out there.

While we are talking about Real Estate commissions let’s talk about value. Just because you pay a certain price for a property, or just because other properties sold in the area for a certain price, doesn’t translate into a value.

When an appraiser comes out there are things they look at that add, or subtract from the value of Comparable Properties. Comparable Properties is kind of a meaningless term. I use town homes as my best example. Comparable Town Homes can be just as worthless as the one that is being appraised. Adding value for a view doesn’t translate into a property value. The view has a value, but the property is questionable. I’m told I may need to adjust my prejudice against town homes as time goes on.

The same is true in a property with obsolescence. The interior may be gorgeous, but the systems may need updating. One classic example is when the appraiser, or home inspector notes there is low water pressure in a newly remodeled kitchen, or bathroom. It could be caused by a lot of things, but there is a good chance it’s the pipes. So the remodel is actually a liability to getting at those pipes.

A buyer’s agent should know property value. They should know the market place, but they should also know what has value, and what to avoid. You learn that by looking at houses, closing transactions, and getting feed back. It helps to have taken apart a few places.

People in the Real Estate business, lifers, are worth the time to find. All agents charge the same, but a few have value.

Real Estate Commissions

There has been a lot of discussion about how Real Estate agents get paid. The Real Estate commission is traditionally 6% under $700K and 5% over $700K. It used to be 7% when property prices were lower.

Now that property prices are falling again the commission is an even bigger topic of conversation. People are stuck, having less equity in a home makes it harder to sign up for a fee that takes away 6% of the purchase price.

In commercial Real Estate the commissions can be between 5% and 10%. It depends on the price, and difficulty, but all commissions are negotiable.

I used to charge 3% as a Buyer’s Agent, and if you bought through me it was 1% for me to list the property. In order to sell I could charge 1% if you did what I asked. If the property was in good condition, it photographed well, and it was priced well I had no problem listing for 1%.

In my opinion working with a buyer is harder because there are so many variables. The second part about that is that you have to buy well in order to have any value in a property. There have been times when a transaction was so easy that I only charged a fee to get the property closed, and pay my expenses. Some times I would refer the client to an attorney who could handle legal issues, and I was only paid a fee for the referral, usually about $200.

You can get a Real Estate transaction closed through an attorney for as low as about $1200, to $1600 including escrow fees. The agent is paid, we hope, based on the expertise they bring to the transaction.

There is a discussion about looking for properties online. For me my first experience was in about 2000. That seems like a long time ago.

The Multiple Listing Service stored data in a central location. The company that handled the data for the Northwest Multiple Listing Service was called Moore Data. I bought a software program from them to do Comparative Market Analysis. It worked great. It made a nice presentation at a time before it became a common tool.

With the program I was also able to share information with other people on line, through e-mails. The e-mail system quickly became a common Real Estate practice. The Real Estate agent would e-mail clients a list of properties. Soon after our Multiple Listing Service began offering an online version of the data base Real Estate agents use.

John L Scott was the first Brokerage that I recall who invested in the technology of online searches in conjunction with Microsoft. Windermere seemed to be dragging their feet. Coldwell banker made the most significant strides nationally.

Then a company called Zillow began the ambitious project of a national data base for Real Estate. Governments had converted sales data to an online system from microfiche. It opened up a whole new world of analysis of tax data.

The next question is, if all of this information was available how did Real Estate prices get so high?