Sorry it's been so long since I've posted a real estate related post. My daughter and grand daughter had an emergency and I had to jump on a plane. As you can see from the photo above, after one week here we are about back to normal, or as much as possible. Prayers appreciated.
I was due here on the 21st for Andrea's graduation (see my family blog), but my emergency with these two darlings above had me on a plane on the 16th, right after my last post. I hope to have their problems, not resolved, but at least manageable before I return ot Seattle on July 5th.
I'll try to post something real estate related ASAP. Thanks for your understanding. 10 days with no entry is a loooong time for a blog.
Using Escalation Clauses to "beat" the highest offer, is a relatively new concept. Before Escalation Clauses, when we received more than one offer on a property, the buyers were often put on "Notice of Final and Best". They each put their best offer in a sealed envelope, the envelopes were opened all at the same time. If the seller was lucky, one stood out from the crowd by a substantial margin, and that person got the house.
Let's say the owner receives ten offers. How does the seller choose from those ten offers? Sometimes receiving too many offers is overwhelming, and the seller doesn't like having the fate of ten families, all wanting his house, in his hands.
As a listing agent representing the seller, I would recommend evaluating the buyer qualifications, as the first consideration. Let's say three of the ten are cash offers. The other seven may be set aside without consideration for now, and the three cash offers may be given a notice of final and best. If one of the cash offers is also the highest offer, possibly that one would be accepted on the spot and one or two others would be offered 1st and 2nd backup position. You can counter the three cash offers, but if you tick off all three, you lose your three best buyers, so not necessarily a good move. Better to counter one at a time quickly, before the other offers expire, so you only lose one at a time.
The cash offer is given first consideration because when a property bids up over the asking price, it may be bidding up over the amount at which it can appraise. If the seller accepts the highest offer, without regard to the loan amount, he loses the other 9 when he accepts one. That one can fall apart when the property doesn't appraise, which can leave him with nothing. Going from ten offers to no sale at all, is painful. So you pull the ones with the most cash forward. All cash, then those with more than 20% down and if you have 3 to 5 offers, you reject the zero down to 20% down offers on the spot and counter the higher cash available bidders.
Escalation Clauses have become popular, because buyers are somewhat assured that they are not paying more than X dollars, more than the next highest bidder. But the Seller does not have to accommodate that convenience. Most escalation clauses are only $1,000 more than the highest offer. Often $1,000 more is just not enough to announce a winner. Given a choice between $1,000 more, and someone the seller likes best or someone the seller feels likes their "home" best, often the seller will choose based on "touchy feely" reasons, without regard to the $1,000 difference in offer price.
The MLS cautions agents regarding using Escalation Clauses, and in fact recommends that the seller reject them all, and tell the buyers to submit their highest, final and best offer, with NO Escalation Clauses.
So what the heck is a buyer to do when their hands are tied when the seller announces "Notice of Final and Best...NO Escalation Clauses?!"
Fact is, if 10 buyers stay in the game through "final and best", 9 people will lose. Most often, not all 10 participate in the final round, increasing your odds. This is where you really have to have a good relationship with your Buyer's Agent. Often the Buyer's Agent knows a lot more than you think they know. The listing agent has given them little clues in conversations that might help you. Their gut instincts should be trusted.
There are no guarantees, as 9 must lose this house. But if you can't turn to your agent and follow their advice, and then live with the result, you may need to come up with your best offer all on your own. If you don't get the house, you should think hard about why you didn't just rely on the advices of your Buyer's Agent. That agent knows you best, or should, and should be the person in the mix who can give you the best recommendation regarding what you should do.
You should discuss every possible option with your agent, including putting in a huge escalation clause of $5,000 to $10,000 to get the seller's attention, even though you were told not to. Sometimes the agent will recommend this, but it has to be a large enough increment to get the seller's attention. There is a famous "case" settled out of court, where the Buyer's Agent did just that, AFTER the buyers were told the bidding was OVER.
The most important thing to do is to pretend you are the SELLER when you are making an offer, and forget for a minute that you are the buyer. In life, you should always put yourself on the other side of the table, when considering what to do next. If you would get ticked off if someone puts an escalation clause, after you told them not to, then don't do that. Expect the seller to do exactly what YOU would do, if you were in his position. That usually works best.
Excerpt from Escalation Clause Instructions:
"No matter who you represent, use of this form is risky and requires utmost care and diligence in order to protect your client. NWMLS does not recommend the use of escalation provisions, and this form is provided merely as a courtesy to our members who have been seeking a standard form for consistency." ADVICE ON USE OF THE FORM. Because of the risks inherent in the use of escalation..., (seller) may reject all of the offers and demand that all interested parties make their highest and best offers without escalation provisions."
I've been in a stats mood today in between painting my house and waiting for the results of a home inspection. I like to hang on to the concrete things of the world, like painting a room or pulling statistics on home sales, when I am waiting for something to happen that is out of my control. If the sale falls apart on inspection, my buyer client gets a second chance at the house. I don't like wishing that someone else's sale falls apart...but that's where I am today. The benefit to you is lots of stats!.
OK, where the heck is that Buyer's Market? King County Stats say it is in the high end, but the builders keep building up there in the nose bleed section.
I don't usually compile stats by hand for all of King County, but if I paint any more bright colors around my house it's going to start looking like a carnival in here. Oh yeah, it already does.
OVER FIVE MILLION - 45 FOR SALE - 2 STI - 4 PENDING - ONLY 6 SOLD IN SIX MONTHS
I WENT THE EXTRA MILE ON THIS ONE AND ONLY 34 SOLD IN 18 MOS, SO 45 IS A LOT!!
FOUR TO FIVE MILLION - 20 FOR SALE - 1 STI - 4 PENDING - ?? SOLD IN SIX MONTHS
3 TO 4 MILLION - 68 FOR SALE - 6 STI - 9 PENDING - 18 SOLD IN SIX MONTHS = BUBBLE
2-3 MILLION - 151 FOR SALE - 13 STI - 28 PENDING - 78 SOLD IN SIX MONTHS
1.75 TO 2 MIL - 116 FOR SALE - 12 STI - 36 PENDING - 70 SOLD IN SIX MONTHS
1.5 TO 1.75 MIL - 156 FOR SALE - 16 STI- 38 PENDING - 83 SOLD IN SIX MONTHS
1.25 - 1.5 MIL - 230 FOR SALE - 23 STI - 70 PENDING - 189 SOLD IN SIX MONTHS
1 MIL TO 1.25 MIL - 236 FOR SALE - 17 STI - 97 PENDING - 330 SOLD IN SIX MONTHS
OF THE 330 SOLD, 169 WERE 1 MILLION TO 1.1 MILLION
The amount sold seems to follow a natural progression, it's the amount on market that seems out of whack.
Jun. 14, 2006 - Are You Looking for a Needle in a Haystack 98033
In the post below, we see that there are many options in the marketplace in Kirkland's Zip Code 98034, if you are looking to spend less than $250,000 for a condo. But if you are only looking in Kirkland's 98033 Zip Code, then the above graph will show you that, yes, you are looking for a needle in a haystack.
Does that mean that you should not still want a condo in 98033 for less than $250,000? No, but when you find one, you can't necessarily be as picky about condition and location as you can in 98034. Also, you likely won't have much time to think about it, as none are for sale, so many will likely want it pretty quickly and it could be awhile before another comes around.
Knowing the stats can help you know how to proceed in getting what you want, based on the stats and the odds.
Jun. 14, 2006 - Are You Looking for a Needle in a Haystack?
If you are looking to spend under $250,000 for a condo in Kirkland, the above graph I made based on hand calculated dats might help. While there are not many for sale/ACTIVE, there are plenty in escrow (STI plus PENDING), and tons sold in the last six months.
So if you don't like what is currently for sale, it is worth waiting as many are generally readily available in 98034, which includes Juanita, Kingsgate, Totem Lake and other areas. Kirkland has two zip codes, 98033 and 98034. See next graph for 98033 stats.
I find that most people really don't want to hear the truth. Sometimes I am somewhat naive, and think maybe they don't know it. But usually they just choose to ignore it for their own reasons.
Some agents and companies don't want people to know that commissions are negotiable, because they don't want the added burden of explaining that the fee they quote is THEIR limit, as opposed to an" industry set" limit. It's easier to pretend that they have no say in the matter. Some buyers don't want me to get involved with which houses they see, because they don't want their spouse to see houses they don't want to buy. "Bubble People" don't want to hear anything, because most of them never have bought a house and are trying to justify their inaction by saying they are the "smart" ones" who chose not to buy.
We have entered the "Era of Manipulation", where truth is an unwanted commodity. Easier to steer people to your "hidden agenda" if you bag truth and tie it up and bury it.
I'll bet dollars to doughnuts that JACK would WANT the truth. He's a big boy. He can HANDLE it. How about you?
Below is the experience of a couple who recently relocated here from Texas. I will add that not one person responded to my call for assistance in finding unlisted rental property in the area, and how could I not hlep someone whose initials are MLS :-)
********Growing up in Texas I always thought that Texans were just the nicest people around, what with that “southern hospitality” and all… but after our recent cross-country move to Kirkland, I am so glad to find that kindness can be found almost anywhere. Just about everyone here has been so very helpful in getting us settled in and feeling welcome. But it was a long hard road to get this far.
For starters, I was getting married… yes, planning a wedding and a cross-country move, at the same time. Not to mention, getting my husband ready for his new job, quitting mine and starting the search for a new one here, trying to sell everything we own, and of course finding a place to live—a great neighborhood as well as a home.
About two months before the move I began to scour the internet for a realtor and began attempting to make contact. I got all my information together, needs and wants… a small house, within an hour of the airport, a yard for the dog. And I planned a trip to the area one month before the move, and just days after the honeymoon, so that I could see as many houses as possible in one weekend. I thought I was so prepared… unfortunately, no one responded back; no one wanted to help “just a rental.”
In Houston, this is unheard of. Any person at any time could contact any realtor and look at any house they wanted. Almost all rentals in the city are listed in the MLS and could be found at HAR.com. Renting a home was easy; I was shocked to find this was not the case elsewhere.
Finally, I got a response. Ardell DellaLoggia was kind enough to help explain the way things worked, or didn’t work, around here. She kindly informed me that I would be on my own and that a realtor would be of no help… Property Management Companies (who did not work weekends), craigslist, newspapers, etc. would be my best resource. Little did she know I would nag her to the point that she herself would become my best resource.
My trip was fast approaching and I had no homes to see, no contacts waiting, and no hope of finding a home. The Property Management Companies wanted little to do with managing their properties and without really knowing the area, listings online and in the papers were of little help. How was I to know what neighborhoods are bad or too far or too expensive?
After a few more emails back and forth Ardell convinced me to check out the Eastside. And after a few more emails, she decided to lend me one of her realtors for the day. Ardell and Gwen Youch spent a day going over any listings they could find and organizing my trip. Upon my arrival, I went directly to Ardell’s home in Kirkland, was fed lunch, and then was driven around town to examine, not only a list of homes, but of the neighborhoods they love. We saw parks and shopping centers and homes that they would not even make a commission off of. It was a wonderful trip and we ended the day with new friends and TWO possibilities for our new home.
I don’t know where I’d be right now if it weren’t for Ardell and Gwen, probably not here in Kirkland. Granted, my home here is half the size and more expensive than my home was in Houston, but that, I suppose is really beyond their control. I cannot thank these ladies enough for their help and we look forward to never again attempting to rent in the Seattle area, maybe buying will be a little easier…
Gary, to understand the benefit of using a zero down, stacked cost loan to help safeguard you with regard to overpaying for a property, you need to get rid of some common mis-conceptions.
Most people think appraisers know what a property is "worth". There really is no such thing as a "true value to the penny of what a property is worth". Heck, we agents change the value of what a property is "worth" everytime we sell 3 houses collectively, as appraisers think a house is "worth" what the last three sold for. So if we over sold the last three, that value the appraiser is using is inflated, because he is using those last three sales to determine value.
Most people want to know what "it appraised for", AS IF that means something to THEM. Even though the buyer pays for the appraisal, the appraiser is not valuing the property for the benefit of the buyer. The appraiser is valuing the property for the benefit of the LENDER ONLY!
So, it is only common sense, that if you put 50% down and the lender is only "on the hook" for 50% of value, the accuracy of that value is not all that important. Even if the appraiser is off by 10%, it won't affect the lender. So the appraiser should not waste a lot of time on that appraisal, fine tuning it to the Nth degree, as it is somewhat irrelevant how accurate it is. A quick "drive by, wham-bam-thank you m'am" appraisal is good enough for that purpose.
So when DOES the appraiser have to be MOST ACCURATE? Again, common sense, whenever the lender's risk is the highest. And when is the lender's risk the highest? When you have no money down and the closing costs are included in the sale price. So you can make your offer with 50% down, so the seller' will accept your offer IF AND ONLY IF YOU ARE PREPARED TO DO THAT IF NEEDED! You can't lie and say that in the contract, if you don't HAVE 50% to put down, if the lender would require that. (Some people get that part wrong. But that's another story for another day.)
So if you apply for your loan with zero down and the closing costs as part of the loan, the appraiser has to be really, really sure of his value when doing the appraisal. That is because if the lender had to foreclose, the lender would need to sell the property at more than the price you are paying, to get his money back. The appraiser protects the LENDER, not the BUYER.
So let's say you pay $350,000 and have $10,000 worth of closing costs and are applying for a loan of $360,000. If it appraises at $350,000 or better, you know it is worth what you are paying, and then you "change your loan program" before docs are drawn, to your original 50% down intention.
Hope that makes sense. Ask questions over here Gary, if you have them, because I don't visit your blog as often as I do mine . And lately, not as often as I write at Rain City Guide. I have to balance that better :-)
So that we can all track the high end homes in Kirkland, I will post the stats on or near the first of each month through "high season".
Yesterday there were 123 homes priced over a million dollars for sale in Kirkland. 60 closed since 1/1/06. That makes current inventory almost a full year supply. More like a 9 month supply in keeping with my previous stats including properties in escrow.
I would expect the rate at which these sell to go up over the next 4 months. As I see more and more homes being built that will all have price tages over a million dollars, I wonder if the inventory will exceed the number of buyers able and willing to pay these high numbers. If the properties on market have to reduce their prices to sell, it may put downward pressure on the homes just under a million in order to compete.
It's a figure worth tracking for many reasons. Not only to predict the market pricings to come, but also to see if tear downs and new construction will continue to be as strong. There should be hearings soon regarding the FAR values, and these stats may influence that topic as well.
ARDELL
DellaLoggia
On Seattle Real Estate including Kirkland, Bellevue, Redmond, Green Lake and most areas around Lake Washington North of Downtown Seattle.
Phone: 206-910-1000 - Mailto:Ardell@RainCityGuide.com
You can find many great Seattle real estate agents and loan officers on ActiveRain.com ARDELL DellaLoggia is a proud member of the ActiveRain Real Estate Network, a free online community to help real estate professionals grow their business.
RSS Blog Feed
