Seattle Real Estate, Fixer, Real Estate Seattle

This is a part of a longer discussion on a blog site called Seattle Bubble at http://seattlebubble.com/blog/2010/05/21/weekend-open-thread-2010-05-21/#comment-101662

This is really simple. You have a real economy, and a paper economy. The real economy is housing, food, health, and energy. From that you get transportation, hygiene, and sustainable resources, like monitoring the fishing industry.

It’s simple. The are no complicated formulas of theory. You can talk about going to the moon, or astronomy, but the reality is we have people to feed, shelter, and make sure we keep a killer plague from wiping out the human race.

When you mention Japan, the economy there was decimated by the price of property. http://en.wikipedia.org/wiki/Japanese_asset_price_bubble

A broader reference  http://en.wikipedia.org/wiki/Real_estate_bubble

Look at property when you want to talk economy. There is farm land, Industrial, manufacturing, warehousing, commercial, retail, and housing. The economy goes up, pricing goes up, the cost of goods goes up. On the way down the price of goods goes down, but the debt service on the properties remains the same.

In Japan the people continued to pay mortgages on over priced housing units. You’ll notice that, in the reference, they refer to asset pricing. It’s all across the board. The people of Japan are paying mortgages on farm land, industrial, commercial, retain, and housing units. The money these savers have in the bank then goes outside of the country to make investments. Guess, just guess what the investments are.

In theory, when you invest in the stock market you are investing on a package of assets, commerce, and blue sky. Microsoft shifted that because the biggest asset they have is intellectual property. That opened a lot of doors to paper trading as if that paper was an asset. The paper was only as good as the asset it represented. Now those asset, based on Real Property, are worth less, much less, globally.

The best part in this thread is where there is a debate about the price of farm land in France. We don’t know the price of farm land in France, but it is a matter of speculation. Mexico’s closer so let me use an example from there. A walled hectare in Mexico was built with the hacienda for $225K. It went up in value, based on written offers to purchase to $900K. It’s now worth about $275K, maybe $325K based on an appraisal by the University of Washington.

People were willing to buy for $900K in 2006 by taking American equity into Mexico. What’s that like in Europe? What’s that like with the value of the Euro going up in value? I’ll speculate that it’s 10 times worse there, than it is in the United States. I’ll bet the value of the Euro, based on asset values, will decline sharply.

You see, it’s simple like that.

Well today finally did it. After all the wrangling about Greece it was Germany that collapsed the Euro http://www.belfasttelegraph.co.uk/business/business-news/german-shortsell-ban-sends-markets–tumbling-14813120.html

Germany stopped short selling, and the world gasped because those shorts have been the hedge on corporate losses. It’s an accounting trick that makes money even when you are losing money. Venezuela also stopped that type of trading with Chavez claiming some plot against him. Then today the United States Senate passed Banking Reform http://www1.voanews.com/english/news/usa/Senate-Passes-Financial-Reform-Legislation-94548609.html

If you put in a request I’ll explain it all, but right now it’s kind of like describing a train wreck that took 12 years to crash. All that matters is what you control today that is tangible. Is your property what you want, can you afford to pay it off, and how much value can you afford to lose?

If you are buying into this Real Estate market place keep in mind that rents will be going down as well as housing prices. People will share before they will over pay you for the privilege of paying your mortgage.

The good news is that we will finally see a housing unit price correction. Those foreclosures must be getting pretty ripe by now. Some, especially in the South East, are rotting as they sit. Banks, with the next round of legislation, may just start dumping properties onto the already shakey Real Estate market.

It will depend on how this all gets spun, but I would suspect that even with the now lower than “Historic” lows of interest rates in the 3%s many people will panic, and pull the purchase they made for the $8K tax credit. That should put further pressure on housing prices. Just be patient because we are very close to having, at least, Real Estate sorted out in the consumers favor.  

Remember bad news is good news for Real Estate purchases.

OK, it’s been a long time since I posted anything about the macro economy, and it’s impact on local Real Estate. The trouble in the stock market because of the idea Greece may default on it’s debt obligation this Sunday May 16th have a lot of people wondering. There are a lot of things to wonder about, but let’s just say that it has stalled the pricing of Real Estate in the United States.

The reason is that we have had this global economy illusion for the past decade, or going back to 1998 to be more exact. When you look at charts and graphs for Real Estate like this one: http://upload.wikimedia.org/wikipedia/commons/6/6c/Shiller_IE2_Fig_2-1.png there are a lot of these, but you may get an idea from just this one, you get the idea that something went wrong with the price of Real Property. This chart is of the United States, because it’s easier to track, but the world, the global Real Estate market, is even more over priced.

So when we heard banks were being bailed out we never thought about what that meant. It means they have loans that are defaulting. People aren’t paying on mortgages. They can’t afford it. In turn what that means is that all the Mortgage Backed Securities that are the basis of Pension Funds, Entitlement Programs, Institutional Investments, are worth less than what the economies of the world thought.

Dubai started it, Greece is next, then Portugal, Spain, Italy, and England isn’t doing to well. It’s an economic domino effect. Our Real Estate pricing has been holding a collective breath, and now we will see, in two days, we’ll see.

I was in a great Open House last Sunday. It’s $650K, 1950s construction with dimensional lumber for floor joist, a ton of concrete in the foundation, and in need of some updating. The lot and neighborhood are worth the price. The problem is the hardwood floors. Some one had them stained, and refinished.

I’m sure the rational is that a buyer will want to move right in to start living there, except that, even with the new paint, every room needs updating. The now painted paneling in the front bedroom needs to be removed. The master bedroom has to have the bathroom re grouted at the very least, and the other bathroom also. The kitchen is a period piece from when the house was built. It’s in good shape, but still, even with the new appliances, it’s a little worn.

All I’m saying is that over the course of the first few years of home ownership you would want work people in, and out of the home. The last thing I would want to worry about is the floors.

Now I understand that having nice floors is a good thing. There would be a time to have them done. It’s really pretty cheap, and that’s why Real Estate agents want to have it done. It’s cheap. They have it done cheaply. In this particular $650K house the floors were destroyed by an overly aggressive sanding grit, and stain that was little dark. It added no value, as a matter of fact I would deduct for it.

As a finishing note, pun intended, all flooring treatments a suspect in my book. new carpet, vinyl, refinished floors, are indications the property had deferred maintenance. In some cases it’s appropriate, especially if it’s in conjunction with added value improvements, like the addition of a laundry on the main floor. In most cases the agent, or home owner, are trying to hide something. For me it just means another negotiating point, but there are plenty of buyers who never really look beyond the paint, and carpet, so you take your chances.

This was our second to the last project in 2005. We removed the stucco, gutted it inside and out, added the roof truss package, and resheathed it with HardiPlank.

My buddy Marlow did a great interview about light, day light, in a listing of hers. http://360digest.com/2010/04/26/light-a-commodity/#comments

It started me thinking about how when we buy properties in Seattle we look for South Western exposure. We want to have as much daylight as we can. As I recall we only have about 52 days of cloudless skies here in Seattle.

While I was thinking about this it so happened we cleaned a couple of condominium units, in different buildings, in different parts of the city. Both units had full sun light, sat high up above the street, and were both unobstructed in the views they had. Both were South West exposure.

In another post, or series, I’ll write about what makes some condo units a good value, but for right now I just wanted to make the point about the light.

It’s kind of common for artists to want Northern light because it’s more consistent during the day, and casts softer shadows. You still need to be higher up, like on a hill, for it to be effective.  You also need space from the next structure. You need the light to be a strong presence in your home for it to add value. Some architects have built careers on how they use light in a project.

For Seattle we need all the light we can get. It’s a dark place here, with some darker winters.

This is the last week end of shopping for the Federal Tax Credit. What that means is that the Real Estate markets, nationally, will begin to stabilize.

We are already seeing lending contract. Lenders who create Salable Notes to the secondary market are very picky about who they make loans to. Properties need to be in good condition, and borrowers need to have good credit. Every thing about the loan is looked at by the Under Writer with a very critical eye. The people buying Notes to use as Securities are also opening files, leaving nothing to chance.

Government intervention in the Real Estate market is getting to be more unpopular so I don’t expect there to be an extension of the tax credit or any other inducement to buy Real Estate coming from the Federal Government. The burden of home ownership will have to be a choice the buyer makes with a full understanding that there will be little appreciation in values.

What we will be talking about at greater length is the buyer’s ability to pay down the principle balance of the loan. On our other blog at www.BuyingSeattleRealEstate.com we talk about ways to buy your home.

 Our goal is to give the consumer a complete resource from Purchase to the Sale of a property. This is the first real installment of the Buying Seattle blog and I hope you will forgive me, this one time, of using shameless Google Ranking to get this article seen.

One of the signs that the Real Estate market is getting better is that a house on Queen Anne was purchased and completely gutted down to the studs inside, and out. That means that the price that was paid made it worth while to gut it. That’s just a side issue.

The real purpose of the post is the 41/2 inch slope from the front to the back on the east side of the structure. The contractor was adding top plates, then planing them down. he pointed out he has to do the same with the floor, and I asked why not just jack up the corner of the house. The contractor said is was a matter of money, but what I know is that it’s the fireplace they are trying to preserve. That’s what usually sinks the foundation.

What we found is that it is cheaper and easier to pay the house jacker to raise the fireplace than work around it. The contractor said it would cost $5K which seems about right.

Even if they do all the leveling the fireplace will still be off kilter, so if that’s the case I still think raising the corner from below is better. The real issue, I’m sure, is the vintage tile work on the face of the fireplace.

My immediate thought is to cut the flooring and siding away from the concrete and chimney to raise the structure. After that I would see if raising the corner of foundation with fireplace and chimney attached is worth it. It just makes sense to me that shimming sub floor to match ceiling supports is time consuming. It just never seems to work out.

2029 NE 97th is an interesting example of why it helps to go look at houses. From the outside you think this is run of the mill. Once you get past the entry you know some one was really paying attention to detail. The pictures, even online, are decieving. Even with a video it would be hard to capture the effect of the home. It’s what every one talks about wanting, done extremely well.

Actually this post is about how, in my opinion, buyers need guidance of an experienced agent. Let’s leave the discussion about commissions for another time and just concentrate on what I saw, as opposed to what a typical buyer would never know.

First was the structure. It was all reworked, reinforced, and over done. Next was the use of the basement space for storage. Effectively you can put four cars, two tandem, and two side by side with room for a shop. The house has a heat pump to compliment the electric heat. The kitchen, living, and dining room flow together then spill out the back southern exposure patio with hot tub. OK, that went a little over the top, but the idea is the same, the house has been well cared for.

Now I have driven by the house, and never stopped. Jeanne has had it open every week end that it’s been listed, so today, Saturday, while her signs were out I thought I’d just have a look. It just went to prove again that you never know by looking at the front of the house how it will be.

Some times when I read new paint, carpet, or hardwoods, I get suspicious. In this home all of the updating was just how the home was cared for over the years. The owner collects classic cars and has a talent for paying attention to details. The reason jeanne has had it open so much is because, like with me today, there is no best way to describe the condition. It has to be seen. It’s an experience of it’s own.

When you hire an agent you are paying some one to know the difference between cared for, and prepared for sale. As much as I try to write it’s still best to rely on years, decades, of home shopping experience.

Why Buyer Agency is Still Relevant

In Today’s techno-savvy home search environment, many buyers don’t see the need for a buyer’s agent.  Many of them see the selling commission on a property as money they will ‘save’ if they go directly to the listing agent, or use a discount Broker. As a buyer’s agent celebrating my 25th year in real estate, I see my job as more crucial than ever.  The reasons are many:

1)      A savvy buyer’s agent is more of an advisor. My goal is to find a home for my clients that will satisfy not only their current needs, but to be forward thinking to their future requirements so that they can stay 5-10 years minimum.  By doing so, they save the expense of moving, and hopefully recoup their original investment, and most importantly, ultimately enjoy their home. 

2)      To see the perspective beyond staging, cheap cosmetic fixes, and owner’s belongings.  Buyers often tell me their requirements for a home, but then fall in love with an impractical house, and it’s my job to remind them of the end goal. 

3)      I see myself as a ‘devil’s advocate.’ I see the condition of many houses, too; it’s my job to be proactive and warn about possible pitfalls in the condition of homes i.e. siding, electrical panels, wiring, plumbing, recommending oil tank searches and sewer scopes, and or locations.

4)      I have studied non-verbal communication and have negotiated offers for 25 years; I pay for my fee, and then some, in most negotiations, and just finding homes that are a good value or that are prime candidates for hard negotiating!

5)      The Internet is not a replacement for 25 years of full time real estate experience and knowledge.  Seeing a home online, and being fully informed are two different things.  I have seen literally thousands of homes in the Seattle area, and sold some of them multiple times.  My insights are invaluable.

6)      My business is based mostly on referrals from prior customers, and finding someone a home that they connect with, in a good location, condition, and price keeps the referrals coming!

Saving a 3% commission but not being properly represented can cost a buyer more in the long run on home repairs, buying overpriced homes, or failing to see other pitfalls.  A qualified, experienced buyer’s agent is worth their fee!

Ann Babb-Nordling has been a Buyer’s Agent for Chuck Cady and Associates for 25 years. In my research she has stood out as the definitive resource for Buyers. She can be reached at:

Ann Babb-Nordling      206.528.4436

ann@annbabb.com

http://www.chuckcady.com/