Fast and Furious....the Buyers' New Home Buying Experience

The greater Seattle area has a seller's market.  We have low housing inventory and many buyers vying for the limited number of homes that are on the market.  In recent years, buyers have been taking their time to find a home, looking at dozens of houses before determining they want to write an offer.  They would look at a home, think about it a few days, view it again and perhaps want to see it again the following week, maybe even bringing family members or friends along for advice.  Those were the "good old days" for buyers.   They would bid low, walk away and wait for the sellers to drop their price before swooping in with an even lower offer. 

Those days are gone. Our current market is fast paced.  Buyers see a home and those in the know act quickly to put in an offer, often that same day.  They may have a "pre-inspection" before even placing an offer (at a cost of $400 or more) and waive any repair requests in order to make their offer more appealing to a seller who may receive a dozen or more offers. 

Our Coldwell Banker Bain office in Bellevue has mandated that we let our sellers know we must keep a property on the market at least three days.  This allows a multitude of buyers to see the home and creates a fair playing field for buyers.  It also often encourages bidding up of the price of a home, which sellers appreciate. 

An escalation clause may be used to present an offer that will beat the high bid by a price of a pre-determined amount but will not exceed what the buyer feels comfortable offering. For example, a buyer may find a home priced at $700,000 which is in a popular area and in fine condition.  A competent agent would call the listing agent and find out if there are other offers.  If so, she advises her clients and they determine what the property is worth to them.  I tell my buyers to determine the number at which they no longer feel bad if someone else got the property.  Is that price $704K? $725K?  $748K?  I recently heard of an escalation clause stating the buyer would pay $100K over the list price! 

Many first time buyers are not accustomed to this market and find it hard to believe a home will sell for over list price.  They also may feel the market is too fast for them to make such a large financial decision that will impact their lives for years. It is not unusual for buyers to "lose" a few homes before they understand they must act quickly if they find a home they like.  I encourage my buyers to call me as soon as they see a property they like and try to find time in their work day to view the property.  This gives them more time to consider if they want to write an offer on the home. 

I have had some buyers tell me that they will not offer more than list price.  Unfortunately, they may miss out on owning the best properties which are the ones with multiple offers.  Right now, with historically low interest rates, buyers have a wonderful advantage many buyers have not had for many years.  In addition, while we have seen prices creep up in the last year, the prices have not yet returned to the highs we saw in 2007, so buyers are getting two advantages:  lower prices which are likely heading up (instant equity) and record low interest rates which means every mortgage payment reduces the principal by a significant amount.  Many buyers are even considering 15 year mortgages with low interest rates which halves the normal amount of time a buyer faces paying back a loan.

All in all, it is a great time to buy or sell a home.  Please give me a call if you need an agent who is experienced in this fast and furious market.  I would delighted to use my knowledge and experience to represent your best interests.

Mortgage Rates at Historical Lows: Will 2013 Be Your Year to Buy a Home?

We have all heard over and over again how great the interest rates are these days, but these charts found in the links below really put it all in perspective.  We really are at historic lows!! 

Thank you to lender Stephen Chow for providing this great visual reminder that now really is the best time to buy a home!  Give me a call if you want to start your search:  206.383.3119.


Click Here for the 30 Year FHLMC Rates On 30-Year Fixed-Rate Mortgage Chart

Click Here for the 200 Year Historical Rates On 30-Year Fixed-Rate Mortgage Chart

Click Here for the 20 Year FHA Interest Rate Average For 30 Year Fixed-Rate Mortgage Chart

Click Here for the Rent vs. Buy Index Chart

If I Get Preapproved Will My Credit Score Go Down?

I recently met a new client who is interested in buying a home this year.  She had a pre-approval from last year, but it expired, so she asked me if she could get pre-approved without having her credit pulled.  Good question! A pre-approval is generally good for 90 days, but after that, a buyer needs to go back to their lender and refresh their pre-approval.

I called a few mortgage lenders I work with and asked some questions which confirmed what I suspected:  You cannot be pre-approved without having your credit pulled.  You can be pre-qualified, but not pre-approved.  So what's the difference?  A pre-qualification is when the lender meets with you, asks a lot of questions about your income, debts and assets and gives you a ball park idea of what you can afford.  As one lender said, this is "useless for an offer situation" as sellers want to know that your financials have been examined closely and that you really can afford their home.  Sellers certainly do not want to take their home off the market and then discover the potential buyer is not qualified.

So why would someone be concerned about having their credit pulled?  Inquiries make up only 10% of your credit score, but if you are hovering near a 740 credit score you may have a valid reason to be concerned. Scores over 740 get the best pricing on interest rates.  A lower rate means a lower monthly payment and significant money saved over the course of the loan.  If you plan to have a FHA loan and put the minimum 3.5% down on your home, the credit score does not matter as much as if you are putting down say 20% or 30%.   First time buyers or buyers with low to moderate income generally select a FHA loan if their credit scores do not qualify them for a conventional mortgage.

So how much damage does pulling your credit score really do?  The answer:  it depends.  If you are considering buying a home and visit a few lenders within a few weeks, and they pull your credit, these multiple pulls are considered one inquiry.  As a result of this inquiry, your credit score could be hit from 3 to 15 points, according to my lenders.  However, if  at the same time you are thinking of purchasing a car and the car dealer pulls your credit, then you choose to add a new credit card to your wallet and have your credit pulled by a number of lenders over a 2 month period, your credit score will take a serious hit.

It is in your best interest to keep your credit score in mind when you are getting ready to purchase a home.  Once you apply for your mortgage, your lender will tell you not to incur any new debt.  It is best to close on the home before you start looking to finance a new car or new furniture for your home.

Securing a pre-approval is an important step that cannot be avoided when purchasing a home, but how you go about doing that, and what the impact will be on your credit scores can vary greatly.  Let me know if you need the name of a reputable lender to help you navigate the financial piece of the home buying puzzle and minimize the impact on your credit score.

2012 Greater Seattle Real Estate Sales in Review

I haven't posted in a few months as I have been busy helping clients buy and sell homes.  All of this has contributed to my best year ever in real estate.  Even though we have low inventory, the buyers and sellers in our market are serious and understand this is an ideal time to buy or sell a home. Low ball offers are a thing of the past.  Buyers understand they must be pre-approved and ready to step up with a very good offer when they find the home they want to purchase.  Sellers know they have the upper hand, but Realtors are wise to insist sellers have their homes sparkling clean and staged if they want to garner the best offers.
 
Having witnessed the purchase of homes with mortgage rates in the high teens back in the 1980's, it is wonderful to see rates as low as 2.75% for 15 year mortgages and near 3.5% for 30 year fixed mortgages.  Those low rates buy you more house for your money.  How long this golden opportunity to buy and sell will last is, of course, the million dollar question I wish we had the answer to.  With the "fiscal cliff" looming and all the talk about our economy, unemployment rates, etc. we can't begin to guess what 2013 will bring.  What we do know is that this year was a very good year for many buyers and sellers. 
 
Besides  being a good year for buyers and sellers, it's been a very good year for my office in Bellevue, Coldwell Banker Bain.  According to Coldwell Banker Bain-Bellevue's Marking Director, Christopher King, over the past 12 months, Coldwell Banker Bain-Bellevue has been the region's top-selling real estate office:

• We've sold over $850 million in homes, the most in Washington and 12% more than our closest competitor;
• In King County, our total sales are 18% more than our closest competitor;
• On the Eastside, our total sales are 21% more than our closest competitor and we've had the most units (homes sold) in Buyer Sales of any office;
• Our average List-Sold price of $845,400 is 66% higher than the Eastside average

All this is to say, I'm proud to be working for an exceptional real estate company and I am happy to share with you all our vast resources at my disposal.

As we see 2012 come to a close, we look back and see progress made in the world of real estate.  The market has unquestionably turned around and is headed in the right direction. I am looking forward to 2013 as I hope you are as well.   Whom do you know who likely will be next to buy or sell a home?  It would be my pleasure to be of assistance to them in this process; please have them give me a call.

 

Market update from my Monday morning meeting

 

Every Monday morning I attend a meeting with Realtors from Coldwell Banker Bain in Bellevue.  We discuss our new listings, talk about the market, then pile into cars and view homes that our agents have recently listed in the greater Seattle/Eastside area.  It is a highlight of my week. One of my favorite portions of our meeting is when one of the Managing Brokers explains the market statistics showing what is happening in our current market .  Here is what the board looked like this morning. 

 

 

As you can see, there is a huge difference between our market in 2008 and now, four years later. On the Eastside, September 1, 2008, there were 3322 active listings, with 581 homes pending.  If you divide the active listings by the pending listings, you get a ratio that tells us that for every active listing, how many homes are pending.  This ratio helps us understand if we have a market that is more favorable for buyers or sellers or is a balanced/neutral market. 

 

A ratio of 2.5 or less is generally thought of as a seller's market. 

A ratio of 4.5 is a neutral market.

A ratio of 6.5 or more is considered a buyer's market. 

For homes in the luxury market over $1M, add 2 to the ratios. 

 

So let's look at the Eastside market again.  In 2008 the ratio was 5.7:1, which tells us the market favored the buyers.  In 2012, we see less than half the active listings and more than double the pending sales, so we know there has been a big shift in our market.  In fact, currently, pending sales in the Eastside market are nearly equal to the active sales.  The ratio shows this with a very low score of 1.17:1.  That means for every 1.17 homes that enter the market, we see 1 home go pending.  This clearly demonstrates that we have a strong seller's market (seller's market being 2.5 or less). 

 

Remember, just four years ago, it was almost six homes active on the market for every home that went pending.  That meant five of the six homes were not selling, so according to the law of supply and demand, prices had to go down in order to move inventory. 

 

We see the converse in effect as well. Take a look at the right side of the white board above:  In the past year in King County, with low inventory, active listings averaged 21% higher price than they did a year ago.  The year to date average price of an active listing in King County is $696,436.  Now let's look at pendings: The average price of a pending home in King County, YTD is $445,617., which is 9% higher than pendings were last year.  Finally, note the trend in sales:  the average King county home, YTD sold for $455,429. which is 5% higher than last year's average.  For homeowners in King County, this is very good news.

 

If you look at the left side of the white board above, you can see that the Eastside luxury market and the Seattle market have similar stories to tell.  In fact, the current Seattle market is white hot with only 908 active listings, but 1512 pendings.  The ratio of .83:1 reveals that now is an excellent time to sell your Seattle home!

 

If you or someone you know is interested in selling a home and wondering if now really is the best time to sell, give me a call for a private and confidential consultation:  (206) 383-3119.  I would be happy to go over statistics for your area and provide a complimentary market analysis.

You call this a bedroom?

Sometimes when I am showing homes to buyers, they are surprised at what sellers will call a bedroom.  Of course if a room can be called a bedroom, it increases the value of a home, since four bedroom homes generally are more appealing to buyers than three bedroom homes.  But can any room or closet be called a bedroom?  Are there any standards?  Well, yes, it turns out there are! 

1. According to  SRC 2009 R.304-305 & R.310 and the Client Assistant Memo prepared by the Seattle Department of Planning and Development, the bedroom code requires 70 square feet as a minimum  for a bedroom.  The width of a room cannot be less than 7', so a 6'x12' room really cannot be called a bedroom.  Height of a room must also be a minimum of 7'.

2.  A bedroom must also have an egress window that fully opens and is no more than 44" off the ground with a minimum of 5.0 square feet net clear open area with 24" minimum clear opening height and 20" minimum clear opening width. 

3.  In the greater Seattle area, there is no requirement for a bedroom to have a closet, but real estate standards say there should be a closet as well as a door than can close.

In addition, Statutory law requires that all homes sold after April 1, 2012 must be equipped with carbon monoxide alarms at each floor and audible to sleeping areas, so sellers should get these installed prior to listing a home for sale.

 

 

 

 

How much should I offer?

You've finally found the home and with pre-approval in hand ask your Realtor to help you write an offer. Good for you! In the greater Seattle area, now is such a great time to buy with low interest rates and prices that are depressed from the height of the market in 2007. So what do you need to know? What comes next?

When my clients tell me they are ready to write an offer on a home, I ask the following questions:

1. What are your full legal names?

2. What is your address?

3. When would you like to close and move into this home (typically 45 days from the day we write the offer)?

4. How much will you be putting down on this home (generally we write a percentage,i.e.,  20% down)?

5. How much will you be putting into earnest money (while typical is 3%, we see from 2% to 5% with higher percentages for competitive bidding situations)?

6. How much would you like to offer for this home?

Often my buyer-clients can answer the first five questions, but they need help on the sixth. "How much do you think we should offer?" they ask. That's when a good Realtor turns to the comparative market analysis and sees what other homes of a similar style, age and location are selling for. While active listings are helpful in determining price, the most accurate information comes from sold comparables. We try to look for homes that have sold within the last few months, especially since our market changed significantly this year from a somewhat balanced market to a seller's market with rising prices. Low inventory can make it a challenge to find comparable sales. Sometimes we need to go back to sales that occurred a year or more ago, then look at how the market has changed from that point forward, using sales data from Trendgraphix or the Northwest multiple listing service. It can be challenging to pin down an exact number, but an experienced agent has the benefit of working their market for years and having looked at a multitude of homes in the area. I can suggest a range for a reasonable offer, but I always point out that we can prove the home is only worth so much, but the seller can still refuse their offer.

I am currently working with a couple who wanted to buy a unique home. They were willing to wait for just the right place, passing by the suburban cookie-cutter homes for homes that offered some architectural interest. We found just the place: hidden in the woods with a triangular shape, multiple decks and a view of Lake Washington. They couple quickly decided this was their home and asked what they should offer. A market analysis was difficult since this truly was one of a kind. After some research I came up with a range, then asked the listing agent if she would share her comparable data to combine with my research. We learned that the home had been on the market two months with no offers, so we bid below asking price and waited. The sellers came back with a price that was countered again by my buyers. The sellers verbally accepted our offer. I urged the listing agent to get the signatures and come to mutual agreement, but the sellers had a medical emergency and a 12 hour delay ensued. When the listing agent was on her way to get signatures from the owners, another offer came in for full price and now we had to compete for this home. My buyer clients were not happy to have to bid for the home they thought they had below list price, but with the uniqueness of the home, they stepped up an made one final offer. They were happy to have won the bid, but this experience underscores that "time is of the essence" in a bidding situation.

When I have clients who decide to purchase a home, I always urge them to get their questions answered, then write the offer as soon as possible, for this very reason. Even if no other person has viewed the home, you never know when someone can make an appointment and decide, just like you did, that this is the home for them and submit a bid along with yours. When you have a competitive bidding situation, the price always goes up. The days of taking a good percentage off to try to "steal" a home are over in the greater Seattle area. Sellers are back in the driver's seat and for those homes that have a great location and great condition, prices are often going over asking price. How much over? It depends on the home and how many bids. I always ask my buyers to consider how much they want the home and there comes a point at which you think "that's too much." I ask them to imagine the other buyer getting the home for a price that they could say, "that's OK...I would not pay that." With escalation clauses, we can make an offer over a competing bid, up to your comfort range. For example, a buyer could offer $700K with an escalation clause of $2500 more than all offers, up to $755K." So if your competitor bids $725K, you end up getting the home for $727,500. Of course we ask to see the competing bid, so we know there really is someone we are competing against. For privacy reasons, names will be crossed out, but confidentiality does suffer in multiple bid situations.

So circling back to the question at hand: "What do I offer for a home?" The answer is both art and science with a great number of factors coming in to play. After considering location, condition and price in comparison to other homes, one needs to consider the market, if there are other offers, and the seller's motivation. This is where Realtors can be a great asset in analyzing the data, testing the winds and giving their professional opinion so you get the home you want for a price you are comfortable with.