Bank owned, Short Sales, & Foreclosures

Short Sales, Foreclosures, Auctions and Bank-owned properties are all different and have different challenges associated with them. Here's my summary on these properties:

A bank-owned property is one where a foreclosure has already happened, and now the bank, which has no interest in being a landlord, owns the property and wants to sell it to recover some of their capital. Great prices can be had on these properties; however be sure you do a pre-inspection before writing an offer, because they are virtually always sold as-is and no repairs will be done. Often the departing owner has stripped or otherwise damaged the property. The sale process is a bit more time consuming than a standard resale, but once you have a signed offer, barring catastrophes such as you losing your job or the house burning down, you will be able to close the deal. You need to beware of the type of title offered in this sale. It is often weaker than a statutory warranty deed and could even leave you vulnerable to old liens on the house. An attorney's help is essential to review the deal.

A short sale occurs when the seller cannot sell for enough money to cover what he/she owes the bank and any other liens on the house. In this situation, the bank becomes involved and must approve all details of the sale, prior to the deal being mutually accepted. Further, the bank can change it's mind at any time in the process, so there is a lot more risk involved for the buyer. Short sales can also be good deals, but be patient and ready to walk through any number of hoops the seller's bank and your own bank may require. Repairs also will not be done at this stage since the seller has no money to do them, so a pre-inspection is very advisable. Your Realtor's commission is negotiated by the banks as well, and most Realtors will ask you to sign a Buyer Agency Agreement prior to representing you in a short sale. This might mean you are responsible for some of your Realtor's commission. The buyer may also be expected to pay for a short sale negotiator, and this can run into thousands of dollars. People who are feeling some pressure to purchase and close on their new home within a specific time frame would do well to avoid short sales. Those with the luxury of time and nerves of steel can do well with short sales.

The actual foreclosure process takes place off the MLS. In my location (King County, WA) the foreclosures are advertised by the Sheriff's department, and once the owner has exhausted all time deadlines to make good on the mortgage, an auction is held on the county courthouse steps. Potential buyers must bid on the property and winning bidders must pay cash on the spot. Foreclosure prices can be anywhere from 65% to 85% of current market value. Auctions are often postponed, and many listed properties don't actually sell, so they then become bank-owned. The huge risk of buying at auction is that the buyer usually does not have the ability to even see inside the property prior to buying, let alone conduct an inspection. Auctions are best avoided by all except those with deep pockets and the skills, knowledge and ability to do repairs cheaply.

More questions? Send me an email!

Home Sales in December - slight drop

In King County, closed sales of single family homes dropped from 1550 in November 2009 to 1396 in December 2009, a 10% drop.

This is a far cry from the "worst drop in 40 years" bleated by the internet. Housing markets are local, local, local.

Before you take an article online or in the newspaper seriously, look at where it was written and what area its writing about. National real estate news is almost useless for anyone who wants news to help make a decision about buying or selling here in Puget Sound.

So, what happened in Snohomish County: November: 689 closed sales (again, single family homes.)
December, 586 sales, a 15% drop.

These are slight drops easily accounted for by the usual seasonal drop in sales activity for the month of December, when most of us are busy with holiday activities of one kind or another.

And so far, January in my office has been WILD! The month still has a week to go and our office is already over 40 sales!

I'm feeling very optimistic about 2010.

(statistics pulled by me from the NWMLS. Not guaranteed but deemed reliable.)

An Encroachment Story

I was at a home inspection the other day with some clients of mine, and they asked me where the property line was. (I get this question often, and the best I can do is indicate an approximate location, and refer them to a plat map, unless they choose to get a survey done.)





This time, we noticed that the neighbor had added a retaining wall in terraces between the two homes, but it seemed his terraces were extending onto my client's future property. According to the seller, the property line was approximately where the fence is. Looking at the photo, you can see why I thought there was a problem, with the terraces installed by the owner on the right, extending well past the fence line.


Anytime someone uses someone else's property as their own by building a fence, shed, or other structure on the other person's property, without the other person's permission, an encroachment is created. These can be a legal nightmare to clean up and can create hard feelings and even lawsuits between neighbors. I told my clients I thought there could be an encroachment here and we needed to get it taken care of if they wanted the property.



Sellers are required to disclose any known encroachment. The Seller in this situation had not disclosed an encroachment, and when I spoke with his agent, his feedback to her was that there was no encroachment! Possibly the neighbor had installed the wall recently and the seller was unaware, giving him the benefit of the doubt.


So to protect my buyer, I created an addendum insisting that the Seller have the property line surveyed, and if indeed there was an encroachment, to remedy the situation before the transaction closed. This was one of several issues that led my buyers to back out of the transaction, and they are now looking at other properties.


Had my clients opted to use a limited service brokerage, chances are they would have purchased this home unaware of the problem, since limited service agents don't necessarily view the property with the buyers. "Do-it-yourself" real estate transactions are very susceptible to this kind of time bomb. If you google "real property encroachment," you'll see lots of attorneys advising you to avoid properties with an encroachment problem, and those same attorneys answering questions from people stuck with one.

Be smart: use a full service Realtor!

Kirkland Improves over 2008

I read this morning in the Seattle Times an article by Eric Pryne the gist of which was that things have improved in King County real estate since last year. He quotes NWMLS statistics indicating total single family home sales for December '09 were up 62.1% from December '08 in Seattle, and up 77.8% on the Eastside.

I decided to delve a bit into the comparable statistics for Kirkand, part of the relatively booming Eastside.Comparing Single Family Home sales only for the month of December 2008 and December 2009 yielded these nuggets:

HOMES SOLD DEC 08: 29
HOMES SOLD DEC 09: 56
(Wow, that's a 93% increase in number of units sold!)

MEDIAN PRICE DEC 08: $490,000
MEDIAN PRICE DEC 09: $445,000
(That's a 9% price drop. Not nearly as bad as the year before.)

% SALE PRICE TO LIST PRICE DEC '08: 95.01%
% SALE PRICE TO LIST PRICE DEC 09: 96.11%
(a modest improvement; more significant if the trend continues.)

EXPIRED LISTINGS DEC 08: 79
EXPIRED LISTINGS DEC 09: 56
(probably the most encouraging statistic.)

How to interpret these figures? The BUYERS ARE BACK! As sales volume continues to gain traction, prices will stabilize. Although there is still a backlog of short sale homes, bank-owned properties are pretty hot commodities just now especially if they are in reasonable condition.
2010 should continue to show healthier levels of activity and stable prices. Economic recovery more broadly will further increase the number of buyers getting into the action and sellers who have held on through the recession will be more comfortable listing their homes.



(Photo courtesy of Beth Billington. Data source: NWMLS. Statistics prepared by Ann Griffin.)

Decade in Review-

I know, everyone is doing 10 year reviews of the decade almost over- although technically it isn't over for another year but what the hey- so I decided to do my own reviews:

My Best Accomplishments

1. Becoming a Grandmother to 2 lovely little boys.
2. Reaching my 10th Wedding Anniversary (my hubby, Art, shares the honors on this one.)
3. Becoming a Realtor! I love this job!
4. Singing with the best choir in the northwest, the Seattle Choral Company.
5. Keeping up with all the technological changes - I'm on Facebook and Twitter, have this blog plus my own website, a smart phone, an iPod and know how to use them all.

Best News Stories

1. President Obama's Inauguration
2. Various stories of communities and families dealing creatively with the recession.
3. Hints that the economy is slowly improving.
4. Boston Red Sox finally erase the curse of the bambino by winning the World Series twice.
5. Long-missing woman found and man who held her arrested.

Worst News Stories

1. 9/11 has to be the worst of the decade.
2. The banking industry meltdown and resulting recession.
3. The killing of 6 police officers in the Puget Sound region within 2 months.
4. The ongoing loss of lives in wars in Afghanistan and Iraq. Not to mention other conflicts around the world!
5. Hurricane Katrina, and the Tsunamis in Asia

Craziest Stories

1. Octo-mom gives birth to octuplets. (This is ok for dogs but not for humans.)
2. World's leaders can't agree on how to deal with global warming.
3. Balloon-boy hoax leads to jail time for his parents.
4. Michael Vick's arrest for dog-fighting and related charges.
5. (fill in your own- what do you think are the craziest stories of the decade?)

My 2010 Predictions

According to this article in the Puget Sound Business Journal, http://seattle.bizjournals.com/seattle/stories/2009/12/21/daily24.html the population of Washington State increased by approximately 90,000 people in 2009.

The figure includes people from all walks of life. What all these people have in common is the need for housing.

In the past two years I have noticed a lot of the people moving to our area have choosen to rent rather than buy, because they are unable to sell a home elsewhere. The difficulty selling is delaying their purchase of a home here, anywhere from one to three years. At the same time, a significant number of people who are leaving Washington state have been unable to sell, so their homes are often available to rent. This has resulted in a plentiful supply of rental housing even at the upper end of the economic scale. This supply should continue well into 2010.

However, as the economy slowly improves, the housing mess will slowly resolve itself. Foreclosures and short sales will decline, followed by a decrease in bank-owned properties for sale. Improvement in hard-hit areas such as Las Vegas will finally allow people relocating from those areas to sell their homes and purchase in their new city. This all sounds relatively simple but it will be quite awhile before mentioning that you have to sell your home does not evince sympathetic murmurs from your colleagues and friends.

My Predictions for 2010:

1. Housing prices in King County will remain relatively stable for 2010, for homes up to $1,000,000.
2. Homes over $1 million will lose another 10% of their value over 2010, with the sharpest losses in the first half of the year.
3. New Housing Starts will show modest improvement throughout the year.
4. Sales of existing homes will increase over 2009 and will show continual modest increases throughout 2010.
5. Rental rates will begin to increase as supply declines towards the second half of the year.

There. I've put myself on the line. I'd love your comments!

Looking Ahead to 2010

At our office meeting this morning, we learned that our office is one of the very few that has grown over 2009. Our branch grew because of 20 new agents, plus 18 from Bellevue Central.

Over 4000 agents have left the business throughout the Northwest MLS area in the past year.

This says a lot about being committed to doing what it takes to make a living in Real Estate. Members of the public are often critical of Real Estate Agents during good years when we can earn a great deal of money, but they often fail to realize that in the tough times, we shoulder the risk and the lean income that comes with an economic downturn.

I just completed my 2010 business plan, and my focus will be online advertising of various kinds: this blog, Twitter, Facebook, and my website will be my primary advertising. I'd like you to think of me whenever you have a real estate question or need.

Some mailings will of course still be needed since not everyone looks me up online, like you, dear reader, have just done.

Thank you for all your support!