Blogs, Facebook and Twitter can be a fun and cathartic way to share details about your life with others. Selling a home can be an angst-ridden process, worthy of blog posts, facebook rants and anxious tweets about the process. Many people are easily found on the web, and the buyer or real estate agent seeking to gain inside information may find a jackpot when they search for your name. Here are some examples of what to avoid on social media.

1. Sharing how many showings – “We haven’t had many showings. I hope the real estate agent can get more people to show up at the next open house.” As a buyer this shows me that you are not getting enough traffic, and may indicate that the home is overpriced. More obviously, it shows that the seller is worried and may be more motivated.
2. Sharing details about the home you just bought – This one is tough. Everyone wants to tell the world about the cool home they just bought, but a comment like “We just bought a house! Now I hope we can get ours sold!” tells the world that you are more motivated to sell quickly and likely for less money.
3. Sharing details about your future moving plans – Same as above. If I know that you are relocating to Virginia in two weeks and can’t buy a home until you sell your current one in Seattle, I also know that your motivation to sell quickly has gone up.
4. Sharing frustrations about your negotiations – Negotiating with a buyer is sometimes no fun. You are anxious to sell the home, but your buyer is making unreasonable demands. Ranting on your blog may give away what you are thinking, or even offend your buyer.
5. Overpersonalizing the home – Buyers want to love a home, but without you in it. When you list a home, removing your family photos is always recommneded so that buyers don’t feel like they are in someone else’s home. Your commentary on social media should follow the same guideline. Make it appealing and tell why you love the home, but leave out the intimate personal details that make it feel like it is still your home.

What you should do on social media

By all means, if you are an active social media participant, use it to market your home to your personal network. Highlight why you love the home and neighborhood, show off your great listing photos and give people contact info to easily set up a showing appointment. If you are an active participant on the web, assume that you will be searched by your buyer and make sure that what you are posting does not compromise your negotiations.

The new state law (RCW 19.27.530) went into effect on April 1, 2012 requires the seller of any owner-occupied single-family residence to equip the home with CO alarms before a buyer may legally occupy the residence following the sale. The building code goes on to describe where the alarms have to be installed: 1) outside of each seaparate sleeping area and in the immediate vicinity of each bedroom; 2) on each level of the dwelling; and 3) in accordance with manufacturer’s recommendations.

Carbon monoxide is an odorless, yet poisonous gas that does kill people each year in homes. Improper combustion in furnaces or car exhaust from an attached garage can introduce dangerous levels of CO into a home, but by far the most common cases of CO poisoning are when people bring their grill inside to heat the house during a power outage, use charcoal to heat their home or bring a generator indoors. In a strangely moronic twist of law-making, the law even requires carbon monoxide alarms be installed on homes that have no fuel-fired appliances or attached garages. Yes, if your house has no actual source of CO, you still need to install these detectors. I’m assuming that they figure you are dumb enough to bring the grill inside?

I’m not going to argue against safety devices and laws. Clearly the intent is correct here. However, I’m really baffled why our legislature picked this single item to enforce when there are countless items in homes that present a hazard that you don’t have to fix to sell a place. On older homes, the space between your staircase banister spindles is often too wide, and small children can fall through. Aluminum wiring in homes built in the late 60′s-early 70′s represents a fire hazard, as do a number of types of electrical panels. Certain models of electric wall heaters are known hazards as well. Current building codes and practices don’t allow for new installation of these items, but if they are already in an older house, there is no law preventing the sale of the home, nor is there a law that requires their replacement. Someone in the CO alarm industry must have extra sway with our lawmakers, as they are going to have a windfall with this new law.

So, if you are getting your home ready for sale, go out and get yourself the required # of carbon monoxide alarms and install them. It is required.

New construction homes often have a warranty

Most new construction homes come with some form of builder warranty. Some warranties are required by law, others may just be a common builder practice in a particular market. In Washington state, it is common to be offered a 1-year warranty on a new home, sometimes with an extended warranty on certain systems for longer times. These warranties are usually pretty broad and cover construction defects during the intial period of your ownership. (Note that construction defects do not include you scratching the floor or damaging something through normal wear-and-tear.)

Builders don’t allow an inspection contingency

For builders that offer a warranty on a new home, they generally will not accept a buyer’s offer that is contingent on inspection results. The logic here is that if your home inspector finds construction defects or needed repairs, they will be covered under your warranty. The builder has essentially pre-agreed to do those repairs during the warranty period, so they are not going to allow a contingency that lets a buyer back out because defects are found.

No home is perfect

We’ve been involved in hundreds of home inspections for both new and older homes. Every inspection report we’ve seen has found problems with the house, even a brand new house. The problems found in brand new homes are generally minor, but I guarantee you’ll find something needing attention.

The most common issues we have seen for new construction falls into the category of contractor sloppiness. Roofers leave debris on a roof or are sloppy with the nailing. Plumbers cut through important structural supports to route pipes. Framers leave wood scraps in the crawl space because it is a hassle to clean out.

Do NOT trust city permit inspection results

Whether you are negotiating with a builder or a home seller who had their home remodeled, beware of this statement: “That was approved by the city permit inspector, so there is nothing to fix.”

The permit process and building permit inspections do provide a basic compliance mechanism for building codes, but city permit inspectors can either be thorough or cursory. They are not going to spend 4 hours crawling in every nook of the home like your inspector, nor are they going to come back to see if something they initially approved has been altered or changed to something that is out of code. For example, they approve the framing of the home and then 1 month later a plumber notches out a bunch of supporting beams. No one is going to catch that in a permit inspection process, but it needs to be fixed.

Spend the money on a proper inspection

Hiring your own inspector is worth the additional expense. You will find issues, sometimes minor but other times more significant, that need attention from the builder.

You will also generally be allowed a walk-through of the home with the builder. During that walk-through, you are given an introduction to the home’s systems. It is also an opportunity to look for cosmetic defects that the builder needs to address prior to closing such as nail pops, scratches or paint touch-ups.

Buyers want a reliable roof

If you are selling your house and the roof has reached the “end of its useful life,” the easiest strategy to prepare your home for sale is to get a new roof. Few buyers are going to want to face an expense that can range from $8k-$30k in the first years of ownership. You can get rid of inspection headaches by addressing the issue before you sell.

Estimating when a roof will fail is an inexact science

Home inspectors are a fairly cautious bunch, and signs of roof wear are pretty easy to see. On a composition roof, the loss of granules is quite obvious, exposing the underlying fiberglass mat. When it is worn out, it is only a matter of time before the roof begins to leak. Predicting exactly when that will happen is impossible to say. Your inspector may say 1-2 years, another roofer says 3 years and yet another roofer may say this year. The roof isn’t going to leak spontaneously all over, but it will eventually fail.

Lenders won’t loan on a bad roof

If the appraiser walks up to the house and it is visually obvious from the ground that the home needs a new roof, your appraisal is going to be issued “contingent on roof replacement or satisfactory roof certification” Said another way, the lender will not make the loan until it is replaced or certified to last for a certain number of years, typically 3 years or so.

The same thing can happen during your inspection negotiations if the lender is made aware of a faulty, worn-out roof. This situation leaves the buyer and seller with only two options to get the loan closed. Either the roof gets replaced or the roof gets certified.

What is a roof certification?

A roof certification is essentially a form of warranty issued by a roofing contractor. It states that they have inspected (and possibly repaired) the roof, and they certify that it will last another 3 years given its current condition. In reality, it is less of a warranty and more of a maintenance plan for the roof. Every company I’ve seen that issues these documents states that the certification is only valid if you pay them to come out and inspect/repair the roof on an annual basis.

Should you get a roof certification

I’ve gone through the roof certification process to get past a loan approval issue. What I found is that many highly-reputable roofers will not even issue certifications. That should give you a pretty clear indication of how much confidence such a certification will give you. Some roofers will certify a roof, but do so with a thorough inspection so they aren’t guaranteeing something that is bound to leak soon. Yet other roofers will certify anything, provided you pay the a few hundred bucks for the report and let them do some minor repairs.

A roof certification can be a useful tool that a seller and buyer use to get a home through closing, but the “warranty” that they provide is pretty much a bunch of hooey. Buyers need to recognize that it doesn’t change the fact that the roof is worn and in need of replacement. Sellers also need to recognize that it doesn’t improve the product that they are selling, and they still need to price the home accordingly, given the condition of the roof.

Roof replacement is always a better option than roof certification, provided you can make the economics work.

To start with, real estate agents are not lawyers and not authorized to practice law. I’m pretty sure this applies in all 50 states. While we can offer guidance and advice on negotiating a real estate contracts, there are many circumstances where the correct response from your real estate agent is “you should consult an attorney for legal advice.”

When you do consult an attorney, you should look for someone who has daily experience with real estate law and transactions. Many lawyers may list “real estate” in a list of unrelated specialties, but lack practical knowledge of how real estate deals actually come together.

1. You paid me, so I had better edit something – I think many attorneys with marginal real estate experience will edit the contract as a means to show that they have added some value to the process. This doesn’t mean their edits are wrong or even bad advice, but sometimes it feels like they need to show that they did something for the $400 you just gave them and their edits don’t contribute towards your real goal, which is closing a transaction.
2. Ignoring the practical realities of closing a deal – An attorney’s job is to advocate for you. Often they will make changes to a contract that are more favorable to the buyer, while ignoring that those changes are either not practical or not commonplace in the real estate market. For example, I’ve seen contracts come back with lengthened deadlines for 20 day inspections, which is way longer than needed and longer than sellers will accept.
3. Changing lots of language in corporate contracts – If you are buying a home from a large builder, relocation company or a bank, they are going to provide you with their own contract language. Some of that language is going to be more favorable to the corporation and your attorney is going to want to change it. Your chance of getting detailed edits approved by a large corporation are slim to none. If Bank of America has standardized their contract for selling homes that they own, they use it thousands of times every day and your chance of getting their legal department to approve changes is low to non-existent. However, these are some of the more important contracts to have reviewed by a lawyer because of their custom language. The practical approach is to use your legal review to understand the risks of signing their contract, but realize you are not likely to succeed with edits.

There are some topics which scream for assistance from an attorney. If you are buying real estate with a group of people with a complex ownership structure, or if you are dealing with real estate issues during a divorce or estate sale, by all means seek legal advice. There are many other instances where legal advice is not only a good idea, it is critical.

Finding an actual real estate attorney is a bit of a challenge, as many generalist attorneys list real estate on their specialties. They may even have a strong background in real estate law as part of their studies. However, there is no substitute for the practical application of real estate law on a daily basis. You will find that a true real estate attorney is somewhat rare, and you may find that they are more costly than a run-of-the mill attorney.

Real estate attorneys can play a valuable role in a real estate transaction, but you need to remember that there are competing goals in a real estate transaction. You want your interests to be protected and want to engage in a deal that presents a minimum amount of legal risk. At the same time, you are negotiating with a seller who wants the contract to be most favorable to them, not you. By their nature, real estate contracts have to strike a balance between the two parties and have to acknowledge certain practical realities to getting a deal done. Your real estate contract is never devoid of risks, and often the best use of legal advice is to minimize those risks where you can, but also simply to understand the risks that you are taking when terms cannot be changed.

Normal closing times

A typical closing time is dictated by how long the mortgage process takes for a buyer. Because getting a mortgage involves applying for a loan, an appraisal and multiple underwriting steps, the mortgage process for your buyer determines how much time you need to allow for closing. At the moment, we are seeing 30-45 day closings to be typical in Seattle. Cash buyers have much more flexibility and could close in a matter of days once the inspection and title insurance is complete.

Don’t try to be too aggressive on a short closing of <30 days unless you have the utmost confidence that a lender can get the loan done early. (Most of them cannot.)

Lengthy closings can kill a deal

Buyers can be a fickle bunch. If a buyer thinks they are closing on your house in 30 days, they’ll probably stop looking at other houses. However, if you ask them to close in 90 days, I can pretty much guarantee that they will still be in “home shopping mode.” If they find something that they like better while they wait for your house, they could back out on you. In fact, if the other property is appealing enough, they may even be willing to part with their earnest money to switch homes.

More time gives more opportunity for something to go wrong with the buyer’s personal situation as well. Maybe they lose their job, get transferred for work or have to deal with a family illness. All of these reasons can kill your deal and put you back on the market looking for a new buyer. (We’ve experienced all three of these with our clients.)

The bottom line is that every day you let go by adds an element of risk to a successful closing, so keep it short and get it closed.

Be aware of mortgage rate locks

Your buyer is likely going to want to lock in their mortgage rate, especially with rates as low as they are right now. Typically, lenders will allow a 30-day rate lock at no cost. If your buyer needs a 60 or 90-day rate lock to meet your closing schedule, that is going to cost money. In fact, it can cost quite a bit of money, or may not even be available for very long time frames.

It only takes one day of crazy global events to send mortgage rates into a tizzy, and a sudden spike in rates could cause you to lose your deal. If you are looking for an abnormally long closing time, you may even want to offer concessions for the buyer to purchase a long-term rate lock.

Rent backs can be messy

One option home sellers may ask for is the ability to rent back their home for a few days or a few weeks after closing. This may sound like a great idea to a seller, but a buyer isn’t going to be so keen on it. Obviously it introduces a bunch of new liability for the buyer. What happens if the house burns down during the 2-week rent back? Or what if there is a pipe burst with massive damage? The buyer needs to make sure they are protected with their own insurance, and there needs to be some sort of lease agreement in place that dictates the terms of the rental. A buyer’s recourse if something goes wrong with the house prior to closing is to halt the closing. Once closing has occurred, all of the money is given to the seller and the buyer is left with little recourse other than costly legal proceedings.

On a more basic level, buying a home is exciting. No one likes delayed gratification. How would you feel if you took every penny out of your savings, went down to the car dealership and bought a fancy new car on the lot, only to be told to come and pick it up 30 days from now? Did I mention that the car is going to sit in the lot for those 30 days so you can drive by and look at it but not touch it? Same principle applies here. The savvy home seller caters to this basic emotion, even if it means they have to seek temporary housing for a bit after their sale.

Strategies for home sellers

The goal for every home seller is to get the most money for their house with the least amount of hassle and risk. The way to achieve this is to cater to what buyers are looking for and keep your closing time short. There are scenarios when asking for a short rent back or particular closing date makes sense, but use that request sparingly and recognize that requests for abnormally long closing terms are going to shrink your pool of potential buyers and introduce more risk to your sale.

We tour thousands of homes with hundreds of buyers each year, and the reactions we see to smells are pretty universal. While some buyers are more tolerant of odors, everyone has a reaction to them. Here are some of the biggest offenders that we see all the time.

1. Cigarette smoke – Almost no one likes this smell, and it is costly to remove. Only by replacing carpeting and painting thoroughly (sometimes with a blocker) can you make it go away. Either fix it before you list or plan to offer a credit or lower price in return.
2. Cat urine – Probably the worst of the pet odors. Cat urine in walls, trim or flooring is nearly impossible to remove without costly replacement of building materials.
3. Dog odors/cat litter – Pet owners are generally tolerant of these, but non-pet owners can have a very strong negative reaction to the hint of wet dog or dirty litter boxes.
4. Cooking odors – You should enjoy cooking tasty food in your home, but tone it down when you get ready to sell. Put away the curries, garlic and deep fryer, or plan on going out to eat. We tour homes with a wide variety of cultures, and somewhat surprisingly, even folks who come from a culture of pungent foods still dislike strong cooking odors.
5. People smells – An unflushed toilet, dirty bathroom or pile of dirty clothes or diapers can really gross out buyers.
6. Incense – Maybe it helps you relax, but be enlightened and lose the incense when you try to sell.
7. Air fresheners - Sometimes an air freshener can help your cause, but one in every room is nauseating. The heavy perfume smell screams that something is being covered up.
8. Moth balls – Nothing says outdated like the smell of moth balls. Get them out of the house before listing.
9. Rotting food – Keeping a little bin of food scraps in the kitchen is eco-friendly and encouraged, but take your food scraps outside immediately when done with them when you are trying to sell your house. Same goes for old food in your fridge. (Some buyers are going to open your fridge.)
10. Mold and mildew – A musty basement can imply unwanted moisture. Circulate the air, install a dehumidifier and do a thorough cleaning to minimize this smell.

Many real estate agents or even friends might feel awkward about broaching the subject of your home odors, but you should encourage it. Ask for an honest assessment of how the home smells before you list it for sale. Don’t be offended by the response and be willing to clean things up before you go on the market.

Introducing positive smells can also be a strategy. Often fresh-baked bread or cookies leaves a pleasant aroma, as does a bouquet of flowers or freshly done laundry.

Are your offers valid?

For a real estate contract to be valid, one of the components is that there must be consideration. Consideration is something of value that is exchanged by the parties. In a real estate contract, consideration is the purchase price. I will pay you $300,000 for the house. Unless you are independently wealthy, you probably do not possess consideration for more than one home purchase, so which contract is valid?

Also, a real estate purchase & sale contract is going to have pretty clear language about how you intend to pay for the home. In Washington, most folks use the NWMLS agreement which states the following: “Buyer represents that Buyer has sufficient funds to close this sale in accordance with this Agreement and is not relying on any contingent source of funds, including funds from loans, the sale of other property, gifts, retirement, or future earnings, except to the extent otherwise specified in this Agreement.” Once again, if you put two offers out there with this language, you are lying to one of them, and presenting a contract that is not technically valid.

Is your approach fair to the seller that you reject?

Being a savvy home shopper, you should explore every home possibility that works for you, but you do need to be conscious of how your actions may affect a seller. When a contract is mutually accepted by both parties, it changes status in the MLS to “pending.” Pending statuses alert other agents that the home is under contract. It also changes the status on public websites, indicating to buyers that the home is now unavailable.

Having a home come off and on the market multiple times is potentially a negative signal to future homebuyers. It may leave them with doubts about the price or condition of the home when another offer backs out. If your strategy means that you have taken Seller #1′s home off the market, only to back out two days later because you came to agreement with Seller #2, you have not been fair to Seller #1. Someday you are going to sell your home, and trust me, you won’t want to be in this situation.

What about short sales?

Short sales put an interesting twist on this question. A typical short sale approval may take 3-4 months after your offer is accepted. It is quite common for buyers to keep shopping, and often you may find a home you like better and can close on sooner. If you are going to offer on another home while you are awaiting short sale approval, you don’t want to back out of the short sale to make your offer. If that offer fails, you are left without either house. You also don’t want to hit the reset button on the short sale approval process if you don’t have to. My usual advice if you have a pending short sale is to go ahead and make an offer on another property, but once you are in contract on another home, be courteous and rescind your offer immediately so that they can start looking for a new buyer as soon as possible.

What about bank-owned properties?

Bank-owned (REO) homes are also unique. A bank isn’t going to go back and forth with countless written offers. They are going to negotiate informally on terms for a few days. Once terms are agreed upon, they will issue a contract for buyer signature. That gets returned to the bank for signature. You do not have a binding contract until both parties have signed, so this may offer you flexibility on making other offers.

Highly competitive bidding

You may also find yourself in competitive bidding wars in certain areas. It may take bidding on multiple houses to finally land one. If you know that you are one of five bids, your odds of losing are pretty high, so it may be prudent to place other offers at the same time so you don’t lose out on everything. My advice in this situation is to be as honest as you can be. If you win a bid at 5PM but are waiting for another bid to be reviewed at 7PM that you like a little bit better, let the first seller know the moment something happens so that they don’t needlessly take the home off the market.

Treat others as you would want to be treated

Throwing out multiple offers at the same time may maximize your options, but my normal advice is that you should pursue the one you want most first. If competitive bidding or short sales are in the mix, do what you have to do to get yourself a property, but be fair to the seller in the process. Contract law aside, it is neither fair nor ethical to take someone’s home off the market while you “make up your mind” about which one you want the most.

Instant, magical information when you’re standing in front of any house

By simply standing in front of the home, xHome uses the iPhone’s location sensors to figure out exactly which house you’re looking at. Combining data from public records, MLS listing feeds and findwell’s proprietary databases, xHome can instantly show you when the house was built, square footage, and previous sale information. If the home is for sale or recently sold, we’ll show the listing or sale price, a listing price history and gobs of luscious photos.

xHome also uses a new patent-pending, low-impact x-ray attachment to peer through exterior walls. Similar to a camera flash, the rays emitted by the attachment are reflected to the iPhone camera interface, which allows the iPhone to render interior photos with surprising depth and clarity.

“Home shopping can be a frustrating experience,” says findwell CEO Kevin Lisota, “Homes listed for sale often have misleading photos and arranging a home tour with your agent for every home that you’re interested in is just too cumbersome. Compounding these problems is that there are so few homes on the market right now, so it is difficult to find comparable homes to gauge an accurate value for the home you are buying. xHome solves this problem by allowing you to view the inside of any home at any time with just a click of a button.”

Low-impact x-rays + iPhone processing power = stunningly accurate interior images

xHome takes advantage of new advances in x-ray sensing technology. While most x-rays penetrate all the way through the home, a small percentage are reflected back to the iPhone’s camera which is sensitive to both visible and invisible electromagnetic waves. Minute differences in the reflected rays provide data that can not only convey depth to the interior images of the home, but can also be used to accurately colorize the images. The result is a photo-realistic view of the home’s interior, without ever having set foot inside.

The xHome attachment does emit a low dose of ionizing radiation that penetrates the exterior and interior walls of the home, but it is uni-directional away from the user. The rear of the sensor is also lead-shielded for an added measure of safety.

“The highly sensitive camera on the iPhone allows us to use a very small dose of radiation to get our images, and most construction materials reflect the rays quite nicely,” says Lisota. “We believe that the app falls below the radiation levels that require FDA approval, and if there happen to be occupants in the home, their exposure is quite small, much like getting a dental x-ray or two. We believe that the technology is very safe, though don’t advise standing in front of the iPhone when the xHome attachment is active, at least not repeatedly.”

Privacy first

The xHome app was built with privacy in mind. Face recognition advances allow the app to automatically detect occupants of the home and obscure their faces prior to images being rendered.

“findwell is all about radical transparency for the home shopper,” says Lisota, “but seeing who’s inside doesn’t affect the value or quality of the home’s interior, so we made sure to block them out. We believe we’ve put the power of accurate, unhindered home evaluation in the hands of the consumer with this new app.”

Download xHome and order your x-ray attachment today

The xHome app is free to download from the iTunes App Store. Upon first registration, you’ll be asked to enter your shipping details and a credit card for shipment of the xHome x-ray attachment. Cost of the attachment is $10, but if you end up buying or selling a home with a findwell agent, the cost of the x-ray attachment will be refunded at the time of closing.

Up until yesterday, if you bought a home with Redfin in Seattle, they would refund 50% of their commission, subject to a minimum fee on lower-priced homes. They’ve removed the formula and calculator from their website, and now you need to look at each individual listing to find out what your potential savings will be, which appears to be calculated by some “black box” formula.

I took a look at a range of properties on their site and came up with the following chart. You’ll see that their rebate climbs from 5%-45%, depending on the list price of the home. Curiously, their announcement of this new program claims a “range between 15% and 50%,” yet the actual numbers on their website tell a different story. The rebate goes to 5% on the low end, and only goes up to 45% (not 50%) on expensive homes. Looks like you’ve got to be a big spender at $950k and above to get the maximum rebate.

Comparing these new fees to their old ones, you can see that they’ve increased their fees pretty dramatically for home buyers in the $400k-$600k range, with a price increase of 20%-39% for the core of the Seattle buyer market.

You might be sent to a partner agent

Below certain price points, you can’t use the services of a Redfin agent. They will shuffle you off to one of their partners at RE/MAX, Keller Williams or other local brokerages. Strangely, this varies by your location on the map and your price point. In central Seattle, you’ve got to spend $200k to use a Redfin agent. In Redmond, this goes up to $250k and in Sammamish, they won’t help you unless you spend $300k. I’ve watched this in some of their other cities, and apparently they tweak these map/price parameters regularly to determine when they’ll help you and when they won’t.

Our approach is different. findwell doesn’t believe that we should pass you off to other brokerages, nor do we believe that buyers of different price points deserve different levels of service. If you are within our service area, one of our full-time agents will help you.

Toast the Savings

A lot of Seattle home buyers are going to spend more to use Redfin’s service. If you buy a $500,000 home, the Redfin rebate is $5,364. The findwell rebate is $7,500, saving you $2,136 more.

Given these changes, we wanted to give Seattle home buyers and sellers a fun incentive to check us out, since it appears that the “Redfin rebate is toast.” For anyone considering using a Redfin agent, findwell will give you a cool toaster if you choose our agents instead.

The Service Difference

The logic behind the price increases is that they are able to provide a more personal, 1:1 service from your agent. They’ve finally gotten the agents who negotiate deals out from behind their desk, but only to meet you on your first tour and to see a house you want to bid on. Redfin still has got an army of hourly contractors to facilitate the rest of your home tours and any inspections you need.

Since we started findwell, our approach to personal service has always been different. We believe in a 1:1 agent relationship at all points in the process, and think that the only way we can provide value and expertise is to make sure that we’re there with you every step of the way, whether that is home tours, inspections or otherwise.

Don’t get me wrong, Redfin has a great website for shopping for homes and we’ve admired their willingness to innovate. We just think that there is a better option out there in Seattle when it comes time to select an agent to help you. Give findwell a look before you choose a Redfin agent.

Q: What is a short sale?

A: There are a lot of short sales out there in today's real estate market. A short sale means that a seller owes more on a property than they can sell it for in the current real estate market. Because they are asking the bank to take a loss on the property, they have to get special approval from their mortgage holder. The process can take a couple of weeks, but more likely a few months, depending on how many mortgage companies you are working with and also who they are.

Q: In a short sale, am I buying the home from the bank?

A: In a short sale the bank does not own the home. The seller still owns the home, so you are generally working with them directly as you would in a traditional sale. Once it is a bank-owned property, however, then you are working with the bank rather than the actual seller.

Q: How does a bank determine the price of a short sale?

A: The price that a bank will approve on a short sale is determined in a number of different ways. They usually have the listing agent and a 3rd party real estate agent complete what is called a BPO, or Broker Price Opinion, where they look at comparable sales that have happened recently to determine a price for that property. They also sometimes will hire an actual appraiser to give them a price for the home. They then combine those figures to determine the price that they will accept.

Q: The seller accepted my short sale offer of $300,000. The bank will approve it, right?

A: Even if a seller accepts your offer on a short sale at the list price or lower than the list price, that doesn't always mean that their bank will accept that price. Once the seller has accepted your offer, the package and your offer will be sent to the bank for review. At that point, the bank will have their BPOs completed, as well as any appraisals, and will determine if your price is, in fact, what the property should sell for. If they determine that your offer is too low, they can come back to you and ask for more money.

Q: How long do short sales take?

A: Oftentimes you won't hear back from the bank for at least a month, many times longer. The process does take quite a bit of time, and there are different factors that lengthen that time. If it is a pre-approved short sale price,  then the process can go much more quickly, but if the process has not been started and the price not yet approved, it can take a lot longer.

Q: What is earnest money?

A: Earnest money is a deposit that the buyer puts down when they make an offer on a home. It shows their good faith in purchasing the property and their intent to move forward with the contract.

There are several contingencies that we put in place to protect your earnest money, so that if you do need to back out of the contract for some reason, you have the ability to do so and keep your earnest money. If you were to back out of the contract without using a contingency or for some reason not specified in the contract, you would forfeit your earnest money to the seller.

Q: Is there a standard amount of earnest money that I need to deposit?

A: There is no standard amount of earnest money that you have to put down. If you are in a multiple offer situation, stronger earnest money always makes your offer a little bit more attractive. However, there is no amount that you have to put forth.

Usually we like to see around 1% (of the sale price) or more. Putting too little of earnest money down can make you look like less of a serious buyer.

Q: My realtor told me that 3% earnest money is standard. Is that true?

A: 3% is definitely a good earnest money deposit, but it is not always necessary to put down that much. It can also depend on the purchase price of the home that you are looking at as well. If it is a lower-priced home, sometimes 1% may not be quite enough, but there is no rule that says you have to put 3% down.

Q: What if I have to back out of the deal? How can I protect my earnest money?

A: We put several contingencies into the contract, contingencies like and inspection contingency, which allows you to have a home inspected and back out of the contract if you are unsatisfied for any reason. In that case, you would get your earnest money back. We put a financing contingency in place for you, so if you couldn't get a loan on the property, you can back out and get your earnest money back. There are several contingencies we can use to protect you throughout the process. However, if you back out not using a contingency or for no reason at all, once all of your contingencies have been satisfied, then you would stand to lose your earnest money to the seller.

Ask an Agent is a regular feature on the findwell blog where our real estate agents answer common questions from home buyers and home sellers. If you have a question that you'd like us to answer, drop us a line at agents@findwell.com.

King County requires that sellers have a septic inspection completed prior to sale, with a copy of the report given to the buyer and King County Public health prior to the transfer of title. The inspection and costs associated with it are the responsibility of the seller.

The inspection process looks at the operation of your septic system, examining the amount of solids, flow of effluent into the drain field and operation of pumps/baffles in the system. The result of the inspection is reported on the Operation/Performance Monitoring Report. The inspection must be completed by a licensed On-Site System Maintainer, of which there are only ~50 or so companies authorized to do this work in King County. Make sure the company you choose is on the Licensed OSM list.

In addition to the inspection, a seller must record a Notice of On-site Sewage System Operation and Maintenance Requirements with the King County Recorder’s office. This document provides notice to the buyer that the home is served by a septic system and describes the new owner’s responsibilities for maintaining the system. Your escrow/closing company will facilitate the recording process for you, but sellers and buyers need to be aware of this requirement.

The actual costs of this inspection process do vary, sometimes significantly. The inspection may reveal that the tank needs to be pumped. This depends on how long it has been since it was last pumped and the actual contents of the tank, which depend on usage and the number of folks who live in the house. Generally you won’t know if it needs to be pumped until the inspector opens the tank and takes some measurements.

Another cost that you may incur is the requirement for an as-built diagram of the system. When you construct a new septic system, a diagram showing the layout of the system in relation to the house and property boundaries is created and filed with the county. The county will likely have record of these drawings for any home constructed recently. However, if a home was built with a septic in the 60′s or 70′s, there is a chance that the as-built diagram doesn’t exist. If it doesn’t exist, you will be charged extra for the septic inspector to examine the system and create the drawing, which could be an extra $300-$500.

If you are selling a house in King County, you need to be aware of these requirements and costs. You may even want to get the inspection completed upfront, though you need to have it inspected within 6 months prior to sale of the property. Often the buyer also wants to be involved in viewing the inspection in person, so in most cases, a seller won’t conduct the inspection until they get a buyer into contract.

As a buyer, you need to make sure that you review the inspection report and receive the Notice of OSSM prior to the sale. You may also want to attend the inspection to see the system components and their operation in person. King County also has great resources for septic care and do’s and dont’s, which are helpful if you’ve never lived with a septic system before.

We operate separate legal entities to offer our customers lending, title and escrow services.

I haven’t seen them offering or talking about these services yet, but the intent looks pretty clear that this is coming shortly or already underway. They did tinker with being a mortgage broker in Seattle, but shuttered the service in 2008 when they laid folks off. It looks like they’ve kept Redfin Mortgage, Inc. alive for this purpose.

It is not an entirely surprising move. Many large brokerages start mortgage or escrow divisions to extract more $$/transaction, though many of them do so through joint ventures so that they don’t have to run the services directly. Interesting that this comes on the heels of their new directory of 3rd party providers that offer these same services, just announced this week.

They’ve talked for years about wanting to improve and integrate the lending and escrow process with their home buying service, but it looks like perhaps they are ready to jump in. Whether they are big enough to sustain those efforts remains an open question. I’m guessing that whatever they offer will be tuned to their own customer base, and many in the industry would be hesitant to refer their clients to a Redfin-owned service. It is a tough road to be 100% reliant on your own buyers and sellers if you intend to offer loans, title or escrow.

Here is the job posting that came across today:

When a seller receives an offer, they can accept the offer as written, reject the offer, submit a counteroffer or do nothing. There is nothing illegal or unethical if they do not respond. In fact, as the buyer, you have the same exact ability if you receive a counteroffer. It is a free market, and buyers and sellers are free to exercise their own discretion and volition during negotiations. Not all offers necessarily deserve or require a response.

Most offers specify an expiration date. If the seller were to respond to your offer after the expiration date, even if they accept it as is, it would then become a counteroffer that would need your countersignature to re-activate the contract and make it valid once again.

There are a variety of reasons that a seller may choose not to respond to your offer. The most common one is that your offer is simply too far away from what a seller may consider reasonable. While my general advice to sellers is to always try a round or two of negotiation to see where it goes, there are times when such an effort seems pointless. I once received an offer that was 35% under list price on an $800k home, with a measly $500 in earnest money. There were no indications that the buyer was serious in their negotiation.

Your own actions as a buyer outside of the offer could also cause a seller not to respond. I’ve heard tales of rude home tours where buyers rifle through personal belongings or engage in other rude behaviors causing this lack of seller response. I’ve even heard of cases where buyers act obnoxiously with neighbors prior to their offer. A particular seller may not want their family home passing to someone that they don’t feel comfortable with. They may also be concerned that if a particular buyer is so difficult at the beginning of the process, that they won’t be viable to actually make it through the month-long closing process.

In some cases, it is simply that more time must pass before the seller is psychologically ready to negotiate at your price point. If the market comparables clearly show that a home is overpriced and you make a reasonable offer that gets no response, you will need to wait and retry your offer another day. Some sellers will change their mind in weeks, others in months. Every seller and situation is different, but if you like the house, playing the waiting game can pay off once the seller has come to the realization that they are not going to get what they want.

We are on the hunt for a new team member and just posted a job opening for a real estate broker.

We believe that real estate can be a rewarding careeer and strive to provide growth, education and advancement opportunities to our agents.

If you think you’d be a good fit with our team, please send a resume and cover letter to jobs@findwell.com.

The promise of the new service level is that you get to have a direct relationship with an agent, rather than being shuttled around between team members. If they can pull this off, it will be a positive for customers. Frankly I’m a little surprised that it took them this long to implement the change, as we continue to receive customers who fall through the cracks of their automated system or are just frustrated by the lack of direct interaction with their agents. To support this, they’ve boosted their fees quite substantially to home buyers.

In the past, if you bought a home with Redfin, they would refund 50% of the commission they received from the seller, subject to a minimum for lower-priced homes. Gone are the percentages and calculator to figure out how much you can save. It has been replaced with a “black box” formula based on the listing price. Their rebate pages only say “Redfin keeps a portion as our fee” and “You save with Redfin.” To figure out how much you save, you have to look at the number on each individual listing.

I dug into the numbers further, and the new black box commission formula does result in a rather significant increase in their fees to many home buyers. In their blog post, they mention a 16% increase in fees, though based on these formulas, that depends entirely upon the list price of the home you are looking at. I’m not sure where the 16% number comes from. You could get a 39% increase in their fees for a $400k house.

It is not a straightforward formula, so here is a chart to show you how it appears they calculate their buyer rebates. I picked two cities that have different typical commissions paid to buyer’s agents, and looked up the rebates that they are offering at various price points. In Dallas, many sellers offer 3% to the buyer’s agent and in Portland, a typical commission of 2.5% is paid to the buyer’s agent. The commission formula appears to be different in these two cities based on this.

As you can see their buyer rebate climbs in a curve between $200k and $900k. You don’t get the full 45% rebate unless you buy a $900k+ home when commissions are 3% or a $1M home when commissions are 2.5%.

Depending on the price of the home you are buying, the fee that Redfin charges for their service is up dramatically compared to their previous rebates, with buyers in the $350k-$650k range looking at price increases of 20-39%. While they remain very attractive at price points nearing $1M, the savings for the middle-of-the-road homebuyer is reduced substantially. I can’t help but think that customers are going to be turned off by the lack of transparency on how these rebates are now being calculated.

It also appears that they’ve hit a snag on this already in San Francisco, where they’ve set their minimum at $900k to be able to use a Redfin agent. Anything under that and they’ll refer you to one of their partners who doesn’t work for Redfin. The limit is apparently temporary as they staff up in the Bay Area, but consumers have to deal with a moving target of how much they can get back on their purchases there until it’s resolved.

We’ve always liked Redfin’s approach to the real estate market. They’ve built a great website and have managed to break down a number of industry barriers by equipping consumers with in-depth data. We’ve also admired their willingness to try something different in how they charge consumers and compensate their agents. With the latest price increase, however, it looks like their efforts to transform the commission side of our business are reaching an end. Clearly they are going to message this price increase as necessary to support enhanced customer service, but there is likely a back story here about how they need to boost their bottom line to show a return and exit strategy for all of the venture investment that they’ve taken.

Whether they are successful with these new fees remains to be seen. Clearly customers want more from their relationship with a real estate agent than they’ve been offering, but the smaller monetary difference when picking one of their agents makes the comparison to traditional Realtors less clear.

You can either catch it on KIRO 97.3 or 770AM this weekend, or listen to their show below or directly via this MP3 file.  You can get every episode of the GeekWire podcast using this RSS feed, by subscribing in iTunes or Zune.

Evaluating a home that is being sold at a foreclosure auction can be difficult, and often requires guesswork. Remember that up until the foreclosure auction, the home is still owned by the individual who is being foreclosed on. The owner controls access to the home, and as you might guess, there may be little or no incentive to allow people into their home. People facing foreclosure may be ashamed, frightened or even angry about their situation.

1. Home is vacant – A home may be abandoned prior to the auction, sometimes just a few days before, but other times may sit vacant for months. If it has been vacant for a long time, the home may be re-secured by the bank who holds the mortgage to protect their investment. Evaluating a vacant home generally involves peeking in windows to get a glimpse of the interior. You may also try to contact any companies that have posted notices on the door.
2. Home is occupied - Can you see the inside of a home that is occupied? It really depends, but in most cases the answer is no.
1. Maybe the home is currently listed as a short sale or was very recently listed. If it remains listed, your agent should be able to show the home according to showing instructions in the MLS. If it was recently listed, a call to the previous listing agent may gain you access, or at a minimum will give you better insight into the actual condition of the property. Previous listing photos can also be a great help in evaluating the potential condition of the interior.
2. If the home has not recently been listed for sale, it is unlikely that there are any photos of the interior, and it is also unlikely that the owners are going to let anyone inside. Folks facing foreclosure are not incented to have their home taken away and aren’t going to take kindly to random knocks on their door. You should be cautious about your own safety before you go trespassing on someone else’s property to attempt to see in the windows.

Let’s say that you are satisfied with the exterior condition of the home, and have enough data about the interior to be satisfied that the property is in reasonable condition. Property condition isn’t the only risk you face in buying a home at the foreclosure auction. You also need to be aware of the condition of the title. There could be liens and encumbrances on the property that become your problem as the new owner. The mortgage being foreclosed gets extinguished by the auction, as do 2nd or 3rd mortgages underneath that one. However, unpaid property taxes, HOA bills or other liens can become your problem as the new owner. At a foreclosure auction, you will not receive a title insurance policy, so you need to do the title research on your own.

Buying at a foreclosure auction can get you a great deal, but involves a significant amount of risk. The actual condition of the property is known to a limited extent, and you are not going to have the opportunity to formally inspect it. In addition to the unknown condition of the property, there can be nasty surprises on title that become your problem. Properties sell for significantly less at foreclosure because of these risks. The educated buyer will do their best to investigate the risks prior to auction, but recognize that in many situations you are left to an educated guess on what the property actually looks like inside.

When a visitor buzzes from the entry, you pick up this handset to speak to them.

But what if you want to see who’s at the door? Well, just pop open the Jetson’s-style monitor! (That is a mini-CRT that pops out!)

Not only do they have a Hobbit door at the entrance, but you can also live on streets like Rivendell Drive or Brandywine Lane.

However, you’ll notice that the homes are a little larger than typical Hobbit size!

It looks like a good deal

Some banks will price their homes at fair market prices and are willing to be patient to maximize their sale price. Other banks want a quick liquidation and will price the home significantly below market value to drum up multiple offers quickly. If you are watching the market and see a bank-owned home that seems to be a real bargain, chances are that 10 other buyers just had that exact same thought. You are likely to face a competitive bidding situation where the price gets driven back up. If you are going to make an offer, work quickly to get your offer submitted so that you don’t miss out on the opportunity.

When do banks respond to offers?

All of the banks that we have encountered facilitate offers on their homes with an online system. The listing agent for the home will review your documents to make sure all of the requirements are there and will submit the offer to a website, usually summarizing the key terms of price, loan, closing date and seller credits so that the bank can review them quickly. Offers are submitted to these websites on a first-come, first-served basis.

How long it takes a bank to review an offer varies pretty widely. Typically we receive a response back in 1-2 business days, but we’ve seen it as short as 4 hours and as long as a week. Typically there won’t be any action during a weekend, but this is not true in 100% of cases. It is important to realize that banks usually don’t respond to your offer directly. They will often use a 3rd party asset management firm to serve as the middleman, and those folks might occasionally work on a weekend to clear backlogs.

The most important thing to remember is that once a bank accepts an offer, any future offers become irrelevant because they have entered into a binding contract. If the bank choose to send a counteroffer, that also means that the first buyer has a binding opportunity to accept the counter, regardless of how many other offers have appeared in the meantime.

Do I need to be the first offer?

Being quick on your offer can help you be the winning bidder in some, but not all, cases. If your offer is reviewed and accepted quickly, you can preempt other bids, but in most cases, the moment a 2nd offer is received, the bank will send out a “call for highest and best” to all previous bidders. Let’s look at two examples.

Example 1

• Bidder #1 – submits offer at 10:00AM
• Your bid – submitted at 4:30PM
• Bank reviews offers at 4:00PM and accepts bidder #1’s offer, leaving you out of consideration.

Example 2

• Bidder #1 – submits offer at 10:00AM
• Your bid – submitted at 4:30PM
• Bank reviews offers at 9:00AM the next day, sees that there are two offers and issues a request for “highest and best offers” to both parties.

In Example #1, the first bidder wins because they acted quickly and the bank responded quickly. In Example #2, which is more typical, the order of offers received is not relevant because the bank will evaluate both offers before responding.

Call for Highest and Best Offers

Banks are not foolish about competitive bidding scenarios. They know that they have underpriced the home and want to give an opportunity to all bidders to raise their offers. By issuing a request for “highest and best offers” to all competing bidders, they give everyone a chance to revise their bid by a new deadline, usually a day or two later. This also gives more time for even more bidders to come forward.

In this scenario, you are not likely to know anything about the other bids. In fact, if the other agents are cagey about it, they will hold their offers until right before the deadline so that they can’t be shopped against others. It is unnerving, but all you can do is decide on what you feel is fair to pay for the home. Put your best foot forward and hope for the best. Make sure that you hit the deadline named, otherwise your offer may not be considered.

Don’t assume that you are being told the whole story by listing agents

Listing agents who represent hundreds of bank-owned listings often can’t keep all the details straight for every property. They also likely employ a staff of assistants who may be receiving offers and uploading them to bank websites. If your agent was just on the phone with the listing agent who said “we don’t have any offers yet,” that may not be true. One of their assistants may have received and uploaded an offer recently, making it available for the bank to review and accept. In this case, every hour that passes is a chance where you may miss out on the opportunity to bid.

Tips for timing your REO offer

1. Submit your offer as quickly as possible for a REO property that you are interested in. Generally every hour that passes is an hour that someone else can bid and have their offer accepted before yours.
2. The exception to this is when multiple bids have been received and a “call for highest and best offers” has been issued. Banks will not review any offers until that deadline is reached, and it can pay to hold off on submitting yours until the deadline so that it cannot be shopped against other bidders.

Housing prices fluctuate based on a complex mix of job growth, population growth, interest rates and consumer sentiment. Layered on top of that is a large percent of pre-foreclosure and foreclosed inventory. But at the core, it is an exercise of supply and demand. Less buyers than sellers, and prices have to decline in order to spur demand. If the supply of housing shrinks and the buyers are still out there, competition and buyer frustration will eventually drive up prices.

I took an in-depth look at the number of active listings and closed sales in King County for the last 11 years.

Statistics not compiled or published by the Northwest Multiple Listing Service

The top line in this chart represents the number of active home & condo listings in King County each month. You’ll notice that the chart bottoms in December and peaks every summer in an identical pattern every year. The inflation of the bubble is also readily apparent, with suddenly declining inventories in 2004, which remained low until 2007. The burst of the housing bubble is also clearly visible, with a dramatic increase in active listing inventory starting in May 2007. (In hindsight, this all looks pretty obvious, but it took almost another year for the price declines to take hold.)

The bottom line in this chart is the number of closed sales for homes & condos in King County each month. You’ll see that closings climbed to 4000 homes a month during the summer of 2004-2006. Once consumer confidence tanked, the number of homes closed sank to roughly half of those numbers during 2008-2011.

What is most interesting about this graph is the distance between the two lines. During the boom, the number of closings was very close to the number of active listings. Homes would sell as soon as they were put on the market. In 2008, the gap between active listings and closed sales became enormous, with over 16,000 active listings against 2000 closings per month, driving prices lower.

Since the worst of the market in 2008, active inventory has been on a steady decline, with levels now down to where we were in 2007. 2011 also posted some very modest growth in the number of closings. If you have been a buyer in the Seattle area during 2011, the lack of inventory was probably apparent, as homes in popular areas have been harder to come by.

At the moment, we are finally entering a territory where the number of active listings is in better balance with the actual buyer demand. How prices will behave with this diminished supply is not entirely clear at this point. Increased competition for a smaller inventory will put upwards pressure on prices, but that will be counteracted by the distressed property liquidation that is still underway. Both short sales and bank-owned homes will continue to drag on home prices.

Also, it is important to point out that King County is actually a huge market area. It is useful to look at these statistics for the entire county, but recognize that inventory, demand and prices vary considerably throughout the county. Popular urban neighborhoods have fared quite differently than some suburban and rural areas.

The pattern of new listings is remarkably consistent from year to year. There is a spike of new listings in January as the holidays end and the new year begins. New listing volume peaks roughly between the months of May-June of each year, with strong listing activity from March-August in most years. Listing volume gradually declines in September-October and then dramatically tails off in November and bottoms out in December. Looking at the last decade, the number of new listings that come on the market in December is 50-70% lower than the peak activity in May-June.

A few more interesting notes on this chart. You will see a big spike of new listings in March-April 2010 as sellers attempted to take advantage of the home buyer tax credit. The sudden shift downwards from 2008 > 2009 clearly shows the lack of seller enthusiasm for trying to sell their home.

2011 has been particularly slow for new listings, and I anticipate that when December numbers come out, the number of new listings for this month will likely set a decade-long low. Obviously the population has continued to increase in King County during the past decade, so it is a very telling story about how fewer people are currently attempting to sell their homes.