Sequim home sales and Port Angeles home sales from January 1st through June 23rd (today) of 2009 are shown in this spreadsheet.  I’ve weighted the data to more accurately reflect the market by only including homes from $150,000 to $600,000.  This range represents something close to 95% of the homes sold.

The columns from left to right represent the number of bedrooms, the total number of listings, the total number of these listings that sold, the average listing price, the average sales price for those that actually did sell, the ratio of the listing price to the selling price, and the days on market for those that actually sold.  Those that did not sell are either expired (about a third of all the listings expired without a sale), or their DOM continues to increase (not shown in this spreadsheet).

It’s no surprise that the largest number of homes listed for sale are three bedroom.  That is the standard, and even for retirees, having one spare bedroom for company or family and a third room for a study or computer room is popular.  Of these three bedroom homes, a third of the homes listed did not sell and the listings expired (not shown in the data here).  Of those remaining listings in this category, only a fourth of them sold in this first six months of the year.  The average selling price was 95% of the listed price.  That means a home listed for $400,000 sold for $380,000.

All of this is worth knowing when it comes time to negotiate the purchase of your own home.

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You’ve got to love the Sequim weather suddenly-warm and hot.  It’s in the mid 80’s, and just beautiful.  Summer is finally here, and it feels good. The following image is used by permission from our local online newspaper, Sequim-News.com.

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Are you buying Sequim real estate, an existing home or a vacant lot?  If you are searching for the ideal property, I recommend being careful about the neighborhood, and I’m talking about junk freaks.  They live in every city and town in America.  They’re typically nice people:  they just happen to be junk freaks.

The problem isn’t the junk freak–it’s what he does to his property that will adversely effect your property.  Who wants a disaster of a junk yard next store or even down the street.  Many buyers have told me as we drove around looking at homes that they would not consider a particular listing because there was a grotesque junk yard nearby.

Driving around the block is important, but drive a larger radius and see just what is out there.  You may not have to look over or through the fence at broken down cars, rusty barrels, and refrigerators from the 1960’s, but if you ever plan to sell your home (or your children do), consider that buyers either won’t buy a home near a disaster zone, or they will pay a lot less.

Even when you do buy a lot or home in an attractive area, does the neighborhood have CC&R’s (covenants) that prohibit junk yards and pig farms?

If you are moving to Sequim or Port Angeles from California or Arizona, I recommend that you do what many of my clients do before they arrive here.  Email with me while you gather information to make a wise decision, search the MLS on my website, ask me about particular listings, the neighborhood, schools, recreation, and covenants.  By the time you get here, you and I will already have a sweet list of good prospects, and you’ll feel like you have a good feel for the area.

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Home sellers in Sequim and Port Angeles must price their homes right to sell in this market, but how do they do that?  What is the right price?  Buyers also need to be able to have a very specific idea of what a reasonable price is for a home in order to write an reasonable offer and at the same time not pay too much.

Most people understand that pricing a home is not a mathematical science, and that there is a large subjective element.  But there is a practical approach to arrive at a very realistic range of values and then narrow the price to a specific number.  So while we can say nailing a fair price for a home is as much art as it is science, we actually can approach this intelligently and get very close to what an accurate and fair price would be.

By the way, this is the short version of how to price a home.  There is much more thought that goes into an intelligent and accurate analysis, but this summary will give you a good idea of the process so you can use this approach yourself, or so you can ask good questions as you work through this process.  Don’t assume all real estate agents know how to do this well.  Not all do.  Remember, the answers you get from your real estate agent are only as good as the questions you ask.  Be sure you know the issues and the questions.  You don’t have to know all the answers, but if you know all the questions, you can find the answers or the right agent to help you find the answers.

The first thing I like to look at when I’m going through a home is the cost of replacement.  I look at the materials and floor plan, the excavation, and the features in the home.  Then I look at the cost per square foot to build it.  I’ve learned that to build a nice custom home ranges from $150 per square foot to $300 per square foot.  The cost to build a cracker box home will start somewhere around $75 per square foot and go up from there, but almost all builders who advertise low rates bring the cost per square foot up during construction with extras and “surprises.”  Their contracts are usually open-ended, which means they can add to the original price.

The cost of replacement is just a starting place.  This isn’t the ultimate answer to value.  It’s good to know right away how much it would cost to build this home on this lot.  Now tuck that number in the back of your mind.  (You might need help identifying the cost per square foot for a particular home, because it will depend on floor plan, quality of materials and workmanship and so on.)

Next, I like to look at the property data at the Treasurer’s office.  Assessed value is an interesting number, but by no means is it always accurate.  While the assessed value is supposed to be 100% of its current fair market value, it rarely is.  The square feet shown on the county records are not always correct.  Many people have added a room or converted the garage to a bedroom, but did not get a building permit to do that, so it won’t show up as finished space on the records.

Now we come to comparables.  The most popular method for identifying the value of a home is to do a comparative market analysis.  I’ve seen some real disasters here, meaning that I’ve seen agents put together a comp report that is way off.  Be careful.  It’s easy to pull up so-called “comps” that are not really good and accurate comps at all.

The best comps are houses that are similar that have actually sold as opposed to listings that are active but have not yet sold.  And these sales are most accurate if they are recent, like within the past few months.  The older the sale, the further you get from the current market and current prices.  The comps should also be in the same or similar area.

Comps must be similar, which is often hard to find.  I’ve seen houses that are beautiful custom built homes that are worth $450,000 plus, and they are being compared to lesser homes that sold in the range of $275,000 to $325,000.  It takes experience to understand how to differentiate houses and compare apples with apples.

Then it is always good to take a look at active listings that are similar to see what the competition is.  These are just numbers to look at, and by no means are they definitive, because they have not yet sold.  Some will sell for much less than their current listing price.

No one can come up with an exact number for an ultimate price.  It doesn’t exist, but I do like to look at what I call a range of values, so all the data collected indicates that the fair market value of a home is within this range of values.  Then it is a matter of discussion to decide exactly where to nail the price down, and that  becomes the listing price.

One of the best guides to doing a good job with this kind of data collection and analysis is old fashioned experience.  If you need assistance with this process and you want to bounce ideas off me, just email me or call me.

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Buying a home in Port Angeles or Sequim right now would undoubtedly take advantage of one of the best market opportunities buyers have had in decades, but one area that creates confusion is the foreclosure market.  Buyers ask me regularly if they can get an extraordinary deal buying a foreclosure.  There are foreclosure stories galore about people picking up a 3 bedroom, 2 bath home for $105,000 in Vegas, or a 4 bedroom home on 5 acres on the top of the mountain in California somewhere for $245,000.

Port Angeles and Sequim simply don’t have a big foreclosure market to take advantage of.  Sure there are some foreclosures here, but very few, and the foreclosure records (data bases) here are in total disarray.  You can’t access the volume of information here on a foreclosure that you can in most areas of the country.  Foreclosure.com is the largest foreclosure website, and I have a monthly subscription I pay for the benefit of my clients.  Unfortunately, they do not have a signed agreement with the Clallam County Auditor’s office to bring all the real estate information into the Foreclosure.com database.  They could, but we are too small and too far out of the way to prioritize.  The same of true of Realty Trac and all the other foreclosure services.

Even if you find a foreclosure, if it is a nice home you would want to live in, it is likely to never make it to the Trustee’s Sale, because the owner will either borrow money from a friend or family member to pull it out of the foreclosure process, or they will sell it to someone they know or to an aggressive investor who spends 40 hours a week looking for that home.  The foreclosure market here is very small and the real opportunities for buyers are very limited.

There are far more opportunities with homes listed in the MLS here, which includes homes that were foreclosed and are now on the market for what may be less than the original balance.  That could mean a short sale, and that could end up being a good transaction.  But notice that these listings are simply in the MLS, like all other listings.

My recommendation is that you search the MLS for your ideal home.  If you don’t find it, you may want to consider buying a lot at the current garage sale prices and have your dream home built by a good builder.

No matter what you are looking at, may I save you time and stress (and potentially a lot of money)?  I’ve been doing this for almost 30 years now, including 20 years as a real estate attorney.  I’ve seen a lot of people over the years spin their tires and waste money and time when they could just email me or pick up the phone and get simple answers without any charge at all.  There’s no downside to that and a lot of upside for you.  Anything I have learned or experience is yours for the asking. Why would I make such an offer?  Because I hope that by being generous you may consider retaining me as your buyer’s agent.

Where can you find the best MLS search?  Here.  Search the Entire Sequim MLS and the entire Port Angeles MSL.

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Dual agency is legal in Washington, but I strongly believe there is a huge conflict of interest when an agent tells his selling client, “I promise to get you the highest possible price,” while also telling his buying client, “I promise to get you the lowest possible price.”

Imagine what a listing agent does for a seller. He or she has worked with a seller for six months to one year to list and market a property, with many many hours of paperwork, planning, writing ads, posting listings, meeting with the seller many times and having phone calls weekly, emailing and talking with prospective buyers, spending numerous hours behind the scenes, encouraging the seller and building an emotional bond, and who has committed his or her best efforts to get the highest possible price from any buyer who does show up.

Now imagine a buyer who drops into town and who calls that listing agent to drive around and look at homes for one afternoon. How can we honestly suggest the agent can fairly represent both the buyer and seller without bias?

Do professional athletes have dual agents?  Not a chance.

I did a very short video on this at:  Dual Agency Wrong

For an interesting debate on dual agency by real estate agents across the country, take a look at this article, Right or Wrong:  Dual Agency.

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Sequim first time home buyers have an opportunity.  If you’re a first time home buyer, you can take advantage of the lowest prices in real estate in decades, the lowest interest rates in decades, and on top of that an $8,000 tax credit! Here’s how it works.

• The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

This is a great time to buy a home in Sequim or Port Angeles and a great time to build a home, but if you wait too long, you will lose the benefit of low prices and low interest rates.

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PRESIDENT’S ECONOMIC RECOVERY PACKAGE TO MAKE MORE FAMILIES ELIGIBLE FOR FHA-INSURED MORTGAGES
FHA implements temporary higher loan limits in Seattle, Tacoma, Olympia, Vancouver Bellingham, Bremerton, Tri-City and other areas to help families keep their homes

WASHINGTON - More American families will be eligible this year to purchase or refinance their homes using affordable, FHA-insured mortgages, thanks to the economic stimulus package signed into law by President Obama on Tuesday. The American Recovery and Reinvestment Act of 2009 will allow HUD’s Federal Housing Administration (FHA) to temporarily increase its loan limits and insure larger mortgages at a more affordable price in high cost areas of the country.

“This is one of many elements in the President’s stimulus package that will aid homeowners and homebuyers in dealing with the volatile mortgage market,” said HUD Secretary Shaun Donovan. “These loan limit increases will help FHA continue to provide safe, affordable mortgage products to families in all areas of the nation.”

Effective immediately, HUD will offer temporary FHA loan limits that will range from $271,050 to $729,750. The maximum amount of $729,750 will only be applicable to extremely high-cost metropolitan areas such as: New York, Los Angeles, San Francisco and Washington, D.C.

In Washington State, today’s announcement will affect loan limits in the following communities:

• In most Washington markets - including Spokane, Yakima, Walla Walla, Wenatchee and Ellensburg. - the FHA mortgage limits that took effect on January 1st, 2009 will remain in effect - on a one-family home the limit is $271,050; on a two-unit home is $347,000; on a three-unit house is $419,400; and on a four-unit house is $521,250. The higher limits also apply to cities like
• In the Seattle-Tacoma area which includes Bellevue, Everett, Seattle, Tacoma ands and King, Pierce and Snohomish counties, the FHA limit on a one-unit house will be $567,500; on a two-unit house will be $726,500; on a three-unit house will be $878,150; and on a four-unit house will be $1,091,350.
• In Bellingham and Whatcom County, the FHA limit on a one-unit house will be $375,000; on a two-unit house will be $480,050; on a three-unit house will be $580,300; and on a four-unit house will be $721,150.
• In Olympia and Thurston County, the FHA limit on a one-unit house will be $361,250; on a two-unit house will be $462,450; on a three-unit house will be $559,000; and on a four-unit house will be $694,700.
• In Vancouver and Clark and Skamania counties, the FHA limit on a one-unit house will be $418,750; on a two-unit house will be $536,050; on a three-unit house will be $648,000 ; and on a four-unit house will be$805,300.
• In Kennewick, Pasco, Richland and Benton and Franklin counties, the FHA limit on a one-unit house will be $275,000; on a two-unit house will be $352,050; on a three-unit house will be $425,550; and on a four-unit house will be $528,850.
• In the Bremerton-Kitsap County area, the FHA limit on a one-unit house will be $475,000; on a two-unit house will be $608,100; on a three-unit house will be $735,050; and on a four-unit house will be $913,450.
• In Port Angeles and Clallam County, the FHA limit on a one-unit house will be $383,750 ; on a two-unit house will be $491,250; on a three-unit house will be $593,800; and on a four-unit house will be $738,000.
• In Skagit County, the FHA limit on a one-unit house will be $373,750; on a two-unit house will be $478,450; on a three-unit house will be $578,350 ; and on a four-unit house will be $718,750.
• In the San Juan Islands, the FHA limit on a one-unit house will be $593,750; on a two-unit house will be $760,100; on a three-unit house will be $918,800; and on a four-unit house will be $1,141,850.
• In Jefferson Count, the FHA limit on a one-unit house will be $437,500; on a two-unit house will be $560,050; on a three-unit house will be $677,000; and on a four-unit house will be $841,350.

Under the American Recovery and Reinvestment Act of 2009, the revised FHA limits for 2009 are set at the higher of the loan limits established for 2008 under the Economic Stimulus Act of 2008 and those established for 2009 under the Housing and Economic Recovery Act of 2008. Thus the new Act permits FHA to insure loans on amounts up to 125 percent of the 2007 area median house prices, when that amount is between a national minimum of $271,050 and maximum of $729,750.

The change in loan limits are applicable to all FHA-insured mortgage loans endorsed after HUD publishes the increased loan limits today, and it lasts until December 31, 2009.

Increasing loan limits will help FHA continue to provide much stability to housing markets across the country. Already, as conventional sources of mortgage credit have been contracting, FHA has been filling the void. From September to December 2008, FHA facilitated $97 billion of much-needed mortgage activity in the housing market, $35 billion of which was through FHA’s refinancing products. By focusing on 30-year fixed rate mortgages, FHA helps homeowners avoid and escape the risks associated exotic subprime mortgage products, which have resulted in rising default and foreclosure rates.

In January 2010, FHA’s maximum loan limit will return to 150 percent of the conforming loan limit. That amount will likely be $625,500, unless Congress approves additional changes.

Home Equity Conversion Mortgages

FHA’s reverse mortgage product known as the Home Equity Conversion Mortgage (HECM) will have a new national mortgage limit of $625,500, up from the previous limit of high of $417,000. As in previous years, the special exception areas of Alaska, Hawaii, Guam, and the Virgin Islands may have higher loan limits.

Reverse mortgages allow homeowners age 62 and older to borrow against the value of their homes without selling them or having to make any monthly repayments. Homeowners can select a lump-sum payment, monthly payments or tap into a line of credit. No repayment is required as long as a homeowner lives in a home with a reverse mortgage. The reverse mortgage is repaid, with interest, when a homeowner sells the home or dies.

FHA loan limits are based on the county in which the property is located. However, for properties located in metropolitan or micropolitan statistical areas, the limit is set at that of the county with the highest median home price within the metropolitan or micropolitan area.

The new temporary FHA loan limits are posted on the HUD website. Additional details on these new temporary loan limits, including FHA’s mortgagee letter and attachments.

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If you are selling real estate in Sequim or Port Angeles, are you aware of the dramatic changes taking place in real estate brokerage?  The way  real estate is being sold is changing.  Do you know that across the United States traditional full commission brokers are struggling to survive (many are going out of business) and new models with flat rate or discount commissions are springing up everywhere?  Why?  First, consumers are tired of high commissions and second, according to consumers, they are tired of so-called “full service” brokers who are actually “full commission” brokers rather than “full service” brokers.  This is not coming from me, it’s coming from consumers all over the country.

Inman News, a major national real estate news service, has been conducting surveys on the issues of commissions and the evolving nature of the real estate industry.  Real estate professionals and consumers all over the country have been involved in this survey, and here is what they are saying. (The quotes are from the Inman summary.)

1. The traditional brokerage model ends up costing home sellers too much money because there are too many people involved (selling side broker and his agent, buying side broker and his agent, and assistants, secretaries, etc.).  “Too many parties are involved in the real estate value chain — directly or indirectly earning sales commissions, in some cases disguised in fees. This adds expense to the transaction, discourages sales in a low-inflation housing market and creates confusion for the consumer.”  See Inman Summary.
2. The effective use of technology (most agents and brokers are not technology savvy) can eliminate massive overhead that translates to lower commissions for consumers.  “Technology adoption allows for agents and brokers to conduct business virtually, and can eliminate the expense of office space. Online home-shopping tools can help consumers narrow the focus of their home searches even before contacting an agent.”
3. The traditional brokerage model is broken.  I’ve been writing about this for a couple of years now from several perspectives, all of which are focused on the best interests of the consumer, not the Realtor.  “The current broker model is in disrepair and should not be fostered by broker inaction and industry enablers.”
4. The big brick and mortar real estate brokerage is top heavy and consumers are just not willing to pay for all of that with huge commissions, especially when it all boils down to one professional agent who knows how to sell a home.  Consumers don’t hire a building.  They don’t hire a huge staff.  They hire one agent, and they expect that one agent to market and sell their home effectively.  Technology and the tools available to consumers has reduced the value of large buildings and expensive conference rooms.  “Brokers who run “body” shops — warehousing agents, no matter the skill level, in massive offices — must slim down their agent pools to the best and brightest. This is for survival’s sake. Those brokers who provide true value in their services will have an easy time recruiting quality.”
5. For a decade top producers around the country have been saying that print advertising is not as effective as it once was to sell houses.  Over 80% of all home buyers start their search on the Internet, and print advertising has gotten ridiculously expensive and less effective at the same time.  Advertising open houses in the newspapers is not effective either.  Open houses don’t sell houses (only 1% to 2% of homes are sold at open houses).  Open houses are lead gathering opportunities for the listing agent, and do not benefit the home seller.  “Wasteful advertising spending also contributes to the cost of the transaction and could be minimized by improved measurement around successful online ad investments. Agents should be encouraged to adopt social media and mobile technologies into their businesses to communicate more instantly and transparently with consumers.”

A logical question for any Sequim or Port Angeles home owner who wants to sell their home would be, “Okay, Chuck, so what are you?  A full commission broker or a discount broker?”  I am a full service broker who does NOT charge a full commission.  I could talk for an hour on this topic.  My business model puts clients at the center of everything, and I use technology more than any other broker in Sequim or Port Angeles, but the big point is I only use the most effective means to market a property.  I don’t waste money or time on ineffective tools just to try to impress clients.  How’s that for blunt and honest?  If you are interested in details, email me, and I’ll be glad to share everything openly and honestly.

Chuck Marunde, J.D.
Broker/Realtor
Sequim & Port Angeles Real Estate, LLC
Real Estate Website:  SequimPortAngeles.com
Real Estate Blog:  SequimRealEstateNews.com

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If you haven’t noticed, there is a major argument all across the country about real estate commissions, and the so-called “discount broker.”  Sellers are frustrated with their traditional brokers, but not because their brokers haven’t sold their houses.  There’s an element of frustration there, but it has nothing to do with the commissions.  Home sellers are intelligent enough to understand if buyers are not showing up, brokers can’t sell their houses.

What sellers are frustrated with is the low level of performance on the part of their brokers who want full commissions.  This is not coming from me.  This is coming from consumers.  As a result of thousands of home sellers around the country being so dissatisfied with their traditional full commission brokers, many brokers are now offering discounted or flat rate commissions to meet the demand.  The brokers who proudly call themselves “full service” brokers are rabid, and attacking discount brokers in articles on the Internet.

What is the argument of traditional brokers against discount brokers?  The first, second, and third argument is, “We are a full service brokerage, not a discounter, and we give our clients full service.”  Not according to many consumers, or they wouldn’t be flocking to discount brokers and FSBO services.  But perhaps there is a difference of opinion on what full service really is.

I just got a call from a friend who told me an interesting story.  This is the story about a full service broker who charges a full commission.  By the way, I have practiced in three states, so which state this story comes from is not important.  What is important is that this is a story that keeps on repeating itself.

Joe (not his real name) hired ABC-XYZ Realty (not their real name) to sell his nice home.  It was listed at a substantial price, because it is a substantial house on a substantial property.  Let’s round the listing price off to $850,000.  The commission schedule had my friend paying a commission of about $42,000 if the broker sold his home.  So when my friend hired this full commission broker, I mean full service broker, what did he get?

According to him, he got nothing.  Of course, we have to explore that a little, because he must have gotten something.  Nothing is pretty extreme.  I talked with him long after he ended his relationship with his agent. He told me there was a little print advertising, but not nearly as much as he wanted, but there was no activity.  No showings.  No open houses.  In fact, his agent told him he would have to hold his own open houses.  But let’s face it, even if the agent held an open house, we all know that open houses don’t sell houses.  They are good opportunities for the agent to pick up leads.  I think statistically only 2% or 3% of homes are actually sold at open houses.  But this seller was perturbed that he had to hold his own open houses when he was going to pay the agent a $42,000 commission.  There were no weekly or monthly reports.  There was no written marketing plan.  My friend was shocked and disappointed, because his agent sold himself as a real hot shot in the business.  There were no regular calls or letters or emails from the agent.  Nothing.

My friend felt like he had been left hanging.  He actually went with a full service broker, because he thought the service and advertising and promotions would be the best he could find, but he ended up not only disappointed, he felt cheated.  [Folks, I can't tell you how many stories like this I have heard.  I do not solicit these stories, but I keep hearing them.]

There’s a lot more to the story, but suffice it to say that this so-called full service broker ended up “stabbing me in the back” as my friend put it.  Let’s not get side tracked with a full explanation of what happened there.  You don’t want to know.

You get what you pay for, or do you?  Many home sellers argue that they did NOT get what they paid for.  Their so-called full service broker didn’t give them much more than putting their listing in the MLS, running a couple of little print ads, and posting it on the Internet somewhere without any SEO or effective syndication.  And then nothing.  No communications with the client.  No regular marketing plan the client ever sees, even when they ask for one.  No showings by the listing agent.  Any showings that do happen are other agents.  Nothing that qualifies as “full service.”  Nothing that qualifies for a full commission of 5% to 6% of a large listing price.

What does a discount broker do for a discounted real estate commission?  About the same as that full service broker, and in my case, as a discount broker I do a lot more.  May I suggest that every time someone uses the term “full service broker” we insert the phrase “full commission broker.” Isn’t that what we really mean?  I can tell you that I am a discount broker, but my professional experience is not reduced at all.  My clients get 100% of all that I am.  There’s no discount in in my knowledge or experience.  My clients get far more exposure on the Internet.  My clients’ listings go in the MLS.  I don’t like to advertise in the print media, but all of my clients agree that the newspaper classifieds don’t sell real estate anymore like they used to.

I’ve been telling the story of my friend, but I’ve been hearing this same story for 30 years, going back to when I first practiced in Fairbanks, Alaska in the 1970’s.  I heard this same story numerous times over a period of 20 years practicing real estate law, and now I’m hearing it again and again as a real estate broker.  So why do other agents get really ticked off when I write about this?  Is it because they are the full commission broker like the one in this story?  After all, if they are providing their own clients with such good service, wouldn’t they agree with me?  What I am writing here is fact, not fiction, so wouldn’t they agree with the facts?  Surely I’m not the only one hearing stories like this over the past 30 years.  Of course I’m not.  These experiences are what is creating such a demand for the discount broker.

As a broker myself, I am offering discount commissions to a limited number of clients that I chose to accept, but my clients tell me that my service far exceeds the full commission brokers they have dealt with in the past.  Isn’t that interesting?  Does that mean my services exceed all full service brokers?  Of course not.  There are many good full commission brokers out there, and they are the ones who don’t have clients telling negative stories about them.  I know many outstanding Realtors who charge a full commission, and I admire their success and their professionalism.  But I would say as a discount broker I will match my skill and experience and professionalism with any full commission broker.  Enough said.

We used to be able to say, “You get what you pay for,” and we could all agree that was true.  It is no longer true according to many consumers.  One of the reasons I offer a discount on commissions for luxury homes is because I think a $30,000 or $40,000 commission is just way too high.  Sure I’d like to bank those commissions regularly, but my business model puts my clients at the center of the universe, not my bank account.  Being a professional Realtor is not all about me, me, and me.  It’s about my clients.  So for me, discount broker is not a dirty name, but a client centered focus.

What about full service?  What is full service?  For those brokers who think full service is putting a listing in the MLS, running a couple of useless print ads, and pasting it up on the Internet somewhere, I would disagree and suggest that is not a full service brokerage.  And I don’t think that broker should be entitled to a full commission.  I do far more than that, and I’m a discount broker.

Consumers are getting serious about doing their due diligence when they retain a Realtor.  I’m glad, because consumers deserve the best Realtor they can find, and if that is a full service broker at a full commission, then great.  If it is a discount broker at a discounted commission, that’s great, too.  The goal is to sell the clients house at the greatest possible price in the least amount of time.  What clients want is honesty and hard work, and they want an agent who is competent and trustworthy.  Ultimately, they want their house sold at a fair price.

Let’s be open and honest with each other and with our clients.  There’s nothing wrong with a full commission model, and there’s nothing wrong with a discount model, as long as the Realtor is doing a great job for the clients.  That is where clients have their argument.  They want good service, and they do not like misrepresentations about what full service really is when they are paying a full commission.  Discount brokers are responding to the demand for their services.  The only discount brokers I know in Clallam County are outstanding men, and in my opinion, they are Realtors who have integrity, who work hard, and who are also competent and trustworthy.

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The 6% real estate commission is struggling to survive, mostly because the entire real estate business is in a tidal wave of change.  A tsunami, an earthquake, or any kind of major natural disaster changes things, and for some people those changes are forever.  The real estate market is in an upheaval never before experienced, and as we get through it and get beyond it, things will have changed, and real estate brokerage and real estate commissions will be one of those changes.

Will the 6% real estate commission disappear?  Not likely.  But new brokerage models have been emerging, and how agents work with sellers and buyers is evolving.  More buyers are recognizing that dual agency can cost them a lot of money, and they are seeking out exclusive buyer’s agents who can represent only their interests as buyers.  Some agents are focusing on just listing homes for sale, and their business model is different than the agent who represents buyers.  There are substantially different responsibilities and tasks that must be accomplished by each.

In 2005 in Sequim or Port Angeles anyone with their eyes open during daylight hours could sell real estate.  People walked in or called and said, “I want that one.”  It was almost that easy.  No high level of education or knowledge, nor experience were necessary to make money and pop 6% commissions all month long.

But the market has changed.  Consumer needs and preferences are evolving.  Easy money is no longer falling off the edge of the coffee table for agents.  Like many agents, I have a business model that is substantially different than the traditional broker’s model.  Many of us have found the old model had way too much overhead and not enough consumer centric focus.  Clients don’t care about a huge brick and mortar building with gorgeous dark conference tables and expensive art decorating the walls, but even more importantly, they are not willing to pay for it anymore.

The Internet and the application of advanced technology has contributed to major changes in how real estate is done.  Lower overhead, broader and less expensive advertising options, and niche marketing have brought us to an interesting place in real estate sales.

But the evolution taking place for consumers is not just that they want more for less, as with all consumers in all industries today: consumers also want a higher level of professionalism and experience with their agent.  Gone are the days when any Tom, Dick, and Jane could sell real estate just because they passed the test and got a license.  Clients want more, and they are demanding it.

The 6% commission is not dead, at least not yet.  But consumers are getting smarter, and they are doing more due diligence on the Internet to find the right Realtor.  Good for consumers.  Not so good for some traditional agents.  But for those agents who learn to recognize the signs and adapt, there will be a kindred spirit with the new Internet saavy consumer.  And that is good.

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How are Sequim luxury home prices holding up in this market?  Maybe only slightly better than nationwide.  Los Angeles luxury home owners were proud that they were immune even well through 2008, but they just got hit with large discounts on multi-million dollars homes, many taking hits of 26% to 30% price reductions recently.

Luxury home prices tend to follow well behind the rest of the market.  hat’s not unusual for the luxury home market.  Buyers of luxury homes aren’t effected as much as the average person when the real estate market slows down, but in a tidal wave event like this one, even luxury homes are not immune.

“The median price of a single-family home in Beverly Hills was $2.1 million in the fourth quarter of 2008, down from $3 million in the second quarter, according to data prepared for the Los Angeles Times by research firm MDA DataQuick. The Pacific Palisades neighborhood closed the year with a median price of $2.2 million, down from a high of $2.6 million during the second quarter, and Santa Monica’s median was $1.6 million, down from $2.1 million last winter. The Brentwood neighborhood’s fourth-quarter median of $2.3 million was down 11 percent from its peak.”  Read High-End Home Prices from the Seattle Times.

What’s happening with Sequim and Port Angeles luxury homes?  Nothing, that’s the point, and that’s precisely why it’s a buyer’s market.  At the upper end it is not unreasonable to clip off a $100,000 or more in this market in any offer.  Of course, our luxury homes are not in the price range of the Santa Barbara or L.A. luxury home.

If you are in the market to buy a home in the Sequim or Port Angeles areas, I strongly recommend that you retain a buyer’s agent.  Calling the listing agent and having the listing agent represent you as the buyer is like asking the agent to negotiate like heck to get the seller the highest possible price while at the same time negotiating like heck to get you, the buyer, the lowest possible price.  When you think about it, it makes a lot of sense to retain an experienced negotiator as your buyer’s agent.  See articles and video on Dual Agency Can Cost You.

Yes, I’m available as a buyer’s agent to a limited number of clients.  Email me and let’s confer.

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I’ve heard the argument from a few people out there in the Internet world that they don’t trust Realtors, because Realtors ALWAYS say it’s time to buy.  First, that isn’t true.  I’m honest about how I preceive the market, and while I don’t have a crystal ball, I do have a degree in economics (with a speciality in monetary policy), law, and education, and now I’m am a Realtor.  But there have been some Realtors out there who have missed the mark so far, it’s downright embarassing.  Watch this video for one who got it wrong and one who got it right.

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An Arizona home builder is throwing in a $200,000 Bentley for anyone who buys of one of his multi-million dollar spec homes that have been languishing on the market for over a year in Paradise Valley, a Phoenix suburb.  The developer is Five Star Development Group based in Scottsdale.

One of the homes, described as the “Old World European Villa,” is priced just under $5 million and is about 7,800 square feet.  The other, which is called “Tuscan Estate,” is under $4 million and is about 7,500 square feet.

The promotion states that if you buy one of these homes, you will get a 2009 Bentley Continental GT, which is worth about $200k.  Or you can have the option of reducing the price by that much.

Now, let me think a minute.  I’m going to buy a $5 million dollar home to get a Bentley?  I don’t think so.  Honestly, how many people who can buy a home like that do they think will do so just so they can get a Bentley?  Anyone who wants and can afford a Bentley probably bought it already.  Anyone who wants a home in the price range of $4 to $5 mil is probably intelligent enough to realize that in this market they probably can offer $2 million and get two for the price of one.  Okay, maybe I’m exaggerating a bit on what you could buy these houses for, but realistically, if someone offered $500,000 less than the current listed price you can bet the developer would accept the offer faster than you can say “Bentley Continental GT.”

No wonder this developer is in trouble.  Well, you say, this marketing strategy isn’t really intended to sell the house by offering a Bentley, it’s a marketing strategy to get exposure for these two listings.  Look, we’re reading about it, so it must be working.  No, it’s not working.  The houses haven’t sold.  What is working is that we are all shaking our heads at such a silly tactic.  This makes the developer look foolish and desperate, not smart and generous.

What brilliant marketing strategy is he going to come up with next? I have an idea.  How about he offers a trip to the moon?  Wait.  That strategy might actually work, but it would cost the builder more than the price of the house.

Bentley anyone?

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More government services in Sequim means more taxes. The Sequim City Council has been trying to figure out how to pay for tennis courts at Carrie Blake Park ($300,000), soccer and softball fields on 12 acres just north of the park ($471,500), urban pathways and bikeways, the next phase of the Olympic Discovery Trail ($2,700,000), and a 45-acre wildlife refuge with a parking lot along Highway 101 west of Happy Valley Road ($1,080,000). The dream list of projects comes to $5,726,000.

The answer, according to an expert the council hired from out of town is to tax real estate developers for $4,385,000, which would cover most of these government projects.

Let me think a minute. Right now developers are going bankrupt around the country, lots sit empty, and if you think homes haven’t been selling, you ought to look at the stats for lot sales. Lot sales around Sequim and Port Angeles are virtually non-existent. So, let me see if I can understand the council’s thinking.

1. Tax developers for new projects, who are not likely to start a new development in the next three to five years, especially if the profits they might make (real estate development is a high risk business) are to be taxed away.

2. If and when they do start a project (which may not be for many years given the state of the market), hit them with a tax that they will be forced to pass on to all buyers of the lots in higher purchase prices.  The tax will add about $4,000 to each house or condo, on top of all the other increasing costs.  Don’t forget that taxes are always passed on to the consumer.

I love Sequim, and I’m thankful for our city council members who labor diligently on our behalf, but I must say that the constant tendency of government at all levels is to spend, spend, and spend.  While I love public parks and nature trails more than the average person (I’m a jogger and nature photographer in my recreational time), I can’t afford more taxes. Yes, I may buy a lot some day from a developer, and I prefer to pay less rather than more.  Who can afford higher taxes these days?

The other issue here is whether Sequim wants to encourage retirees to move to Sequim or discourage them. The sequence goes like this. Tax the developers and they pass the tax on the buyers, if they develop land at all.  (Don’t assume developers will develop land in the coming several years. We’ve had tremendous overbuilding, a huge unsold inventory, and lots of upcoming foreclosures and bankruptices.)  Higher prices for lots in Sequim will discourage some retirees from moving here, because many retirees want to have their dream retirement home built on a lot. Already Sequim has the highest utility hookup charges on the Olympic Peninsula as far as I know. Hookup charges for Port Angeles are about $3,000, but for Sequim they are about $10,000. See Sequim hookup charges here.

For those who want to close the gates into Sequim (and there are many), then higher taxes on the development of land makes sense.  The higher the better.  Keep everyone out.  But for those who want to have an economy that stays above water, has jobs for people still working, and thrives, then moving here must be an attractive option.  Remember, Sequim is not the only city in the list of  “Best Places to Retire in the U.S.”

An opinion by Chuck Marunde, J.D., SequimRealEstateNews.com.

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If you’re buying a Sequim or Port Angeles home, or getting ready to have one built, you can wait this market out, or you can take advantage of the lowest interest rates any of us have seen in our adult lifetimes. Under 5% for a 30 year fixed rate mortgage? Are you serious? Yes.

I’ve written elsewhere about Why Building a Home Now is Smart, and that it’s A Buyer’s Market in Sequim, and I wrote articles here about Low Interest Rates and The Perfect Storm, but who would ever have guessed that interest rates would be at levels as low as half a century ago?

I believe that when the market starts to breath again, inflation will slowly bring prices upward, but one of the first economic variables to go up is usually interest rates, so don’t be surprised if they dip as the are now to sub-five percent, and then level and start to climb in 2009.

If you are going to build or buy an existing house, now is nearly the Perfect Storm opportunity with interest rates at historical lows.  A low monthly mortgage payment.  That sounds kind of nice, doesn’t it?

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What effect does a foreclosure or a short sale have on your credit score? Negatives on a credit report are scored by three factors: recency (how recently did the negative event occur), severity (how late is the payment) and frequency (how many times you’ve been reported delinquent on credit obligations). If you have payments in default on a mortgage, your credit score is taking some hits, but if you have a foreclosure, you will not be able to get a Fannie Mae or Freddie Mac backed loan for five years.

If you have a home for sale that is threatened by a possible foreclosure, you may have to try to sell it for less than the current mortgage balance. If your mortgage company accepts less than what is owed, that is a short sale. Trying to do a short sale is not for the inexperienced homeowner or the inexperienced real estate agent. It’s very technical, and you don’t want to screw it up.

Lenders prefer short sales over foreclosures because they net more from them. Foreclosures incur additional legal costs and fees, carrying costs, and marketing costs. Your credit score is downgraded with a short sale, but not as much as a foreclosure.  Borrowers can be considered for loans following a short sale after 24 months, if the sale was caused by extenuating circumstances outside of a borrowers’ control, or 48 months if it was the result of financial mismanagement on the borrower’s part of the homeowner.

There are potential tax implications with a short sale.  The IRS code penalizes you if you do a short sale by taxing you on the forgiven portion of the loan, the difference between what you owed and what the mortgage company accepted in the short sale. It’s hard to believe that our government would tax you on a short sale when you are already in severe financial hardship, but who said our tax code was fair?

Because of public outcry, congress made an exception to the IRS code. The Mortgage Forgiveness Debt Relief Act of 2007 and the recently passed Emergency Economic Stabilization Act allows you to exclude up to $2 million of income ($1 million if married filing separately) from debt that’s discharged through mortgage restructuring, or that’s forgiven in connection with foreclosure, for the years 2007 through 2012. The exclusion must be connected with a decline in the home’s value or the taxpayer’s financial condition, and only applies to a principal residence, not investment properties.

If you own a home you need to sell, this is absolutely not a time to experiment with selling prices and marketing.  It’s not a time to hire an inexperienced real estate agent.  You may only get one chance to do it right, and time is your enemy.  If you do everything right from the beginning, in four or five months, if your lucky you’ll have a closed sale.  Trip along the way on any of dozens of steps, and you will lose, and the consequences could be devestating.  The key to getting it right is finding an experienced professional who knows exactly what to do and when to do it.

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Be proactive if you are facing high debt service and could end up with a foreclosure action in the coming months. If you wait to sell your home or your business at the 11th hour before a Trustee’s Sale, you may lose everything. If you find a buyer just before a foreclosure, you may be at the buyer’s mercy on the price. Don’t wait until it is too late. Be proactive with a loan modification now. How does a loan modification work?

A loan modification is not a new loan, it’s not a refinance. It is the same loan with adjustments to the terms of the loan so that you can reduce monthly payments. That is done with an adjustment to the interest rate or to the amortization schedule, or both.

Many people have told me they called their bank and tried to get a reduction in the monthly mortgage payment but it didn’t work. There’s a simple reason they could not get that done. The process of applying for a loan modification is very detailed, requires a ream of paper and information, and there must be a very persuasive argument as to why the modification should be allowed. You have to know who to contact, and most local bank tellers don’t even know who you would contact for their own institution. Loss mitigation departments or the modification division of any mortgage company is not found locally. They are not listed in the phone book. They are not listed on the Internet. These departments are not trying to hide from you, but they were not created to interface with the public, so they are below the radar.

In order to put together the right paperwork, you must know what they want, and to make persuasive arguments in writing, you must know what the issues are and how to address them. Then you must be able to write very good English and be very persuasive.

The truth is very few homeowners or business owners will have the knowledge and experience to get this done right. For those who try and screw it up, it could ruin their chances entirely even if they do hire a professional later.

I am not a loan modification guy. I do know one who is, and he is one in a thousand who knows how to do this.  He is having great success with loan modifications. He tells me incredible stories of good people who are staying in their homes because he was able to help them get a substantially reduced monthly payment.  What an incredible service he offers!

If you do need help getting your monthly payments adjusted with a loan modification, email Chuck Marunde. I’ll refer you to a man who can help you get the job done. By the way, he is qualified to do this in any state, so it does not matter where you live.

Don’t wait until it is too late. Be proactive and start working on your loan modification right now.

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The real estate market has taken a serious beating these past months, and the U.S. economy appears to be chaotic at best. I’ve been watching real estate cycles for 30 years, and I’ve learned four important lessons in this market.

Lesson Number 1. The national real estate market has very little to do with a buyer’s opportunity to find the ideal home at a great price right now. Let me explain.

Real estate news is a macro-economic perspective, while buying a home is a micro-economic decision. National news about housing inventory, foreclosures, and prices is all very interesting in the media and in the college classroom, but when John and Mary Smith are considering buying a home or building their retirement home in a new area, the national stats are irrelevant. Their decision is based on their personal goals, their credit score, their available funds, whether or not they must sell a house first, what kind of loan they can get, and a host of personal issues.

If all signals are full speed ahead for John and Mary Smith, they are in the most powerful place and time that buyers have found themselves in decades. They can shop at their leisure, taking time to gather information on the Internet before they actually hire an exclusive buyer’s agent, and they can narrow their search as they walk through a dozen or so homes.

Since the Smiths are the master of their own offer, they are in full control of the price and the terms of the offer. If they cannot come to terms with a seller (who may have had his house on the market for 256 days or more), they simply say, “Thank you very much. It’s been great. We will be making an offer on another house.”

I have written elsewhere that it is important to make a distinction between the market and an individual house. That’s exactly what the Smiths will do. The state of the market plays out in their favor right now, but their decisions are based on the facts in their little world and the house they decide to buy.

As I sipped a cup of hot gourmet coffee while walking around my yard this morning, I considered the state of the world economy, the U.S. real estate market, foreclosures and other disconcerting statistics, including my last five real estate commissions that went “poof.” Then I noticed a bee perched on a leaf and scratching himself. (I’m guessing the bee is a “he” and it appeared he was scratching his head, but there are many things in life I do not actually know. I’m only 54.) The bee was clearly unconcerned with the state of the economy or the number of days it takes to sell a home. The bee lives in his own micro-world, and I’m thinking macro-economics is not something at the forefront of his mind lately.

Buyers can and ought to focus on their own world and their own real estate market in deciding whether now is the time to buy their next home. We’ve never been in a buyer’s market like this where buyer’s who have good credit or cash have so much power.

Lesson Number 2. Don’t trust strangers with your money. If investors in the stock market, which includes the majority of retirees with 401(k)’s, have learned anything in this recent crash, it is that you should not blindly trust financial advisers or fund managers. I learned many years ago that “they don’t know what you think they know.”

Lesson Number 3. A good investment in your home and in rental real estate, where you are not over leveraged and where you seek to be totally debt free (a novel concept today, but quite popular among our grandparents’ generation) is far more secure and safer than the roller coaster known as the stock market. Of course, you must buy right and hold for the long term, and practicing that effectively would mean that dips in the real estate market, even of the current magnitude, would not jeopardize your retirement plans.  [Read a series on Real Estate vs. the Stock Market.]

Lesson Number 4. Find a professional in real estate who is truly knowledgeable and experienced to help you make your buying and selling decisions, and stick with that professional for life. I do not recommend that you retain any Tom, Dick, or Jane who got a real estate license as a part-time hobby. That would be like letting a stranger on Wall Street manage your 401(k), and look how that turned out.

Chuck Marunde, J.D. is a retired real estate attorney, author, and exclusive buyer’s agent in the State of Washington.

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Are homes selling in Sequim, Washington?  How does this year compare with prior years?  I’ve compiled data showing Sequim and Port Angeles home sales for each of the 12 month periods prior to this month.  (Click on image for a clearer graphic.)

Clearly home sales are down in our current fiscal year, but look at Sequim.  This year sold 212 houses thus far compared to 238 last year.  That’s not exactly a drastic reduction.  Port Angeles has seen a much larger reduction in sales, 142 this year compared to 216 last year.

The drop in sales is coupled this year with a factor not shown on this graph:  increased inventory.  The reason money talks in this market, and as I have written elsewhere, “Cash is King,” is because:

1. Sales of homes are down;
2. Inventory has increased and continues to increase every month;
3. Our largest segment of buyers come from California, Arizona, Texas, and the Seattle Area, and those buyers are unable to sell their homes first;
4. Of the buyers who need financing, their plans to obtain loans have been put on hold or have been made more difficult by the mortgage crisis.

All of this means that Cash is King, and if you have it in this market, you have tremendous negotiating power.

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