North Sound Round Up, Part Two

Mukilteo's mayor got a raise, but the pay is still less than the mayors of other nearby cities of similar size, and by my estimation, he is also paid less than the salary of a good administrative assistant. Now, I don't purport to be an expert, but I am thinking the job of mayor is more complex, by far, than what your average administrative assistant would be expected to handle.

Part of the issue with bringing the pay scale for the position of Mukilteo's mayor in line with what a mayor of a city this size would be expected to earn, is the question of whether or not the job should be a full time one or not.

According to Mayor Joe Marine, the job is effectively a full time one whether it's paid as such or not. Others in the community feel that the mayor's job should remain a part time position. When Marine was elected, the position was understood to be a part-time one so some people feel that when Marine chose to run for the office, he should have been prepared to do what he was elected to do based on the pay scale as offered.

I think there is probably some merit to that argument, but on the other hand, I think this is part of a larger problem that the city of Mukilteo seems to have with adapting to change. It seems to me that what once worked for Mukilteo as a small town, can't be expected to work as the city continues to grow. The last 20 or so years has transformed what was once a sleepy little town into now a fairly large suburb. And I would expect that the growth will continue with the healthy economy that we enjoy. So, pretending that we are still a town too small to need infrastructure, to need planning, and to need full time employees to help manage the growth that we are experiencing, seems rather short sighted to me.

Now that I've thrown my hat into the ring on THAT little argument...

Across Puget Sound from Mukilteo, the Clinton ferry terminal on Whidbey Island has been renamed for late Washington Senator Jack Metcalf. I had the good fortune in my life to be acquainted with Mr. Metcalf growing up on Whidbey Island. He was a good man--had a farm not far from our home in Langley and I have fond memories of going to his farm to buy fresh, unpasteurized milk. I also experienced electric fencing for the first time on his farm! He was described by the Seattle Times as "having a reputation for independence and quirkiness." Sounds like a Whidbey Islander to me!

Finally, a real estate tidbit from the Zillow Blog. Today's post called, "Selling or Buying, Better Check that Calendar!" talks about the best time to list or buy a home. No, they are not talking about which month of the year is the hottest buyer's or seller's market. The topic is what day of the week, is the best time to list or make an offer.

Best time to list? Thursday morning. List any earlier in the week and your listing is stale by the weekend. Wait any longer, and you could miss some of the buyers that are searching for homes to tour that weekend. Thursday also gets you on the hotsheet for the buyer's agents that are planning tours for their clients.

Best time to buy? The first Tuesday morning of any month. Why? Because sellers will have just paid their mortgage on the first of the month (ouch!) and by Tuesday they will have given up on receiving any other offers based on the previous weekend's showings.

I think these are interesting thoughts, but there are a couple of other things that clients need to consider. For instance, when listing your home in my area, a Thursday listing will eliminate the possibility of getting your home seen on our Broker's Open, since those occur on Thursday. And in my office, our office tour is Wednesday, so a Thursday listing would mean that clients wouldn't be able to be on tour until the following week.

Mukilteo Market Stats - June

Here are the market stats for the month of June in Mukilteo.

Sales activity was strong, with twice as many properties going under contract and closing in the month of June as were listed. However, we had a fairly large backlog of inventory coming into June, so even with the increasing sales activity, we still have a 2 month supply of inventory as of June 30.

As an aside, we calculate supply by looking at the number of listings on the market and dividing by the number of listings that went under contract or sold during a given period. Last month, we had a 2.5 month supply of inventory, which means that at the current rate of sales, it would take 2 fewer weeks to sell through the entire stock of housing inventory in Mukilteo than it would have during May. This tells us that things have in fact picked up for the summer.

I would classify this as a healthy market, if somewhat slower than last year (last year we only had about a 1 month supply of inventory). A balanced real estate market (a market that is neither a buyer's market nor a seller's market) occurs when there is about 2 to 4 months of inventory, though some would classify as a buyer's market any inventory levels of more than 6 months, and a seller's market as inventory levels of more than 6 months. Clearly, here in Mukilteo we are in a balanced market that leans towards still being a seller's market. But, with inventory levels up over the last two years, buyers definitely have more leverage than they have had in some time.

One sector of the market that plays a big role in how days on market numbers as a whole pan out is properties over $1,000,000. These properties comprise about 10% of the market in Mukilteo, and typically, we expect to see longer market times in this sector of the market. And this is what we are seeing. Currently, it is taking an average of 130 days to get properties in this price range "under contract" and it is taking an average of 139 days to get them to sell. But we have several properties in this price range which have been on the market in excess of 250 days, which has increased days on market figures for Mukilteo as a whole.

That's my analysis, here's the data. All statistics are hand calculated by me, using NWMLS data, and include Mukilteo (in city limits) ONLY for the period June 1, 2007 through June 30, 2007:

Active Listings
Listing Count: 92 (this includes ALL listings currently on the market, regardless of date listed)
Average Time on Market: 88 days
Median List Price: $622,475
Average $ Per Square Foot: $259

There were 25 new listings in the month of June

Under Contract (includes Contingent, Active STI and Pending)
Listing Count: 21
Average Time On Market: 55 Days
Median List Price: $579,900
Average $ Square Foot: $252

Sold Listings
Listing Count: 29
Average Time On Market: 123
Median Sale Price: $620,820
Average $ Square Foot: $238

This graphic shows the breakdown of time on market for properties currently listed. Last month, about 54% of our inventory was less than 30 days old. This month, we are seeing more balance between new and older listings.

Lease Option Purchases

One of the conversations that I always find difficult in my job is when a person comes to me wanting to buy, but is unable to because of credit issues. It's frustrating because I can really sympathize with people who are in this position, but unfortunately, I can't give them a lot of good alternatives to solving the problem. The reality is that it takes time to establish a poor credit history, and it takes time to turn things around. But people are always hoping that there is some quick-fix or a secret way to improve their credit, or some way that they can buy a home without having credit history be an issue.

Keep in mind that having poor credit doesn't always mean that a person is totally irresponsible. Sometimes it does, but there are a lot of other reasons why a person can have a low credit score. So, when I am having this conversation, I don't judge and focus mainly on what to work on going forward so that the client can achieve their goal of buying a home.

One of the things that comes up with some frequency is the idea of a lease option purchase. The client may have seen TV commercials or signs up by the road saying things like "Bad or no credit? Let me help you Lease to Own."

Folks with credit issues will ask me if I think this is a good alternative for them. Unfortunately, I have the unenviable task of saying no, given what I know about these kinds of deals.

Why? Well, typically on a lease option purchase you are putting a buyer with credit problems together with a seller who has an overpriced or otherwise unmarketable property. Think about it--if the seller could unload the property today, rather than a year or two from now, why would he choose this route? And if the buyer could buy today, why would they choose go this route either?

While sometimes it can work out, more often it is a recipe for disaster.

Let's look at the seller's side first. Most sellers will only consider doing a lease option if they are unable to sell in a normal-financing transaction. And why would that happen? Because the seller did not price his property at a level where there is market demand--in other words, it's overpriced.

That's one scenario. Another involves a seller who doesn't even try to sell his property in a normally financed transaction. This is the serial lease-option seller, and he is basically hoping that your lease-option purchase falls apart. Here's why.

In a lease-option, the buyer pays an earnest money deposit just like if they were going to buy the property outright. This is usually between $5,000 and $10,000 depending on the purchase amount. This is non-refundable, as compared to the deposit amount on a normal lease, most of which is refundable.

So, the buyer hands over his earnest money, and then pays rent for a year or two while trying to clean up his credit.

If all goes well, at the end of the lease period the buyer gets a loan and buys the home. But very often, this doesn't happen. Frequently, the credit problems are bad enough or the bad credit behavior is ingrained enough, that the buyers are not able to get their credit cleaned up enough in the period of the lease to qualify for a loan they can afford. Or, perhaps the buyer discovers there is a problem with the home and decides not to buy it. If this happens, at the end of the lease the buyer may have to walk away from the transaction. That means they also walk away from their deposit.

At this point, the seller may do another lease option, and collect another deposit from another buyer.

The serial lease option seller can put his property on the market over and over again, collecting $10,000 from each buyer, in addition to rent money. The property is making him money whether the individual buyer is able to close or not.

Sellers can lose out with a lease-option too. Sometimes the buyer decides to back away from a lease-option purchase for other reasons besides credit. If the market happens to be weak at the end of the lease period, the seller may have to put the property back on the market at a lower price. But, if this is the case, at least he has the earnest money amount from the first buyer.

Now, I'm not saying that there is never a time when a lease-option couldn't be the right course of action, and I'm not saying that every one of these transactions fails. What I am saying is that both the buyer and the seller need to control their risk by having their eyes wide open about what they are getting into.

And for buyers with credit issues, the truth is that the best way to resolve those problems and be able to buy a home of your own is to find out what factors are affecting your score negatively, and resolve those issues. This approach takes time, but it is the best and safest way to go.

Top 10 Staging Tips

Thinking of selling your home? Want to get the most money possible in the least amount of time?

Then staging is your friend. Here are my top 10 tips for staging any home.

1. Make sure your home is CLEAN. I mean, spotless. You need to be looking at your home the way buyers do, and you would be amazed at the kinds of they notice. One of the things they notice is dirt. Grime. Dust. Cobwebs. These will literally distract buyers from the positive qualities of your home, and cost you offers. It may make sense to hire a professional housecleaner and have the home professionally deep-cleaned, including around, under and behind everything. Have carpets and windows cleaned, and scrub any walls that may be dirty.

2. No CLUTTER! Don't leave papers or anything else on flat surfaces. Countertops, tables, floors must all be kept neat and free of unnecessary items.

3. COLOR is important. Your home doesn't need to be "real estate beige," but if you have any wild colors on the walls, the time to tone them down is before you sell. Same goes for purple carpet. Offering a paint or carpet bonus doesn't work because buyers "only buy what they can see." If there are 2 similar homes on the market and one needs paint, the one that needs paint will sell last.

4. "If you can smell it, you can't sell it" So, take it easy with cooking those spicy dishes while your home is on the market. Keep the catbox clean and take out the garbage EVERY DAY. I know, you probably already do that, but this message is for those who don't. I have seen buyers pass up homes that they otherwise loved because of strong odors. So don't let this happen to you.

5. "If you can't see it, you can't sell it" This is another Barb Schwarz-ism that sums up very nicely the ill-effect of overgrown landscaping and indoor plants. Don't let them overshadow what you want buyers to see (your home).

6. Deferred maintenance--take care of it BEFORE going on the market. You will have the luxury of shopping for the best price, rather than going with the only contractor who can replace your roof before you close (rush jobs cost more). If you don't know what needs to be done, talk to your realtor or have a home pre-inspection done.

7. Vacant vs. "vignettes" If you're trying to sell your home vacant, it probably makes sense to consider leaving a few pieces of furniture and decor behind, in order to help buyers see how furniture fits in the rooms, and how the space can be used. Buyers have a hard time warming up to vacant rooms.

8. Go outside and look at your home from the street. How does it look? Grass should be mown, hedges trimmed, weeds weeded. Flowers are an inexpensive way to improve your home's curb appeal and provide contrast and texture to a yard that otherwise doesn't catch the eye.

9. Clean out your closets and garage, and STORE all your extra stuff while you are on the market. It doesn't make sense to stage the entire house and exterior and then leave a pile of stuff in your closet, waiting to fall on the next unsuspecting buyer. It detracts from the overall impression of the house, and makes it seem as if the home doesn't have enough space. Don't give buyers a chance to think this--if you don't need it while you are on the market, hire a POD (portable on demand storage) to get rid of it until you sell. You may even find that after going a few weeks without the stuff, you don't need or want it after all. Moving is good for helping us sort the wheat from the chaff!

10. Make sure your MLS pictures look great. If your agent doesn't take great pictures (ask to see samples!) have them hire a professional so that all your hard work staging doesn't get overlooked on the MLS due to bad pictures.

Staging Success Story

About a year ago, I received my designation as an Accredited Staging Professional Realtor. What that means is that I have taken and passed a two day course on staging homes and helping sellers prepare their properties for sale.

Staging is one of the best ways to ensure that a home sells quickly and for the most money possible. The reason it works is that buyers have a hard time using their imagination to see what a property would be like if they lived there. All they can see is what it looks like now. And most of us don't live in our homes the way they need to be when we sell them.

Staging a property isn't just about making sure it's clean and clutter free. It's not about bringing in expensive furniture and decor. And it doesn't have to cost a lot of money.

It's about identifying what excites buyers and what turns them off, and solving any issues a house might have, BEFORE it hits the market.

Recently I got to work with a seller through the entire process of preparing their home for sale. Believe me, what we started with and the end result were two completely DIFFERENT things.

The home was a cute little rambler in a relatively inexpensive, but nice and safe, neighborhood. The best way to classify the homes in the area is that they are starter homes. They sit on very nice sized lots and are close to Boeing and other amenities.

Anyway, the seller had owned the home since it was built in 1984 and had never updated it. Carpet and paint were worn and dirty, and the entire house was cluttered and messy. To get top-dollar, it needed fresh paint, new carpet, and a thorough scrubbing from top to bottom.

Fortunately, the sellers were on-board with staging and willing to put in the work. They also went a little further than necessary, putting in a new mid-price kitchen with Corian countertops, new cabinetry and new flooring. This added value to the home, but wasn't strictly necessary from a staging perspective.

The sellers also worked on the home's curb appeal, making some changes to the landscaping that enhanced the view from the street.

This was the end result.

Average market time for comparable homes in the area was more than 30 days. This home sold in a week with multiple offers. The total amount spent on staging, upgrades and deferred maintenance was less than $8,000, but brought a price more than $40,000 higher than comparable, unstaged properties in the neighborhood had received.

That's the power of preparation and staging!

Here is a link to the full photo gallery.

Home Pre-Inspections and Doing the Right Thing

One of the areas where real estate agents can provide a good deal of value to sellers is in the process of preparing a home for sale. In recent years, many homesellers have realized what developers have known for years--proper preparation is a huge part of getting ready to sell. It's not just about making sure the beds are made and the grass is mowed and the furniture nicely arranged, it's also about making sure that you don't get blindsided somewhere down the road with having to address "delayed maintenance," or those maintenance tasks that were put off until later or half finished. Your home needs to be ready to sell in all respects, not just the cosmetic details.

That is why I recommend to all my sellers that they have a home pre-inspection done. It serves several purposes, and costs very little relative to what NOT having one done can cost--think rescinded or low-ball offers. The first purpose it serves is to help you identify any major or minor jobs that need to be done. Just because a problem is identified--such as failing siding or a roof needing repair--doesn't necessarily mean you have to address it, but it gives you an opportunity to determine your strategy for dealing with any issues. Forewarned is forearmed, as they say.

The second purpose it serves is as more of a marketing tactic. A good real estate agent will often create for your home a "marketing book" that contains all the pertinent information about your home and neighborhood. Buyers love these--they love being able to go through them at their own pace and learn about the house in question. In the ones I provide, I usually have a few pages about the town and neighborhood, the schools in the area, all the title information for the house itself, pictures of the home and flyers, mortgage information. When a seller has a pre-inspection done, we also include the pre-inspection and a letter detailing all the work the seller has done to prepare the home for sale. It shows the buyer that the seller is pro-active and not just waiting to sell the house to the "greater fool." It can actually encourage a buyer to make an offer on your house as opposed to another, because the home has been better cared for and the seller will be more reasonable.

Some sellers, of course, feel that this is unnecessary and of course, it's their house and ultimately they have to decide how much they are willing to do to get it ready to sell. In some cases, it might make even make more sense to sell a house in more of an "as-is" condition and not worry about doing the fixing up. Some buyers are looking for a "fixer-upper" and if your house falls into that category, then you want to let the buyer take on the expense and hassle. That's where they are going to add the value and take the profit. However, if you would rather take the profit yourself and get the best price you can, it's something to consider. Just realize that you will not be able to get "top dollar" for a house that is not in "top dollar condition."

The other argument I sometimes hear is, "well, it's a seller's market and with so little inventory out there, buyers are just lucky to buy whatever they can." This kind of falls under the "a sucker is born every minute" category of thinking. A year or two ago, maybe you could get away with thinking this way, but since rates have started to go up, we are in a different market. It's still a fast paced market, but buyers are being much more careful about what they buy and making sure that they are not committing to a house that will be a money pit. They are not desperate to get into a house this week or this month just because interest rates happen to be low and there isn't much to choose from. Rates are good, but not good enough to create a "feeding frenzy" type of atmosphere. This is a good thing. The kinds of price increases that real estate experienced in the last few years will inevitably slow down as interest rates go up. Sanity will and must return to the real estate market.

Sanity is good, peeps.

Everyone wants to get as much money out of their house as they can, but sometimes in our haste to save a few dollars, we can actually end up costing ourselves in the long run. The cost of an average home inspection is $300 to $400 dollars. The repairs themselves can be considerably more. But these expenses pale in comparison to what it may cost if you lose a deal based on inspection issues, fail to recieve any offers, or if your home is sold with undisclosed and unrepaired issues and a buyer decides to sue.

Ultimately, doing the right thing always pays. And as Wilford Brimley would say (anyone remember him?) "It's the right thing to do."

Choosing Sides

One of the not-so-great things about working in the particular market that I do, is that because a lot of the homes out here in the 'burbs were constructed within the last 15 years or so, we see a lot of the faulty construction issues that were common during that period. The major one being LP siding.

Today I had the interesting experience of touring 2 homes in succession that had failing LP, and in both cases neither the sellers nor their agents were aware of it. One agent claimed that it couldn't be LP, because the house was built in 1988, and LP was only sold in 1994 - 1995. In fact, the product was sold and put on more than 800,000 houses nationwide between the period of 1985 - 1995. The earlier product, that is, pre-1992, was the most prone to failure, so in fact, this agent's house is a sitting duck, and he just doesn't know it yet! But, since the failure of the siding is plainly visible to the untrained eye (i.e., mine), I'm sure he will soon find out...

As a Realtor, it only takes one listing with LP siding for you to become something of an expert on the subject because it can be the cause of so much heartache for your sellers. Heaven help the naive seller and agent who go merrily traipsing along, assuming that because the LP "looks okay" to them, that all will be well. There are a lot of different stages of failure, and some are not immediately apparent. The process of breakdown begins with tiny cracks, and without vigilant maintenance of the LP, you may have these cracks which allow water to seep into the siding, and not even know it.

I think it usually pays to know what you may be looking at up front, so a pre-inspection of the property can be beneficial, and having been through it once, I would now recommend any seller with LP siding have this done. In some cases, I can visually determine if damage exists, but I can't as easily determine the extent of the damage...or "how bad is it really?"

That's a big distinction, depending on whether the moisture has penetrated behind the siding and into the actual structure. Is it a matter of replacing all siding on the house, or is it possible to paint, seal and caulk the siding to keep minor damage from progressing? A pre-inspection can help answer these questions, and will allow you to formulate a plan to deal with the problem. The way I look at it, you'll either end up paying for it up front, or in the form of a price reduction or failed sale when the problem is uncovered.

In Washington state, sellers are required to disclose if there is LP (or and fiber-board type siding) on their home, and if the siding has begun to fail, most lenders will not lend on the home. (Clearly, the agent mentioned above either didn't read his seller's disclosure, or maybe the sellers don't know either! ) This can make it extremely difficult to sell, even if the siding only has minor damage, simply because most buyers do not want to put themselves in the position of buying a home knowing that there is a $10K-$15K repair job that will have to be done...and with LP and a lot of similar siding products, it is not a question of IF it will need to be replaced, but when. So, if a homeowner has this siding, they will most likely end up having to make some sort of arrangements to deal with this problem.

I guess the long and short of it is, if you are a real estate agent or a homeowner whose home contains these products, it pays to educate yourself about the products, know your options and have a plan for dealing with any problems that may arise.