Karen McKnight's Blog

The buyer can’t just back out of a contract for “no reason”. If the inspection contingency passed with no response, and you had Northwest MLS contracts, the buyer is legally committed to buy.

If there was a financing contingency, you should have a Pre-Approval from the Buyer’s lender. If you become nervous about the buyer’s financing, you, per Northwest MLS contracts, can give notice to terminate.

If the earnest money amount is low, the buyer may be willing to risk losing his earnest money.

If a Buyer just backs out with no legal excuse, you can request that escrow “interplead” the earnest money. The Northwest MLS contract stipulates that $500 of the earnest money is allocated for escrow to start the interpleader suite, which will determine the outcome of the earnest money.

Usually, if a buyer “backs out” of a purchase and sale agreement the smartest choice is to get a Rescission Agreement signed, give the Buyer their earnest money, and move on as quickly as possible. If you don’t have a real estate broker, the wise choice is to contact a real estate attorney. I keep a list of great real estate attorneys.

You will have the best opportunity to sell from now and into the late spring – in most years, to get your property sold.

Many sellers™ agents (regular listing brokers, relocation brokers and builder’s brokers) ask for pre-approval by their own trusted lender, simply to make sure the seller truly has a buyer who can perform. .Often, even though you may have your own favorite lender, if you want to purchase a property, you get pre-approved with the relocation company’s lender or the listing agent™s lender.   Usually, it will not lower your credit score to have a couple of lenders review your borrowing credentials, because there is a window of time (45 days I think) where you can be doing several credit checks because you are in the process of purchasing.   The credit bureaus know you may be shopping for loans during this period, so applying for several loans during a short period is factored into the credit score algorithms.An aside – the good news is, I am feeling more activity from relocation companies, which is a sign that companies are hiring again, and that is good for the housing market.   As the job market improves, we eventually shift to a Seller’s Market (where the seller has the negotiating advantage).We are still in a Buyer’s market (where the Buyer has the negotiating advantage), so even though buyer™s have to jump the hurdle of an extra lender approval, they are getting the home at a great price and at great interest rates.   Interest rates are still amazingly low, hovering around 4% for a 30 year fixed rate, which makes homes the most affordable they’ve been since these statistics have been tracked.   This all means, it is a great time to take advantage of the market, as a buyer.

Many sellers™ agents (regular listing brokers, relocation brokers and builder’s brokers) ask for pre-approval by their own trusted lender, simply to make sure the seller truly has a buyer who can perform. .Often, even though you may have your own favorite lender, if you want to purchase a property, you get pre-approved with the relocation company’s lender or the listing agent™s lender.   Usually, it will not lower your credit score to have a couple of lenders review your borrowing credentials, because there is a window of time (45 days I think) where you can be doing several credit checks because you are in the process of purchasing.   The credit bureaus know you may be shopping for loans during this period, so applying for several loans during a short period is factored into the credit score algorithms.An aside – the good news is, I am feeling more activity from relocation companies, which is a sign that companies are hiring again, and that is good for the housing market.   As the job market improves, we eventually shift to a Seller’s Market (where the seller has the negotiating advantage).We are still in a Buyer’s market (where the Buyer has the negotiating advantage), so even though buyer™s have to jump the hurdle of an extra lender approval, they are getting the home at a great price and at great interest rates.   Interest rates are still amazingly low, hovering around 4% for a 30 year fixed rate, which makes homes the most affordable they’ve been since these statistics have been tracked.   This all means, it is a great time to take advantage of the market, as a buyer.

If you have the money to pay the difference between what you owe the bank and the selling price, you can choose to bring the money to closing to pay that difference.  To do a Short Sale, you must have a “hardship”, which means you have had undo medical expenses, lost your job, had a job transfer of more than 100 miles, etc.   If you have a second home, you may be able to get a line of credit on that home to pay to close your current home.With all the publicity about Short Sales in the media, I feel some basic concepts have gotten misconstrued.   You borrowed the money to buy this home and if you have the resources to keep it and if you don’t have a “hardship”, you can’t do a short sale.   A short sale is a negotiation with the bank to keep the bank’s losses to a minimum and settle a hardship for you.   Outcomes often include promissory notes for you to pay all or part of the loss over time, a release of the bank’s right to pursue a deficiency judgment, and a 1099c for you because when a bank releases you from debt, it is considered income to you.

Each short sale situation is complex and there are a myriad of options, so I invite you to call me for a consultation.   If you don’t have a hardship, you may even choose to turn your home into a rental property.

If you are renting, thinking of purchasing a home, the idea of a foreclosure may appeal to you because you think you can get a “good deal”.

A  foreclosure is really an umbrella term. A property often starts as a short sale which doesn’t sell, then goes to auction.     About 2/3 of the properties at auction are bought by the lender.   Once the lender takes title to the property at auction, it goes into the lender’s portfolio.   At that point it is called “Real Estate Owned” because it is real estate owned by the lender.

The lender does not like to own real estate, because real estate is a liability to the lender.   For each property a lender has in their asset management department (REO Portfolio), the lender loses 13 times the value of the property in the lender’s abiltiy to loan money.

Based on how many properties are on the lender’s books and based on the “Net Present Value” of each property, the lender decides at what price and when they will unload the property.   It is at this stage that you are actually buying a “foreclosure” (the property has been foreclosed upon).

Once a property is an REO, the process is very simple.   Most lenders use online systems where the listing agent places the bids.   You can get a response on an REO very quickly if the lender is at “$0.00″ net present value or if the lender has decided to get this certain property off it’s books.   All REO’s are listed because the lender is not in the business of selling homes to the public.

Now, a “short sale” is very cumbersome and can take many months.   Many lender’s have hired staff and put systems in place to make the “Short Sale” go as smoothly as possible.   There are about 5 stakeholders in every Short Sale negotiation so short sales are tricky to negotiate.   As a buyer, in the state of Washington, agents have very thorough addendums that protect the buyer’s interests. Bank of America states that their average short sale now takes 45 days.

Most people want a “foreclosure” because they think they will get the best price on those.   Sometimes properties in a normal, non-distressed sale are better values than neighboring foreclosures.

I recommend you meet with a good, very experienced agent for a Buying Consultation and that agent can lead you through the process of buying.   Focus on getting a great value and if the great value you find is a bank REO (foreclosure), and your timing is right, your agent may be able to negotiate a great price for you.

What is most important for you, is focusing on the value.   Is the property the best location and condition for the price?

First, to clarify, a person cannot put  his property in the Northwest MLS without a real estate broker who is a member broker. Both brokers and agents pay fees to run the Northwest MLS and brokers volunteer substantial time on the different boards and committees to keep the mls functioning in a way that is fair to all the member brokers.

If you use one of the inexpensive services, you get what you pay for, simply a listing that is entered in the Northwest MLS.   With most of the companies that offer these very low flat fees, you take all the calls, set up all the appointments, do all the followup, and you tend to get no advice on how to price or when to adjust your price.   Also, you usually get no advise on how to “stage” your property to maximize its value.

Most importantly, you do not receive the higher level services like consulting to help you gain clarity, handling of the 150 plus communications and contract details that occur during the transaction, or representation in the negotiation.   In short, you simply get your listing entered into the system.

To clarify further, a listing in the Northwest MLS, is not an ad, it is entry into a database that is used by most real estate agents and is now fed out to many broker’s and their chosen marketing venues.   For example, my company, Keller Williams Realty, through our own international Keller Williams Listing System, (KWLS) has 40 subscribers, with whom we have negotiated contracts.   These “subscribers” push our listing data out to over 400 websites and our data is enhanced on those websites to give our listings maximum exposure.   This very extensive and expensive marketing is done for our clients who have signed exclusive listing agreements and gives them maximum exposure.

First, to clarify, a person cannot put  his property in the Northwest MLS without a real estate broker who is a member broker. Both brokers and agents pay fees to run the Northwest MLS and brokers volunteer substantial time on the different boards and committees to keep the mls functioning in a way that is fair to all the member brokers.

If you use one of the inexpensive services, you get what you pay for, simply a listing that is entered in the Northwest MLS.   With most of the companies that offer these very low flat fees, you take all the calls, set up all the appointments, do all the followup, and you tend to get no advice on how to price or when to adjust your price.   Also, you usually get no advise on how to “stage” your property to maximize its value.

Most importantly, you do not receive the higher level services like consulting to help you gain clarity, handling of the 150 plus communications and contract details that occur during the transaction, or representation in the negotiation.   In short, you simply get your listing entered into the system.

To clarify further, a listing in the Northwest MLS, is not an ad, it is entry into a database that is used by most real estate agents and is now fed out to many broker’s and their chosen marketing venues.   For example, my company, Keller Williams Realty, through our own international Keller Williams Listing System, (KWLS) has 40 subscribers, with whom we have negotiated contracts.   These “subscribers” push our listing data out to over 400 websites and our data is enhanced on those websites to give our listings maximum exposure.   This very extensive and expensive marketing is done for our clients who have signed exclusive listing agreements and gives them maximum exposure.

First, get a couple of price quotes based on a design that you like.   The range for the cost of a remodel for a bathroom is large.

Per the National Association of Realtors (NAR)  Annual Remodeling Survey for the Pacific region as of January, 2011, a mid-range remodel costs $19,000 and an upper end remodel costs $66,000.   It depends greatly upon what you choose for materials and workmanship.

On the mid-range remodel, a seller recoups about 80% of his investment and on a high end remodel, a seller recoups about 63%.   The NAR Report did not specifiy, but this is most likely for master bathrooms.

The commonly accepted range for an average house main bathroom update is $4000 to $5000.

What is considered mid range versus high end is neighborhood specific.    For example, in a trophy neighborhood like Madison Park, a bathroom remodel would be much more extensive than in Columbia City, due to average price range in each area.

There is a great difference between updating and remodeling.   Remodeling  changes walls and /or  ceiling structures, whereas updating is simply updating the finishing from tubs, to sinks to counters, cabinets  and countertops.

Staging a property can help it sell, but don’t spend money staging if you need to make a choice between a price reduction or paying for staging.

The biggest issue in selling your home is being priced well for the market.   If your house is clean and meticulously maintained, you may not need to spend the extra money on staging.   I have been in the business since a friend of mine started the concept of staging, which was originally  a lot simpler  than what has evolved through the 2000s.

We are still in a buyer’s market with more short sales and foreclosures coming on the market this quarter than we have seen in two years.

What this means for you is that you (under the guidance of your agent) need to be watching the activity very carefully and making decisions based on your number of showings and whether or not buyers are coming back twice.   If you have been at your price 30 days with no offer you are probably still too high.

Short Sales and foreclosures sell at a 10% to 20% discount so that has the effect of lowering prices.   You want to stay ahead of your competition.   Make sure you are the best active listing on the market in the area, and that includes competition in nearby neighborhoods, because buyers usually look within a number of neighborhoods based on their commuting and pricing criteria.

I’ve seen the question several times asking about capital gains in relation to Home Equity Lines of Credit (HELOC).

Capital gains is a totally separate concept from HELOC, which is simply a loan on equity.   Capital gain is the difference between what you paid and what you sell the home for minus “capital improvements” you made.

Capital improvements are improvements that add value to the home.   For example, adding a new fawcet is a capital improvement but repairing a fawcet is simply a maintenance item.

In all 50 states, lenders can get deficiency judgements on HELOCS, so if you  have a HELOC  ”dismissed” or forgiven, you  are very  lucky.   HELOCS have different rules from “purchase mortgages”.

Regarding personal residences, the HELOC lien on the property may still remain after the loan is “forgiven”.   Personal residences can be forclosed upon due to an unpaid HELOC, with the first mortgage being paid off in full, if there is enough equity.

It is always wise, with the complexity of HELOCs and the fact that the underlying asset is your personal residence, to hire competant real estate attorneys with any negotiation attempting to clear that HELOC debt.

I have  can recommend  great attorneys who work in this arena.