Seattle Housing Buzz

NOTE: Since this post was originally written, many of the forms have since been revised. The information contained below may no longer be accurate.

This Summer the NWMLS revised a number of the forms commonly used in the purchase and sale of residential property (single family homes, condos & townhomes). Listed below is a synopsis of those changes. Whether you’re a seller or a buyer, it’s important to understand how these changes can affect you. This article only highlights the changes and is not meant to convey & explain the complete set of revisions.

Seller Disclosure Statement (Form 17)
Revision of farming disclosure. In the previous update the form incorporated a question where the seller had to indicate whether there was a “farm” within a one mile radius of the property. There was ambiguity as to what consistuted a farm, thus potentially creating undue exposure on part of the seller. The current revision simply states that the property may lie in close proximity to a farm. It no longer requires to Seller to actively acknowledge the existence of a farm.

Residential Purchase & Sale Agreement (Form 21)

Possession Date:

• Eliminated a possession option on the contract allowing for possession to occur after closing. Contracts now default to possession at closing, though other alternatives may be agreed to. A possession date may fall on a weekend or holiday.

Computation of time:

• Clarifies that time is expressed in days, not hours. In respects to the contract, 24 hours does not equal 1 day. Time starts by counting the next day. Time periods end at 9:00PM unless otherwise specified.
• If a specific date is entered, that date will apply even if it’s a weekend or holiday.
• For time periods of 5 days or less, business days are counted. For more than 5 days, calendar days apply.
• If the last day falls on a weekend or holiday, it is not counted, except for the Possession Date.

Legal Description:

• A legal description must be attached as an Exhibit at the time of the offer for the contract to be valid. If not attached, the contract is considered illusory and not binding.

Assignment:

• The Purchase and Sale contract prohibits assignment to another party without written consent of the seller. However, at the time of offer, the parties may include “and/or assigns” on the first page of the agreement.

Financing Addendum (Form 22A)

• Buyers must disclose type of loan they are obtaining including whether the loan is a Second or Bridge.
• Clarifies that the downpayment is in addition to all sources of financing.
• The Contingency runs from Mutual Acceptance or Satisfaction of Form 22B.
• Buyer must either waive or provide a letter of loan commitment within 30 days; obligation to provide the letter is automatic. Unless waived, the Contingency remains active.
• If the Buyer does not provide the loan commitment letter, the Seller may provide a 3-day termination notice or allow the deal to continue.

Buyers Home Contigency Addendum (Form 22B)
The revisions clarify that:

• Sellers must accept the bump offer before giving the bump notice.
• Satisfaction is something much different than waiver and with different ramifications
• By waiving Form 22B, Buyer waives all other contingencies including Financing and Home Inspection

Inspection Addendum (Form 35)
Previously, the NWMLS supported two differently Home Inspection Addendums. The former Form 35A allowed for the Buyer to back out of the contract simply by disapproving the Inspection report. The former Form 35B allowed the Seller the opportunity to make repairs on items which the Buyer disapproved of. Both, Forms 35A and 35B, have been discontinued and replaced with Form 35.

• The new Form 35 closely resembles the former Form 35A, providing the Buyers the right of termination by disapproving, albeit subjectively, the Inspection report. This allows the buyer to essentially walk away from the deal.
• The Buyer has 10 days to inspect and may (1) approve and waive the contingency, (2) disapprove and terminate the contract, (3) request additional inspections or (4) propose modifications. If the Buyer does nothing, the contingency is automatically waived.
• Removed provisions for Deferred Deposit of Earnest Money and the Neighborhood Review (now separate form).

Today’s Seattle Times Real Estate section’s feature article is titled “Real Estate: Sellers, buyers should make sure they’re comfortable with the agent.” The gist of the article is to impart on readers the need to evaluate and choose their agents carefully:

Many people have heard a horror story about a bad real-estate agent: a young agent who butchers a deal because of poor negotiating skills; an agent who lies to prospective buyers about a home’s leaky roof; or one who pressures clients into buying a home they can’t afford.

Bad agents may be few and far between, but prospective buyers and sellers should take steps to ensure that they get one of the good agents and one they feel comfortable working with.

Membership in the National Association of Realtors has jumped 44 percent since 2003, from 876,195 to 1.26 million, the Washington, D.C.-based group said.

That means there are a lot of fairly new agents and even more reason to be picky, said D’Ann Jackson, president of the Seattle-King County Association of Realtors

Of course the part that was of particular interest:

Seattle-area John L. Scott agent Ben Kakimoto, who volunteers at the Seattle Animal Shelter at Interbay, donates a portion of his commission to the Seattle Animal Shelter or to a charity of his clients’ choice.

Got the urge for a little DIY? Some people engage in home-improvement to enhance the functionality and comfort of their living space. Most often than not, improvements increase the home resale value bottom line. Some, however, may not:

Homeowners can find plenty of information on which improvements will help boost the value of their houses. But significantly less attention is paid to what to avoid when remodeling your home. Consider the following seven deadly home-improvement sins before committing to projects that may work against you to lessen your resale value.

Read on- the seven deadly sins of home remuddling

In a previous post I wrote a post about a study which Texas A&M University undertook regarding the net effect of utilizing a discounter or limited service company. Their findings indicate there was no net dollar advantage to using a discounter.

I wanted to follow that up with case in point. I recently competed against a 4% listing company for a single family home listing. The owners ultimately selected the discounter because they were saving 2% off the commission (4% instead of 6%). The discounter listed the price at $420,000, considerably below market value by $20,000 - $30,000 when analyzing comparable sales, neighborhood market activity, like size and finishes, and lack of inventory in the neighborhood. It was not the best decision for the seller.

* Assumption: I would have listed at or close to market value based on seller’s requirements. Example uses the low-end of the market value range.

Based on this comparison, by trying to save 2% off the commission, it actually cost the seller $10,400 in gross proceeds.

I’m not privy the the information shared between the seller and the listing company for why the listing was priced so low below market. The seller is relocating but that itself is not sufficient reason for the lower price.

At the time of the sale, the neighborhood was sought after and inventory was very low. I had just listed and sold a home in the neighborhood that was comparably priced and received multiple offers. I had done my market analysis so I knew the market and neighborhood well. Had it been listed at $440,000 and with full-service marketing and promotional activities, the property would have sold at the higher price, possibly with multiple offers as well.

An independent study by Texas A&M University revealed there is little, if any, savings for sellers who utilize discounters or limited service companies. The study of 55,000 residential transactions found that discount companies sold their listings for 1.7% less than full-service companies and took 17.1% longer to sell.

The 1.7% reduction is sale price offsets the average 2% commission savings of most discount companies (i.e. 4% vs 6%), resulting in a negligible net dollar gain for the seller.

Most of the study results were statistically significant, indicating valid relationships exist between limited service representation and agent experience and marketing performance (time to sale and sales price). Licensing type did not demonstrate such a clear relationship.

Interestingly, the empirical results from the models show that limited service listings sold for 1.7 percent less than typical exclusive-right-to-sell listings and took 17.1 percent longer to sell. Given that the typical discount offered by limited service brokers is approximately 2 percent, there does not appear to be any net gain to sellers using limited service representation.

If the limited service broker charges a total 4 percent commission, then the commission plus the 1.7 percent lower price is approximately equivalent to a 6 percent commission from the seller’s perspective. If this result holds up in additional studies, it would indicate that limited service brokerage offers no dollar advantages to the seller over typical brokerage when using the exclusive right to sell contract.

One observation is that discounters work on volume and may not be able to fully represent, promote and conduct a thorough analysis of the market, neighborhood and pricing of the listings they are taking, and thus, detrimential to the seller’s best interest.

Article was originally posted on 6/19 and re-created on 6/22.