Sunday, December 21, 2008

To Test or Not to Test, That is the Question

I must start with two disclaimers.

1. I do not like unions. Unions are a huge drag on the economy. My first experience with unions was as an 18 year old in my first real job with a textile company in Birmingham Alabama in 1969. A small group, 20-30 percent of the employees, went on strike. They used to stand outside of the outlet store where I was the sole employee.

They cursed me and verbally abused me in many ways. The cars of those who disagreed with them were routinely vandalized. In the 40years since, I have not seen much to disabuse me of my initial feelings.

The current congressional goal to get rid of the secret ballot in union organizing is a continuation of this attitude. (I call it the "Union Right to Harrass bill") Of all the unions, I think the teachers' union probably does the most damage because they are a huge weight against making our schools competitive.

2. I support the legalization of Marijuanna. Not because I think it is good. Not because I want to use it--I do not even drink alchol except with very rare exceptions and I do not recall the last exception. But, because it is only marginally harmful and we do far more damage trying to stomp it out. This is a war we HAVE lost.

So, I make this disclosure because Unions are NOT the reason I am upset with the Hawaii Teachers Union. They made an agreement to be subject to random drug testing in return for an 11 percent pay raise. Well, in two years of getting the raise, no one has been tested. Further, the testing is being fought and argued against, even though the rank and file accepted it.

I think random drug testing is a great idea! Of course, I spent 26 years working for Uncle Sam and was constantly subjected to this same random drug testing program. I have been called at 2 AM along with an entire corps. Two thousand people or so standing in line to take the golden flow exam.

My last military posting was, oddly enough, Hawaii. Here, each month the military spun the magic dial and picked a number from 0 to 9. Everyone whose SSN ended in that didget lined up to fill the good old bottle.

So, let's go back into history. Leading up to and at the end of the Vietnam War, April 30, 1975 officially. The military was in a very low funk. Morale was not good. As a matter of fact I can recall my time in a military school in 1971 and 1972 where any walk down a barracks hall would likely have caused a positive reading for cannibas.

In Germany, in the late 70's, the military drug empidemic was very tough. I recall the story of an officer who walked into a second floor dorm and caught some dopers. They put him in a locker and threw the locker out the window. I believe he died. It was not a pretty picture.

So, in the late 70's the military finally got some backbone. They instituted the on call Golden Flow test system coupled with a very hard "Be positive (w/o a perscription) and you are history" policy. In a relatively short time, couple of years, the military had very little problem with drugs. Not to say we stopped the problem because we did loose people after that. Unfortunately, we lost some good troops due to the policy. But, we cleaned up the system.

One of the arguments the DOE in Hawaii has used is the cost, $35 per person. Of course, you do not test everyone and after a few are fired, the random nature of the testing keeps folks in line.

So, you Hawaii teachers, suck it up. Step out smartly. Fill the old bottle and get to work. You are, after-all, the primary adult model our kids see. You agreeded to the program. If you do drugs, you do not belong at the podium.

Thursday, December 18, 2008

Sub-Irrigation. What is it?

I recall a few years ago an appraiser making fun of my listing. He thought it was absurd a farmer would install sprinklers that spouted underground or some such way. He was pretty derogatory about this description.

He did not understand what the word meant, and I imagine many city people moving to the country to enjoy the rural lifestyle also do not understand that term. It is both cause for rejoicing and cause for concern.

What causes sub-irrigation? Typically, this results from an impervious layer of rock or clay fairly close to the surface. Ground water flows to the bottom of the ground then hits this layer and can go no further, or seeps downward very slowly. This results in the ground being “irrigated” from this collected water when normally, it would have dried out. In much of Williams Valley which is just west of Deer Park in Eastern Washington, you can dig a hole in the ground in late August and within ten feet hit water.

So, what is good about this? Obviously, you can really grow a lot of grass and other agricultural crops. Again, check to be sure what you grow is compatible with the water level in the ground. That is a good subject for another discussion and I am not going to go there now. But, if you are driving around a rural area in the late summer and there has been no rain for a month or two, look for nice, lush green growth. You have probably located a sub-irrigated field.

So, What is bad about this? Two things come to mind.

Basements. You may want to think twice about putting a basement in your home or be very careful if buying an existing home with a basement. If the home does not have a sump pump, you may need to install one later. Expect drainage issues. A killer? No, just be aware and learn how to work with it. Especially if you are building. Make sure to factor this issue into the construction equation.

Septics. Septic systems work on two equations, drainaige and evaporation. In our area, we need about six feet of drainable land before hitting an impervious layer. When your six foot deep perk holes rapidly fill with water, you have a problem. Again, not a killer, just plan to spend extra money on your septic system. If you are buying raw land and it is very green in the very late summer, you better include a perk test as part of the contingency. Know what you are dealing with. That is the key to success.

Sub-irrigation is a real state and like most things in life, it has both good and bad wrapped up in the equation. Also, like most things in life, do your research before you buy, not afterward.
Call Dave Atherton to Buy or Sell or talk real estate. (509) 216-4985.

Thursday, December 11, 2008

Big City Realtor or Active Small Town Realtor. What is your best move?

There is always a struggle between smaller companies located in the satellite towns located around the bigger cities and the larger companies located in the cities as to who can best service the real estate needs of people who want to buy or sell in the rural towns and areas outside of the metropolitan centers. Of course, in large part, that depends on the aggressiveness and nature of the smaller companies.

So, let's talk about Real Estate Marketplace whose 20 or so agents are experts in the northern Spokane and Southern Stevens and Pend Oreille (Pronounced "Ponderay")Counties. Deer Park, Elk, Clayton, Loon Lake, Springdale, Chewelah, Addy, are some of the towns located in this general area. Additionally, it includes Deer Lake, Eloika Lake, Loon Lake, Davis Lake, Sascheen Lake, Long Lake and Diamond lake.

Besides Real Estate Marketplace, in this area and in Spokane, there are a number of smaller agencies who each serve their own circles of influence. In Spokane, two companies dominate the market, Tomlinson (Black) and Windermere. These two companies have, I believe, in excess of 300 agents who serve their clientele well.

(Disclaimer, I spent 7 years working with Tomlinson Black North and have nothing but good feelings for that company in general, the North office in particular and the many friends I have there. Leaving four years ago was a very difficult decision for me. I look forward to working with them every time I sell one of their listings.)

A quick review of all current active listings and all sales of properties in our general area of operations listed on or after 01/01/08 show generally the same ratios.

RE Marketplace Tomlinson Windermere
40 62 60 Active listings
11 17 16 Sold listings

When you consider Real Estate Marketplace's 20 agents are competing with the 300+ agents in these two companies, it is obvious how much more efficiently the 20 agents in Real Estate Marketplace are working our area of influence. Listings at roughly 66 percent against each of the large companies. Sales at roughly 60 percent against each of the other offices.

The rest of the companies both in and out of Spokane trail well below Real Estate Marketplace.

Now, we come to the question, "I want to list my north Spokane, Southern Stevens or Pend Oreille County home. I see looking at your numbers Mr. Atherton, Tomlinson has sold more than you guys have and has listed more than you guys have. Why shouldn't I list with them and get ALL the advantages of the Big City Realtors over you little town Realtors."

Well, because the law of averages says 300+ agents are more likely to sell more real estate than 20 agents. In Fact,they should sell fifteen times more. Yet, they do not. What this says is the Real Estate Market agents are out there working this area very hard. Our smaller numbers are bringing more energy per capita to each listing or sale in this area.

Why do we sell and list so much of the real estate in this area? We live here. We know the history of many of the properties in this area, we intuitively know what is going on in the area. We actively work the area. We know people who want to buy and sell but who may not be quite on the market yet.

Our agents are sprinkled throughout this roughly 2000 sq mile area (50 miles NS and about 40 miles EW). So, each of us bring a subset of knowledge to the office then by actively cooperating with each other weave a thick mat of expertise and knowledge which blankets the area from which you the buyer or seller can benefit.

Another factor is the servicing level. Spokane is 15 miles south of Deer Park. Chewelah is yet another 30 miles up the road. Diamond lake is 25 miles or so north. We live here, we do not have to drive here to show a home. It is far more convenient for our agents to service the listings in this area. Time is money and gas can get pretty expensive.

Finally, we need to look at the technology driving today's market. Eighty-five percent of the searchers start on line! We are all on line. You are reading this because you are on line. The MLS is on line. Everything to do with real estate is on line. The Internet has been the great influence leveler. The larger companies do not bring more to the table than do the smaller companies. In fact, it comes down to each individual agent. How hard do you work and where do you work.

We work very hard and we work in your back yard. We are the one who can help you best! Dave Atherton (509) 216-8589,

Friday, November 28, 2008

Who Is Your Mama?

I said I would do an occassional blog on other than real estate issues. I am a political junkie and I am going to step into that pond here.

In the past election, I did not like any of the candidates very much. In the end, I had a choice of McCain or Obama or a totally wasted vote. While I have a lot of problems with McCain, I do not think Obama ever verbalized a position with which I agreed. No brainer. Vote McCain. Lesser of two evils.

I have to say, and I am not going to go deep, I think for the "Race in America" issue, Obama is good. It was the only reason I even considered a vote for him. But, what you stand for is far more important than if you wear a dress or have a bit darker pigmentation. So, why am I rehashing this issue? Because it is important to understand what I am NOT. I could care less that Obama is Black. I could care less that he is recently from Chicago. I could care less he was born in Hawaii--BUT HERE WE ARE AT THE QUESTION!!! Was he?

We just do not know where he was born. Personally, I think Hawaii. Having lived all over the world, I can not imagine a woman leaving the American medical system to have a baby overseas if she does not have to. Further there does not seem to be a history showing she went there. I am also not too stressed over technicalities arising because his parents took him to Indonesia for a couple years.

Regarding Obama's birthplace and state of being a Naturally born American, I have the following positions.

1. You SHOULD have to prove your eligibility to run for this office. You have to prove it to do virtually everything else. I would be content with there being some government agency who has this as a duty. With the massive amount of legal and illegal immigration we have experienced over the past 30 years, this issue will only get worse. Let's fix the problem before it is a problem. Let's define what is and is not a naturally born American. (Are my children? All were born before their foreign mother obtained her citizenship. Two were born overseas in military hospitals. Should the officials of our representatives abroad, both business and government, be able to have their kids run for president? This is NOT a partisan issue, but, it is an issue.

2. Because this IS an issue and an issue that can be answered quickly, simply, cheaply and without controversy, why does Obama continue to act like his birth certificate is a classified document? This defys logic. It also bespeaks arrogance. It is also consistent with everything Obama did through the race. Hide your past, dissemble, lie and make adjustments as the lies are found out. Those of you who thought Bush and Cheney were secretive may have a real shock in store for you.

3. I do not care what the Governor of Hawaii said. It was vacuous and did not address the issues. Even then, that is not the correct venue.

4. With current technology, the birth cirtificate posted on line by the "Stop the Smears" site is completely meaningless.

So, Mr. President elect. Do your administration a favor. Do yourself a favor. Do the American people a favor. Tell the state of Hawaii to release your birth cirtificate to the FBI so they can put this question to rest. Untill then, your refusal to do this makes many of us who did not buy the question in the first place begin to wonder if there is not some fire under all that smoke.

Saturday, November 22, 2008

I hate to monopolize the conversation, but...

The Multiple Listing Service, AKA "MLS". Is it good? Is it evil? Is it a "monopoly"? Just what is going on here?

In short, the objection to the MLS is "The public does not have FULL access to the system." Of course, much of the data IS easily available. For spokane, go to and you can search properties there.,, and hundreds of other sites also provide significant access to MLS information around the US. But, the commenters were correct, John Q does not have the same access as do MEMBER Realtors.

The other major point of objection was the exclusion of For Sale By Owner (FSBO) properties from the MLS and most other sites tapping into the MLS and the lack of listed properties on the FSBO sites.

The net result was to search any neighborhood, there was no central clearing house where all the data could be perused at one time. Several non-realtor bloggers felt this "monopoly" was wrong. Here is where I stand!

I pay about $50.00 a month plus one time fees, lockbox fees etc etc etc as does every other Realtor in town to support the collection, compilation and maintenance of this data. Additionally, each Realtor pays their office a split of every commission much of which goes to support the people who manage the data and provide it to the MLS for input into the system. Folks, creating and maintaining this system is very expensive. It is unrealistic to expect people who pay for and work on this system to give the information away.

Because most realtors in any area are MLS members, any buyer can see any home that is available with one point of contact! This is a huge benefit.

What does the MLS do for you? It pulls together a huge amount of information, sales, listings, expired listings, property histories, property data and historical data. It let's your Realtor quickly figure out the likely value of the home you want to sell or the home you want to buy. Also, it puts the majority of homes for sale in any area into one bucket. While it does not include FSBO's, recent evolution of the system has permitted "flat rate listings" where the FSBO pays a realtor to list his property in the MLS. One complaint about this was the FSBOs were "required to pay a compensating broker commission" (CBC). I am going to talk about that at greater length in "Show Me the Money" but for now, I will leave it to the reality of "If they do not pay a fair, competitive CBC, they probably won't get much cooperation from realtors because no one wants to work for nothing!

The MLS is responsible for the data that populates virtually all the real estate sites people look at that involve listed properties. is paid for from the dues realtors pay and loads MLS data every 24 hours., and many other sites also draw directly from MLS input. These sites are free to the public and let you search in significant detail. I still recall looking for Spokane property while I was in Thailand and the internet real estate venues were in their infancy or even perhaps the mothers were still in a state of pregnancy. I much prefer the current system.

IF you work with an agent, you will have access to all the detail available. The solds, the actives, the listing history of any property, huge data pertinent to that property and the sales history for any area that interests you. You do have to pay to play, but, that pay is usually wrapped into the sales cost of the house.

What is the biggest effect of the MLS? I think it has evened the market out significantly. Believe me, waiting for that unsuspecting Californian with a lot of money to come and pay you three times what your home is worth is just not going to happen. The MLS and associated sites on line make determining asking value very easy. If you are working with a member agent, you can access the solds with the same ease.

In the end, the MLS resulted in a market where you do not get massively ripped off because you do not know the market and you can not get rich quick by finding someone who does not know the market.

Monopoly? No. (2000 realtors to choose from with all kinds of business models in my area). Beneficial? Absolutely. Call your realtor today for quick access!

Monday, November 17, 2008

Cry Me A River

Sellers and buyers are often their own worst enemy. They struggle with many burdens which they just can not overcome. Their weakest point is their emotions.

Yes! We are emotional beings. God made us that way. Cold hearted people with zero feeling are the saddest of all individuals. There is a place and time for everything.

If you are a Buyer you need to use your emotions when determining where and in what you are going to live. Obviously, this is important. After you figure that out, throw away your heart and engage your mind.

Likewise, Sellers, it really does not matter that Uncle Willard made that pie table and Aunt Millie made a hundred thousand pies on it, 380 of which you ate while growing up. These are sweet memories for you. They are meaningless to your buyer. They like cake!

Check your heart at the door. There is really only one thing that matters to you as a seller. The Bottom Line.

I think the most common complaint from Sellers, especially older ones who have not bought in the past 20 years is "Why should I pay his closing costs? No one ever paid mine. (See the emotion oozing out of the statement?) Who really cares. The only number that matters is the one on the check. If that is enough, you should be happy as can be. Take that trip to the Bahamas.

Buyers, on the other hand, seem to feel any offer they make is just and generous. Probably not. The Seller is just not going to leave Uncle Willard and Aunt Millie's pie table in the house. That puppy is gone!

So, Buyers, ask away but do not expect to get it all or even any of it. Look at the numbers and see if the counter works.

Sellers, we agents, especially in this market, are going to be really, really creative to get things done. That is our job. Do not get wrapped up in indignation when the Buyers offer 30k less, want the tractor, lawn mower, tiller and the cats, not to mention expecting you to pay 8k in their closing costs. It may not be rational, but, does it work? Do you walk away w/ what it takes to make you content, if not happy?

Do not sweat the small stuff. Park your heart at the door and look at the numbers. Vizualize drinking pina colladas on that old pie table at the Beach and sign the papers.

Tell me, Who do you Love?

I read the other day about an individual who had submitted an offer on a repo as had two other persons. He was upset because his realtor would not tell him how much the other offers were. (Unless the agent was a dual agent, she should have been able to disclose this IF SHE KNEW. This is a topic I will try to cover in another epistle.)

He felt there was a conflict of interest because he had called the listing company, talking with this lady who offered her services when she discovered he did not have an agent. She was not the listing agent. So, let's talk about Who does my agent love?

In Washington State, we are subject to the Law of Agency. As a less law is better law guy with a rebellious spirit, I admit to loving this law!

First, it is possible for me to write an offer without representing either of the parties. I am just providing the paperwork and filling it in. In this case, I facilitate and do what the warring parties tell me to do.

I might represent the Seller. We call this the listing agent. In this case I do his bidding and seek to get the highest possible price for the Seller and the best possible terms.

I might represent the Purchaser. We call this the selling agent. When I wear this hat, I try to get the lowest possible sales price with the most personal property and most favorable terms possible.

Sometimes, I represent both parties. We call this Dual Agency.

Confucius described this situation many centuries ago when he wisely observed "A man who straddles a fence gets a sore crotch." This really is the toughest situation of all. We really are trying to please two masters. Christ told us we would end up loving one and hating the other. I have not found that to be the case in this situation, but dual agents become more of a facilitator than a negotiator.

In many cases, this actually helps both parties as it removes a lot of confusion and miscommunication. Also, this is a situation where some agents might be a bit more willing to negotiate commission. For myself, I typically give up one percent--6% becomes 5%. This is always subject to how much work is involved, how much of a pain in the neck the clients have been and other variables. Some agents just do not negotiate.

Regardless of the representational relationship, agents often walk a fine line trying to meet their parties' needs to sell or buy without giving away too much information. Do not be surprised by agent appearances of wishy washiness. This is where the clues are hidden. Pay attention!

After all, the agents' jobs are to get their Sellers' property sold, their Buyers into a home and in the dual agency case, become a preacher and create a marriage between the Buyer and the Seller.

Just because two agents are in the same company, it does not mean they represent the same person. Usually, they do not.

Finally, the burning point of the law is, while I have a lot of options as to who I represent, I must disclose to the client what our representalional arrangement is. This is why this is a great law. It gives you freedom to do anything you need to do, but, protects the client because the client knows where he stands with you and can protect himself accordingly.

Sunday, November 2, 2008

Where's The Stinking Address!

Did you ever wonder what was up with real estate advertisements? What is the MATTER with these stupid agents? They do not put in the price, they do not put in the address, they leave this, that or the other obvious pieces of necessary information out of the ad.

Now, you have called on ten ads and NONE of the properties are in the area that interest you. NONE of the properties are what you want or you just had to leave messages! Your blood pressure is up to 200 over 180. (Good is about 130/80 or a bit less). What is wrong with these miserable agents?

As Pres Clinton says, "I feel your pain." But, there is a reason AND a solution to avoid the hassle.

Real estate agents pay for their ads out of their commissions. Generally, the company is not a participant in these costs. My advertising bill exceeds $20,000. per year and is only second to my salary (which I pay myself from my business.) I advertise for two reasons. First and foremost, I need to get my listing clients' properties sold. Second, I need to find buyers.

If I put all of the information about the property in the ad, I limit the responses to the very few people who might actually want that house. My business flourishes, even in bad times, because I pick up a healthy number of buyers who call on my ads. Sometimes they actually buy the listing they called on, but, usually not.

OK, OK, you do not care about my problems and you shouldn't. But, how can you avoid the frustration of calling a hundred agents to talk about 99 properties you could care less about?

Easy. Find an agent who works the area(s) or types of properties you might like. Get "married" to that agent and let him/her provide you with the information you need. He/she will be happy to provide you huge amounts of information on most homes. In this age of automation and computers, you can designate an area, price range and other details and receive, at least in my area, an email notification of every property that fits the criteria as soon as it is listed.

Does that mean you will not be reading ads and magazines anymore? Probably not, but, now, you just give a list of the ads to your agent and he will get you details on all of them. This is part of the service we do for our LOYAL clients. I often call half a dozen agents about their listings to service my clients.

In the meantime, I will continue to bait my hook with 2/3rd's of a juicy worm to try and draw as much interest as I can.

Now I lay me down to sleep

This is always a depressing time of year for me. The sunny, warm days of summer are long gone. The days of working outside 'til 9 PM are a fond memory. The clock just sprang back and at 4:30 in the afternoon it is dark. I have not got my barn completely ready to accommodate working at night because there is no heat.

I sell real estate for a living and we know how that is going.

I love my plants and was happy to have day lilies blooming here until late October, a real abnormality. But, I got out my weed-whacker and whacked all of them down to the ground a week ago. A year's work and growth now just chopped up weeds.

To make things worse, it looks like the country is going to elect an abnormal number of democrats, and liberal democrats at that. My democrat friends are virtually in an ecstatic stupor.

I have bought a great sack cloth suit, some ashes and am looking for a public square where I can sit, throw the ashes over my head and moan.

My friend asked me to go to McMorris's victory party Tuesday night to watch the election, but, I declined. I told him I needed to be in a place where I could cry like a little girl as the returns come in.

But folks, the NEXT national election is only 4 years away! In a mere 51 days or so, the days will start getting longer. Six weeks after that, the tulips will start pushing up from the ground. Spring is not THAT far away.

My real estate year has been pretty good and I thank God for that.

Life is cyclical and today's mourning contains the seeds for tomorrow's joy. So, I will plant the seeds, gird my loins, thank God for the many blessings he gives. I will seek to look up, not down. I will persevere and with God's help un-funk.

Catch you on the rebound!

PS The older of my sons is here for a couple weeks from the middle east. My daughter is going to visit for the coming weekend and my youngest son's last college check is due in January. Life is great after all!

Thursday, October 30, 2008

Trailer full of confusion

Stick Built, Mobile Homes, Manufactured Homes, Modular Homes, Trailers, Site Built Homes.

Just what DO these words mean? That depends on who is asking or answering.

Stick and Site built homes generally means a home built on site by a builder using 2 x 6's, 8's, cement, rock, trusses and all the other thousands of pieces of stuff that go into a home. These homes will normally be the most desired, most expensive and most easily financed.

Mobile homes and trailers typically refer to, well, mobile homes and trailers! Let's get a bit more precise. If the "trailer" was built in 1976 or earlier, it was "Pre-HUD" and may have many more issues relating to the wiring, the construction and general condition. These homes are virtually impossible to finance without extraordinary interest rates.

Also, this term is used by older people who have not transitioned mentally from the cheaper homes made when they were young hot studs and studdess to the very expensive, finely engineered Manufactured homes of today.

Manufactured homes are Mobile homes and Trailers made in 1977 up to now. These homes, if set according to FHA standards, are easily financed by many lending institutions, although, the current pendulum swing has made the down payment requirements much higher.

For financing, the rules vary from year to year based on the mood of the financing establishment. Right now, that mood is a bit gloomy. Expect .5 to 1 percent add on fees for a Manufactured home over a Stick/Site built home. Construction of these homes is done in a factory and the home incorporates a metal frame into the building. This frame accepts an axle and the home comes in on its own wheels, is set on cement blocks or jack stands upon cement runners which function as the foundation. We will discuss setting in a separate blog.

Modular homes. It is obvious modular homes are manufactured homes, but, as far as banks are concerned, a modular home finances like a Stick/Site built home.

What is the difference between a modular and manufactured home? Easy! Both are made in a factory and driven to a different location and turned into a house. But, the modular home is constructed with a typical base plate, set on a truck bed, then a crane or other slide methods are used to remove the home from the truck and set it onto a standard home foundation.

It may look like a manufactured home, most of the construction is the same, it may be made at the same factory, but, the bank says "Dude! Have I got a deal for you! Construction costs are a bit higher than most manufactured homes by the time you get it set up. But, the cost difference may be mitigated by cheaper financing rates and lower down payments.

So, there you have it. A quick definition guide that works today, in the Spokane Washington area. Who knows what the terms will mean tomorrow, but, at least you have a general idea. Do not forget the other wrinkles, Panelized homes, Log home kits, Pre-fabed homes. Like anything in real estate, there are wrinkles on wrinkles, so do your homework.

Wednesday, October 29, 2008

Las Vegas money for Sellers

If you have great credit, you can still get a good home lone without any trouble. But, the 100 percent down loans are almost gone. FHA demands 3.5 percent down and conventional loans are 3-20 percent down. It is time to trot out Owner Financing again.

Owner Financing falls into two categories. First and second mortgages.

Owner Financing with a first mortgage usually requires a down payment of at least ten percent to cover costs. Most sellers want to take a trip, buy a car, or do something that costs money. Expect to come up with at least 15 percent and more likely 20 to 30 percent down. Sellers want to know if they must repossess the house, he will be able to fix any damage and be able to price the home a bit more aggressively if he has to resell it later.

Three other aspects regularly affect Owner Financing.

Expect a "balloon" payment. The loan is written with monthly payments based on a 30 year pay off. BUT, in 5 years, 10 years or some other designated time, you will be expected to pay off the entire loan.

Expect to pay higher interest. If the going rate is 6% then do not be surprised the seller wants 7.5 to 8.5 percent. You do save a lot of money on loan costs.

Expect and demand the loan be held by an escrow company. This is one of the best consumer products out there. The minimal costs of collecting, disbursing and keeping track of the monies is truly wonderful and safe for all concerned. I did one of these between parents and an adult child. I insisted they do this. Only way to go.

What Dangers lurk out there in the world of Owner Financing?

Two common ways of transferring property are "Real Estate Contracts" or "Deeds of Trust." The actual ins and outs are legal and beyond my understanding or licensing capabilities to explain. The old timers around here who LOVE to provide owner financing favor the Real Estate Contract method.

Make sure you can pay it off in full anytime without penalty. I saw one where the buyer had to pay 13,000 dollars in penalties to pre-pay 25,000 dollars of principal. It was all the interest due until the end of the loan.

Sellers, make sure the loan has a "Due on Sale" clause. You may want to let another buyer assume the loan, but, you do not want that to be the default.

Don't just set down with a good old boy and write it on a napkin--either sellers or buyers. Take the napkin to a real estate agent or real estate attorney and make sure it is done right. Better arguments before than after for everyone!

"Las Vegas Money for Sellers."
Sellers, if you take a SECOND mortgage to help a buyer qualify for a first mortgage down payment. Then, the buyer defaults and the home is repossessed, more than likely, there will not be enough money to pay anything against the second mortgage. That means that money just goes away, kinda like a mutual fund. You may be able to go after the buyer to try to recover it, but, it is probably not worth it (call a lawyer).

Therefore, a second mortgage is Las Vegas Money. If you can say "Thank you God" for every Penny you got paid by the first mortgage, and for every penny you get in monthly payments and if it repos and you do not get one payment on the second mortgage and can still say thank you God for what you got, do it because Second mortgages are just Las Vegas Money.

Saturday, October 25, 2008

Do FSBO'S pop or fizzle?

FSBO = For Sale By Owner. Does it make cents to sell your home yourself? Maybe, maybe not. Certainly the motivation is money. While there is no set percentage rate and there are as many potential plans as there are people, the Agent commission is one of the largest costs of a sale. For the purpose of this blog, let's say the commission is six percent. That is $12,000. on a $200,000. house. We could all do a lot with that much money. So, let's look at some general statements or consistent ideas about FSBO's and the pros and the cons of this route.

I hear sellers say, "I am going to FSBO it and keep the agent commission for myself." I hear buyer's say "I am going to buy a FSBO and knock all the commission off and get the house for $12,000. less than market." Which is correct? Either or a hybrid could be true. I have observed some FSBO's to be incredibly under priced. I have seen many more to be very much overpriced. In the end, it will come down to a negotiation and that will determine who benefits.

If you decide to sell your home by yourself, what are some of the problems. First is access to buyers. In most markets, 85 percent or more of the buyers are associated with an agent. A buyer, in our example, is a $6000.00 business asset to the agent. If you are not willing to cooperate with the agent, why should he release his buyer to you? He has spent hours, if not months; many thousands of dollars becoming educated regarding the practices, principals and quirks of the local real estate market. He has likely spent much time driving that buyer around showing him property. For the FSBO to expect the Agent to say, "Here is my buyer, have a nice life" is the same as for you to walk into the hardware store and say "Gee, this is a nice hammer. I appreciate it. See you later." Then leave without paying. Second. How familiar are you with local real estate law? Two obvious questions that are often missed by sellers acting on their own behalf are the Lead Based Paint addendum for 1978 and older homes and the Property Disclosure Form which is required in many states. Failure to use either could result in legal problems or fines. Third. Selling or buying a home is very emotional for most people. Agents earn their money by being the Emotional Dead Zone where the heat can dissipate without damage to either party--at least in theory. Sometimes, you are just too close to the situation to be rational. An agent may keep it together for you in these circumstances. Fourth, how do you price your home? How do you know how high or low it should be? Are you pricing your home too high so it will not sell? Are you pricing it too low? If so, you may be giving away the commission and assuming the work and stress of the sale yourself. Does that make sense? And finally, costs. The agent generally spends a lot of money advertising your property. You are going to assume that bill. Also, the Multiple Listing Service (MLS) gives you access to and all the local agents. This tool is the single biggest benefit to a seller. Without listing your home with a Realtor, you lose this benefit. Your house becomes much less visible. Visibility sells. That, after-all is your target.

What is the benefit of being a FSBO? You MIGHT keep a few more dollars in your pocket. Obviously in the hot, hot, hot markets where nothing is available, being a FSBO may make sense. Also, if there is just no money to pay those costs, it might make sense. In any case, it is probably worth your time and money to buy and hour or two of an Agent's time to get your home priced, find out what forms are necessary and get a general state of the market. A good agent may charge you $100-200 an hour. It is usually money well spent. Certainly, it makes sense to enlist the aid of the buyer's agents by paying a buyer's agent commission of half or slightly more of the typical commission in your area. Remember, it is not legal to set industry commission rates. Rates are always negotiable. That does not mean an agent has an obligation to accept your offer. What is reasonable to you may not be to the agent. So, in our example. Pay the buyer's agent 3 - 4 percent. He is doing the work of both agents because he has to deal with your emotions as well as his buyers' stress. Believe me, he earns his money.

In the end, 85 percent or more of FSBOs list their property. Personally, I am not offended by FSBOs. I have sold many of their homes, I have helped many more with forms, information and photos. After-all, many ultimately become my listing or I help the seller buy their next home. I built a 2000+ sq foot barn. Took me 7 years to do it. The front is 49.5 feet, the back is 50.2 ft. Sheet rock does not come together just perfectly at the corners. But, it works. I wanted to do it myself, I did it, I am happy with it, but, I will never build another myself. Do you really want to sell your home yourself?

PS: Do It Yourself Apendectomy kits available from

Monday, October 20, 2008

Has the real estate market turned into nacho cheese?

Day after day, I listen to the media bemoan the high numbers of homes being repossessed. As a Realtor, I know first hand we are in a tough market. So, it has been with some surprise I have found the repo market is not what the national media is saying it is. Not in Spokane, at any rate.

I know there are repos out there. I see an occasional repo when showing homes. I have friends who have listed a number of them over the past several months. Sadly, I have friends and acquaintances who are losing their homes or hanging on by their fingernails. Repos have not been a significant factor in my business, but I began paying closer attention because several long-term clients indicated they were ready to invest if I could find a screaming deal. Repos are a good place to start looking.

In recent years, most lenders have listed their repos with Realtors in order to get free advertising and to expand the market for their "used goods." I felt I could get the numbers together easily and that there must be hundreds of choices. So, where is our market here in eastern Washington?

To give you a yardstick, in May 2007, there were about three thousand homes listed in the Spokane area. The market was hot and multiple offers were common. Now, houses sit for months. Values have dropped 10-20 percent and in homes costing over half a million dollars, probably more. Currently, in the Spokane Multiple Listing Service (MLS,) there are 5,818 residential properties for sale. Of these, 603 are "pending," which means they are under contract and quickly (hopefully) moving towards closing. Another 310 are "contingent" waiting on inspection, sale of another home or some miscellaneous issue to come to pass. Clearly, we have a problem when our inventory has almost doubled in 18 months and new construction has almost stopped.

The burning question is, "How badly have we been hit by the repo plague?" Of almost six thousand active listings, only 112 are repos. HUD, a rare non-MLS user, has only three listed in Spokane County and one in the adjacent Stevens County. This is certainly not an epidemic. It is not significantly worse than in previous years and on a percentage basis, I would hazard a guess, far less. It seems to me, 12 years ago when I first moved here, there were far more repos and far fewer homes for sale. Also the cost of getting into the homes and making the payments was much, much less then.

What does this mean? I think, it tells us our Inland Empire real estate market is still strong. I believe it shows the majority of people are working hard to save their largest investment. I think it also tells us in this area our industry, both the lenders and the Realtors, have not been the scalawags the media has portrayed them to be. Finally, I truly believe this demonstrates the flexible programs we used to help people buy their homes were often not so bad after all.

My lender and I had a radio show for about a year. We often discussed some very creative lending programs, some we liked and some we did not, but, we noticed all were appropriate for some users, none were good for everyone. In the end, if we as real estate professionals work carefully with our lenders to put the right people in the right programs and keep our clients' well-being, not the transaction at hand, in the front of our faces, we will have a limited number of failures. That is ultimately our duty -- to take good care of our clients.

Friday, October 17, 2008

Why "Verities & Balderdash?"

Those who know me, know I know a little about a lot, a lot about a little, and have a mind that retains nonsense more effectively than my body maintains carbohydrates. Also, I can sing along with about 90 percent of the Harry Chapin songs. His most popular album was titled the same as my blog and I cheerfully admit to purloining his title! According to Unabridged (v1.1) Verities means:

1. the state or quality of being true; accordance with fact or reality: to question the verity of a statement.
2. something that is true, as a principle, belief, idea, or statement: the eternal verities.

According to quite a number of authority figures in my long life, "Balderdash!" was the one word definition of some of my wilder ideas. Think about the scene in Forrest Gump in which Lt. Dan's ancestors are killed through a series of wars. Just replace the dying ancestors with my grandparents, parents, teachers, pastors, sergeants, commanders, bosses and wife sternly staring at me as a baby, young boy, little older boy, teenager, young college pup, draftee, up to a grown man, with each level saying "Balderdash!"

So, in this blog, you will get to know me through my verities and my balderdashes as they come to mind and I have time to commit them to this forum. Hang on! It could be a wild ride!

Here are some of the subjects we may discuss: Real Estate, because that is my current profession. Gardening, because it is one of my passions (Check out, the daylilies tab at the top right to access pictures of my garden. Peonies, Iris and 200+ varieties of daylilies! ), politics, religion from time to time, places foreign, books and just plain old stories.

I look forward to lots of conversation.

Before I say "Goodby," I want to compensate Harry for the theft of his title by encouraging you to check out Harry's daughter, Jen. She makes some very nice music. Her site is: