Sequim real estate sales in the first quarter of 2012 are an indication of whether the Sequim real estate market is recovering or still on hold.  The national real estate market is showing some signs of recovery according to the National Association or Realtors Chief Economist, Lawrence Yun.  Since many of our buyers are retirees who must sell their homes in other states, this is relevant.  Here is a chart showing Sequim real estate sales in the first three months of the year from 2005 (our peak year) to 2012.

Sequim Real Estate Sales Graph

Sequim Real Estate v. National Sales

As shown in this graph, the last three years have been pretty even, 81 homes sold in Sequim in 2010, 76 homes in 2011, and this year 72 homes.

Here is the positive news from the NAR Economist.

Existing-home sales were down in March but continue to outpace year-ago levels, while inventory tightened and home prices are showing further signs of stabilizing, according to the National Association of Realtors.  Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 2.6 percent to a seasonally adjusted annual rate of 4.48 million in March from an upwardly revised 4.60 million in February, but are 5.2 percent above the 4.26 million-unit pace in March 2011.

Lawrence Yun said the recovery is in the process of settling into a higher level of home sales.  “The recovery is happening though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases,” he said.  “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year.  With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year.”

Also on a national level, total housing inventory at the end of March declined 1.3 percent to 2.37 million existing homes available for sale, which represents a 6.3-month supply2 at the current sales pace, the same as in February.  Listed inventory is 21.8 percent below a year ago and well below the record of 4.04 million in July 2007.

“We were expecting a seasonal increase in home listings, but a lack of inventory has suddenly become an issue in several markets with not enough homes for sale in relation to buyer interest,” Yun said.  “Home sales could be held back because of supply factors and not by demand – we’re already seeing this in the Western states and in South Florida.”

The national median existing-home price3 for all housing types was $163,800 in March, up 2.5 percent from March 2011.  Distressed homes4 – foreclosures and short sales sold at deep discounts – accounted for 29 percent of March sales (18 percent were foreclosures and 11 percent were short sales), compared with 34 percent in February and 40 percent in March 2011.

Foreclosures typically sold for an average 19 percent below market price in March across the U.S., while short sales were discounted 16 percent.

Sequim Real Estate Sales On Pace

Sequim real estate sales do not track national sales precisely, and I’ve written that the Sequim real estate market is shielded to some extent from the national market, but we’re clearly still impacted.

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• Did I Pay Too Much for My Sequim Home?
• How Many Sequim Homes Are Under Contract Now?
• The Housing Market – Recovery or Not?
• Buyers Cannot Always Find The Perfect Sequim Real Estate

“Did I pay too much for my Sequim home in 2007?”  This is a question a client asked me today, and since it is relevant to so many Sequim homeowners right now, I think the answer is worthy of posting here.  This issue is important to sellers right now, but deep in this story is a huge lesson for buyers.  Since I act primarily as a buyer’s agent and never as a dual agent, this article could be the one of the most important articles a buyer will read on this real estate blog.

To answer the question of whether you over paid for your Sequim home, we need to look at the history and put your purchase in context.  I looked at the recorded Deed and it shows you closed on March X, 2007 at a price of $300,000.  That was the tail end of the boom years in real estate prices.  The year 2005 had the most sales in Sequim at the highest prices, and 2006 sales slowed down but prices did not begin to stall out until the impact of the real estate recession began to be felt in the spring and summer of 2007.  You purchased at the precise end of the bull market in real estate and at the beginning of the decline.

Sequim Home Value

But there’s another important aspect of valuing your Sequim home, even going back to when you purchased it.  Let’s look briefly at this property’s history.

It was built in 1983 at what was probably $55 per square foot or $67,000.  Land like this was selling for about $25,000 at that time.  With a few other costs, I would estimate that the owners had about $92,00 to $110,000 in this property and home.  In November of 1999, they sold it for $142,000.  Considering they held the home from 1983 to 1999, or 16 years, they had a very modest profit of roughly $30,000. 

From 1999 to 2005 Sequim saw the largest price appreciation of homes in our real estate history.  As I’ve said already, those prices did not start dropping significantly until 2007.  Some home prices dropped slightly in late 2006 and early 2007, but it was later when we began to see the cumulative effect of the nationwide real estate recession.

When you purchased your Sequim home in March of 2007, in my opinion, it would have increased in value substantially since 1999.  The price it sold for in 1999 was $116 per square foot.  At the peak of the market this home would have been worth, in my opinion, approximately $170 per square foot, and that is a generous number.  That would have been $207,000.  That would represent a 45% price appreciation from 1999 to 2007, only 8 years.  That’s a gigantic price appreciation.  Again, this is a 1983 home and it is very small, only 1,220 square feet, and only 2 bedrooms.  In 2007 you could buy a brand new 3 bedroom, 2 bath home in Sequim on one acre for $250,000.   (more…)

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I’ve been out showing homes to a California couple and land to an Arizona couple.  This may be a surprise to you, but not all buyers find the perfect Sequim real estate while they are here.  Most buyers give themselves a week to look at homes or land while they’re here.  Most of my clients do find the ideal Sequim real estate, but in these two cases, they did not.  How can that happen?

The Perfect Sequim Real Estate

Sequim Real Estate Not Perfect?

There probably is no such thing as the perfect home.  Like most of my clients, chances are you’ll find the ideal home that has all the important features but not necessarily every single feature you would like in the perfect home.  But every once in a while a buyer cannot find the ideal home in the right location and at a price within their budget.

My California clients did find a home that was ideal, but the seller could not close at the 11th hour due to insufficient funds to close after paying off her loans.  Despite our good faith efforts, we could not get that transaction closed.  We found a second home that was stunning, but was on a lot in the wrong location.  [Note the terrible mistake the owner made building a gorgeous home on a bad lot in a poor location.]  We found a third home that was ideal, and drafted an offer on that home only to find out another offer came in later on the same day, and the seller decided to accept the other full price offer.  (Just because we are in a recession doesn’t mean you might not want to make a full price offer on Sequim real estate if it is the right property in the right location and already reasonably priced.)

My Arizona clients and I had a great time walking lots with water views and mountain views, but we could not find a lot within their budget.  We found a few lots that were nearly perfect, but those lots were over $100,000.  One was almost $300,000.   It’s hard to find a gorgeous Sequim lot on which to build the ideal retirement home for under $100,000 if you want any kind of view, even a simple mountain view.

Sequim Real Estate for Buyers

Sequim real estate has been hit hard by the real estate recession, but finding the perfect home or land may still not be easy.  Sequim real estate is in high demand by retirees from all over the country.  As I’ve written elsewhere, the best Sequim real estate in the best areas and reasonable listing prices is selling every week.  This means that the best homes and the best lots are selling in this recession, and this also means the homes and land that are sold are off the market forever.   If you find the ideal Sequim real estate, buy it now or someone else will.

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What about private septic systems and private wells?  A client recently asked me a very good question that comes up regularly for buyers from outside the Sequim area.

Question:  “How much trouble is it to own properties served by private septic system and wells?  We’re used to having city water and sewer and would, of course, prefer to continue with that. However, my husband really wants a larger lot and most of those are outside the city utility service area.”

Answer:  Private septic systems have both advantages and disadvantages compared to public sewer systems.  I have a private septic system myself and have had in several other homes.  I also attend private septic system inspections regularly for my clients, and I’ve reviewed many septic reports and interviewed septic system designers and inspectors.  The simple answer is that a private septic system is probably just as good as a public sewer system.  A public system requires that you pay the city or the PUD (public utility district) a monthly fee, and that fee has a tendency to keep increasing.  You don’t pay yourself anything to use your own septic system.  But there’s more to consider.

Private Septic Systems Cost

If you’re building a home, installing a septic system can cost you anywhere from a few thousand to $18,000 for an expensive mound system.  But if you amortize that over the life of your home (20 to 40 years), it’s reasonable when compared to paying to be on a public system.  Now here’s an interesting scenario.  If you build a home in the city limits of Sequim, you will pay roughly $20,000 to $24,000 for city permits, which includes your sewer connection fee.  That’s extremely expensive.  In that case, building a home with a private septic would be less expensive, and building permits are a fraction of that in the county outside the Sequim city limits.  But if you buy an existing home within the city of Sequim that has a private septic, you basically get that septic system free, because it adds virtually no appraisal value to the property.  It probably should, but it doesn’t.  That’s a little like buying a home on 3 acres or 5 acres.  The price does not increase for the additional 2 acres by much at all.

If you own your own septic, you will be responsible for the maintenance, and there is now a county requirement that you file an annual certification.  I wrote an earlier article about how that works at Septic Regulations.  And here’s another article about septic inspections when you purchase a home in the Sequim or Port Angeles area.

Private Septic Systems Cost

Conclusion:  The new private septic systems are designed and built to far exceed minimum standards, and can last for 40 plus years.  The actual maintenance is almost non-existent.  I would suggest that a private septic system is equivalent to being on a public septic system, all other things balancing out.  In other words, there is no great advantage to one over the other.  [There are some exceptions, but that's another article.]

You also ask about private wells.  I prefer a private well to a public water system.  You are in total control of your own water, the purity of your water, and not subject to increasing water fees.  A health expert once told me, “Don’t drink public water without clorination, but whatever you do don’t drink water with chlorine.”  Public health standards can actually be dangerous to your health.  (Consider the dangerous drugs the FDA approves.)  A private well has almost no maintenance, because pumps last for so many years, sometimes decades.  And your electric bill to run a pump is almost nothing.  I’ve written several articles about private wells and here are two:  Are Private Wells Safe, Private Well Inspections.

Private Septic Systems Pros

My recommendation is that you find the ideal home and the ideal location with the acreage you desire, and whether the property is served by a private well and a septic system or a public utility system is probably of little concern when you examine all the advantages and disadvantages.  Private septic systems and private wells are perfectly fine in the Sequim and Port Angeles area.

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This articles answers the question, “How to make an offer on a home?” on the specific issue of price.  There are several scenarios that can play out, so I’ll address the three most common scenarios, and this will help you plan your strategy even before you make an offer.

How to Make an Offer on a Home First

Scenario 1 on How to Make an Offer on a Home:  You have your buyer’s agent write an offer on a Sequim home.  Your buyer’s agent will help you put together the right documents and addendums for you.  There are about 100 documents in the State of Washington for buying and selling real estate, so you’ve got to get it right.  Once you have the right documents, you’ll submit the offer.  Here’s the normal procedure.  You give the seller X days to accept, reject, or counter your offer.  Once you have the offer back, you respond appropriately.  As I’ve written in other articles, negotiating effectively takes more than a decade of full time experience from the school of hard knocks.  Trust me, you do not want an inexperienced agent negotiating a half million dollar transaction with your money.  This is not a garage sale. Barring any unusual circumstances, once you’ve reached mutual acceptance on the price and terms, the due diligence and inspection period kicks in.  [For more on handling the inspections and completing your due diligence prior to closing, see Home Inspections.]

How to Make an Offer on a Home with Competition

Scenario 2 on How to Make an Offer on a Home:  How to make make an offer on a home is not a small question.  But sometimes events require a different strategy.  Suppose that you are not the only one making an offer on a home?  Believe it or not, a home can be on the market for months with no activity, and suddenly (even in a recession) there will be two or three offers on the same day or within a couple of days.  In an area like Sequim where retirees tend to think similarly (and want similar floor plans), this happens far more often than you might think at the peak of the buying season.  In fact, it just happened this week, so this is no exaggeration.  In this scenario, the competition among buyers changes the negotiating strategy.  How the strategy changes will depend on a number of specific variables, but beware that your buyer’s agent needs to know exactly what to do and when to do it.  This is not a time for your agent to cut his teeth with your money and your dream home.  [You can imagine why dual agency is such a conflict of interest.]

Scenario 3 on How to Make an Offer on a Home:  How to make an offer on a home depends on another important variable–who the seller is.  If the seller is an individual, there’s a standard practice and negotiating strategy that is most effective for that particular home and it’s history.  If the seller is a bank and the listing price requires a short sale, there is another standard practice and procedure and another negotiating strategy.  If the seller is a bank and the property was foreclosed, you’re making an offer on an REO and the documentation and the negotiating strategy are different than either of the first two.

How to Make an Offer on a Home in Sequim

There is a lot to effectively searching for and finding the ideal retirement home.  You know this already from the many hours you’ve been spending online looking for your ideal Sequim home.  Once you’ve filtered that list and viewed many homes and narrowed that list down to “the one,” the strategy you implement to make an offer and negotiate the best possible price and terms is no small matter.  You get one opportunity to do this right when you move to Sequim.  Make sure that you and your agent work together to thoroughly answer the questions about how to make an offer on a home.

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Today I realized something about Sequim real estate agents and Sequim listings.  This graphic tells a story that will be of interest to Sequim home sellers and of casual interest to buyers.  In 2009 I examined the Sequim listings that were in the Olympic Listing Service (OLS) and in the Northwest MLS (NWMLS).  At that time about 66% of the listings in our OLS were in the NWMLS.  In other words, the NWMLS only had 2/3rds of the Sequim listings.  Today that percentage is down to only 44%.  This means that the only complete listing service for sellers’ homes is the OLS, and for buyers the most complete MLS is the OLS.  Today I look at the number of Sequim real estate agents in the OLS and NWMLS in 2009 compared to 2012.

Sequim Real Estate Agents in MLS

Sequim Real Estate Agents in OLS Decreases

In 2009 there were 186 Sequim real estate agents in the OLS, the most important local multiple listing service.  In 2012 that number is only 130 Sequim real estate agents.  We have lost a lot of Sequim real estate agents in this recession. 

Sequim Real Estate Agents in NWMLS Increases

The number of Sequim real estate agents in the NWMLS has increased from 103 in 2009 to 128 in 2012.  Why is that?  That’s easy.  More Sequim real estate agents have realized the importance of being a member of both MLS services to give their listing clients the greatest possible marketing exposure, and they’ve realized the importance of reaching more buyers.  I was the first Sequim real estate agent to have a public MLS search site that gave buyers the option of searching either or both the OLS and the NWMLS.  Actually, my site may still be the only site with that option in the form of a pull down menu.  Check it out at Sequim Real Estate Agents MLS Site.

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