The rule for buying real estate long ago was “caveat emptor,” meaning “buyer beware.”  Consumer protection has been one of the primary priorities for both state and federal governments.  Despite our governments’ best efforts to protect us, liars and cheats have not yet all repented, so . . . the rule of caveat emptor is not dead, certainly not to be ignored by a buyer of real estate.

As we enter the new year, we have some new major consumer protection activity regarding disclosures to consumers when buying a home and obtaining a loan.  The Real Estate Settlement Practices Act (RESPA) has been upgraded, so to speak.  Under the new rules, all lenders and closers must adhere to the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement which is intended to simplify the disclosure of loan fees and closing costs and allow consumers to shop around for the best deal.  I think more important to consumers than shopping around for the best deal is a little fundamental concept many consumers have called, “old fashioned honesty by lenders.”

HUD recently released a great guide: Shopping For Your Home Loan: HUD’s Settlement Cost Booklet. Loan originators are required to provide consumers with the booklet within three days of a loan application.  The booklet provides a basic overview of the home buying and mortgage lending process. It also explains in detail each part of the new Good Faith Estimate and the new HUD-1 Settlement Statement.

Frankly, I was impressed by this guide.  Whoever drafted it actually understands real estate, the mortgage market, escrow, and how real estate agents work.  The guide has some excellent consumer protection advice, such as this:

Frequently, the first person you consult about buying a home is a real estate agent or broker. Although these agents and brokers provide helpful advice, they may legally be representing the interests of the seller and not yours.  .  .   It is your responsibility to search for an agent who will represent your interests in the real estate transaction. If you want someone to represent only your interests, consider hiring an “exclusive buyer’s agent”, who will be working for you.

A word of caution bolstered by personal opinion:  The reform to RESPA requires that certain documents be given to consumers, including disclosures drafted by attorneys who spent months plying their trade, and mathematics regarding fees and costs associated with the loan and closing costs.  All this is good, but my opinion is that we don’t have a panacea here.  We have more paperwork that consumers are supposed to read . . . and understand?  I applaud the feds and their well drafted RESPA reform.  It’s all good.  But two thoughts occur to me.  First, does anyone really think consumers will be better protected by giving them more legalese to read?  Consumers are already swamped with disclosures of all kinds and mandatory consumer protection warning labels everywhere!   It appears that the burden of watching one’s backside falls upon the consumer again, hence the phrase “caveat emptor” at the beginning of this article.  Second, don’t expect this new law and guide to transform the less-than-honest loan reps into Priests.  They are still prowling about seeking whom they may devour.  What they are doing right now is working on a new strategy to steal money from you.

Having said that, I do recommend that you review this HUD guide.  I am a strong advocate of consumer protection, and my small part in this Universe to help protect consumers is education with helpful articles and the latest in news and helpful tips on this blog.  I realized long ago I don’t have the power to save the world, but I can help one client at a time, and I do that as a Sequim Buyer’s Agent and a Port Angeles Buyer’s Agent.  My job is not only to help my clients find and negotiate the best possible deal on their retirement home, but to help protect them all the way through closing.

The image above is from this guide, and you can see how nicely it lays out the buying process in a simple graphic.  You’ll find the guide at RESPA HUD Settlement Cost Booklet.

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Buying foreclosures in Sequim and Port Angeles is a challenge, and that is an understatement. Here’s a short video that describes why.

Chuck Marunde is a Qualified Foreclosure Buyer’s Agent and can be reached at chuckmarunde@gmail.com or at 360-775-5424.

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Negotiating the price on homes and land in Sequim and Port Angeles effectively can put $10,000 or more in your pocket, or cost you $10,000.  But even worse than loosing money, poor negotiating can cost you the transaction.  As a seller, if you chase that one buyer away when mature negotiating could have brought the buyer to the closing table, you may have the house for many more months (or years), and you could end up selling it for less than the first buyer would have been willing to pay.

Port Angeles Real Estate Negotiating Mistake.  I drafted an offer for a client who was pre-qualified and had a great job.  After going back and forth on counters, my client finally upped his offer to the maximum that his lender would approve, which back in June of 2009 was a quite reasonable offer for a house that had not sold in about two years.  The house had been empty and was ultimately foreclosed on.  Believe it or not the seller killed the transaction over $5,000.  I told the seller’s agent at the time in a friendly way, “You realize your client killed this transaction over $5,000.”  During the negotiations I shared that the price my client offered was the maximum his lender would allow and all the money my client had, and we had made it crystal clear that that last counter was a final and firm offer.  The seller made a negotiating mistake and lost that sale.  My client walked.

I remember thinking at the time that by killing the transaction over $5,000 in the worst real estate recession I’ve seen in 30 years in real estate, the seller risked not selling the home for a long time, would have to pay property taxes again soon, would continue to drain his account paying other maintenance expenses for a vacant home, and by the time it does sell, he might end up taking less than my client offered if the market does not markedly improve.  If you were a seller, would you have killed a sale over $5,000 in this market?

How did things end up?  My client moved on to buy another house and he and his family are living happily ever after.  The seller’s house sat on the market for another three months before it sold, and it sold for $3,000 less than my client’s last offer and $8,000 less than the seller’s bottom line.  On top of that his loss  included maintenance for another three months, which included hiring someone to take care of the place (he could not do so), winterizing the home so pipes would not freeze, paying the second half property taxes, and there was the opportunity cost of not having sold the property earlier.  You can be sure for any normal seller there would be added stress, which you cannot put a price on, but it is a significant negative value.

Sequim Real Estate Negotiating Mistake.  I drafted an offer on a nice home for a client, and without revealing the home or the seller, it was a price just south of $500,000.  In this market my client was quite reasonable when he made an offer that was about $30,000 less than the listing price (about 6% less than the asking price).  The seller foolishly countered with only a $4,000 reduction off the listing price.  My client instructed me to not bother making a counteroffer.  He felt the seller was either not a serious seller, or he was getting bad advice on how to negotiate.  We found out later it was the later.

What was the final outcome for this seller?  He ended up selling the home later for about $25,000 less than his listing price, but not without lost time and a lot of stress and frustration.

Negotiating the price on homes and land is an interesting game.   You know the saying, “A little knowledge can be dangerous.”  As I have written elsewhere, arrogance and pride are very dangerous.  Humility is beautiful when it is combined with knowledge and wisdom.  In these examples, humility (and good advice) also could have helped the sellers negotiate much more effectively.

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Writers in Sequim and Port Angeles needed for a new online “newspaper” with local news, human interest stories, non-profit news, school news, sports news, real estate news, health issues, senior citizen news, events calendar, opinions, speciality news (equestrian, dog, boating, hiking, etc.), photographs, videos, and much more.   See it at Sequim and Port Angeles News Online.

Writers do not have to be professional writers, but you must be passionate about your subject.   Writers can be any age, and we are adding student writers from the schools.   We will call our writers correspondents.   This is a voluntary position.   Only those who love what they do and are passionate about what they do are qualified.

Do you own a successful business in Sequim or Port Angeles, and can you share your knowledge and experience with others?   This is a great forum to do that.

Do you want to make a valuable contribution to your community and to the lives of others living here?   This is a perfect way to do that.   There’s hardly anything more fulfilling than sharing your knowledge and experience to help improve the quality of other people’s lives.   Become part of a community that is developing here.   Join us.   This is going to be very exciting.

Email our Editor, chuckmarunde@gmail.com, and let him know what your experience and interest is.

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Want to help Sequim and Port Angeles grow in the right direction? Ever wonder what you can do to make a valuable contribution toward that end? Are you passionate about some issues but not others? Do you want to make your opinion count with hundreds or thousands of other Sequim and Port Angeles residents?

Complete this survey and we’ll enter you in our monthly
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This survey seeks insight into what drew you to move here, what you love most about living here, and what you would change. You’ll have simple multiple choice and a couple of essay questions you can choose to answer or not. Tell the truth about how you feel, and identify yourself or remain anonymous. It’s up to you.

Now you can help by taking this easy online survey, and the results will be made available to you and shared with decision makers who will hear your voice. The survey consists of 28 easy questions and you can probably take it in 5 to 10 minutes.

Take the Sequim and Port Angeles Community Survey

Results can be emailed to you and will be subsequently compiled here for analysis. This is another community service from your friends right here at Sequim and Port Angeles News Online.

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“Economists have predicted that home prices will continue to decline for the next five quarters as a growing number of foreclosure sales depress prices. According to Mr Yun, 45 per cent of transactions in December were distress sales at discounted prices.”   See Bargain Hunters Spur US Home Sales.   Price have dropped by large percentages in many areas of the United States, but how has that effected the Sequim and Port Angeles home prices?

In the stock market there is a mathematical tool called volatility.   For example, an option to purchase stock might have a very high volatility quotient, meaning the price of the option can fluctuate dramatically as the result of any small change in the price of the underlying stock.

I would suggest that home prices in Sequim and Port Angeles, which are obviously stable compared to so much of the country, have a low volatility quotient.   In other words, even though we depend heavily on buyers from outside the state, and even though those buyers have largely put their buying decisions on hold, the prices have not dropped here accordingly.   If prices here were measured directly by the number of buyers and their willingness to pay fair market value based on the national market, prices in Sequim and Port Angeles would be down something like 40%.   But they’re not.

On the Northern Olympic Peninsula in Clallam County, here’s a vignette of prices of homes sold in 2006 and thus far in 2008 (as I gathered these stats in October, and not much has happened since then).

Clearly the prices in the Northwest have not crashed as in some other areas. Prices are far more stable in our market than in many areas.   I would suggest that there are three reasons the prices here are more stable.

First, the majority of sellers here are not desperate to sell at any price.   Second, we don’t have a huge foreclosure inventory here.   And third, this remains a very popular retirement area, and everyone knows that.   That means retirees will continue to move here as the market starts to come back.   Therefore, the majority of sellers are willing to wait this market out rather than have a garage sale they don’t need to have.

The price volatility quotient here is low, and our prices are fairly stable.   That’s just one more reason retiring here and owning a home makes good sense, good investment sense, especially compared to the stock market.

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