Buying in a Softening Real Estate Market

That’s a lot of “For Sale” signs! This condo conversion near the Newsvine Global Headquarters has been on the market for about six months now.

Up until last month, I had been happily renting a great condo in the Lower Queen Anne area of Seattle. I had owned another condo until 2003 but sold it because of an extremely loud construction project breaking ground next door (another condo building). Rent was extremely reasonable at about $1300 a month, and when compared to the payments on a presumed purchase price of about $360,000, it was a comfortable living situation for someone who had just taken a 50% paycut to start their own company. A couple of months ago, however, the owner of the condo decided to move back to Seattle from North Dakota and hence, back into the condo. I was given plenty of notice and looked feverishly for a place to buy during the following two months, but the Seattle real estate market just didn’t produce anything I wanted for under a half million bucks.

During the last couple of weeks of my tenancy, I found an extremely nice place to purchase. It was a condo in the newly converted Queen Anne High School building. It’s a historical building like no other in Seattle and the unit I put a deposit down on had a great view of the Space Needle and was well situated in the building. Truly a one of a kind if you place great importance on historical significance in your living quarters. There were two problems with the unit, however, which caused me to bail out only a few days before my 20-day contract-binding window: it was just over $400k for 655 square feet and it wasn’t going to be ready until January or February. So even if I was able to rationalize living in such a small place, I’d have to move into an apartment for a few months while I waited for the unit to be done. Moving once sucks. Moving twice really sucks.

It was a tough decision to bail out, but since that day several weeks ago, I’ve noticed some things in the Seattle real estate market which have convinced me I made the right decision:

1. When I reserved my unit about 50 days ago, the building was about 20% sold out. Today, they are reportedly about 30% sold out. Not great. One of the problems with this building is that some of the units are really, really great but others seem borderline unlivable to me. It’s not a knock on anyone involved in the project and it’s not a knock on people who have already purchased units. It’s just the nature of the building. I’m no real estate expert but I just can’t see some of these less desirable, viewless units going for between $400k and $800k. Also, the stated dues were an affordable $271 a month but who knows how much a grand old building like this will really cost to maintain.

2. The condo I had been renting was an 800 square foot two bedroom unit but it felt bigger than that. The apartment I just moved into is a one bedroom 700 square foot place and it’s just too small. College-level math tells us that 655 square feet is less than 700 square feet, and common sense tells us that dropping $400k on a place that feels too small is not good for the soul. In this unit’s favor, it did seem like a “big” 655 square feet, but still.

3. In the last few months, I’ve noticed a serious softening of the real estate market around here. I am a total do-it-yourselfer when it comes to searching for places. I have an up-to-the-second RSS powered custom search set up on WIndermere which alerts me multiple times per day as well as other saved searches on Coldwell Banker Bain, Redfin, and Prudential Northwest. Nothing gets by me. Lately I’ve noticed properties staying on the market a lot longer and prices being reduced much faster and more drastically. There’s a listing on Redfin right now that has just been reduced by $129k in one fell swoop ($729k down to $600k!). Some properties still go quickly but many — even in great neighborhoods — do not.

4. There are a lot of condo conversions going up around Seattle and I’ve found most of them to be selling a lot less briskly than the builders had anticipated. I try to check these things out the first day they are open because I am generally only interested in the top floor, primo units, and it’s been very interesting to watch the pace at which they’ve been selling. You come in on the first day and the selling agent is super-enthusiastic, telling you how quickly they are going to sell and how all the prices are firm and will remain so until the building sells out. Then — on three separate occasions for me — the agent e-mails a few weeks later offering to cut the price. Sometimes it’s only by $10k or so, but on one occasion, it was a drop from $440k to $395k… and it was the best unit in what I think is a pretty nice building.

So the question I’m asking myself now is, what’s the best way to buy in a softening (but not plummeting) real estate market? Seattle is not like a lot of other markets around the country in that we rarely seem to actually lose value, but rather we climb and then level off. That said, my feeling is that a lot of the prices out there over the last several months have gotten slightly ahead of themselves. Now seems like a good time to find a property, get $25k-$75k knocked off and settle into a decent deal.

My problem is that I’m really only interested in living in Queen Anne, I need between 800 and 1200 square feet, and a view of either Puget Sound or Lake Union is a must. I just visited another condo conversion this week and found a top floor unit I love with a view of Lake Union and Lake Washington, but it’s about $30k too high in my opinion. The agent is going through her “confident phase” right now and if it sells, good for her. But I’ve let her know that the moment she’s willing to come down $30k, I’m in.

So here is a question for readers: has anyone ever proactively sought out a piece of property that wasn’t previously for sale? I ask because I could probably narrow down the list of buildings I want to live in to about 25 or so. Given that, is it a viable strategy to spend a weekend or two contacting every resident at each of those buildings and asking if they want to sell? And if so, what’s the best way to do that? Just send an actual letter via U.S. mail to the “resident” at each unit number? I know it sounds like a lot of work, but it really feels like it could be done in a few days and the payoff could be nice. Any success stories or advice on this sort of thing? And of course, anyone have a condo in Queen Anne they want to sell? :)

48 comments on “Buying in a Softening Real Estate Market”. Leave your own?
  1. Mike Rundle says:

    We just bought a house about 2 months ago and although you said you were doing it a lot yourself, our real estate agent kicked some serious ass. We didn’t have to pay her a dime either, her entire cut was taken out of the seller’s price which I’ve heard is actually pretty common. Might be worth looking into especially since their connections could put you in touch with places/people who are “about to sell” but not on the market yet.

    As for approaching people I’d just send out letters to them, be as cordial as possible and act friendly. Getting a random letter is odd enough lol.

    And don’t send out a mass email :) Speaking of that, did you ever sell the list? I bet you could make some more home downpayment money haha.

  2. Don says:

    That is a very common practice around here on lakefront vacation property. Hot lakes sell very easily to friends and family and never hit the listings. Plus drop out a commission and suddenly you are 30K less.

    What I have done is pull the tax roll (publicly available) and then make contact. A letter is probably best yes. If it gets you what you want … well then it was worth it, wasn’t it?

    Good luck Mike.

    Move here and get five times the property on Lake Michigan for that price no doubt.

  3. Don says:

    p.s. I wanted to be number one … haha, I’ll have to try harder. And how is your running going … let’s have a post on that soon.

  4. Joshua says:

    Contacting everyone in a unit is certainly a good way to do it. Many people might be in the position to sell but due to their schedules and life situations, it just might not be top of mind, sending a letter could certainly create that small push they need to get things rolling and entertain offers. The only problem is, that just like agents, the owners will have a confident phase as well, meaning they might just try to one-up you to death, but it’s always worth a shot. A letter is a nice way to do it, but a phone call works as well. My father in law actually did a couple cold calls to some properties in Lake Stevens that were not for sale a year or so ago and got a hit on the first one, took the offer and bam! It does happen all the time.

    As for the “softening” market, I’m not totally sure I’d agree with you 100%. I think more of what you are seeing is just the general cyclical market of the year. Summer winds down and so does real estate, it happens every year, especially around here where the “summers” make any property look amazing, and a rainy seattle mood has a way of being un-motivating. Combine that with the many conversions popping up at the same time, etc… and sure, you can start to notice a trend of properties not moving as fast as expected. However, Seattle is still anything BUT a soft market. Ask Keith how much his home increased in value just from December of 2005. I just did a refi for them and you wouldn’t believe how much it went up in such a short amount of time, it’s a fantastic market, one of the best in the country currently.

    Combine that with the fact that rates right now are the lowest they have been all year and probably will be all year, and you still are prime for good market conditions. People could wait around for a price to drop another 10 or 20k, but you could be saving that alone just on the rate condition right now, so in the end, it’s all a personal decision.

    Also remember that just because prices are getting knocked, it’s not necessarily the market, the agents have to rely on their clients as well, and the general nature of people, they will always try to get what’s best for them. I was talking with an agent the other day about a property that was right on the river. He was convinced that $375,000 was probably the best he could get for it but the builder would not let him list it at anything below $450,000 for at least a month to see if there was any traffic on it. So when it did eventually drop, it had nothing to do with the market, just that it was out-priced originally.

    My final advice? Work with a good agent. Get a referral to someone who you can trust will have your best interest at heart, has good experience and is fantastic at what they do. It’d be the same advice I’d give anyone looking to build a website for their company. Sure, they could fire up Frontpage or Dreamweaver, but it’s not the same, and it goes the same way in the real estate market. I find that the value the agent can bring just in assessing the property as an investment alone (and not the housing side of it) can be priceless.

  5. The agents in Spain are probably a bit less tactful then in Seattle. We regularly get notes, not letters, notes dropped in our mail slot (front door opens, agent slips in) asking if we want to sell (some with an offering price!). We’ve even had people buzz us and ask it we’re interested in selling.

    Having had this experience, I have this to pass on: I live where I do because it’s a kick-ass place to live with tonnes of upside, views and a great location. We live in one of the best units in the building. It can therefore be assumed that we appreciate the w00t of our unit. If someone were to leave me a note stating how they are looking for a spot in this area and why, and show that they too appreciate the w00tiness, I think I would sympathize with their plight and call them first. Well, and of course they are outright telling me they are motivated ;-)

  6. Mike D. says:

    Mike: Yep, buyer’s agents always take their cut from the seller. If you have a buddy for an agent though (like I do) or if you go through a discount service like Redfin, the agent will actually take their cut from the seller and then give it to you. So it’s better than free.

    Don: Thanks. The running is going great! One year in! Funny, my next post was a toss up between this one and a “one year of running” post. That will be the next one I guess.

    Josh: Thanks. Spoken like a true mortgage broker. :) You’re in the business of being optimistic about this stuff and you see a lot of success stories every day so I understand the sentiment, but something feels a little different here. My agent even says he’s never seen things this dead since he got into the business. He just listed three properties last week and zero calls on any of them. The first half of 2006 was good and I’m sure a lot of Keith’s good fortune came from that (go Keith!), but I think that was the overshoot period. That’s kind of what I’m saying, in fact: not that we’re in for a long down period… just that we’ve overshot a little in 2006 and there’s a bit of a correction going on right now. Sellers are still posting at pre-correction prices and there seems to be a good opportunity to wait these properties out for several weeks and get a more reasonable deal.

  7. Tom says:

    I’m sticking it out as a renter for one more year… I want to see how the landscape changes in the next year with all of the condos going up. I hear you about moving twice though… moving sucks.

    Craigslist lets you save search results as RSS feeds as well… I’ve found that a worthwhile way to keep an eye on the market.

  8. Keith says:

    Don’t know about getting a place that’s not on the market, although I got a few unsolicited offers on my old place. They all came in the mail.

    I do know this is a good time of year to buy. Josh is right as far as that goes. It’s when we got our house last year and I’m 100% sure had we not bought when we did we’d have never, ever, found a place as nice in Seattle for the price.

    I do see a bit of a softening though, especially when it comes to condos.

    However, you can’t expect that to last forever. You mention you think there is a correction going on and I bet it’s corrected very quickly. My advice would be to get in as soon as you can. Trying to save that extra 30k for too long could cost you more than that. I also suggest a good agent, ours landed our house for us, without him we’d have had no shot.

  9. Tom Watson says:

    Man, good luck with it all Mike. I’ve been seeing the same things you have with the market, but I’m still not sure what to make of it all. It definitely feels “softer” then when I moved here a year ago and was looking.

    I’m actually headed out tomorrow to take a look at a few places just to get an idea at what’s out there. I’m not seriously considering anything just yet, but I did get a card in the mail today talking about how you can win Seahawks and concert tickets just for showing up and taking a look at some condos.

    I defnitely wasn’t seeing anything like that a year ago.

  10. gb says:

    Nice timing on this… I’m moving up to seattle in the next month or so (depends on what happens when the ol’ resume starts making the rounds), and while I don’t think I’m anywhere close to actually buying something, it’s good to see where the real estate market is going.

  11. Dave says:

    Well i just bought my first apartment and know exactly what your going through :( its sad when the market seems to be changing but you don’t know at which to enter to get the best deal..
    Good luck mike

  12. Mike, what unusual timing!! I just put in a contract for a condo in Washington DC last night in relativity the same price range. We decided the market being how it was, we should take some of our extra (savings) cash and put it into a new apartment and rent out the one we currently own — now that the rental market in DC is amazing!!!

    Our thoughts were not to buy anything that was on the market at least 30 days (so they seller has the “fear”) and not to buy anything that hasn’t dropped (or willing to drop) at LEAST 20k since it was originally placed on the market.

    The market may be slightly different here in DC, but it was a successful strategy for us. Every agent we spoke to about asking their buyer if they were willing to reduce the price and accept a few contingencies (waiting for us to rent our place first) were extremely interested without hesitation!

    So, happy to say we got an amazing corner unit condo in the heart of “Adams Morgan” with floor to ceiling windows and a roof top of what has to be some of the best views in DC at exactly what we were willing to pay (all contingencies included).

  13. Calvin Tang says:

    I’d wait if I were you. There’s been a ton of speculative short-term investing going on for several years in a row now and this has inflated the regional market like never before. Someone stands to snap up some great pieces of property when the shit hits the fan. (and I think the shit is beginning to hit the fan)

  14. We just bought a Co-op on capitol hill and feel like we got a great deal. 1050 sq ft. 300k. peek-a-boo view of lake union and the space needle. plus the building is old enough that it’s got real wood doors. When shopping we looked at a couple of the new constructions and even the “nice” places felt like they’d fall apart in a year or two.

    There’s tax/insurance benefits to s co-op as well. Of course the fact that we got in at a discount (compared to a condo) means we’ll probably half to sell at one as well.

    Anyway, the unit next to was just went on the market @ $310 and is now going for $295. interpret that however…

  15. Scott says:

    Although I have no experience in purchasing a home/condo, I’m going to agree with Keith. Although $30k is certainly a lot of money, it’s really only a small increase over what you’re already looking to spend. It sounds like this unit is pretty much the ideal place for you, and it’s tough to put a price on that (ok, maybe not too tough.) The problem with houses is that once they’re sold, that’s it. It may be 30 years or a hundred years before it’s back on the market and more than anything else they’re one of a kind. the extra $30k over the life of a mortgage isn’t going to change your monthly all that much.

    Just something to think about. Good luck, Mike.

  16. Mike D. says:

    Tom: Thanks for the pointer about Craigslist. It’s easy to forget how many people self-list and don’t even use the MLS. Well, it’s not *that* many people, but all it takes is one, right? RSS feed is now setup.

    Keith: I think that’s good advice in general, but as was shown with the previous places I looked at, had I taken that advice, I’d have bought a place for $45k more than I could have it for just a few weeks later. If I find a perfect place, then yeah… I’m all over it. But a lot of these places are what I’d consider “B+” places, and I’m content to wait out a B+ for a few weeks and see what happens. Your house is very nice though… great pickup.

    Calvin: I’m still not of the opinion that prices are going *way* south for any extended period of time. According to this Seattle Times article, the Seattle market has not experienced a single year of decreasing prices since 1985. And even more shockingly, Seattle has only experienced three quarters of actual “downturns” in its entire history as a city: once in 1981 and twice in 1982. You’re right in that it’s definitely going to happen again (perhaps now), but I just don’t think it will be dramatic or long lasting like it frequently is in cities like San Diego.

    Ryan: I looked at one co-op on Queen Anne and backed away from it because it seemed like co-ops can impose a lot more rules than condo boards can. Is that true in your building? As I understand it, the co-op often even has the right to “approve” new tenants and forbid you from renting your unit out. Still, sounds like you got a nice price so that’s great.

  17. Steve says:

    You could always sign up for Google Adwords and let the sellers come to you ;)

    It’s a shame that you’re not looking in Florida – I got my first condo last August for only 165K – 3 Bedrooms 3 Bathrooms and a Loft with a view of the water. I guess hurricanes are good for something after all!

    Best of luck Mike

  18. Chris says:

    Have you thought of buying a boat and living on the lake?

  19. Jim Gaynor says:

    Interesting to read your observations.

    We bought in Ballard back in late 2001, then sold for 36% appreciation in early 2005 when I took a job in Redmond (I decided I’d rather spend that 2+ hrs a day with my wife and son than on 520).

    Now we’re considering returning to Seattle proper. Microsoft’s renewed focus on their central campus (and continued hiring) have kept the Redmond-area market in good shape, but homes are definitely selling a little slower than they did when we moved in here.

    The condo conversion market has also been interesting to watch. Last I’d heard, the number of apartment>condo converstions in the first half of 2006 had exceeded the total from 2005. Certainly a lot of people trying to cash in while they can.

  20. Wow, if you had moved into Queen Anne High School, you would have lived no more than 5 blocks from me…

    I’ve looked at a few condos and even some town homes in the neighborhood and over in Capital Hill/Volunteer Park. There definitely seems to be a “lull”. I can see it being reasonable to write each of the tenants of the buildings you’re looking at. (What buildings are they, if may ask?)

    Also, if you’re in need of an agent to help you out, I happen to be related to one who would gladly help you.

  21. Mike D. says:

    Steve: Moving to Florida would put me exactly zero states away from Scrivs, and that’s too scary of a proposition for me. :)

    Chris: I love boats, but living aboard one (or even a houseboat) is probably too big a lifestyle change for me. I’m into zero-maintenance living.

    Samuel: There are a few buildings on Highland, one on Comstock, a couple on West Roy, and then some between 1st Ave West and 5th Ave West (I don’t know the names of the buildings unfortunately). I’m trying to stay on the south slope or Lower Queen Anne if possible. Some good stuff on the top of the hill as well though.

  22. Rex says:

    I’m one of those people who almost paid the $450K for the Queen Anne high school condo nine months ago. Wheh! I loved the building, but the additional condo fees were practically as high as another rent. I went Belltown instead, hoping that it’s not a bubble, and grimacing everytime someone writes a blog post saying it is. So stop it!

  23. Ryan Martell says:

    Hi Mike–

    I currently have two condos for sale in Dallas, that I renovated, and I love hearing about the “Bubble” situation. Here’s what I would look for/at:

    1. Price per square foot (this can give you the closest apples to apples comparison). This is modified by location and fit out, but it can be good to sometimes get the cheapest house/condo in a neighborhood with plans on spending the money you saved on renovation.
    2. You touched on this lightly: New condo conversions often have lower dues at the outset than will be needed. This is because the builder/convertor will do lots of the maintenance at first for free, and secondly because the builder wants people to buy the units, and not be scared off of larger dues. This is why whenever you buy a condo unit you want to make sure you ask when was the last dues increase, when was the last special assessment, and what’s the HOA have in the bank.
    3. You have bought a condo before, so this isn’t as critical, but I have a friend locally that just bought a house, using a discount realtor (he got 3% from the seller, and was going to pass through 2% to my friend). The discount realtor didn’t show for the closing, and my friend didn’t know that he had to add his name to the Realtor addendum. (He had added it to the Buyer’s information sheet). So when he got the contract back, and his realtors name wasn’t in it, he called, and THEY HAD WHITED OUT THE REALTOR’S NAME on the buyer info sheet. Unethical, but not illegal (since it wasn’t part of the contract). So my buddy is out $8k. Plus, he signed a contract that was the builder’s contract, not a Texas Standard contract, so everything is in favor of the builder. Point of the story is that a realtor can be worth it!
    4. The market always takes a downturn around this time of year, because 30 day closings get you close to holidays, and no one wants to move during the holidays!
    5. Checking the tax rolls and sending letters is a great idea. I’ve done that before, though with no success. Of course, that might make someone think that they had a hot property, and ask MORE than it’s worth, but it could start a dialogue…
    6. Finally, another thing you could do is take a contract to one of the seller’s of the property that is overpriced. Sign it, put what you want to pay for it, make it have as few contigencies as you are comfortable with, and take it to them. A contract in hand (vs. talking about prices) can be a very powerful motivation.

    Good luck!

    PS: I have two great condos within walking distance to downtown Dallas; if anyone is interested! ;-)

  24. Nick says:

    Off-topic question:

    If you just moved, how come we are still seeing the same view in the live cam header?

  25. Yikes, these price ranges you’re mentioning, Mike, make me even more glad I live in Texas! I would love to check out Seattle someday soon, but I don’t image I would be keen on the living expenses :-o Best of luck with the condo search, Queen Anne sounds like a very nice area, especially with a Puget Sound view.

  26. Stephen says:

    Man I can really relate about that construction noise. They just never follow the rules – they started banging away this morning at 4:30.

    When I was looking recently, I just told my agent what buildings I was interested in, and he had access to information about who lived in certain buildings, and their contact. Talk to your agent.

  27. Mike D. says:

    Nick: Haha… I was wondering when someone would notice that. Before I moved, I saved out one photo for every hour of the day. I still have a view at the new place and I will probably hook it back up when I find a half hour of time, but just haven’t gotten around to it yet. :)

  28. Dennis says:

    Mike –
    AS you make your decision about whether to buy in Seattle right now, I would check out the conversations over at I just went through the same process over the summer, and my decision was to rent for another year. Lots of good facts and figures about the state of the market there.

    I totally agree with your assessment of QA High, by the way. Some units are great, but I saw “loft” units with pipes running through the sleeping space at right about the level of my forehead. I didn’t check the price, but I wouldn’t even rent one of those!

  29. Matthew says:

    Seattle may have never had a YOY depreciation in the past, but it also has never had a run up in value like the last 3 years. The last 3 years are totally abnormal, and prices will correct themselves somewhat. I’m not a believer in a total market crash, but I am a believer in the market coming back to reasonable levels.

    I’d personally would not buy in this market. I’d sit on the sidelines and see what happens. Inventory has been skyrocketing, deals are getting better and better.

  30. Ben says:

    Mike – to comment on your question (note: I’m a Realtor), I’ve sent letters to sellers on my buyers behalf, so it’s certainly not uncommon to do so. I’ve had an ok response rate but none of which came to fruition for my buyers. Coming from an individual buyer may have more impact on prospective sellers than another letter from another real estate agent.

  31. Todd says:

    Mike – DEFINITELY go and talk to individuals.

    However, don’t ask them if they want to sell.

    Ask them if they know anyone in the building that is looking to sell.

    This way you kill two birds with one stone. You get their knowledge of others who may want to sell and you avoid the awkwardness of asking them directly if they want to sell. Of course the guy you ask that does want to sell… will not overlook himself!

  32. Todd says:

    One other site to check out. No this is not spam.

    Great real estate search using Google Maps.,townhouse,coop,apartment/sort_bestMatch/

  33. Keith says:

    re: trying to save 30K. I certainly only meant in relation to a place you really like. What I’m getting at is don’t pass up a deal or a really great place (that A+ place) on the off chance you’ll save a bit of money. You’ll kick yourself later. Along the same lines, you should pass on any B+ places anyway…I’d tell most people that and you’re a bit of a perfectionist so it goes double for you! Good luck man!

  34. Mony says:

    I live in Nashville. My friend that is doing in-filling and remodel conversions uses the property assessor’s office to get addresses and does exactly what you are suggesting, contacting present owners by mail (or course he is looking for old houses and duplexes, not condos). Even if the the response is 5% that is all the work he can handle on his own. In your case, all you want is one unit so if it saves you $25K it would be worth the effort and postage.

    I love your blog.

  35. Kevin says:

    Wow….$400K for less than 700 sf. If you ever want to move to Atlanta I’ve got a nice 1br/1ba 750 sf condo for less than $130K for sale! Cheap HOA too :-)

    Sales plug aide, you can contact the local tax commisioners office to get names and addresses for your letters. If a few hours of your time gets the unit you want then I’d say do it. Interesting that news I read today said new home sales over a one month period have decreased the most since 1970. It’s definitely a buyers market right now (depending on your market of course).

  36. p auL says:

    I’d consider waiting; even just a couple more months….yes, that may require putting up in an apartment for a month or two, but if you save 15k or more, it’s worth it.

    The problem with buying condos is that in a softening market, they’re the first thing to lose value. Nationwide, you’re seeing a pretty big leveling off/downslide of home prices; elections and holidays will help pull prices down even more. (People selling around Christmas generally let places go for much cheaper.) And there is HUGE overdevelopment in the Seattle condo market right now – as you mentioned, places that have trouble sellling are going to plummet their price & start adding incentives to buyers.

    Keep in mind though; even with a lowering price, right now you’re buying with prices still near the peak of what they were during the housing boom….my guess is next year around this time, they’ll be even lower. Just a guess though.

  37. Chris E. says:

    My word of advice is to avoid real estate agents at all cost if you can. I think you are spot on for sending letters to residents in building you want to live in. If you get someone to bite, you can use a lawyer to draft up the purchase and sale agreements. The seller avoids paying 6% commission to an agent and you can use that savings to the owner to negotiate a mutually acceptable selling price (I would highlight this in your letter). We did this with our house in Ballard 3 1/2 years ago (bought it from a loose family acquaintence ). The house wasn’t on the market, we just approached the owner and asked if they were interested in selling. They thought about it for a couple days and called us back with a “yes”. We hired a real estate lawyer who drafted all the agreements and it cost around $600 for his services including title reports. In the end it worked out for both parties. We got a great house in the neighborhood of our choice and the previous owner was able to walk away with more money than if they had listed it with a real estate agent.

    IMHO real estate agents are one of the primary causes of the real estate boom/bubble we’ve seen in Seattle and across the country (that coupled with cheap money). We bid on two homes before buying our place in Ballard and were out bid significantly on both properties. The agent we were working with at the time counseled us to do some pretty risky things such as submitting bids with no contingencies (i.e. no inspection) and suggested we provide escalator clauses with our offers knowing full well that the houses were going into bidding wars (agents at the time encouraged bidding wars, especially on prime properties). Overall it left a bad taste in our mouths for real estate agents. We felt that the agents were more interested in their commissions than in helping us find a place we liked and could afford.

    The other thing I would point out (which I am sure you’ve thought about) is that with condos you are beholden to the home owners association. You need to really dive into the HOA’s books to make sure you don’t get surprised by big $$ assessments (often times these are hard to avoid). Many condos in Seattle that were built in the ’90’s used porous stucko material which didn’t hold up to Seattle weather. A lot of buildings had to be completely re-faced (I am sure you’ve seen the buildings around here covered in plastic) and I bet those repairs cost the HOA plenty of $$ not to mention the crappy living conditions while the repairs were done. The key is do your home work which I am sure you will do.

    You are in a great position as a buyer. You don’t own other property that you have to sell in order to buy the new place and properties are sitting on the market much longer than in previous years. I agree with others that the prices will most likely continue to dip over the next few months. It will be interesting to see if the Fed lowers rates in the coming months since we are seeing a big drop in home sales and prices. I suspect if they do we will see more activity in the real estate market, but there are a ton of new condo developments in Seattle (seems like one on every corner).

    The last thing I will mention is that this time of year is tough from an inventory perspective . Few people want to move during the holidays and with Thanksgiving and X-Mas fast approaching many potential sellers will probably hold out until after the New Year. We ran into this 3 1/2 years ago. We moved back to Seattle from SF in January and there was nothing on the market. By Feb/March there were tons of places to look at.

    Good luck,

  38. I’m almost finished with school and looking to make the move back home. We’re in very similar situations… just replace $500k with $500 dollars and replace condo with studio apartment with gritty bathroom tiles and stained carpeting!

  39. Hoppy says:

    Hey Mike

    I read an article about the drop-off note (might have been Money magazine) and think it’s a great idea. The couple was living in a specific area which they knew they liked (like you and Queen Anne) and used to go for walks after dinner. There was a house that they’d pass by all the time which they totally loved, so on a whim they wrote a nice handwritten letter and slipped it in the mailbox, saying how much they loved it and if they ever thought about selling it, to give them a call. It wasn’t right away, but a few months later they got a call from the person and ended up getting their dream house.

    A few things probably helped… a little bit of sucking up, the personal nature, and selling to someone that knew and appreciated the neighborhood.

    And hey, you could always go with the direct marketing test method and try different approaches as well. One note could be handwritten. One can be official looking. One can be informational, just asking if they like the area and the building. One can be a harder sell with an asking price.

    Right now I am subleasing from a couple in a New York city condo where everyone else owns. I get some type of postcard about once a week in the mail from local real estate agents, either talking about condos for sale in the area, or saying ‘when you’re ready to sell, contact us’. I have to admit, it makes a lot of sense to me. It’s a passive way to know about listings in the area and you never know when someone wants to upgrade/downsize, and when you’re ready to sell the agents are top of mind.

    Good luck.

  40. Don says:

    And hey, you could always go with the direct marketing test method and try different approaches as well. One note could be handwritten. One can be official looking. One can be informational, just asking if they like the area and the building. One can be a harder sell with an asking price.

    Careful with this one Mike. These people know each other. If you drop three gushy notes saying theirs’ is the place of your dreams … they’ll manage to compare notes sooner than later. The world is a very small place and you don’t want to be the stuff blogs are made of …

    So be straight and say what you mean, mean what you say.

  41. Off topic, but I absolutely _love_ newsvine’s subtle nod to Halloween. Very nice.

  42. Andy says:

    You could easily send a letter out to the owners in the buildings where you are interested in living – a couple of hours work. I think the return would be very low, but it might turn up something.

    My suggestion is to look at as much inventory as possible your “inner real estate agent” will tell you when you have landed on the right spot.

    As far as pricing: in an up market, shoot above the target. In a down market, shoot below the target. Make an offer in writing – a ready willing and able buyer is very compelling to a seller especially in a slowing market.

    and last (I am a real estate agent in Ann Arbor, MI) I understand the need to do it yourself, but an agent that really knows the market and has a solid understanding of your needs can add significant value. I would interview some top agents in your market.


  43. Mike, I am a Windermere agent in Ballard and I happened across your site while researching a year-end piece I am doing on the so-called “bubble.” I noted that the author of the Seattle Bubble blog had put off his search in the hopes that prices would come down. I’ll bet he wishes he hadn’t waited.

    I agree with all that has been said about interest rates driving the market and I think that there has been some overpriced real estate around. I don’t agree that real estate agents cause prices to go up faster, anymore than gas station attendants drive up gas prices or Catherine Zeta Jones drives up cell phone prices. But I do agree that the market has brought in lots of folks who probably shouldn’t be in the business and that has caused some stress and bad experiences for buyers. I have been in the business for 12 years, and have studied the market for another 5 or 6 years before that. I think that there are lots of great comments here and lots of good ideas for finding a “deal.” However, I have to say, that by and large, the best way to get a great deal is by sticking to the fundamentals. There are lots of investors who have gone broke buying “deals.”

    I have done lots of “off-market” prospecting for myself and my clients over the years and I know a lot of non-realtor investors who send out letters, etc. It is a lot of work, and it can pay off if you are diligent and stick with it. But the learning curve is steep, and you put in a lot of energy that generally isn’t worth the effort unless you are going to buy more than one house. Quite a few friends and clients have fallen into good deals through insider information from neighbors and friends and these are great when they happen. The question is: are you willing to wait, and is it worth it to wait?

    For the last 20 years I have watched as people wait for the big collapse. We have had a correction in prices a few times during that period, but I don’t think that prices are going to retract 5 or 10 years of appreciation worth–perhaps not even 2 years worth! So market timing is very dangerous. If you are already in the market, and own your own home it may be worth it to wait for an inside deal or a market downturn before buying up. (trade up in a down market!) But if you are sitting on the sidelines, it is risky to wait for the downturn. In the stock market, experts advise “dollar cost averaging.” That is, buy at regular intervals to take advantage of natural dips in the market to purchase at a discount. The math works out. But if you are buying just one of something, like your house, that isn’t really possible, is it? So, the only issue that matters is the length of time that you hold the investment. So, get in the game! Whether you are an experienced homeowner or a first time buyer, the important thing is to stay “fully invested.” Does that make sense?

    It doesn’t really matter if the market is soft, hot, if you use a realtor or by from an owner. What really matters is that the timing and situation is right for you.

    The market is good right now for buyers as it is almost every year around this time. I don’t expect that to last very long. I expect an upturn in the spring. Or next spring. What difference does it make for you if prices drop 15% after they go up another 20% first? If you can find something that is less than it was in the spring, go for it!

    It sounds like you have been doing your homework. That is the main thing that you need to have lots of success. The key to getting a good deal is due diligence. Condos ARE tougher than single family residences as investments. First to cool in a cooling market, last to heat up in a hot market. More volatility. But overall, condominium prices have appreciated more than single family residences in neighborhoods like Queen Anne over the last decade. So they can work. Due Diligence: Chris E is right about this. You really need to look at the association and study the building. Is there an envelope study? (regarding roof and siding) Do you know how to read the Resale Certificate and judge the financials? You are indeed better going it alone and hiring a good real estate attorney than just following the advice of an inexperienced salesperson or site agent that represents the owner.

    What I see happen is that buyers who wait and wait for a good deal often burn out, get panicked and then buy a bad deal. It takes discipline to stick to the fundamentals and keep the purchase period short. Let the pro’s wait out market cycles and then buy ten units. For the owner/occupant, the trick is to get over the hump on a solid building in a great location that has the most space/amenities that he or she can afford. You will probably have more leverage on a resale than new construction. Find a unit that isn’t selling because it needs cosmetic remodels. Condos can be inexpensive to remodel. What counts in a condos is sales history. The price you pay is the comparable sale for the next seller or buyer. So, you want to be in line with a good appreciation track record for the building. That is more important than just getting a cheap price. If you can find that on your own in about 2 or 3 months, great. If you need an agent to push you, make sure you find a heavily experienced agent that specializes in your area and whose success is built on the clients results, not their own need for a quick sale.

    Sorry for the ramble, just thought I would throw in my two cents. Thanks for the blog!

  44. Vallie J says:

    I am a realtor in Seattle and have contacted unit owners regarding selling their property with success every time. If you are sincere and not “sell hard and now” attitude you can get good feed back from it.
    But why doesn’t your ‘friend’ agent help you with this?

    I feel bad for Chris E, and glad they found a place with a situation that seemed to work for them. The “Hot Seller’s Market” that we are now coming out of, waiving everything to get the deal was hard for the buyer’s agent too. A lot of agents will not be returning this year because it has been very tough. An agent is there (and paid) to give you their best service and advice and if you don’t like it, you can find another agent. When we work for the seller, that is what we are doing ‘working in the best interest of the seller’, there is no possible way for realtors to be driving the housing bubble when we are not the ones buying and not buying the properties. We are a service, and some bad agents forget that and unfortunately their clients are spreading the word to not use agents instead of saying they didn’t like how their agent handled situations. Just because one agent was not for you doesn’t mean we will all be the same way. It is important to know if your agent isn’t right for you before discrediting all real estate agents.
    Chris E, hopefully when you go to sell your Ballard place, you will find or know someone like you to buy it:)

  45. rob says:

    I had a friend who wanted a condo in a particular neighborhood. He sent every resident on two streets a letter in which he introduced himself, gave some information about his career plans and reasons for settling in this area. He closed with a request to be contacted before the unit went on the market if anyone desired to sell. He had a great unit in about 2 months.

  46. Joe says:

    Wait it out. It appears 2007 will be the best buyers’ market in years. I follow the market closely and there are several indications that this will be the case. Interest rates are very low now and do not appear to be in much danger of a large increase. I would look carefully for something you really like, and wait until there is an offer you can’t refuse. The only thing, the winter months are usually the best buyers’ months, so this time next year you may see some incredible deals. good luck.

  47. sandy says:

    Folks, it would incredibly useful if you could give me some insight into real estate trends in the redmond, wa area. the key questions i have are 1) are prices at the risk of going down? 2) is it better to go for a new home than a 30 yr old home?

  48. […] Market Timing – Secrets for Timing the Real Estate MarketRealty Times – Real Estate News and AdviceMike Davidson – Buying in a Softening Real Estate MarketShare it!   —   Rate it:  up  down  [flag this hub]Smart Investor […]

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