Seattle Real Estate News

Is a shake-up on how real estate agents are paid on the horizon? In November 2023, a federal jury in Missouri ruled that the National Association of Realtors, a powerful real estate organization that owns the trademark to the title Realtor and controls much of its members’ activities, and several other large brokerages conspired to inflate agent fees.  This ruling will force buyers to negotiate a fee with their agent and it will make it easier for lower-priced agents to catch the attention of buyers and lead to greater price competition.  But some argue that this case could leave most Seattle-area homebuyers to fend for themselves in an ultracompetitive and pricey market and that homebuyers to shell out more money upfront to buy a home.  If co-op fees are prohibited, homebuyers might have to pay their agents out of pocket.  This will further erode purchasing power for our veterans, minority buyers, and first-time homebuyers who are struggling for loan qualification to begin with. 

In March 2024, the National Association of Realtors (NAR) reached to a Settlement Agreement to resolve a series of lawsuits against the organization. The key issue in the lawsuits was the practice of "tying," whereby NAR members require the commissions paid to buyers' agents to be set by the seller's agent.  When a home is listed under tying agreements, the compensation for a buyer's agent is established before the buyer can be sure of the quantity or quality of their services their agent will provide. Tying also means that sellers may have to offer higher commission to maximize the chance they sell their home through the practice of "steering." If the agreement is approved, tied compensation will no longer occur on MLSs. Furthermore, buyers and their agents will have to explicitly agree about what services agents will provide, online MLS databases will no longer display commission rates, and NAR will also be required to permit real estate agents to be paid for their work without subscribing to MLS.

Here in Washington state and the Northwest Multiple Listing Service (NWMLS) which serves most of Washington have already made several changes to make the system more consumer-friendly. In 2020, NWMLS, which is not affiliated with the National Association of Realtors or subject to its rules started publishing agent commissions on its webpage. The seller is also not required to offer the buyer’s agent a fee – which is a key issue in the federal class action lawsuit.  On January 1, 2024, important revisions to the law that governs real estate brokerage relationships (RCW 18.86) in Washington State – otherwise known as the “Agency Law” – become effective.  These are the first significant revisions since the Agency Law took effect in 1997.  The revisions, which are explained in detail in this bulletin and set forth in Senate Bill 5191, include the following:

• Requiring real estate firms to enter into a written brokerage services agreement with a buyer as soon as reasonably practical after commencing real estate brokerage services for the buyer;
• Changing the term “dual agent” to “limited dual agent” to reflect that a broker representing both a buyer and a seller in the same transaction is limited in the representation that the broker can provide;
• Giving buyers and sellers the clear choice whether to consent to an individual broker acting as a limited dual agent by requiring the consent to limited dual agency to be separately initialed by the consumer;
• Clarifying that a broker owes certain duties in RCW 18.86.030 to all parties in a transaction;
• Ensuring complete transparency with regard to compensation by requiring that real estate firms disclose to all parties any compensation offered to a firm by another party or another real estate firm; and
• Modernizing and simplifying the “pamphlet” that brokers must provide to consumers which explains general information about real estate brokerage relationships.

NWMLS revisions to the state’s Agency Law will require agents to have a written agreement between buyers and sellers that spell out the scope of the agent’s services and compensation. 

Get your Pre-Approval here. 

The spike in home prices and interest rates has significantly impacted first-time homebuyers. The following three tips can help such buyers successfully navigate the market as they look to purchase their first home. 

1. Expect to move quickly.  Inventory remain very low so buyers will likely need to move quickly and make an offer if they see a home they like. Chances are the property won't be on the market too long before it's sold. 

2. Apply for mortgage Pre-Approval. The market's competitive nature for buyer means it's in their best interests to arrange financing before beginning their home search. A mortgage Pre-Approval indicates to sellers that buyers' won't ben denied a mortgage or lack financing after making an offer. Gather these documents and with a local mortgage broker for your pre-approval letter. 

3. Set a realistic budget and expect to offer over the asking price. In the current market, buyers should know that they will likely need to pay more than the asking price for a home. 

Compare our rates here and let me assist with your Pre-Approval Letter. 

Since 2020, the income needed to afford a typical house in the Seattle-area has almost doubled from $120,000 in 2020 to $214,000 in 2024 – thanks to skyrocketing home prices and interest rate hikes. Mortgage rate increases over the last 18 months  drove up the monthly cost of buying a home. At the same time, a shortage of homes for sale kept Seattle-area home prices from plummeting.  Real estate economists expect interest rates to dip some in 2024, but not to drop dramatically since it's an election year and the Fed seems  happy with it's current inflationary policy.  Fannie Mae projects the rate on a 30-year fixed mortgage will average 6.7% in 2024 and 6.2% in 2025, as the Fed continues to try to fight inflation. Lawrence Yun, chief economist at the National Association of Realtors, has a similar, but slightly lower, projection that rates will average 6.3% in 2024. 

While the income needed to afford a home shot up 79% from January 2020 to January 2024, median income in the region increased only about 22%, the analysis found. According to Zillow’s based on the housing affordability index from the Washington Center for Real Estate Research at the University of Washington, homebuyers earning the median income can afford a median-priced home in only two of Washington’s 39 counties, Lincoln and Columbia. The index assumes a 20% down payment and a household spending only 25% of its gross income on mortgage payments.

Few homeowners are listing their properties for sale due to “lock-in-effect” either they bought their house or refinanced during the pandemic era (2020 – 2022). Even, if they are willing to sell – their purchasing power is reduced drastically due to high mortgage rates.  That combination has throttled the housing market as homebuyers struggle to get in the door.

So, how are homebuyers coping?

• Many homebuyers are spending more than 40% of their income on housing (10% more than what is recommended).
• Some buyers rely on loans or gifts from family members to help cover down payments and closing costs.
• There are several financing options for homebuyers with low down payment - HomeReady program with 3% down payment or FHA with 3.5% down payment or VA financing with 0% down payment.
• Others are teaming up with friends to afford a home or leaning toward condos and many are simply waiting longer to buy. 

For those who succeeded in the current market – congratulations since property appreciation and Return on Investment (ROI) have been in double digits.

Since 2020, home values have skyrocketed particularly in outlying areas that offer more space and affordability. For example, according to ZIP-code-level data from Zillow, the value of a typical home in a zip code covering Seattle’s Capitol Hill and Central District neighborhoods increased about 8% from 2020 to 2024, compared to 51% in a Renton zip code and 61% in Mill Creek.

1. What does my credit score need to be for me to buy a house? We preferred if you have at least 720 to obtain optimum rates. However, a minimum score of at least 620 is required by most banks. We offer FHA insured loans with imperfect credit score with as low as 550 with 10% down. Please consult with me if you have lower than 620 for special options available for you.

2. How much do I need for a down payment? We preferred if you have 20% to avoid paying for mortgage insurance. However, we also have low down payment options as well as no down payment options that you may qualify for.

3. What are closing costs, and how much are they? Closing cost are the cost incurred to close a loan and consist of bank charges, third party fees such as escrow, title and prepaid items such as property insurance and property taxes. In general, on a $200,000 house - the rule of thumb is between 2-3% of the sales price depending on the variables.

4. I want my monthly mortgage payment to be $X per month... how much house can I afford? Excellent question. Ideally, your Debt-To-Income (DTI) ratio should be at 45%. Since each property is taxed at a different rate - please consult with me for details. Live within your means and do not over leveraged yourself.

5. Should I pay off my car and installment loans so that I can qualify for more? Please consult with me for free consultation before paying any debts off or doing anything that will affect your FICO score.

6. I don't have enough cash for closing costs AND a down payment... Can I still buy a house? Closing Cost can be paid by the seller, in addition taking a premium rate the lender can credit back some closing cost help as well. USDA and VA loans do not require any down payment.

7. What type of loan product is best for me? It depends on several factors, such as your down payment, credit score, and DTI ratio. If these factors are not a concern - then a 15-year loan will save money due to lower rates and lower maturity/duration than 30-year loans.

8. Rent Vs. Buy - Analytical tools to assist you in evaluating both options.

9. Be patient during underwriting. Don't charge up your credit cards and don't apply for new credit while the mortgage is going through the underwriting process. Lender will soft-pull your credit shortly before closing to survey your credit again. If there is a substantial change, the lender might have to delay your mortgage closing.

Please consult with me to evaluate your options. It's free and you don't even have to sacrifice your hectic schedules. You can email, text me at 408-605-5927 or swing by my office in Seattle at your convenience.
 

In February 2023, King County home prices tumbled 7% with the median home sold for $800,000. The biggest difference in 2023 is the increase in mortgage rates. Higher rates mean less purchasing power for potential homeowners and in turn creating less competition for homes.  Some home sellers are waiting to see if rates would dip down again and markets would pick back up.  Others want to make sure their jobs are safe before making a move. 

The inventory was already tight before but now with homeowners with lower mortgage rates – they are staying put longer and not listing their homes. Others are becoming a landlord instead of selling especially if they have extremely low interest rates on their current property. 

To attract potential buyers, sellers are taking on more home improvement projects such as painting, upgrading carpets or replacing light fixtures and faucets before listing their properties.  Buyers are demanding more to compensate for higher  mortgage rates. 

Find an experienced local mortgage broker. If you find yourself in a bidding war, a local broker as opposed to a big bank can make all the difference.

Since March of 2020 and the COVID-19 Pandemic, "normal" has been difficult to describe and for those thinking of buying a home over the last few years, the market has been anything but what used to be though as "normal".  Property appreciation ascended rapidly due to high demand and lack of inventory  and mortgage rates jump significantly due to economic concerns. 

To buy now or wait. Higher mortgage interest rates  generally mean a larger monthly payment. Mortgage rates change daily and PLEASE do not expect rates will come back down to 2021 level again.  There are options to lower your rate such as with temporary rate buy-down option or with an Adjustable Rate Mortgage (ARM). 

Your goal is to have a monthly mortgage payment that is within your budget and not to overstretch yourself financially leaving nothing for repairs, living expenses and emergency savings. If you can comfortably afford the mortgage payment, then now is the time to buy. Else, waiting would be more prudent. 

Timeline. If you are planning to stay put for only a year or two, in this current economic cycle, waiting would be more prudent. 

Housing market. Buying a house in a more balanced or "normal" market when you are up against 1 or 2 other buyers rather than 20 and where you can actually inspect the house may be better fit your risk appetite than buying during the 2021 housing market.

Winter is an excellent time for making improvements to your home. Temperatures might be cooler but contractors' schedules are lighter. The season is perfect for making changes to your home that improve your comfort as well as your resale value.  Here are six ways to bring more comfort to your home and give you better chances to sell during the homebuying and selling season. 

Updated Wood Floors - Wood floors provide a timeless, classy look to any home. Plus, they're built to last. A well-cared-for wood floor can be a beautiful part of your home for more than 100 years. These floors also collect less dust and debris than carpets which is good news for allergy sufferers. If you are planning to have a professional do the installation, you should plan on investing about $6,000 to $12,000 per 1,000 square feet. 

Updated New Appliances - A relatively inexpensive upgrade would involve replacing your kitchen appliances. Not only will you enjoy the streamlines look of matching and more energy-efficient appliances, but you can also see about a 3% to 7% increase in home valyue. This upgrade usually costs roughly $3,000 to $8,000 depending on  how many pieces you replace, what brands you choose and whether you DIY or have them professionally installed. 

Upgraded HVAC system - New requirements have emerged for air conditioners so newer models are more efficient than previous ones. While new HVAC unit can run anywhere between $5,000 to $10,000 - Money Magazine reports you can get between 5% to 10% ROI on your home value. 

Finished Basements. Finishing your basements can give your home the extra space you need such as adding bedrooms or playroom while increasing  your home value. According to HGTV, you can get about a 70% ROI for your basement remodeling costs (assuming your budget is between 5% to 10% of your house's current value).