Market • May 13, 2022

2022 Q1 Gardner Report

by Brenden Covington

Western Washington Real Estate Market Trends

2022

Our Western WA real estate market data is updated quarterly to aid in your real estate forecasts. Historical Western WA real estate data and trends are included below the latest update. We break down our data by county, but we cover major cities in this region including Seattle, Tacoma, and Everett.

Q1 2022 Gardner Report

Western Washington
Real Estate Market Update

by Matthew Gardner

Below is the latest Western WA housing market trends analysis. Additional links:

Historical Western WA Data
Eastern WA Data
Central WA Data
Other Regional Data

The following analysis of select counties of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

The post-COVID job recovery continues. Though data showed the number of jobs dropped in January, February saw gains that almost offset the jobs lost the prior month. As of February (March data is not yet available), the region had recovered all but 47,000 of the more than 300,000 jobs lost due to the pandemic. Of note is that employment levels in Grays Harbor, Thurston, San Juan, and Clallam counties are now above their pre-pandemic levels. In February, the regional unemployment rate rose to 4.1% from 3.7% in December. Although this may be disconcerting, an improving economy has led more unemployed persons to start looking for a job, which has pushed the jobless rate higher. I expect the regional economy to continue expanding as we move into the spring and summer, with a full job recovery not far away.

Western Washington Home Sales

❱ In the first quarter of 2022, 15,134 homes sold, representing a drop of 5.8% from the same period a year ago, and down 31.7% from the fourth quarter.

❱ Yet again, supply-side constraints limited sales. Every county except Snohomish showed lower inventory levels than a year ago.

❱ Sales grew in five counties across the region but were lower across the balance of the counties contained in this report. Compared to the fourth quarter, sales were lower across all market areas.

❱ The ratio of pending sales (demand) to active listings (supply) showed pending sales outpacing listings by a factor of 6.7. Clearly, the significant jump in mortgage rates in the first quarter has not yet impacted demand. Rather it appears to have stimulated buyers partly due to FOMO (Fear of Missing Out)!

Western Washington Home Prices

❱ Although financing costs have jumped, this has yet to prove to be an obstacle to buyers, as prices rose 16.4% year-over-year to an average of $738,152. Naturally, there is a lag between rates rising and any impact on market prices. It will be interesting to see what, if any, effect this has in the next quarter’s report.

❱ Compared to the same period a year ago, price growth was again strongest in San Juan County, but all markets saw prices rising more than 10% from a year ago.

❱ Relative to the final quarter of 2021, all but Kitsap (-2.7%), Mason (-1.5%), Skagit (-1.8%), Jefferson (-6.3%), and Clallam (-0.1%) counties saw home prices rise.

❱ The market remains supply starved. While increases in “new” listings suggest that more choice is coming to market, it remains insufficient to meet demand.

A map showing the year-over-year real estate market percentage changes in various counties in Western Washington for Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A map showing the real estate market percentage changes in various counties in Utah during the third quarter of 2021.

Western Washington Days on Market

❱ It took an average of 25 days for a home to go pending in the first quarter of 2022. This was 4 fewer days than in the same quarter of 2020, but 2 days more than in the fourth quarter of 2021.

❱ Snohomish, King, and Pierce counties were the tightest markets in Western Washington, with homes taking an average of 11 to 15 days to sell. The greatest drop in market time compared to a year ago was in San Juan County, where it took 23 fewer days for homes to sell.

❱ All but five counties saw average time on market drop from the same period a year ago, but the markets where it took longer to sell a home saw the length of time increase only marginally.

❱ Quarter over quarter, market time dropped in Snohomish, King, and Pierce counties. Jefferson and Clallam counties also saw modest improvement. In the balance of the region the length of time a home was on the market rose, but seasonality undoubtedly played a part.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The numbers have yet to indicate that demand is waning amid rising interest rates, but this is sure to become a greater factor as we move into the spring. A leading indicator I pay attention to is changes to list prices and, in most counties, these continue to increase. This suggests that sellers remain confident they will be able to find a buyer even in the face of higher borrowing costs. If this pace of increase starts to soften, it may be an indication of an inflection point, but it does not appear to be that way yet.

A speedometer graph indicating a seller's market in Western Washington during Q1 2022.

Given all the factors discussed above, I have decided to leave the needle in the same position as the last quarter. The market still heavily favors sellers, but if rates rise much further, headwinds will likely increase.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

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Buyers • Sellers • May 4, 2022

Man vs Machine: the Zestimate, is it Good for Consumers?

by Brenden Covington

In November 2021, Zillow upset the real estate world and Wall Street when they revealed their plans to terminate their iBuyer program, Zillow Offers, due to over $881 million in recorded losses. In addition, Zillow sadly eliminated 25% of its workforce (approx. 2,000 Seattle employees) because of the company’s exodus from the practice of purchasing and re-selling homes due to their mismanagement of property price evaluations. Zillow CEO Rich Barton went on record to say: “Fundamentally, we have been unable to predict the future pricing of homes to a level of accuracy that makes this a safe business to be in,”.

The Zestimate and Zillow Offers

This was a shocking statement to hear from a CEO who’s partially built their business model around a computer algorithm that spits out a home value called the “Zestimate”. A Zestimate is an AVM (Automated Valuation Model). The numbers produced by automated valuation technology come from analyzing public record data and utilizing computer decision logic to provide an estimate of the probable selling price for a residential property. An AVM is generally a combination of two types of evaluation, a hedonic model and a repeat sales index. The results of these are analyzed, weighed, and then reported as a final estimation of value based on a hypothetical date.

Zillow’s iBuyer program targeted eager home sellers who wanted a quick, no-hassle sale. Zillow Offers would present the sellers with a cash offer based on the Zestimate and close on a mutually agreed-upon date. Soon after closing, Zillow would flip these recently acquired properties with some mostly aesthetic improvements and list them back on the market. The problem was that Zillow ended up overpaying for a majority of their purchases, which proved that their Zestimate (AVM) lacked accuracy in the market. Accounts vary, but on average, Zillow Offers lost between $25,000-$80,800 on each property they flipped!

Why Is It Inaccurate?

One of the biggest reasons we find why Zillow’s Zestimate misses the mark by so much is the lack of human touch. Thorough market research that includes touring the subject property and neighborhood, recent local industry sales experiences, surveying other brokers about their surrounding listings, and assembling information from other agents about the terms of their recent sales and overall experiences helps to determine more accurate market conditions than the macrocosm of impersonal data used to establish an AVM like the Zestimate. Computers unfortunately can’t do this type of in-person research, nor do they have the instinct to pick up on and predict shifts in the market, but humans (real estate brokers) can!

Oftentimes when we are talking with prospective seller clients, their Zestimate (or other AVMs, like Redfin Estimate) come up in the preliminary conversation. We absolutely understand why, too. This is information that is relatively easy to access, constantly advertised, and gives the seller a beginning idea as to the value of their home. Where an AVM can become detrimental, is when a seller thinks it’s the be-all, end-all of home evaluations – becoming attached to the number initially provided. Even worse is when a consumer bases this major financial decision solely on this limited information. This is harmful to sellers because according to Zillow themselves, ~39% of all Zestimates in the Seattle metro area are not within 5% of the actual value.

For Quarter 1 2022, the median home price in the Seattle Metro area was $915,000. With 39% of all Zestimates not within 5% of the actual value, that is a beginning margin of error of $45,750 for 2 out of every five 5 households! Further, they claim that only 82% of their Zestimates are within 10% of the actual value, which is a marked difference for a fifth of sellers – up to $91,500! Where AVMs are flawed is that the foundation of their formula is tax records, which in our experience are often outdated and inaccurate. In addition, and perhaps most importantly, an AVM does not take into consideration the condition or recent improvements of the home, the neighborhood, and other environmental impacts such as school district, road noise, and unsightly neighboring homes, to name a few.

Then What’s the Point of AVMs like the Zestimate?

So, why exactly does the Zestimate exist? Zillow is a publicly-traded company (ZG) and its website is the medium through which they create profit. The Zestimate attracts consumers to the website who are often just beginning to dip their toes in the pool to see what their home might be worth or begin to search for available homes for sale in their budget. When a consumer is browsing Zillow’s website they get bombarded by real estate and mortgage broker ads on every page. These brokers are paying large amounts of money for that advertising space, which is how Zillow creates its revenue and why there is a Zestimate. The Zestimate is not a public service, it is a marketing gimmick, a widget to bring prospective clients to their advertising space which allows for them to sell more ads to brokers looking to obtain new clients.

The take-away is this: use Zillow/Redfin/any AVM as one of many tools in your real estate search and evaluation arsenal. Zillow provides a great jumping-off point and contains a plethora of information to begin familiarizing yourself with before embarking on your real estate endeavors. However, we live in a time of information overload and we are overstimulated at best. Nothing beats the evaluation and judgment of a knowledgeable and experienced real estate broker to help you determine your home pricing accuracy, which will lead you to the empowerment of clarity. At Windermere, we refer to this as The Human Algorithm.

If you are curious about the value of your home in today’s market, please contact us. We can provide an annual real estate review of all of your real estate holdings, and can even dive deep into a complete comparative market analysis if that would be helpful for you. It is our goal to help keep our clients informed and empower strong decisions.

Zillow® and Zestimate® are trademarks of Zillow, Inc.

Brenden Covington

Trusted Real Estate Advisor

Windermere Real Estate/HLC

13901 NE 175th St, Suite 100 | Woodinville, WA 98072

Cell 206.617.4879 | Email bcovington@windermere.com

Sellers • April 27, 2022

Equity Is At An All-Time High – Align With Those Who Can Net You The Most

by Brenden Covington

2022 has had an unprecedentedly powerful start in Western Washington’s real estate market. In March, the average list-to-sale price ratio (the percentage a house sells for in comparison to the list price) was 113.6% in King County and in Snohomish County it was 112.5%. This is in tandem with year-over-year median price appreciation (the last 12 months of price growth averaged and compared to the previous 12 months of price growth) of 13.3% in King County and 25.7% in Snohomish County. In fact, the stats show that 59% of homeowners in King County have over 50% home equity and 55% of property owners in Snohomish County have more than 50% home equity.

That said, how do you navigate successfully transitioning that equity to your next move, and who do you choose to help you with the job? With inventory near all-time lows and interest rates still rising past 5%, buyer demand is high but slowing. There is no denying that homes can sell quickly in this environment and often for over-list price due to more than one offer. In this market, there are a variety of business models to choose from for consumers when selecting who they wish to align with to help them make such an important move; there are brokerages that will provide basic services while offering an up-front discount on the commission and there are full-service brokerages, with everything in between.

Before we highlight what a full-service brokerage, like Team Covington, has to offer a seller we want to show you some numbers rooted in seller results. In 2021, our office, Windermere Woodinville, outperformed the market – we sold homes faster and at a higher return!

Even as we track our statistics so far in 2022, according to NWMLS data, our office’s median list-to-sale price ratio for King and Snohomish Counties combined, for residential sales, was 105.1% and 14 days on the market. This compares to the average market results of 101.5% and 21 days on the market.

Our approach involves a strategic listing preparation process, detailed rolling price analysis, and keen negotiations. You may be wondering what type of negotiations happen when a seller is reviewing a stack of offers; actually, more than you know. Sifting through the terms of offers multiple times and vetting the buyers through research, and rapport-building with their broker and lender helps us to investigate who the most qualified buyer is to get under contract with. This takes extra time and skilled communication, but as you can see, these extra steps more than pay off for our sellers.

We understand that getting your home ready for market can be an intimidating task, but the upside is too measurable to ignore. We help our clients to identify a checklist of prep items and match them up with vetted concierge-level service providers to help them complete the work. Even if our sellers are limited in funds to ready their home, Windermere has funds available for no up-front costs. Please reach out if you think this would fit your needs.

Then, depending on the house, the merchandising comes in: proper staging, professional photography, video, floorplans, print materials, comprehensive online advertising, open houses, reverse prospecting, and public exposure is fully planned and executed. Our listings hit the market perfectly positioned for buyers to envision themselves living there and we invest in this on behalf of our sellers so they may achieve their goals. We help connect the emotional dots that invoke buyers’ lifestyle goals resulting in higher returns for our sellers.

Finally, perspective is key! Markets are always shifting: ebbing and flowing. Pricing a home is strategic and requires analysis of the recent sales, historical seasonality, and knowledge of the current local and overarching market trends. This research isn’t just done by poring through data, but also with daily experience in the market and the intangible outreach to fellow brokers inquiring about their experiences and gleaning conclusions. In addition, physically touring the inventory, whether we’re showing buyers or walking through to see for ourselves, helps us understand how a home measures up and what buyers are looking for. All of these steps are far and above the norm and help contribute to the results our office is producing.

If you are considering a move, make sure you align yourself with trusted advisors who are willing to put in the extra work to get you the best possible results. Navigating an ever-changing and extreme sellers’ market takes great skill and care to achieve the best results. When done right, that skill and care will beat out any upfront discount a less-engaged broker will offer to win a listing. Make sure you consider the big picture, your net gain, and not just an immediate reward. Understand that who you choose to partner with to assist you with one of the biggest financial decisions a person can ever make is a very big deal. It is always our goal to help keep our clients well-informed and to empower strong decisions. Please reach out if you think we can help you or someone you know, whether you are just curious about the market or you’re ready to make a move.

Brenden Covington

Trusted Real Estate Advisor

Windermere Real Estate/HLC

13901 NE 175th St, Suite 100 | Woodinville, WA 98072

Cell 206.617.4879 | Email bcovington@windermere.com

Market • April 22, 2022

Quarterly Reports – Q1 2022

by Brenden Covington

The 2022 real estate market started in a sprint! We started this year with the lowest amount of available inventory this market has ever experienced coupled with mortgage interest rates a full point lower than they are now, a robust buyer pool due to a strong job market and work-from-home influenced moves, and the threat of inflation spurring buyers into a frenzy to beat rising rates. The combination of supply and demand and low debt service has created an intense seller-centric environment which resulted in massive home price appreciation from January to March. This is on top of ten years of previous solid price growth; over 50% of homeowners in WA state have at least 50% home equity.

As we head into the spring and summer months, we anticipate (and have begun to see) seasonal increases in inventory, which will provide much-needed relief for buyers. Interest rates have increased as a tool to combat inflation, as was predicted by economic experts across the nation and announced by the Fed. Rates still remain historically low for the time-being and have only departed from the “tell-your-grandkids” levels of between 3.5% to 4.5%. Price growth should start to temper after a feverish Q1 and buyers will enjoy more selection. If you are curious about how your real estate goals match up with the market, please reach out. It is our goal to help keep our clients informed and empower strong decisions.

What We Are Seeing On the Ground

Agents all across Western Washington are already starting to see a slight downward trend in buyer activity as buyer burnout, the end of the current school year, gas price increases, geopolitical uncertainty, and interest rates pushing higher have led to many buyers taking a step back to catch their breath and reassess.

A driving force behind this, mortgage rates, are shooting up at the fastest pace in history, sending the typical monthly mortgage payment for a homebuyer up more than $500 since the beginning of 2022. As rates quickly pass 5%, we expect their impact on buyer demand to change from a motivator—driving a sense of urgency to buy before rates rise further—to a deterrent—causing even more buyers to step back as the cost of homebuying exceeds their budgets. There are a number of early signs that this shift is beginning to take place.

Fewer people are starting online home searches and applying for mortgages than this time last year, and year-to-date growth in home tours remains far below 2021 levels. An increasing share of sellers are also reducing their prices after putting their homes on the market (As of April 22nd, 2022, 489 listings have lowered their asking price in the last 7 days – a number unimaginable just a few months ago). The share of homes that sell quickly (within 14 days) continues to grow, but at a much slower pace than earlier this year. Whereas a home listed in late January to early February would have up to a dozen early offers, we’re now seeing many homes sit on the market, miss their offer review dates, and then lower their list price in response to existing buyers becoming more selective in their process to find a home.

Still, in some places and for certain properties, the market feels red-hot – with these properties selling faster and for more than ever before. That’s primarily because inventory levels remain near record lows with more sellers likely to hold onto their properties this season out of fear of being priced out of their current market and/or to avoid losing their sub-3% interest rate.

Windermere agents say they’re starting to see some sellers put their homes up for sale earlier than planned because they’re worried they’ll miss out on the market’s peak if they wait.

What Does This Mean For Me?

Mortgage rates are not slowing down or showing signs of stopping; the Federal Reserve is expected to meet another 5 to 6 times this year and is anticipated to increase the Fed Funds Rate increments from .25 to .50 while also shrinking its balance sheet of Mortgage-Backed Securities (MBS). Many experts are expecting this move to effectively combat inflation, but also to raise mortgage rates as a result.

As A Seller:

Although the peak of the market is behind us, it is still very much a seller’s market and a great time to accelerate your plans to sell this Spring/Summer before interest rates remove more of your potential buyer pool. As stated, more and more listings are reducing their list price as they find buyers are becoming much more selective about which homes they visit, and by extension, buy; before putting your home on the market you should consider consulting with a professional to find out which repairs and updates will make your home net you the most profit and benefits.

As A Buyer:

As previously discussed, interest rates are not expected to reverse anytime soon – the quicker you can get under contract and lock in a mortgage rate, the better off your budget will be. Now more than ever, it is important to be working with experienced and dedicated professionals, work with a local and responsive lender or mortgage broker, and be constantly in tune with your finances and pre-approval.

Brenden Covington

Trusted Real Estate Advisor

Windermere Real Estate/HLC

13901 NE 175th St, Suite 100 | Woodinville, WA 98072

Cell 206.617.4879 | Email bcovington@windermere.com

Sellers • February 10, 2022

Selling a Property with Tenants

by Brenden Covington

How do I Sell a Rental Property with Tenants?

When it’s time to sell your rental property, but it is currently occupied, there are two main ways you can handle this as a landlord: Waiting for the lease to expire before selling without renewal, or listing while your tenants are still living in the home. There are pros and cons to both options.

In the aftermath of Covid lockdowns and eviction moratoriums, many homeowners who’ve experienced difficulty with tenants have soured on the idea of continuing to rent out their properties going forward. In addition, the real estate market is booming right now in Washington, which means that landlords who may have been holding out on selling to see an increase in their equity may be coming to the conclusion that there may never be a better time to list their rental properties than now. Compound all of that with the Federal Reserve increasing their rates this year (which will have a negating effect on the demand side of the housing market), and many sellers are starting to feel immense pressure to offload their properties ASAP.

Of course, if you’re a landlord thinking similarly about selling your house, one of the things that may be stopping you is that there are people currently living in it. Selling with tenants can be a challenge at the best of times, and a tenant can make or break a sale. To help avoid your tenant negatively impacting your listing, you’ll need to plan well in advance, communicate frequently and candidly with your tenant, and make some compromises with them in order for your sale to run smoothly and be a success. Next, we will explore some of the pros and cons of each option.

Option 1: Wait for the Lease to Expire

Pros

Allows Time for Improvements: If you’re able to wait for your tenants to vacate, you’ll be able to clean, perform cosmetic repairs or updates, and generally touch up the property before listing, which could help you end up with a better deal and/or a better sales price.

Can Alleviate Timing Issues with Closing: In this hot housing market, your listing could sell faster than you were originally planning, and depending on the terms of the lease and regulations of your city, county, and state – you may have trouble getting your tenants out before the new owners are supposed to take possession. However, if the home is not occupied when you list it, you no longer have to worry about timing and can simply accept the best offer.

Cons

Mortgage Carrying Costs: Each month without tenants is a month when you’re on the hook for the mortgage payment. If it takes a few months to prepare your home for sale, list, accept an offer, and close, you’ll be responsible for the full carrying costs.

Market Could Sour: Waiting for your lease to end could take several months and during that time interest rates can increase (as they are now), demand can fall, or supply can rise.

Option 2: Sell with Tenants in the Home

Pros

Built-In Staging: When a home is furnished, buyers can more easily picture themselves living there. If the current tenants have kept the home clean and decorated it in a positive way that enhances the features of the home, it will be more desirable to potential buyers who view it.

It’s Attractive to Investors: Having tenants currently living in the home is attractive for buyers who might be looking to acquire the home as a rental property — you’ll be saving them the legwork of having to find a tenant!

Cons

Angry Tenants Can Ruin Showings: You’ve now told your tenant they have to move out soon or that ownership will change (and the new owners may not renew their lease). Now you’re relying on them to keep your home clean for showings, asking them to adjust their schedules around countless strangers walking through their living space (strangers who will end up displacing them), and trusting that they’ll cooperate with you on your sale and avoid driving away potential buyers? This can be a difficult pill to swallow, and uncooperative tenants can have a big impact on how the house shows – interfering with scheduling showings, driving away buyers with negative comments, or even letting the home fall into a mess or disrepair.

Current Furniture Could Reflect Negatively: If a tenant hasn’t taken care to coordinate their furniture, keep the home tidy, or if they’ve filled the home with too many personal possessions it could sour a buyer’s perception of your home as they walk through it. A messy tenant can also ruin listing photos, driving away potential buyers who would’ve liked your home otherwise.

Primary Homebuyers Don’t Want Tenants: Although investors may consider already-existing tenants to be a positive, buyers looking for a new primary residence don’t want to become landlords for any period of time before moving in and will avoid tenant-occupied homes.

Many Buyers May Not Qualify: Many homebuyers who obtain financing for their primary residence are required to begin occupying the home they purchase within 60 days of closing. If the current lease expiration is beyond 2 months out, many buyers will be driven away.

Landlord Solutions

There are several ways that you may be able to persuade your tenants to cooperate with your plans to sell, consider offering them a lower monthly rent in exchange for an agreement for them to communicate openly with you and show a clean and well-kept home. Other potential incentives you can offer are a flexible move-out date, reimbursing moving costs, paying for the tenants to stay in a hotel for a weekend while showings and open houses are held, having your agent help them find a new rental, or buying the tenants out of their lease.

Review Lease Agreement

However you decide to move forward, the first thing you should do is review the lease agreement that you have with your tenant. You should also look up the city, county, and state laws regarding notice to vacate requirements that you are legally obligated to give before listing or selling your home. Your real estate agent can be a great resource for local requirements, as well as offer tips for a successful sale with tenants in the home and act as a liaison.

Ultimately, the actions you can legally take — and when you take them — depend primarily on the lease agreement you’ve signed with your tenants.

Month-to-Month Lease

Make it known to your tenants, in writing, the date their lease agreement will be canceled and when they’ll need to have moved out. In most states, month-to-month leases require you to give them between 20 to 60 days’ notice – but make sure to check your local laws. Whether or not you can show the property while your tenants still occupying the property depends on your existing lease.

Fixed-Term Lease

If your lease includes an early termination clause, you can vacate your tenants with proper notice adhering to the process outlined in the contract. If not, you may have to wait until their lease expires. There is one notable exception: If your tenant has failed to pay rent or violated your contract terms, you may be able to terminate the lease early according to local laws and the language of your lease.

Messaging and Delivery

Being on amicable terms with your tenant if and when you decide to sell before they vacate is a vital step. Breaking the news on your plan to sell is the most important conversation to have with your tenants and can go a lot more smoothly when you consider not just what you’re saying, but also how you’re saying it.

Be Respectful

Breaking this news in person is best, it may be the most comfortable for everyone if you had this discussion in a neutral third-party location, maybe while out for a cup of coffee. Make sure to schedule out enough time to address all of their questions and concerns about the process.

When selling your rental property, it’s best to be open and honest with your tenant.

Meeting with Tenants

Offer Your Tenant the Chance to Buy

If your tenant has fallen in love with where they currently live, they could be open to buying your home. It’s okay to present your tenant with this option directly, but if they admit to being interested in purchasing, you’ll absolutely want to work with a real estate attorney. Here are just a few ways these off-market transactions can proceed:

A lease-to-own with an upfront, one-time, non-refundable option fee that allows tenants the right to purchase the home from the owners within a set amount of time, at a set price. In the meantime, they remain a tenant and pay rent.
A lease-to-own agreement that is structured (in writing) so a portion of each month’s rent goes toward a future down payment.
A seller-financed agreement. This is where the landlord (you) serves as the lender, instead of a bank. With this kind of agreement, the tenant agrees to make payments (with a mutually agreed-upon interest rate) to you over a few years, often including a balloon payment. The biggest benefit for you, as the seller, is the money you’ll make from the interest paid by the buyers on the debt. In order to utilize this type of sale, you’ll need to own your rental home “free and clear”, without a mortgage balance still on the property.

Go Over the Details

It’s best practice to agree in writing on all things pertaining to the listing and sale, like how much notice you’ll give the tenants before showings (24 hours is usually the legal requirement), what time of day the showings will happen, and what the obligations of the tenant should be and what condition the home should be in throughout the process.

*The information provided in this article is meant for informational purposes only and is not intended to constitute legal, financial, tax, or insurance advice. Team Covington encourages readers to contact their attorney or other advisors for advice regarding these matters.

Brenden Covington

Broker

Windermere Real Estate/HLC

13901 NE 175th St, Suite 100 | Woodinville, WA 98072

Cell 206.617.4879

Sellers • February 2, 2022

Factors for Evaluating an Offer on Your Home

by Brenden Covington

So, you have just received an offer on the sale of your home – Congrats! Now what should you do? Deciding between offers on your home, especially when you’ve received multiple, can be confusing and stressful. You may be tempted to immediately sign the first or highest offer received, but there’s more to consider than just the dollar amount before signing and going under contract. Here’s some expert advice from us on how to properly evaluate offers from prospective home buyers.

But First, Prepare Yourself:‍

Before you begin reviewing offers for your home, you should prepare yourself for what’s to come. That way, when the first offers come in, you’ll be able to make a better-informed decision as to whether you should accept, reject, or counter.

The first step in getting yourself prepared is understanding what to expect when you receive an offer to purchase your home. The best way to do this is by talking to your agent to learn how to read the Purchase Contract and familiarize yourself with what each section entails.

A Purchase Contract, also referred to as a Purchase and Sale Agreement, is a legally binding contract between two parties detailing the agreed-upon terms and contingencies for the sale of a home. It includes the sales price, earnest money deposit amount, date of closing, and a legal description of the property–among other things.

Once you’ve become familiar with the key terms and contingencies of a Purchase and Sale Agreement, it’s important to decide what aspects of an offer will be the most important to you (and any partner/spouse). Are you simply looking to maximize your proceeds, or do you want to prioritize a lower-risk buyer, or someone who can close on your (longer or shorter) timeline? Whatever it is, understanding beforehand what you need and want from the sale and mentally prioritizing what’s most important will go a long way when it comes down to which offers to accept and reject.

Now, let’s take a look at some factors we think you should consider when evaluating offers on your home.‍

‍

3 Factors to Consider When Evaluating an Offer on Your Home

1. Certainty: how qualified is the buyer?

Is It a Cash Offer?‍

An all-cash offer often typically spells out a quicker and safer road to closing, which means cash offers are a very attractive option for sellers. Although a cash offer can sometimes come at the cost of your overall profits, the benefit is that you don’t have to worry about a low appraisal or third-party financing contingencies.‍

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How Financially Secure is the Buyer?‍

When considering an offer for your home, you want to make sure the deal runs as smoothly as possible and that requires a financially stable buyer. A few good indicators in an offer of a buyer’s financial ability are: the size of their earnest money deposit, how large of a down payment they’re making, and if they’re already pre-approved (not just pre-qualified) for a loan.‍

‍Down Payment: A down payment is the amount of money a buyer puts towards the purchase of a home that is not loaned to them by a lender. A higher down payment percentage is indicative of a financially secure and serious buyer. In general, the larger the down payment, the better. Typically, a down payment at or above 20% is a strong signal that the buyer is both financially stable and prepared to buy.‍
Earnest Money Deposit: An earnest money deposit is an amount of money put forward by the buyer at the beginning of a home purchase contract as a show of good faith to you, the seller, that they’re serious about purchasing your home. This deposit is offered to you with the understanding that you get to keep the money should the buyers back out of the purchase for any reason not specified in the contract. The larger the earnest money deposit, the more confidence you can have that the buyer is serious about purchasing your home.‍
Pre-Approval: Being pre-approved, unlike being pre-qualified, means a lender has officially reviewed the buyer’s credit, income, and other documentation to confirm they’re financially able to purchase your home. Although pre-approval doesn’t guarantee a buyer’s financing, it’s a strong indication that they’re a qualified buyer and ready to make a purchase.‍

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What Are the Buyer Contingencies?‍

A buyer may (and most of the time will) send you an offer with contingencies that must be satisfied before the purchase can be completed. Many contingencies (or requirements) will have an effect on the speed of a transaction and may provide buyers with the opportunity to withdraw from the contract without surrendering their earnest money to you. When going over offers, take note of any contingencies in the contract and how they could end up affecting you as the seller. A simplified explanation of some of the most common contingencies we see include:‍

‍Home Sale Contingency: the purchase of your home is contingent on the buyer selling their current home for funds. ‍
Inspection Contingency: the buyer can back out of the contract if a problem is found during the inspection and the parties can’t come to an agreement.‍
Financing Contingency: the buyer can back out of the deal if they are unable to obtain a mortgage.‍
Appraisal Contingency: When your home appraises for less than the offer amount, the buyer can pull out of the transaction or renegotiate for a lower sale price.

The key takeaway here is: with fewer contingencies included in an offer, the buyer is afforded less opportunities to walk away from the sale with their earnest money deposit, greatly increasing the likelihood the sale closes without issue.

2. Speed: How Soon Does/Can the Buyer Want to Close?

What is the Closing Date?‍

Pay close attention to the written date of possession that’s listed on the Purchase and Sale Agreement. If circumstances require you to stay in the home past this date, you may need to secure alternative housing, counter for a later closing date, or rent back the property from the buyers for a period of time after they gain possession.‍

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Does this Date Align with Your Timeline? ‍

Maybe you want to close on the sale of your home as soon as possible or you may want to close within a specific timeframe due to external circumstances. For instance, you may need to sell quickly to relocate for a new job or you may want to hold off on moving for a few weeks until the school year ends.

If the buyer wants to purchase the house sooner than your timeline, are they willing to do a rentback? A rentback, or leaseback, is when the buyer takes possession of your home but then rents the property back to you for a period of time – which may be beneficial if you need to delay your move. This is commonly seen when a seller is waiting to close on the purchase of their new home.‍

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How Flexible is the Buyer on Timing?‍

If your circumstances require you to move in a specific timeframe, consider whether the buyer can be flexible with when they take possession of the property. If you need to close quickly or stay in the home for a longer period of time, you’ll need to know if the buyer is willing (and able) to work with you.‍

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When Does the Offer Expire?‍

Every offer that comes in will include an expiration date (in the upper-righthand corner) set by the buyer. As the seller, you’ll need to decide on whether to accept, reject, or counter the offer and communicate this to the buyer in writing on or before this date by 9 pm. In the current market, it is very important to note the offer expiration first because it is increasingly common for offers to expire on the same day or the next.‍ ‍‍

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3. Price: How Much are They Offering?‍

The amount of money that a buyer is offering in exchange for your home is fairly straightforward, however, there are a few extra details to consider that could end up affecting your proceeds from the sale. When evaluating the offer amount, be sure to keep in mind the following:

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Are the Buyers Offering to Pay for Any Closing Costs? ‍

Both you and the buyers are responsible for paying closing costs. In addition to covering agent commissions, the seller also pays another 1-3% for other closing costs related to the sale. Sometimes, potential buyer offers will include paying for a portion of the seller’s closing costs.

For example, the owner’s title policy–typically the third-largest closing cost for sellers–can be negotiated. Other closing costs that can be negotiated include escrow fees, recording fees, HOA transfer fees, home warranty fees, and title insurance fees.‍

Are the buyers requesting a home warranty?‍

A home warranty can cover the cost of replacing or repairing some home appliances and systems if they break after the buyer has purchased your home. Home warranties are not required, but may be purchased by a buyer when they close on a home or bought by the seller for the buyer. ‍

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Are the buyers offering a leaseback at no expense?‍

If your situation necessitates you to stay in your home for a while longer, you may negotiate for a rentback in which the buyer allows you to rent the property back from them for a specified amount of time after they take possession at closing. The buyer in question may require you to pay some form of predetermined rent during that time or they may be persuaded to let you stay in the home for free. In a competitive market (like we are experiencing now), a buyer who can afford to be flexible with their move-in date may offer a free limited rentback to you in order to make their offer more appealing.

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Although price is a major part of the decision in which offer you decide to go with, it isn’t always the end-all-be-all, keep in mind the above factors as you go over offers to ensure you end up selecting the buyer that’s the best fit for you. Luckily, when you partner with a Team Covington agent to sell your home, we’ll be with you every step of the way. From walking you through incoming offers to handling negotiations, you’ll always have an experienced and trusted advocate to help guide you through the closing process. Have questions about what it’s like to work with Team Covington Real Estate? Learn more about selling with Team Covington Real Estate or give us a call. Our family is always here to answer any questions you might have!‍

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Brenden Covington

Broker

Windermere Real Estate/HLC

13901 NE 175th St, Suite 100 | Woodinville, WA 98072

Cell 206.617.4879

Sellers • November 23, 2021

Don’t Count Your Chickens Before They Hatch – How A Home Sale Can Go Sideways

by Curtis Covington

Waiting to get an offer from someone who wants to buy your house can be emotionally draining. Receiving an offer can make you feel ecstatic, but that doesn’t necessarily mean that things will go smoothly. There are several reasons why the deal might fall through and you might be forced to put your house back on the market.

The Buyer Has a Change of Heart

If your contract gives the buyer the option to withdraw for any reason, don’t celebrate until you reach closing day. The buyer may find a more desirable or more affordable property or have a change in personal circumstances.

Sometimes buyers get cold feet. The buyer may feel overwhelmed by the thought of paying for a mortgage, insurance, maintenance, and repairs, and may decide to buy a less expensive home or simply not to purchase right now.

It’s also possible that a buyer who wasn’t ready to make a decision and didn’t want to miss out submitted offers on multiple houses. Once the buyer decides which house to buy, he or she will have to withdraw from the other contracts.

The Buyer Can’t Get a Mortgage

Even if a buyer is prequalified, that doesn’t guarantee final approval for a mortgage. Sometimes buyers provide incomplete or inaccurate information when applying for pre-approval. After signing the contract, a buyer may experience a job loss or pay cut, or may take on more debt and no longer meet a lender’s guidelines.

The House Doesn’t Appraise for the Amount You Agreed On

A mortgage lender will require an appraisal before approving a home loan. If you and the buyer agree on a sale price, then the house appraises for less, which can make it difficult for the buyer to get a mortgage. The buyer may have to pay the difference in cash or may ask you to reduce the price. If you can’t reach an agreement, the deal can fall through.

The Inspection Reveals Serious Problems

A wise buyer will have your house inspected before proceeding with a purchase. While it’s normal for a home inspector to discover problems in any house, a major issue, such as a damaged foundation, a leaky roof, or an outdated electrical system, can make the buyer have second thoughts about buying the property.

You may be able to work something out. For instance, you may be willing to reduce the sale price or make repairs before the buyer moves in. If you can’t reach an agreement, or if the buyer doesn’t want to go through that additional hassle, the buyer may choose to simply walk away.

Curtis Covington

Broker

Windermere Real Estate/HLC

13901 NE 175th St, Suite 100 | Woodinville, WA 98072

Cell 206.255.2521

Buyers • September 15, 2021

Six Considerations When Choosing A Dog-Friendly Home

by Brenden Covington

Man’s best friend is more than just a title for most dog owners. Many family photos wouldn’t be complete without the inclusion of our canine companions! Below are a handful of ideas to consider when shopping for the paw-fect home for you and your beloved canine.

One: Appropriate Outdoor Space

Dogs need easy access to an outdoor space where they have plenty of room to run and play. A backyard, front yard, or dog run attached to the home can fill this need. These do not have to be massive either. One source states that small, couch potato breeds like English Bulldogs may need as little as 100 square feet while traditional hunting and guard dogs will thrive in at least 2500 square feet. A local neighborhood park can also satisfy the activity needs of your dog but a private yard provides easy access to let your dog run freely and do their business at any time without you being leashed to them. Private yards also can be beneficial for dogs who are not sociable yet with other dogs or people.

Two: Fencing

A fenced-in yard isn’t necessarily a requirement for families with a dog, but a physical border can offer several benefits. Most importantly, it can help to keep Fido from wandering into a potentially dangerous situation or trespass onto your neighbor’s property. In the same way that a fence can help keep your dog safely inside, a fence can keep out other dogs and animals from coming onto your property t. When planned and built properly, a sturdy fence can also act as an effective sound and sight barrier for your dog – especially when combined with landscaping planned with the same effect in mind. Fencing is available in a wide variety of styles to match the aesthetic of your home while effectively protecting your companion and giving them a safe place to play.

Three: Shade

Once you’ve found the right property that fits your pet’s needs, the next thing you may consider is if there is enough shade. Dogs require cooler spaces to retreat to on those hot summer days, much like we do. You might look to see how shadows fall from nearby trees, the house, fence, or other already existing features. If there is minimal to no shade to be found during the hottest part of the day, you may consider a doghouse, shed, or garage your dog can access if they are ever outside on their own.

Four: Flooring

When it comes to living with our furry friends, many dog owners prefer hardwood floors which provide ease of cleaning up shed fur or the occasional accident. Sturdy hardwood floors can also be more ideal for families with large dog breeds that could ruin carpet as they run through the house with the ‘zoomies’. Families with older dogs may appreciate the extra padding carpet can provide too though as it will provide additional traction for their independent mobility and cushion their hips when they sleep. Some families choose to use area rugs to maintain hardwood floors while accommodating an elderly dog. Be sure to secure these with rug tape (if it lacks gripping material) to avoid any unfortunate slips!

Five: Neighborhood Noise

Living on, or near, a busy road can be a cause of anxiety for your dog and cause them to act out in unexpected ways such as bolting unexpectedly, anxious digging, or chewing/licking themselves excessively to the point of developing sores. Aside from ambient noise that will be a persistent stimulus to your dog, there can be nearby sources of intermittent loud noise (I.e. stadiums, high schools, parks with 4th of July celebrations, etc.). If you and your dog thrive in a home that feels like an oasis away, a quieter neighborhood may be a high priority in your search.

Six: Doggy Nook

What is the layout of the home? Are there convenient places to put your dog’s food and water bowls? Spaces that could fit their bed and essentials? A tiny alcove or a seemingly inconvenient corner may be perfect for your best friend. You will want your pet’s bowls to be out of the way of high traffic in the event of a spill and you do not want to have your dog anywhere that they may be emboldened to get up to mischief.

Just as you consider property features for your own use, the aspects mentioned above will ensure your future home is dog-friendly and your pet is happy and healthy in their new home.

Sellers • September 9, 2021

3 Most Important Things You Should Do Before Selling

by Curtis Covington

From my 30 years of experience in the real estate industry, I know that when you’ve decided to sell your home, it can be hard to take the next step and decide on exactly where to begin. Although the home listing process can vary case-to-case, I have found that these are the three most important items to keep in mind as you ready your home for the market:

Fix Anything (Big or Small) That Is Broken

Even simple things that you have grown accustomed to such as a door that is hard to latch, a drawer that sticks, or a cooktop burner that doesn’t heat, could be red flags during a home showing. You may have learned to live with these little annoyances, but a buyer will be sure to notice. Take special care to note these details while you’re making a to-do list of repairs for each room.

Although these details may seem insignificant on their own and unimportant in the grand scheme when selling your house, combined they can end up costing you hundreds or more at the negotiating table if left alone.

2. Quiet Any Annoying Sounds

Make sure to silence any squeaky doors, windows, floors, or stairs. Whistling windows could indicate an air leak that will need to be taken care of before you try to sell. Similarly, a ceiling fan that has developed a rattle might need its blade screws tightened or its mount might be loose. Take a moment to listen carefully to identify any troublesome sounds that might have become background noise to you over the years.

Look For and Remedy Any Leaks

Check the usual culprits where leaks can develop: faucets and toilets. Look for water damage around windows and doors and on ceilings. One sign of a possible underground leak: a puddle or a lush spot in your yard. Leaks can quickly go from a small drip to a big problem, so don’t shrug off a little excess water here and there. You should manage any leaks before your home hits the market.

Curtis Covington

Broker

Windermere Real Estate/HLC

13901 NE 175th St, Suite 100 | Woodinville, WA 98072

Cell 206.255.2521

Covington Corner Mortgage Blog • September 1, 2021

How Much Home Can We Afford?

by Brenden Covington

COVINGTON CORNER MORTGAGE BLOG

*This post is written by our Preferred Lender*

I wanted to address some of the most common questions we get when starting a Homebuyer Client relationship. I’ll be addressing a new question each week in this Blog Post. I hope you find this information helpful.

HOW MUCH HOME CAN WE AFFORD?

This is the most common question I get from new Buyers as well as move-up Buyers.

How much home can you afford? There are so many variables here and so much information to share with a client. This usually invites me to ask if I can get a few questions answered:

How much do you have to put down?
How is your credit?
How much do you make?
What is your timeline to purchase?
And most important: How much do you want your monthly payment to be at the maximum? Because, after all, it doesn’t matter if you can afford a $6000 a month house payment if you wouldn’t dream of paying more than $3500 a month.

What I find is that where a client will land is somewhere between where they “want” the payment to be and where it needs to be in order to get the home and area they want to purchase in. It’s important to be realistic and to educate the client about where their dream payment will put them (perhaps in a condo in a small town in eastern Washington) – and, what they need to be prepared to pay to get the home they need in the area they would desire to live.

Most clients don’t realize how complicated this question is. A good Mortgage Banker will ask questions, listen carefully, ask more questions and then, with the input from the client – decide what the best range of purchase should be for them to feel good and have a reasonable expectation of being able to attain an approval. This helps everyone, including the realtor, work with the right expectations when offering on potential home purchases.

Of course, there are folks who are going to be stretching to get the home they want in their area. This is either due to down payment funds available, income or debt load that eats up buying power. Their first home will likely NOT be their dream home, but, just the first step into homeownership that will allow them to build equity and eventually move on to the home that is closer to their dream. No one gets anywhere without taking that first step. My job then is to explore creative ways to help them stretch their dollars – perhaps a gift from family to have a bit larger down payment? Utilizing a first-time homebuyer program (FTHB) to lower their rate and mortgage insurance costs. Do they have a 401K? Perhaps they can take a loan from that to reach better buying power.

Again, this all takes detailed conversations upfront to be sure that everyone understands the parameters of an approval and that the clients are comfortable with their choices. This is why I highly encourage my partners and clients to get in for a conversation with me as early as possible. This gives us all time to absorb the info that is being shared and to make the best decision all the way around.

Take a look at our mortgage calculators here!

Shelley Ann Covington | NMLS ID# 102076

Branch Manager/Mortgage Consultant

Penrith home Loans LLC

11411 NE 124^th Street, Suite 110 | Kirkland, WA 98034

Fax 425.823.8425 | Cell 206.255.5814

shelley.covington@penrithloans.com| https://www.penrithloans.com/consultants/shelley-covington

“The greatest compliment a client can give me is to share my name with friends and family”

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Western Washington Real Estate Market Trends

Q1 2022 Gardner Report

Western Washington Real Estate Market Update

Western Washington Home Sales

Western Washington Home Prices

Mortgage Rates

Western Washington Days on Market

Conclusions

How do I Sell a Rental Property with Tenants?

Option 1: Wait for the Lease to Expire

Pros

Cons

Option 2: Sell with Tenants in the Home

Pros

Cons

Landlord Solutions

Review Lease Agreement

Month-to-Month Lease

Fixed-Term Lease

Messaging and Delivery

Be Respectful

Offer Your Tenant the Chance to Buy

Go Over the Details

3 Factors to Consider When Evaluating an Offer on Your Home

1. Certainty: how qualified is the buyer?

Is It a Cash Offer?‍

How Financially Secure is the Buyer?‍

What Are the Buyer Contingencies?‍

2. Speed: How Soon Does/Can the Buyer Want to Close?

What is the Closing Date?‍

Does this Date Align with Your Timeline? ‍

How Flexible is the Buyer on Timing?‍

When Does the Offer Expire?‍

3. Price: How Much are They Offering?‍

Are the Buyers Offering to Pay for Any Closing Costs? ‍

Are the buyers requesting a home warranty?‍

Are the buyers offering a leaseback at no expense?‍

One: Appropriate Outdoor Space

Two: Fencing

Three: Shade

Four: Flooring

Five: Neighborhood Noise

Six: Doggy Nook

Western Washington
Real Estate Market Update