There is an article that says Commercial Real Estate is the bright spot in Seattle. We have a lot of commerce here. We are the gateway to Asia, have many high tech firms, top retailers, and manufacturing. There is a lot to like in Seattle.

South Lake Union is being developed as reasearch facilities, and Amazon has moved in there. That is a lot of space for expansion next to a down town core that has been a low priority for development because of heighth restrictions that were just lifted a few years ago. A lot of the jigsaw puzzle that makes up a vibrant commercial market place is still very much up in the air. We have a lot of room to grow.

Growth potential is one part of a value. It implies scarcity. Scarcity is one of the things that increases rents. Rental income is one of the key factors in the value of commercial property. The higher the rent the higher the value the property has, in theory. There is also costs for getting that rental income. Some properties are in disrepair, or obsolete. Some properties have very high expenses, like taxes, or utilities.

Some commercial properties, like the Smith Tower, have a historic, or prestige value that is much harder to calculate.

We will explore more about the value of all properties here on this site. Many values are inner related. Job centers, transportation, and amentities play a big role in the values of residential housing units.

A Short Sale has specific policy, and procedures. The seller owes more than what the property will sell for at Fair Market Value. It would have to sell for less than the mortgage amount. That is the “Short.” In order to qualify for a short sale the seller must demonstrate a financial hardship, like death, divorce, or medical condition. It’s changed a little bit now to include job loss, and loss of income.

The question that comes up the most often is if these properties, which are called “distressed” are worth buying. The answer is it depends on the property.

REOs, and Short Sales are getting to be consistent as 25% of the Real Estate market place. That’s a lot by historic standards. They are usually a small per cent of properties for sale, and a specialized purchase.

They are now so common place that I’m saying they are the standard of Fair Market Value.

The fact is that we are in a declining Real Estate market. This has been a long term decline that looks like it will continue for another couple of years. Rather than wait for a seller to lower a price to where you would want to buy, you can make an offer.

The etiquette of making a low offer is to make a reasoned offer based on tangible facts about the economy. I’m throwing that in there because many people want to use the fact they can’t afford a property as a rational for making a low ball offer.

I use the market trends, and where the market is headed as a starting point. It helps to have well qualified buyers who have financing approval. It’s always good to have likable buyers, but really it’s also important to have distance.

I’m going to make a leap that this post would be read by principles in a Real Estate transaction rather than agents.

We are in a difficult market place. Many of the old rules of how business was conducted even a few months ago no longer apply. It’s important to make the best of any transaction. Keep in mind that both buyers, and sellers are making sacrifices. Make your concessions in good faith.

By chance I saw the agent’s sign for a Broker’s Open in my neighborhood, and stopped in to ask about the other listing. I went through the house, and figured in my mind it would be in the $500K range. It’s listed for $479K. The owner bought it in 2007 for $600K and some change. The owner will bring the money to close. The owner of the $1.1 Million dollar house owns it free, and clear.

After some kibitzing, and pleasantries I was trying to calculate the odds of an agent having two great properties listed at fair prices.

In all the multiple offer mania there seems to me a lot of houses that are just sitting on the market. Another one was pointed out to me today in Ballard that even a few months ago would have had a bidding war. Today it’s waiting for next Sunday’s Open House.

For that matter I’m waiting for another property to close that did have multiple offers in the same price range of $475K. It was a price that made no sense to me at all, but it went.

I’m wondering why the market place we have, right now, is so fickle.

The observation I would make today is about how the area can handle the price of a major remodel. The location is great, and the area was built, by my estimation in the late forties, and early fifties. There are some properties that are older, and some were completed in the 1960s. It was obviously built up after the University was formed. The lay out had to have been established at roughly the same time though. 

There is a street named after Vassar college that has another extensive remodel project that is just finishing. I wrote about another home on the same street about three blocks away. In this particular case the home owners purchased the property with the idea they could remodel to fit the criteria they were looking for. 

I met the owners today and the wife made the comment that they could sell the property today for what they have into it. I just ran some numbers on the home, and in my opinion she is right.

There are very few neighborhoods that have this type of luxury in value any more.

It happens to be a million dollars, but that is irrelevant to what it’s worth. It’s worth much more.

The concrete work is top of the line. It is the focal point of the curb appeal. Many people are probably more attracted to the cedar shake siding, with tight black trim, but for me the concrete gives you the feeling of crisp lines. This is a place of substance. Your walk in gives you every indication that some one spent a lot of time on detail.

Once you enter it feeling a little more normal. It takes a moment to adjust. You can see the house, but the detail is a little muted. You can see the kitchen, it is meticulously done, much better than anything you have seen, but it seems kind of plain from the doorway. You may even be standing in the kitchen before you see the yard beyond. Then the whole experience once again anchors you into the idea that this is exceptional.

While you stand there looking at the yard, with the concrete, sports court, standing fireplace with Tudor detail, the metal sculpture, you begin to sense the stair case to your left. it’s just a sense until you move that direction, and see the master bedroom. The vista from the open stair case, and bedroom could have you anywhere in Europe.

Below the high ceilings, finishes, and expanse are lit by the windows in the stairs case. You have to move to the front of the house before there is a sense you are below ground. Once you get to the garage, that has wood paneling, the good 1950s kind, you forget about it being a basement. It’s extraordinarily detailed, in every way.

Once you are back upstairs the remaining two bedrooms, and bath, even though they are spectacular, seem kind of routine. There is a folding stairs in one bedroom with a child’s play area in the attic that is expertly finished, with operable skylights.

Now for the nerd factor that is all me, the furnace is in the closet in the attic play room. This is where you know that every little detail has been thought out, and considered. There are two furnaces, one for the main floor, and one for the lower level. You can also see that they sistered in some supports, and the opening for the stairs are anchored with metal brackets.

This is a work of art. It would be another example of properties worth owning. It’s worth the price as a whole, but it is also a massive investment in minute detail.

The back yard is spectacular. The current owner certainly made an oasis of the large back yard with Southern exposure. That part is worth keeping. The rest of it has to go. It may have a foundation to work with. There is no basement, just a tall crawl space.

Using the rule of three the house built on the lot would need to be at least a milion dollars. The neighborhood can support that so maybe there is a chance for a sale. I was just shocked by the price.

I have more information on www.FixerFixer.com about foreclosure because they used to be bargain properties. Now they compete head to head. This shows how much prices have declined.

As an example a house down my street is a foreclosed property listed at $580K. It’s 2700 sq ft so a little over $200 per sq ft. It’s completely tricked out. Marble, and granite appointed, radiant in floor heat, new windows, doors, kitchen, sauna, roof, siding, floors, and carpet. The lot supports two, two car garages and two storage sheds complete with electricity, and one with water.

Four blocks away on the same side of the street is charming home with the same number of bedrooms, just as large. It’s $540K, soon to be $525K, next to be $499K.

Some people say that the foreclosed home is putting down ward pressure on the other home that is listed. The fact is the foreclosed home sold in a day, and the other home is going through price reductions.

Contrary to popular thinking, banks are not stupid, or bumbling along. In my opinion banks have always known the value of property. Just because banks, and investors lent more than properties are worth doesn’t make them stupid. They were playing to a different investment than lending practices. That’s a post for another time.

I’m just saying that now is a good time to look. It’s a good time to make an offer. We may still be 10% away from the true market pricing, but each property is individual.

OK, that was my reasoning, but I always forget about Loyal Heights, and the neighborhoods North of 65th. 59th is actually a demarcation point, but above 65th things change. I’ll spare you the twenty years of zoning wars between the meat head builders of rental units, and neighborhood houses. Above 65th was where the family home was preserved.

Above 65th all the way to 145th you will find well built solid timber homes. We were in a house this week where you could tell the builder built it for himself. It had all the usual stuff, of the Duffy tile work, mahogany trim, and doors, hard wood floors, and a sandstone fireplace. Everything was perfectly level, and you felt how solid the house was.

The other thing about all of Ballard is the South West Exposure. On Loyal Heights it’s a big expanse of flat so you feel the sun light all day, every day, even in the rainy season. There’s a whole gambit of housing styles with a penchant for those war era working homes. There’s no doubt though that the builder had money, the labor was skilled, and the materials the best.

I forget about Loyal Heights. It’s just a great family neighborhood that is a buffer between working class, upper class, and wealth.

A second thing that he brought up was a shadow inventory of 7 million housing units, and I pointed out that the Census Bureau puts the number of vacant homes at 18 million. We were having a little back, and forth about housing values, more specifically the value of new construction.

I like older homes, and think they will maintain value, longer than new construction. Even though we have construction costs that are fairly well set, there are still many new units that are selling for below what it cost to build them. Older homes, in more established neighborhoods, have a tendency to hold value no matter what the economy does.

I’m going to point out that established million dollar homes increased the most in value, declined the sharpest, but on a straight line of appreciation are still performing better than the McMansion counter parts. Some people claim that is because of the increased lot size, and I’ll concede a point to that, but there are many five acre tract McMansions.

The best way I can describe it is if you are buying a Chevrolet is it better to buy a 1957 Bel Air, or a new Monte Carlo?