If you’re shopping for new construction condominiums in Seattle in fall of 2009, here are a few things to keep in mind based on my recent experiences helping a condo buyer:

Expect large price drops for new Seattle condos and structure the offer accordingly.

You’re not guaranteed the result you want, but even with the general uptick in the Seattle housing market that we’re seeing right now the odds are still definitely in your favor.

Keep an ear out for ‘things in the works’.

Developers are using condo auctions as a way to sell large quantities of inventory and set a trend for pricing of remaining units at the same time. Current examples are Gallery in Belltown, and Brix Condos in Capitol Hill (both links now go directly to the auction website.)

Remember functionality and re-sale criteria when shopping for Seattle condos!

Regardless of how cool or famous the condo designer is, people need space to store their clothes, cook a meal, and fit a king sized bed comfortably into the master bedroom.  These are the major issues I hear about from buyers when they’re deciding to not purchase a property.

My client and I did a massive tour of multiple units in five new Seattle condo buildings a couple of weeks ago, and out of all of the ones we saw (one-level, loft and brownstone styles) there were only four units total in two buildings that we thought were worth considering. Most of the rest ruled themselves out with a small master bedroom, and one highly touted building had a master closet the size of a broom closet, with a washer and dryer stuffed into it to boot.

I realize that you can get away with more funkiness in Seattle than you can on the Eastside, but as I told my client, if you buy a place like that you have to be OK with your future target market for re-sale being the itinerant artist who only needs space for a pair of pants and an easel in the master closet. (Rule out most couples, and even many singles.)

Home buyers typically have an eye for at least some of these things, but I’ve found that most of them still need someone to point out the things they don’t notice that affect functionality and re-sale, and to back them up when they have a feeling that something isn’t right but they think they might just be too picky – usually they’re on target.

Walking out of well over a thousand homes for sale over the past 10 years and hearing exactly why my client will or won’t buy it is the best training for coaching people on re-sale value that I can think of.  You would think that building designers would be in tune to the same things, so it really surprises me to see new Seattle condo units with features that are deal-killers for many home buyers.  Fortunately there are some good ones out there too – it just pays to be picky!

Whenever you buy a home, even if it’s new construction, it’s a good idea to have the sewer line scoped.  That means hiring a sewer scoping contractor to check for damage by running a video camera down the line from the home to the street by means of a long steel cable.

In the Seattle area this typically costs around $200 to $300.  Considering that problems arising from sewer lines due to root intrusion, damage, degradation of materials, or simply poor installation can cost well into the tens of thousands of dollars (and are typically not covered by home insurance or the local utility company, since they usually fall outside the footprint of the home but are still on your property) it’s an investment well spent.

The company I recommend is Hydrophysics Pipe Inspection, owned by Tom Delamare.  Sewer scoping is all they do, so they know how to handle complicated situations such as having to remove a toilet in order to access the sewer line.  It also means that they have nothing to gain by diagnosing a problem, so there’s no potential conflict of interest.

Over the years I’ve found their service to be excellent – although I have to say I’m always secretly disappointed that we never get any great footage of a dead cow floating nonchalantly by (sewer lines are pretty boring, for the most part.)

You can schedule a sewer scoping with Hydrophysics at (425) 775-8445 or (866) 775-8445.

The New York Times ran an interesting article today about the growing problem of people unknowingly buying homes that were used as methamphetamine labs.

The negative health effects are staggering – you don’t have to look around online much to read about kids repeatedly taken to hospitals with mysterious breathing problems, dead pets, and even a poor guy who released so many toxins when he steam-cleaned the carpet of his newly purchased home that he ended up with permanent brain damage.  Remediating a meth-contaminated home typically costs $10,000 to $30,000, and can cost up to $100,000.

Here’s a link to the article, called “Illnesses Afflict Homes With a Criminal Past.”  They reference another useful site, www.methlabhomes.com, started by a woman whose son unknowingly purchased a meth-contaminated home a few years ago.

(Many states, including Washington, requires sellers to disclose if they know that their home was used to manufacture illegal drugs, but not surprisingly home buyers often find out too late that the seller was not honest.)

Please note!  When you read most of these stories you hear a recurring theme: that once they contacted the police department and/or talked with the neighbors they found out that it was pretty commonly known that the home was a meth lab.

I always encourage my home buyer clients to stroll the neighborhood on a weekend and after work to catch neighbors at home, and with the recent increase in the number of meth lab seizures it’s probably smart to be on the safe side and check for any police reports on the property as well.

The New York Times published an interesting interactive graph a few days ago, showing home prices compared to median incomes in major U.S. cities since 1979.

Moving your computer mouse over the lines (click on the image above to go the the live New York Times graphic) shows the information for each line as you pass over it.

Where are home prices headed?

On the one hand, local real estate has been surging in the month of April, as I’ve mentioned in previous posts.  Extremely low interest rates, the First-Time Home Buyer Credit and home prices that are now nearly 20% lower than a year and a half ago make it a much more buyer-friendly market.  The first-time buyer price ranges are especially active.

On the other hand, we’re seeing some economic news that I think is going to take some time to filter down.  The IMF recently revised its global economic forecast: in January it predicted that world output would increase by .5% in 2009, and it now expects a 1.3% global decrease.  Stories like this, along with other more U.S.-based news makes me think we’re not necessarily at the beginning of the end yet.

The home buyers I’m working with now don’t necessarily think we’re at the bottom of the market, but are taking advantage of hefty price drops and prime lending conditions to purchase homes they plan to stay in for a while.  I think that’s a healthy way to approach this market.

King County just introduced new regulations requiring all sellers of properties with onsite sewage systems to have their on-site septic system inspected by a King County Licensed On-Site System Maintainer (OSM). The inspection must be completed and a copy of the report must be given to both the buyer and Public Health before the transfer of title.

This applies to any transaction for which mutual acceptance occurred after January 19, 2009.

If you’re thinking that people typically already had septic inspection prior to selling a home, you’re right.  One of the main differences is that the seller now needs to pick an inspector from the King County Licensed On-Site System Maintainer list, and the inspection goes not just to the buyers but also to Public Health.

Here’s a link to the main information page about the new regulations:

http://www.kingcounty.gov/healthservices/health/ehs/wastewater.aspx

And here’s the page that has the link to the list of King County Licensed OSMs:

http://www.kingcounty.gov/healthservices/health/ehs/wastewater/realestate/sellers.aspx

I’ve had good results with Earthwise Excavations (Postema Enterprises) – 425-486-1664.

By the way, don’t forget!  Regardless of who inspects, it’s important to get them to test the drainfield performance if at all possible, with a drawdown test or some other method applicable to that specific type of septic system.

Appraisals that used to be ordered and completed within a week are taking two weeks or more these days, which means that a typical closing time is changing from 30 to more like 45 days. Just something for you buyers and sellers to keep in mind when planning ahead and deciding on contract terms.

Here are some stats showing Seattle and Eastside real estate activity through July 2008.  The following graph shows the total days on market (CDOM) for houses and condos in King County, beginning in May 2007.  As you can see, average listing time before a sale has nearly doubled during that time.

The triangles show that the percentage of sales price compared to original listing price has dropped from 99% to 94%.

The following graph shows the months of housing inventory remaining during the same time period.

The change from 3.3 in May 2007 to 8.6 in July 2008 doesn’t mean that there are 2.5 more homes on the market, since the remaining months of housing inventory evaluator is based also on the number of pending and closed sales in any given month.

For example, in May of 2007 there were 11,188 homes for sale, 3670 pending sales and 3420 closed sales.  In July 2008 there were 16,643 homes for sale, 2248 pending sales and 1931 closed sales.

Prediction:  We’ve had the typical summer slowdown along with some downbeat housing news over the past six weeks, so I expect the August numbers (which reflect closings of homes that went off market in July) to be even weaker.  However, I’d love to be wrong.   Those stats are due out in mid-September. 

There’s no question that the Puget Sound housing market has slowed down since summer of 2007, but home buyers still need to be prepared for multiple offer situations – yes, even now!

It all depends on the home and the price. While there’s far more inventory on the market than there has been in recent years and buyers are finally enjoying a break from a seller’s market, interest is high and some desirable, well-staged homes that are priced for current conditions are going in bidding wars.

The most recent spate of multiple offers, in Seattle and on the Eastside (going by my personal experience and reports from agents in my office) started three weeks ago and lasted two weeks. This past week was much quieter, for some reason.

Note 5/7/08:  What I should mention is that we’re seeing a fair number of multiple offers that don’t go above list price, which was almost unheard of a few years ago.  It shows that buyer interest is strong, but they’re also cautious about the market and homes need to be priced accordingly.