Buying a Condo: Pros and Cons

The Pros and Cons of owning and living in a condo should be considered carefully.

By Ken Urman, Realtor

When you make the decision to buy a new home, you will make many choices and decisions. One of the first choices you must make is whether to buy a single-family home or a condominium. Each

option has clear – and less clear – pros and cons. For most people, the differences between living in a single-family home and living in a condominium are significant. When considering buying a condo, evaluating the pros and cons is very important.

Let’s face it: the perfect home for your best friend might not be the perfect home for you. To help you make that choice, here are the most commonly discussed pros and cons of buying a condo.

The Pros of Buying a Condo

Buying a condo is like living in an apartment that you own, right? No annual rent increases, on-site maintenance, and an exterior you don’t need to maintain. Maybe.

1.       Maintenance. Having other people who take care of all maintenance issues is a big benefit of living in a condominium. The knowledge that you don’t have to do maintenance tasks is a huge plus for people with limiting health conditions, people who are very busy with work, those who travel frequently, and first-time homeowners. What is more, you do not have to worry about maintaining the landscaping. Having few, if any, maintenance tasks to perform also means you do not have to invest in all of the equipment necessary to maintain a property.

2.       Amenities. There is no question that condos offer great amenities. You have access to the pool, a fitness center, community activities, and (often) a community clubhouse that is available to you when you want to entertain. Many of these amenities can be a bit too pricey for a number of average homeowners. In addition, these amenities are available to condo owners without obligation to maintain the facilities or plan the activities.

3.       Security. Most condominiums are in buildings with locked entries or in gated communities. Many condos also provide either a doorman or a professional security guard. When you live alone or your physical condition makes you feel “vulnerable,” the added security is important. In addition, there are many people nearby that you could call upon in the event of an emergency.

4.       Affordability. Condominiums typically carry lower price tags than single-family homes. They, thus, offer a solid initial step into owning your own home.

5.       Elevators. Many condos are in buildings with elevators. There is no need to carry groceries up steps. If stairs present a physical challenge for you, life in a condo solves the problem.

6.       Lower Utility Bills. Living in a condo (rather than a single-family home) often incurs lower utility costs because the space is smaller and because many accessibility features and amenities are powered by community utilities.

7.       Urban Living Option. Many people are again choosing urban living. They can walk where they want to go or use public transportation. Good restaurants and great shopping are close.

8.       Predictable monthly maintenance or condo fees. Most homeowners do not have the same level of predictability in their budget.

9.       Lifestyle orientation. Some condo communities are geared to a particular lifestyle. A particular community might be geared to the singles lifestyle or to a retirement lifestyle. This typically means that the community offers activities and amenities desirable to those who have chosen that lifestyle.

These are wonderful arguments for buying a condo. However, like most things, there are some issues associated with condo ownership. It is important to understand the cons, as well as the pros before you buy.

The Cons of Buying a Condo

The very things that make condo living attractive to some people can be unattractive to others. Some of the most frequently mentioned “cons” of condo ownership follow.

1.       Special Assessments. Some condominiums are “underfunded.” This means that they do not have sufficient reserve funds for capital improvements and repairs (new roof, painting, or concrete repairs). When a critical need arises and the reserve is insufficient, condo managers sometimes find it necessary to impose a special assessment upon condo owners. This can be both costly and inconvenient for your budget.

2.       Condo Fees. The security staff, maintenance costs, pool maintenance and fitness center equipment are paid with funds collected from condo owners in monthly condo fees. Depending upon the size of the community, the level of luxury provided, etc., monthly condo fees can range from $100 to $1,000 or more. Not only should you know what the monthly fees are at the time of purchase, you should also know the rate at which fees typically increase from year to year.

3.       Non-resident Owners. A number of condo owners do not live in their condos. Instead they rent their condos. Some condo associations have rules that govern whether you can rent or how many units can be rentals at one time.

4.       You do not control the maintenance and repairs schedule.

5.       You might be compelled to pay for amenities you will never use.

6.       You must abide by community rules.  Some condominium units are noisier than others; some units offer less privacy than you might like. Possible restrictions may be in effect on noise, parking, pets, smoking, window coverings, and other details.

7.       The Homeowners Association. Many single-family home communities also have a homeowners association. These groups represent all condo owners in a community and are authorized to make decisions that affect everyone. Many of these requirements will be innocuous, some may be irritating. If you can accept most things, you are less likely to be bothered by the association or their rules.

8.       Less space in many units. Many condos are somewhat smaller than single-family homes. Without a yard, they also typically offer very limited opportunity to make your surroundings your own.

9.       Condos offer less privacy than single-family homes. Owning your condo does not preclude you being bothered by noise from surrounding units. You may also assume that if you can hear your neighbors, they can also hear you.

There are pros and cons of buying a condo. There are also pros and cons of buying a single-family home. People have different needs, lifestyles, and expectations.  The choice between a single-family home and a condominium home might be one you are prepared to make. 

If you would like to discuss the choice with an objective outsider, please call me. I have helped many potential buyers make this difficult decision. I can also help you place your decision within the context of the current market in our area. 

Number of Million Dollar Homes Tripled

According to a recent study by Trulia, the number of million dollar homes in the Seattle metro area has nearly tripled in the last four years. According to the study (of all homes in the metro area – not

just those for sale at a particular time), In May 2012, 2.6 percent of homes in the Seattle area were valued at $1 million or more. In May 2016, 7.0 percent of Seattle metro homes are valued at one million dollars or more. This means that in just four years, the number of million dollar homes nearly tripled.

This increase in the number of million dollar homes also moved Seattle from 20^th to 14^th in the nation for the largest number of homes valued at $1 million or more. The majority of these million dollar homes are waterfront properties or other homes with views of water. These tend to be focused largely around Lake Washington, Lake Union, and Puget Sound.

Why is this Happening?

Several factors have converged that have driven prices higher.

·       One factoris the number of wealthy Asians who are looking for luxury homes. Their specific needs in these houses have led them to focus on large homes or to add specific rooms and amenities to the homes they purchase. These buyers also clearly want luxury homes.

·       A second factor is that Seattle has become a major tech hub in the U.S. This expansion of the tech industry locally is drawing people to high-paying jobs. Further, many tech workers who find themselves priced out of the San Francisco and Silicon Valley market, are drawn to Seattle by the relative affordability of housing.

·       A third factor is that Seattle has limited opportunities for expansion of housing. There is a limited amount of land available. To accommodate the influx of tech and other workers, the best use of available land is the construction of apartments and condos (in every price range). Although apartments are being built, few of the buildings have made the conversion to condos.

·       A fourth factor confronting Seattle area buyers and home values is the very limited number of available properties on the market. As I have pointed out in my blog posts for the last year, extremely low inventory of available homes drives intense competition for the homes available, often ending in bidding wars. The competition drives home prices higher. Ever increasing prices then becomes a

factor for those who might want to sell, creating fear that they will not be able to find another home before they have depleted their resources.

What does it Mean?

Based on my recent experience with two luxury homes listed within the last month is that demand is just as strong as it is for homes priced at other levels. We should keep in mind that there is no single definition of luxury real estate. Whether we define luxury property on the basis of price, custom build, or amenities above the average home, there is still demand for these million dollar homes. On Mercer Island, a luxury home tends to be defined as a home priced at $1million or more.

One of the homes listed in the last month was on Lakeview Lane on Mercer Island. This home has a contract pending today. The other million-dollar-plus-home, on Avalon Place on Mercer Island is currently generating strong interest. The migration of higher-paid tech professionals coincides with the growth of tech centers and demand for luxury Real Estate.

Other neighborhoods experiencing dramatic growth in million dollar homes include:

•        Broadmoor, a gated community on a Seattle golf course, has the highest concentration of homes valued at $1 million or more (97 percent).
•       The Capitol Hill neighborhood saw the proportion of million dollar homes increase from 11 percent to 24 percent.
•        East Queen Ann and West Queen Anne saw an increase from 12 percent to 30 percent.
•       Belletown saw an increase from 3.6 percent to 8.4 percent.
•       Fremont’s increase was from 0.7 percent to 6.1 percent.

The Bottom Line

The number of million dollar homes in the Seattle metro area has increased significantly during the last four years. We should keep in mind, however, that the median price for a single-family home in the area increased from $425,000 in 2012 to $637,250 today.

Is this reason for alarm? Absolutely not!

Homeowners should be aware that the value of their homes has increased in the last four years. This appreciation in value can be expected to pay off whenever they decide to sell.

Those who want a single-family home will be able to find an affordable option, even if that option is farther from the job hubs.  As construction and use of the regional rapid rail system moves forward, I believe commuting to the economic hubs will be far less onerous than it now seems to some buyers.

I believe that there will be buyers for the million dollar homes in our area. I also believe people will be able to find a home they can afford. 

Remember, for every million dollar home in the area, there are 13 homes that cost less than $1 million.

If you are interested in selling or buying, please call me. I am helping people sell and buy homes in this market every day. 

Seattle Loves Craftsman Homes

By Ken Urman, Realtor

When working with home buyers, I’m frequently asked why Seattle loves Craftsman homes with such devotion. One of my answers – the short one – is that they have excellent bones, they are the

best style to renovate and update, and that they are my favorite style of home because they are always classic and appreciated.

Craftsman homes can be found in almost every neighborhood of the Seattle metro area. Several factors converged in the region to make the style extremely popular. The American Craftsman style was developed beginning in the final years of the 19th Century on the east coast. These homes were designed to fit the lifestyle of working class and middle class families.

 An “explosion” of American Craftsman homes in Seattle began just after the Alaska Yukon Pacific Exposition in 1909, according to Larry Kreisman, program director for Historic Seattle. This coincided with the birth of the street car and the development of “the suburbs.” Transportation out of the city center made it possible for workers to escape the city and own a home.

This “explosion” of American Craftsman homes also coincided with a population explosion in Seattle between 1900 and 1910. The City’s population tripled from slightly more than 80,000 to more than 230,000 people. There were not enough rooming houses and small apartments in the city center to accommodate this growth.

As the popularity of the American Craftsman style home was growing, so was the ability to own one of these homes. At the time, land was cheap in the “suburbs.” More important, something unique was occurring in home construction. To be sure, home builders were constructing homes in this style and selling them to those who wanted them. The new options in home construction made it possible for potential homeowners to invest themselves into their houses by building from designs published in magazines or by purchasing a home kit from the leading catalog stores Sears and Montgomery Ward. These kits were shipped to the west coast and included everything necessary to follow the detailed instructions and build a Craftsman style home. Not only could home owners do much (if not all) of the work themselves, they could also customize and make their homes truly unique.

At this time, on the east coast and in many large cities throughout the nation, high-rise apartment buildings (often tenements) were becoming the norm for city living. The ability to find a job and live cheaply, even in one’s own home was an attractive benefit of moving to Seattle.

American Craftsman homes were part of a critical time in Seattle’s history. Their locations, their style, their uniqueness, made them part of the very fabric of the City – an essential part of its ethos. Over the years since the introduction of Craftsman style homes, some of these homes have disappeared. Others have been maintained and preserved as they were originally built. Others still have been expanded, updated, renovated or even redesigned. Most of these homes have remained as a part of the essence of Seattle living.

When we look at the history, the philosophy of Craftsman design, and the beauty and adaptability of Craftsman style homes, it is no secret why Seattle loves Craftsman homes. It should not be surprising that homes designed for family life that incorporate the work of craftsmen and are both beautiful and utilitarian should be loved and desired by the people of Seattle.

I would be delighted to help you buy or sell a Seattle metro Craftsman home. Call me. And remember, I’ll bring the coffee!

The Seattle Tech Migration

By Ken Urman, Realtor

I have commented frequently during recent months about the number of new jobs bringing people into the Seattle-Bellevue-Lake Washington area. These people are looking for, and buying, homes

and condominiums. They are contributing to the fierce competition for available properties in and near the job centers. Many of the people moving to the Seattle metro area are part of the Seattle tech migration.

There has been a “tech boom” in the Seattle area during the last few years. In fact, Seattle ranks second to the San Francisco Bay area among the nation’s four tech hubs.

Although people have been migrating from California to the Seattle metro for many years, the rate of the migration has increased. The source of the migrants has also narrowed in many cases to the San Francisco Bay area, specifically Silicon Valley.

Why Is the Tech Migration Happening?

As Silicon Valley became the nation’s primary tech hub, the Tech Giants like Google, Facebook, Apple, and others paid higher compensation and offered more perks to get top talent. The talent brought into an already expensive area found housing costs continuing to rise. The result was a cycle of rising compensation driving higher housing costs driving higher compensation.

As some employees grew tired of the ever-increasing housing costs, they moved to more affordable surrounding areas, with longer commute times. Eventually, these prices began to rise, more people were commuting, and commute times grew longer. According to one report, between August 2014 and August 2015, home prices increased 13 percent, rent increased 12 percent, and the average

Silicon Valley commuter spent 67 hours in traffic. Recently, the situation in Silicon Valley became so desperate that some of the large tech companies began supporting the construction of high-density housing, with some even lending their names to the structures.

The average software engineer was paid $132,000 in 2015 in Silicon Valley (according to recruiting company Hired). In 2015 in Silicon Valley, the median home price was $870,000. According to Zillow, the median home price in San Francisco is now $1.2 million.

People soon began to realize that their money would go farther and their quality of life would be better in other cities. Please recall that Google recently opened a facility in Seattle, for example. Based on differences in the cost of living in the various locations, Silicon Valley’s $132,000 when adjusted for local cost of living is $164,000 in Seattle and $195,000 in Austin, TX (another tech hub). The median home value in Seattle ($533,000) is half that of San Francisco. Austin’s median home value ($290,700) is one-fourth of San Francisco’s.

What Does It Mean For Seattle?

The Seattle tech migration has been going strong since 2012. Although Californians have been migrating to Seattle metro in large numbers since 1999, according to the Washington State Department of Licensing, the number of license migrations from California rose from 25,619 in 2012 to 37,624 in 2015.

Already, these migrants have impacted the local housing market, competing for available properties and contributing to the increase in local home values. Although Seattle has not been the top destination for tech workers leaving Silicon Valley, Seattle has already become a major tech hub. Software developer is the second most common job today in the area, with 45,312 workers. The average salary these workers earn is $119,000.

While many homeowners are delighted to see their homes bring high prices in the market and many community leaders are happy about the growth of the local economy, others are concerned that the situation in Silicon Valley will be repeated here. They point out that there is limited opportunity to develop additional housing now.

I believe that with strong leadership and thoughtful planning the Seattle metro area can continue to accommodate growth in the tech sector and provide commuting options that will permit growth in some of the surrounding areas. 

Selling in Seattle’s Spring Housing Market? You Need a Plan . . . and an Experienced Realtor

By Ken Urman, Realtor

Are you planning on buying or selling in Seattle’s Spring Housing Market? If you are, you need a plan  . . . and an experienced Realtor to achieve your goals. The Seattle Metro area, including Bellevue, Mercer Island and the communities surrounding Lake Washington, is already one of the hottest real estate markets in the country. The Spring peak selling season, beginning now, offers both unique opportunities and unique challenges for both buyers and sellers.

The Market

For the last few months, the local housing market has been extremely tight due to record low inventory and very high demand. Limited areas available for new development, strong reluctance on the part of homeowners to list their homes, and increasing demand for available homes have generated bidding wars for single-family homes and driven the prices of both houses and condos to pre-recession highs. Potential sellers have been reluctant to list single-family homes often due to fear they will not be able to purchase another home before their current home sells.  As the current trends continue, we can expect more first-time buyers to enter the competition for available properties.

The job market in the Seattle area has remained strong. This trend is continuing as Expedia and Weyerhaeuser move from their suburban headquarters to Seattle, Amazon opens a new campus in South Lake Union, and both Facebook and Apple open satellite offices in Seattle. The strong job market has driven increases in family incomes during the last five years, a trend that is likely to continue. The current and recent changes will also drive increased demand for homes near the job centers (mostly in Seattle) and for waterfront properties. Already, the median home prices in Seattle have risen 29 percent in Seattle, compared to a mere seven percent in the rest of King County.

Online real estate company Zillow conducted an analysis of the Seattle metro area housing market. They discovered that houses sell 20 days faster if they are listed between May 1 and May 15. They also sell for $2,600 more, on average. Zillow also found that area homes sell faster than the national average during this peak season. Finally, Zillow found that sales increase significantly beginning in March, increase somewhat more in April, and leap in May; June brings a decrease in sales, and July sales drop significantly. Sale prices increase by more than $5,600 from March to May.

Although I expect a number of sellers to decide to list properties this spring, like many market experts, I anticipate continuing low inventories of available homes, intense bidding wars for available homes, and a continuing lack of new housing options. In this market, the two things I believe every buyer or seller needs are a solid plan and an experienced, knowledgeable Realtor.

Home Seller Planning

Sellers also need a plan in intense markets like Seattle. Here are some important guiding insights to help you.

1.    .    Do not be overly aggressive when pricing your house for sale. If you price a home above market value, the home will typically sit on the market too long. When this happens, buyers tend to conclude that there is something wrong with the house.
2.            At the same time, it is not good to underprice the house. There will be potential buyers who conclude there is something wrong with the house. This approach could also make the home seem inappropriate for buyers who are looking for a home in the price range of a market price for your home.
3.           Sometimes, there is an advantage in listing a home further into the peak season, according to Zillow’s chief economist Dr. Svenja Gudell. Your listing might attract the attention of buyers who need to find a home and are willing to pay a premium for the property.
4.           Listen to the advice of your Realtor about when to list your home. He or she will have the intimate knowledge of changing market conditions to guide you in establishing listing price and deciding when to list.
5.       Ensure that your home is clean, freshly painted, and decluttered to make it possible for buyers to appreciate the features of your home. Work with your Realtor to identify and repair things that would make the home unattractive or become distractions for potential buyers.
6.       Resist the temptation to overprice your home. Marking down the price of your home after listing it will send a message that something is wrong with the property. Trust the knowledge and experience of your Realtor.

When selling in Seattle Metro’s spring peak season, you need a trusted Realtor to help you navigate the complexities of a very hot market with low inventory and abundant opportunities for costly mistakes. If you are ready to  sell, call me. I’m ready and willing to help you sell your current home. 

Available: 26 Historic Homes at Fort Lawton

By Ken Urman, Realtor

The development of the 26 homes at Fort Lawton is a fascinating story of history, a unique living opportunity and restoration. These homes, which were built between 1899 and 1935, have been closed to the public for decades, despite their location in the center of Seattle’s Discovery Park.

They are similar to the military housing of San Francisco’s Presidio.

Buyers will have the unique opportunity to live in the middle of a large park (think Central Park) that has miles of trails and beach front. This is a unique and rare opportunity to own an historic home in a very special location. Owners of these homes will be participants in the revitalization and preservation of this important historic Seattle neighborhood. All of the homes are on the National Register of Historic Places.

The houses were built in the Colonial Revival Style. They range from two bedroom homes to six bedroom estates. They feature high ceilings, thick moldings and refinished hardwood floors, as well

as tiled fireplaces, oversized windows, and wraparound porches. The exteriors of these homes preserve their historic colors, styles, and architectural details (as required of all historic structures).

The interiors have been renovated to incorporate the amenities and luxuries expected in a distinctive contemporary home. The homes range in size from 4,017 to 6,600 square feet. A new two-car garage has been added behind each home. All of the homes offer spectacular vistas of Puget Sound, the Olympic Mountains, and the acres of protected parkland surrounding them. The homes are located in two “enclaves” – Officers Row and Montana Circle.

The developer has done an outstanding job of preserving the historical nature of the buildings and grounds. For example, the original double hung windows were fully restored. They give the homes great character. Owners will be restricted from installing different windows or from making any other significant changes to the exterior facades. At first, I thought this was a negative, and then

realized that single-pane windows are a small sacrifice to make for the unique opportunity to live in one of these homes in such a unique environment.

In 1897, local citizens and governments donated 703 acres of land to the U.S. Army for a new artillery battery to defend Seattle and the south Puget Sound from naval attack. The base was to be called Fort Lawton. It was named for Major General Henry Ware Lawton (1843-1899. Lawton was a veteran of the American Civil War, the Indian Wars, and Spanish-American War campaigns). He was killed in action in the Philippines.

The fort opened on February 9, 1900 on a site that was redesigned for infantry use in 1902. In 1910, landscape architect John C. Olmstead prepared a design to include housing for officers and enlisted men. During the Great Depression, the Army offered to sell Fort Lawton back to the city of Seattle for the price of just one dollar. The city declined due to maintenance concerns.

World War II changed the use of the installation again. During the war 20,000 troops or more were stationed at the Fort at a time. More than 1 million troops passed through Fort Lawton both before and after the war. It was the second-largest port of embarkation for U. S. forces and material to the Pacific Theater during the war. The facility was also used as a prisoner-of-war camp.

The Korean Conflict brought another flurry of activity to Fort Lawton as troops moved to and from Korea. In the late 1950s Nike anti-aircraft missiles and Air Force radars were in use at the Fort. In 1968, the post was rejected for proposed defense upgrades. A few years later (1972) the Army

transferred 534 acres back to the city, which was dedicated as Discovery Park in 1973.

In 2005, the fort was included in the Base Realignment and Closure list for that year. Fort Lawton officially closed on September 14, 2011. The remainder of the fort property (except the military cemetery) was transferred to the City of Seattle in 2012.

You can learn more about the history of Fort Lawton on Wikipedia [ https://en.wikipedia.org/wiki/Fort_Lawton  ]

To learn more about the Homes of Fort Lawton, visit http://wonfortlawton.com/opportunity

If you are interested in owning one of the unique Homes of Fort Lawton, please give me a call. It would be a privilege to show you one of these homes.

4 Terrific Reasons to Be Bullish on the US Housing Market – And Especially Seattle’s Market

By Ken Urman, Realtor

During the last month, several people have asked me if it is wise to continue investing in the housing market. My response has been a resounding “YES!” Several indicators point to a strong market for the foreseeable future. Our region’s economy is no exception.

The data for the Seattle-Tacoma-Bellevue area is compelling:

1.      Job growth in our area is remarkably strong. According to a report from Bright Media, a staffing agency, the Seattle metro area saw 168.44 new jobs per 10,000 residents. This places us at the top of the list of U.S. metro areas in job growth. The top industries for this area were professional services, health care, tech, financial services, and retail.

2.      According to a recent Gallup poll, the region ranked second in the nation for wage growth. Employees in the Seattle-Tacoma-Bellevue area saw salary increases of $4,320 between 2009 and 2012.

3.     To assess consumer confidence relative to the real estate market, one need merely look at the competition for available real estate inventory during the last year.

4.      Inventory of home available for purchase has been consistently tight. I’ve commented on this issue almost every month for the last year in my monthly market update (published in my monthly newsletter). Our area has abundant pent-up demand.

5.      Housing starts in our area – primarily for single family homes – is somewhat behind the national average.

A recent article published on Forbes.com by PIMCO pointed to “4 Reasons to Stay Invested in U.S. Housing.”http://www.forbes.com/sites/pimco/2015/10/02/4-reasons-to-stay-invested-in-u-s-housing/  retrieved October 6, 2015]  Some of the key points in the article are particularly relevant to our area.

      ·       The nation’s housing market is continuing to grow faster than the economy.

·       Strong job growth and rising consumer confidence will lead to demand for homes, even if mortgage rates rise modestly.

o   The U.S. economy added about 3 million jobs in the private sector during the last year.

o   About 750,000 of those jobs are in the 25 – 34 age cohort, which is near a 15-year high. This is the prime segment for first-time home buyers

o   The unemployment rate dropped by 2.4% in the last two years to 5.1%.

o   The authors expect these factors will lead to increased consumer confidence and a higher demand for homes.

·       Low inventories and rising pent-up demand.

o   Nationwide, home inventories are near 15-year low levels. 

o   In the last year, 1.5 million new households have been formed, yet less than 12 million new housing units have been added.

o   About one-third of people aged 18-34 are living with their parents.

o   This translates to a lot of pent-up demand at a time when the nation has been significantly under-building relative to long term demand.

·       Banks are more willing to lend and demand for credit is expanding.

o   Mortgage origination at all four of the largest U.S. banks rose by double digits.

o   Consumer confidence is rising.

o   A large number of previously foreclosed homeowners could become eligible to buy a home in the next five years.

o   These factors are expected to result in increased supply of credit, which should, in turn, support the U.S. housing market.

·       Relative affordability.  The cost of owning a home is still remarkably low both as compared to the cost of renting and as compared to historical housing affordability.

When all factors are considered, it is clear that the housing market will remain strong in the Seattle-Tacoma-Bellevue area. It is a great time to sell, a great time to buy, and a great time to invest in real estate. If I can be of assistance to you, please give me a call. Let my experience, professionalism, and tenacity help you make the best possible real estate transaction.

Top 6 Factors in Pricing a Home for Sale

By Ken Urman, Realtor

To many people, the factors that contribute to the way a home is priced for sale seem mysterious. In fact, this is one of the most common questions asked by sellers and by some buyers. The seven factors considered by most realtors and appraisers to set a sale price are actually not mysterious at all. However, there are many factors that affect selling price, and no two homes are identical.

It is important, first, to distinguish between the Listing Price (the price advertised and asked for the property), determined by the seller and his/her Realtor; the Offered Price (the price offered by a potential buyer), determined by the buyer and his/her Realtor; and the Sale Price (the final price negotiated by the buyer and the seller and their respective Realtors. The seven factors most commonly used in pricing a home for sale are:

(1)  Local Real Estate Market Conditions

In the Seattle-Bellevue-Mercer Island area today, these conditions are very important. We are currently experiencing a shortage of homes for sale and an abundance of potential buyers. In business terms, demand is far greater than the available supply. This is called a Seller’s Market. Typically, sellers are able to ask higher prices and find buyers willing to pay the asking price or more to own a desirable home. Sometimes, there are multiple bids for desirable available homes, which results in competition and even bidding wars. This is the first type of market.

The second type of market is called a Buyer’s Market. Under these conditions, there are typically more homes available for sale than there are buyers. Sometimes, either listing prices are reduced or homes remain available for some time, with some not selling at all.

The third type of market, a Balanced Market, is characterized by some equality between the number of homes for sale and the number of potential buyers prepared to purchase them. In terms of both buyer and seller interests, this is the most desirable type of local real estate market.

Other factors that can influence local market conditions include:

·       An event that affects the desirability of a neighborhood or region either positively or negatively (for example, Bellevue was ranked one of the most livable cities in the US in recent months)
·       Some change affecting major local employers, especially a leading employer moving to the area or leaving the area
·       Local Schools and their public rankings. 
·     Transportation improvements. For example; new light rail lines going into many areas.

(2)  Comparable Market Analysis

In setting a listing price for a home, many Realtors conduct a Comparable Market Analysis (CMA). This process identifies homes that are “comparable” to the seller’s home and compares the “selling price” of these homes. There are two primary reasons experienced professionals use a CMA: first, it helps to establish a base price based on what buyers are willing to pay for a comparable home at the current time, and, second, it helps the Realtor keep the listing price within a range of what lenders will accept as a reasonable price for the home.

Mortgage lenders typically look for at least three comparable home sales occurring in the last 12 months at roughly the same price. If a selling price negotiated between buyer and seller is too high, the bank may not approve the loan. However, your local Realtor will often have a better sense of the current market climate than an appraiser.  When lenders challenge the price, the seller’s Realtor can usually explain the pricing justification and resolve most problems with lender appraisals.

(3)  Factors Based on Location and Neighborhood Characteristics

We often hear the phrase, “location, location, location” in connection with home prices and desirability. In calculating the price of a home, location refers to the geographical location of the property. Is the property located across the street from a busy shopping center, or at the edge of an industrial/manufacturing zone? Is the home within city limits or in a suburb? Is it located on a busy road or is it on a quiet street in a residential neighborhood. Is it proximate to an airport, railroad tracks, high-voltage power lines, or an expressway?

Characteristics of the neighborhood in which the home is located also influence price. Is the home located in an older, established and thriving neighborhood or in a decaying neighborhood? Is it located in a high-crime area? Is the neighborhood considered desirable? Is it typically populated by white collar executives and professionals, by middle class people, or is it a subsidized neighborhood? How are the schools rated? What local amenities are nearby (parks, shopping, hospital, entertainment venues, restaurants, etc.)? Is public transportation available? How does the tax rate for the neighborhood compare to other neighborhoods? Is the home on the waterfront? Does the home offer spectacular views?

All of these location and neighborhood characteristics can affect the listing and selling price of a home in any area. An experienced professional Realtor is a great benefit in assessing these factors and how they affect pricing due to his/her extensive knowledge of local communities and neighborhoods.

(4)  Upgrades and Other Special Features of the Property

No two houses, even if built with the same floor plan, are identical. They might be differentiated by features of the yard or upgrades and additions to the home. These features are important factors in pricing a home. If the upgrades and additions are desirable to potential buyers, at the time of the sale, they will influence the price upwards. If they are not desirable or are poorly done, they might influence the price downwards. The right upgrades to a home will also make it sell faster once it is listed.

Among the most desirable upgrades and additions to homes on the market today are:

·      Gourmet kitchen
·       Energy efficient windows, doors, appliances, roofing, etc.
·       Garage (usually attached)
·       Smart-home features
·       Decks, landscaping, outdoor kitchen
·       Upgraded bathrooms
·       First floor master bedroom or single-level living
·       Security systems

(5)  Motivation of Buyer and/or Seller

The urgency of the need or desire to sell or buy a home can also influence the selling price. Often, people who need to sell quickly (perhaps because they are being transferred to another city) are willing to make some concessions on listing price in order to make a quick sale. Similarly, some people who like a home and need to buy quickly will offer a higher price for the home they want if, for example, they want to move in before the beginning of a new school year.

Occasionally, sellers who are in no hurry to finalize a deal will overprice a home. The result is often that buyers overlook the home (because of price), and in time it becomes known as “the house nobody wants.” In this case, I typically advise the sellers to wait until they are motivated to sell before they list their home on the market.

(6)  Choice of Local Realtor

All Real Estate agents are not the same. Your choice of a local agent, whether you are the seller or the buyer, can become a factor in the price of a home. An inexperienced or incompetent agent can cost either party to a real estate transaction.

Sellers need agents who will do far more than list a property with the Multiple Listing Service and hope it is seen by the right person. A seller’s agent should price the house carefully, actively market the home, and be a strong negotiator on your behalf. In addition, I believe it is important to choose a full-time, experienced professional Realtor (a member of the National Board of Realtors) with a strong track record in the area, who is honest and creative in listing and selling your home and attending to every detail related to the closing of the transaction.

These are the top 6 factors in pricing a home for sale. If you would like to know more about how these factors affect the listing price of your home, please give me a call. I would be pleased to put my experience, knowledge and professionalism to work for you. And remember, I’ll bring the coffee.