A House By The Park

When you buy a property with an existing house on it, you have several choices ahead of you. You can:

1. Move right in and accept the house as is.
2. Do a classic “remodel”, putting in new floors, carpeting, bathroom fixtures, and/or kitchen appliances.
3. Tear the whole thing down and start from scratch.
4. Tear 99% of the thing down, start almost from scratch, and call it a remodel.

Options a and b are pretty straightforward and if your house already has a great footprint and layout, you probably don’t need to think about c or d. But what if you need to completely reinvent the property? What is the best way to accomplish a total transformation with as little friction as possible?

In the United States and other countries with similar building conventions, it’s usually option d. All cities are slightly different, but generally if you keep even a single wall up, it officially counts as a “remodel”. I’ve even heard stories of people keeping a tiny portion of an existing wall up, calling an inspector out to bless it, and then knocking the wall down and rebuilding it within 24 hours.

If you get your project blessed as a “remodel” by your city’s planning department, you save yourself a lot of extra permitting, extra costs, extra arguments with the city and/or neighbors, and extra time. You’re also more likely to get special “out of code” allowances from the city if you need them. For instance, the carport in my current structure does not conform to code anymore (it’s too close to the street) and the western-most edge of the house is technically in an environmentally critical zone. If I built from scratch, the chances of getting approval to re-create these out-of-code elements would be small.

So we’re all set to close tomorrow and the real estate agent who was not retained by the seller apparently thinks he is still owed a commission.

Unbelievable.

I presented this agent with a release form to sign (just to be safe) in order to get the 0.5% referral fee that my agent was willing to give him and he won’t sign the release form!

Do I really need him to sign a release form? No, since he has no contract and therefore no claim to any commission, but since I indemnified the seller in order to get the deal done, I want to make 100% sure this is all settled before this agent sees any money at all. If he still has thoughts of raising a stink, he can do so without my money.

What I ended up deciding to do is to close this deal tomorrow, as planned, and have escrow hold this other agent’s 0.5% in escrow until he signs the release. If he doesn’t sign within a couple of weeks, I will just have escrow pay my agent the full commission instead.

I’m not too worried about this situation at this point, but it’s annoying to even have to deal with it. I do like having the power to keep this money in escrow, but honestly, I wish I had the power to withhold all commission related to this deal if I needed to.

This is important: most people don’t realize that the buyer’s agent contract they sign usually specifies that the buyer will be responsible for paying a 3% commission to the buyer’s agent if the seller doesn’t pay it (which they usually do). I do not like this arrangement at all and I will be writing it out of my next contract. I was still going to pay my agent 3%, but I don’t like giving up the right not to under circumstances like an intra-office commission dispute. Another thing people should change about their contracts is the termination clause. My stock contract didn’t allow me to sign on with another agent until three months after I terminated my existing contract. I ended up changing this to 14 days, but I would go even further in retrospect. Probably one week.

So it’s been several months now and the Seattle real estate market in the middle of winter appears to be an extremely quiet place. I’ve looked at hundreds of listings which continue to come up every week, drove by about 20 of them, and went inside of only five. Since I am already comfortable in my condo, there is no need to jump on a property unless it is perfect.

Yesterday, however, my agent took me to a property which, strangely, has been on the market for about six months and yet I never remember seeing. It turns out the photos of the property that the realtor uploaded online were so awful that I wrote the place off months ago without even checking out the specs. It’s an old 1950s tear-down on a huge 15,000 square foot lot with a great water view in the exact area I want to be in! After touring the property, I instructed my agent to contact the selling agent and feel out the situation. The price has already dropped about $500,000 since it was originally listed and I’m wondering what price would make it mine.

To my unfortunate surprise, it turns out an offer was accepted today, a full six months after it went on the market. Man, I am so mad I didn’t find this earlier.

Lesson: Don’t let online photos dissuade you from checking out a property in person.

It turns out this place is an estate sale and there are 10 beneficiaries, so I am going to put in a “backup offer” in case the first offer falls through. I’d love to figure out a way to outbid the existing bid and move into first place, but apparently in real estate, it is almost impossible for a seller to get out of a contract unless the buyer is in breach. Any interference by me could be considered what’s called “tort interference”, which you can be sued for.

Fingers crossed, but not hopeful.