A Broker’s Perspective

Way back in ‘72 I was a first grader at Briarcrest Elementary School — out on NE 157th, in the Shoreline School District — just a few blocks east of Shorecrest High School. 

Between last bell and the yellow buses pulling out to haul me home, I would sprint the couple of hundred yards to the Sunshine Grocery Store, and with my lawn mowing money, I’d buy myself a couple of Zotz for the long ride home.   I have fond memories of those jogs and the sweet taste of nickel candy with fizzy sugar.

Nearly 30 years later, the Sunshine Grocery had disintegrated into a malt-liquor-cigarette-porn selling, teenage-loitering hangout.  And then it was gutted by fire.  I couldn’t help but do something to bring back the Sunshine that I remembered.  This is what it looked like when we bought it in 2001, for $215,000:

Actually, it was way worse, but I didn’t take pictures.  The owner had collected his insurance money, boarded it up, and left all of his smoke damaged inventory in place.  When we closed (sight unseen), the rats had been partying for months.  Every day for two weeks our workmen would spread D-CON.  And every morning, a few more cat-sized rats would be feet up.  One of the all time nasties in a long line of nasty remodels we’ve done.   And those abandoned RV’s, well - those are harder to get rid of than you’d think.

A year and way more cash than we expected later, the place was back to how I remembered it — pristine, all new windows, new systems, new framing, new roof.  Here’s 1952’s photo from the King County Archive, and today:

I thought it would be easy to find a new Sunshine proprietor; except in 2003 there weren’t a lot of businesses that wanted to reopen a neighborhood grocery store just a few blocks from an Albertsons, QFC, and Safeway. 

After some trials, we found a woman who wanted to realize her dream, and she opened Sunshine Coffee, serving espresso to the masses.  She ultimately moved on, and sold to another guy who tried to expand into teriaki and other cafe type food.  Didn’t work.  So the Sunshine building is once again vacant, standing proud, and waiting for another business owner to fill the space with their dreams and wares.  I think a motivated, community minded businessperson could really make the espresso/sandwich shop work.

We’re back on the market, for lease ($1850) — and we’d entertain a sale — $595,000.  If you have a yearning to do something creative in a great neighborhood commercial space, let us know!  Would love to work with the right person in doing something that benefit the very active and supportive Briarcrest community.   If fact, if anyone out there has a great idea about what this space could be, let us hear it!

UPDATE 5/7 — We now have an agreement with a terrific couple for this building.  Their idea and use is extremely cool and I think will be well received by the community!  So stay tuned for Sunshine rising again.

Gordon Stephenson 
Owner and Licensed RE Broker
Real Property Associates, Inc.
206.577.0824
gordon@rpaseattle.com

I love seeing three bits of happiness about Northwest business on the front page of the Wall Street Journal.

Yesterday’s (4/24/0 edition in the “What’s News” column:

• Amazon’s net income climbed 30% on a “healthy jump” in sales.  Shares up $3 today to $81.  Lots of Amazon investors and employees in Seattle who are loving the stock’s jump from $40 a year ago;
• “Boeing posted a 38% gain in profit” on strength in its commercial airline biz
• Liberty Mutual agrees to buy Safeco for $6.2b in CASH.  While this will mean some lost jobs in Seattle, eventually, it means lots of cash for Safeco investors — of which many shareholders in Seattle have been behind the company for decades.  My father worked for Safeco briefly in the 50’s, and my wife’s first job out of Stanford was at Safeco (she got laid off…but managed to bounce back by taking a position at Microsoft).  Fisher Broadcasting (FSCI), whose founding family bought 3m shares in SAFC back in the 30’s, stands to have a huge cash infusion from this sale of their remaining 2.3m shares — over $150m for Fisher to pay down debt or to make other strategic investments.

To be fair, there as also a hit to a Seattle company noted on this same page:

• Starbucks warned of lower earnings…citing weak economy

But I think it’s notable that in one day’s WSJ there were a half dozen mentions of prominent Seattle companies, including the above, and also Costco and Microsoft. 

We have a real economic engines here, which will continue to produce not only jobs, but also gains for a huge group of their shareholders.

Google has just gotten clobbered in the market these past few months — from a high of 747 in November, the stock is down into the mid 400’s.  Well, big news after the market closed today.  Profits up over 30%.  See one article here.  The stock is trading after hours today up 75 points, near 525.  It will be interesting to see what happens tomorrow.

It occurs to me that some of this is obvious.  The dot com boom in 2000 — everyone knew that bust was coming, it was just too “irrationally exuberant.”  A few years ago interest rates were incredibly low; back then we refinanced everything we owned.  We knew those rates wouldn’t last, and it didn’t.  And when housing prices soared, the bubble guys sure called what was coming. 

So now oil’s at 110/barrel…can that last?  Can the bank stocks stay as low as they are now?  It seems like we’re thick headed during both good and bad times and can’t see it coming.  When a situation has deviated so far off the norm…well, swinging back the other way seems nearly always to be a when, not if, question.

There has been much discussion over at Rain City Guide about agents’ commissions (this link is to just one of many posts on that blog). 

Elementary info:  Listing agents generally sign a exclusive listing contract with a seller (the “exclusive” contract is required for participation in the MLS as it binds the seller to pay a fee if the property sells during the contract period.  Standard stuff.)  The fee is negotiated, but is often 6%; however in many cases, if the client is giving him repeat business, the listing agent will suggest or accept a lower fee. 

The listing agent then publishes the listing, offering typically 3% of that total listing commission to a cooperating broker who procures a buyer for the property.  (If the listing fee was 5.5%, for example, we’ll nearly always give the same “full fee” of 3% to the coop broker).  It’s important to keep that “buy side” cooperating broker fee close to whatever the market is paying for the procuring/cooperating buyer’s broker.  To whatever extent, some agents are disincentivized by a “less than market” fee.  It’s easy to see what the market is paying, and it varies based on price range and region.  Your listing agent can easily pull this data and show you.  In Washinton Park, a high priced area in Seattle, the typical “buy side” fee (we use SOC — sales office commission — as an acronym) is 2.5%.  This implies the total commission might be 5% if the listing agent is offering a 50/50 split to the coop broker.  Kary over at Seattle PI’s blog wrote a post on this topic here that was pretty solid, even if the metaphor got a bit mixed up. 

So there is the basic story.  Listing agent (actually, his broker, but as a practical matter the seller works with an indivicual listing agent) has the contract with the seller for a commission.  The contract is not with the buyer.  If the seller’s co-worker, upon learning from the seller that they’re putting the house on the market, says “I’ll buy it!”  then the listing agent should be elated with that.  The contracted commission has already been agreed to, no matter who buys the house or whether or not they have an agent.  Most sellers understand that.  And when that co-worker offers a bit below asking price, the seller should negotiate with the buyer — not with their agent, with whom they ALREADY have a contact.  After all, the listing agent has already put a lot of work into the property — at least according to Ardell here.  The buyer may want the benefit of some savings, by not having their own agent.  Let the buyer and seller negotiate over that sales price, and perhaps the seller and their agent can have the conversation about how much fee might be reasonably reduced to bring the parties together.

As a practical matter in this scenario, will the listing agent “throw in” some of that fee to make it work?  Sure.  Maybe.  Depends.  But it needs to be the agent’s decision, not the buyers.  And not unilaterally the sellers.  It’s a modification of a contract which requires mutual agreement.  Of course, the buyer can certainly go to Redfin, or to his buddy, and get them to write it up and rebate as much of the SOC as they can get.  That’s not the listing agent or the seller’s issue. 

And there are other situations where I have voluntarily given back some of that negotiated fee.  Most recently, we had a buyer balk at the 11th hour on a pending Greenlake listing that had.  Didn’t like the condition of the paint.  Or the hardwoods.  Of course, this was well past the inspection period, but he wanted $5,000 or he was going to default and walk from his $5,000 earnest money.  While my seller was making a nice gain on this from when he bought in ‘01 (selling for $500k, and had paid around $240k), I knew it would give him major gut burn to have to negotiate with this buyer.  And I didn’t want to lose the buyer in this market, at that sales price.  So I reduced my fee by the extortion amount ($5,000) and the thing closed smoothly.  This was a seller I love, with whom we’d done maybe a half dozen deals in the past decade.  So seller’s happy (I didn’t tell him about it for a few months, actually, to avoid any post-traumatic stress); buyer was happy (presumably); and I made a decision that I could live with, that no one asked me to make.  And we have a closed sale.

Used Car Salesmen, Trial Lawyers, and Real Estate Agents

Just posted this in my second post over at the wildly popular Rain City Guide where I’ve become a guest contributor…check ‘er out here