by Merri Ann Simonson
Coldwell Banker San Juan Islands Inc.
REAL ESTATE IS BEST WHEN KEPT LOCAL
Using local real estate brokers and local real estate related service providers is very important when buying or selling real estate. Boots on the ground here brings the expertise. Further, it is similar to buying locally sourced food and shopping to support local retailers and restaurants; any effort in this direction helps to reduce our carbon footprint and reduce climate change.
Real estate is one of those industries where it is imperative to use the local experts. There is no better time to start the benefit of using island services than in your search for real estate. For all of us that already live here or for those that plan to move here in the near future, this can and should be accomplished.
AND HERE IS WHY
No one understands the importance of using local service providers more than an experienced real estate broker in the San Juan Islands. All the successful brokers ensure that their clients, whether buying or selling, create relationships with the local service providers early in the process. Failure to utilize the local expertise can result in failed sales, unexpected expenses, and delays. Plus, the frustration and disappointment of a poorly processed real estate transaction.
Below I have recapped just some of the issues as it relates to using some off island service providers. I am sure all off island individuals and firms are great in their neck of the woods, but when it comes to the islands, they may be out of their area of expertise.
REAL ESTATE BROKERS
This one’s a tough issue, I understand that the agent from the city wants to maintain their relationship with their buyer and provide them with the level of customer service that the buyer deserves. Further, the buyer already knows them and trust their advice. However, it can be extremely treacherous for both to do business in an area that the broker is not familiar with. In fact, RCW 18.65 holds brokers to the standards of a practicing attorney, and that can be difficult to achieve when a broker is out of their area of expertise.
Of the 39 Counties in the state of Washington, San Juan County has many unique regulations, statutes and ordinances that exist in no other County. In fact, we have created a custom form with our local attorneys that is used in our contracts to address many of these unique issues. However, even with the form, it takes local knowledge to give clients the representation they should have. Almost all off island brokers will not be familiar with the issues and the result may be legal and practical problems, delays and failures.
Further, a broker that lacks connections with the local service providers such as home inspectors, well water testers, septic inspectors, septic designers, surveyors, lenders, title, and escrow may also incur delays in the transaction as they may not know who to contact. They may not understand the logistics of doing business here with our smaller recorder’s office, title and escrow offices who do not have the manpower the metropolitan offices enjoy. They may also lack knowledge of some of the rural aspects of our market.
How can they protect/represent their client properly?
• Do they know that a buyer should obtain a draw down test on all wells that are within 1000 feet of the shoreline in order to obtain a certificate of water availability which is required for a building permit?
• Do they know that we have sensitive areas throughout the County and if there is Indian Midden or other archeological sensitive materials found on the property that it can add thousands of dollars to the cost of construction and potentially long delays for a property owner?
• Do they know that a buyer pays excise tax in San Juan County?
• Do they know who to hire to inspect the dock and /or mooring buoys?
• Do they know that we need a bacterium and San Juan Short water tests for the wells, and who can do that for them?
• Do they understand the regulations and inspections around the Owner Builder Permit process?
• How do they prepare an opinion of value when they have never seen the comparable property sales or neighborhood?
The answers to these questions and many others, are well known to the local professional real estate brokers. Although, as a broker, we are not licensed to process the buyer or seller’s feasibility study, but an agent needs to have enough knowledge to help focus our client in the right direction and provide them with the right referral. Local agents know, at times these issues can be “deal breakers” and they need to help their clients address the issue properly.
For myself and my experience at Coldwell Banker San Juan islands, Inc., it is not all about our “commissions”. Local real estate transactions tend to be more complex than transactions in the suburbs or the cities. We help guide our clients through these complexities using our knowledge, experience, and oversight. I cannot imagine the struggle it would be to do business here if I did not have a good understanding about our regulations, service provider availability, their timing, and have the connections and experience.
In addition, whether I am the listing broker or representing a buyer, I visit the site with or without the buyer at least 4 times during the transaction, and some properties require up to 8 site inspections. How is the off-island broker going to provide this level of service when their business model does not include spending this amount of time running up and down the freeway and being on the ferry for hours? Did I mention carbon footprint?
In the real estate industry, we have what is referred to as a courtesy showing by the listing agent. Typically, the selling agent has a conflict and is unable to show the property within their client’s schedule, so they contact the listing agent and ask that they show the buyer the property. Most local agents agree to process these with other local agents as it is in our seller’s best interest, and we generally work well together. A listing agent, upon such a request, can be confident that the client is vetted and pre-qualified for the purchase.
We also have off-island curtesy showing requests. Many local brokers hesitate or even refuse to accommodate these requests as they may not be in the best interest of their sellers. The request is originated because the client is on island, but their broker is not. At times, these types of curtesy showings are because the buyer is here on vacation and the viewing of property was unexpected. The client may not be vetted or pre-qualified so it can be a waste of the listing agent and seller’s time.
If the client was serious, the off-island broker would figure out a way to join their client or make a referral to a local agent that can show them the subject property as well as all the other properties that they may want to view. A serious buyer may consider it very inconvenient to meet 3-5 different curtesy listing agents throughout the day to view their list of properties. This is not a good experience for the buyer.
With a curtesy showing, the buyer typically writes the offer through their off-island broker. If the broker cannot even come to the island for the showing with their client, how are they going to be present for all the inspections? They should seriously consider their next step as it is dangerous to write an offer on property that the broker has never seen. In addition, they are not familiar with our custom local forms, excise tax, area disclosures, service providers and timelines. This type of contract exposes the listing broker’s seller to a transaction where it is not a matter of if, but when something will go wrong.
Even though it may be that the listing agent nor seller did anything wrong, they will most likely get named when the buyer is unhappy and starts a lawsuit as they were not told or shown important information about the area, island or property.
Out of the area brokers have options, they can adhere to industry standards and find a qualified local broker for their clients and make the referral.
This one is critical, having a buyer select their lender based on their existing relationship that they have in their metropolitan location or to save .125% in interest is asking for problems. Many lenders, that are nationally branded, do offer great products, but have difficulty loaning on rural real estate. Their underwriters, for instance, back in Alabama, struggle with understanding the private wells, community water systems, private roads, septic systems, small encroachments, and selecting a local appraiser.
Whenever I am working with a buyer that is reliant upon institutional financing, I immediately provide them with the list of the few trusted loan officers that I work with on a regular basis. This ensures that they are pre-qualified properly for the purchase of San Juan real estate. Further the local lenders have knowledge of our rural issues, and their underwriters have previously approved numerous transactions that may have those same issues. My experience has been that out of area institutional lenders are often alarmed by rural real estate, such as here in the San Juan Islands.
Most importantly, communication with the local lenders, myself, escrow, title, inspectors, and the appraiser is at a much higher level as we are accustomed to working with each other.
Something as simple and unique as our excise tax paid by the buyer can be troublesome for an off-island lender, as they do not expect it. We recently had a transaction where the lender overlooked the tax not only in the contract, but in the title report and on all estimated settlement statements. The result was the day before closing, the lender had to credit the buyer an amount equal to the excise tax in order to close the transaction for the buyer and not risk losing their dream home and delay the seller’s next home purchase. The expense to the lender was great but the damage to buyer and seller would have been worse. This was not the first time an out of area lender missed the tax and had to ultimately pay it.
Many of the issues with off-island underwriting and lending can be resolved but not without cost; extra hours, documentation and effort are needed by both the listing and selling agents and the borrower to guide the lender through the issues. In some cases, the issues are not resolved, and the buyer must start over and select a different lender which may trigger the need for a second appraisal and related costs to the buyer. Sometimes, the buyer’s loan is rejected, and they lose the property they had hoped to buy.
One of the largest issues is timing. Off-island lenders do not know the time frames needed for appraisers, home inspectors, well and septic inspectors and surveyors and will convince a buyer/borrower that they can produce the loan within an unrealistic time frame. The result is the buyer enters into a contract based on their representations and is unable to perform and then may find themselves in default of their contract.
Whether you are using a lender for a refinance or purchase, make your choice wisely.
Unfortunately, due to the size of our market, we only have two appraisers that service San Juan County on a regular basis. Those two appraisers are on most every lender’s approved appraiser’s list, however; because they are busy, some lenders will allow the assignment to an appraiser that does not service the area. Local lenders always use Local appraisers.
When the appraiser, for instance, from south of the Seattle area arrives on the island, the area is completely foreign to them, including all the closed comparable sales. My all-time favorite, an agent used a telephoto lens and then the appraiser uses that exaggerated view to adjust the subject property’s value. The appraiser never inspected the comparable property, so of course, the report ended up with a mislead value. A local appraiser would have seen that comparable property and be familiar with the actual view knowing that the ferry doesn’t pass by 30 feet off the land on the channel nor is Mt Baker in our immediate neighborhood.
Often the reports must be reprocessed for the lender to be acceptable, this takes time and may incur extra fees charged to the borrower. Homeowner Association information, private roads issues, carbon monoxide monitors and hot water tank straps are all common reasons for re-inspections and retyping the reports.
Bottom line: the appraisers that are out of their area of knowledge may take longer and may cause the need for a second inspection/report or transaction failure. The national Tri Serve appraisal system allows the assignments to any appraiser that chooses it, regardless, if they are out of their area, so I can’t blame the appraiser. Although this may give them the opportunity to have a nice weekend at Roche Harbor with the family in addition to processing their report. In my opinion, there is no good reason for an appraiser to accept an assignment out of their area.
Again, unfortunately, due to the size of our market, we only have two home inspectors that service the County. Both are exceptionally good but can be busy. Some buyers opt to bring in an off-island inspector to meet their deadlines or as a matter of choice. These inspectors are not always familiar with rural real estate and can get stumped with septic systems, propane versus natural gas appliances and well systems and the result can be an alarming report that may be incorrect. Further the local home inspectors can aid the buyer with direction to which local contractor to chat about the report with. This helps the buyer with their feasibility study and may resolve the home inspection issues easier.
ESCROW AND TITLE
We have several very qualified escrow and title firms in the County. There is no logical reason for a buyer or seller to request an off-island company. When the off-island firms are used, errors can be made in the preparation of the closing documents and conveyance instruments which results in delays. They may not understand the quirks at our County’s recording office, i.e., having an excise tax payment at the time of recording and their cut off for recording deadlines. The logistics of doing business here is complicated as most of our transactions require remote notaries as many of our buyers and sellers are not on island during the closing. Further, the off-island escrow firms’ software is not programmed for the splits between the seller and buyer for the land bank and affordable housing excise tax.
Even though we have remote notaries and programs such as Authentic-sign, many of our local buyers and sellers still desire to go into the office to sign their closing papers. Whether it’s just comfortable for them or we have no other choice as we have run out of time, it is always good to have the option of an in-person signing.
We have numerous land use consultants that assist in the preparation of permits, engineering, and surveying. We do lack some of the specialized inspectors, and in those cases, it is necessary to bring in the experts from off-island. For example, a log home inspector, environment phase 1, 2 or 3, air quality testing, archaeological, and some aspects of geological and marine habitat as well. These are all specialized servicers working with a defined science that does not vary from one area to another. Due to our size, we are unable to offer every expert that may be needed during a transaction.
I can only speak to real estate for this category, but I feel just as strongly about your attorney selection as your agent. Whether you need a view easement, a joint use agreement, encroachment solution or an LLC created, the local attorneys are well qualified. With rural real estate, more detailed provisions must be included than in the boiler plate forms that some attorneys subscribed to. Further, you can connect a face to voice as you may visit their offices as part of the process.
Insurance is written with the purpose that some day, you may need to file a claim. Using one of our local insurance brokers allows you trust the process whether it be for real estate, car, boat, or liability. Most local firms are able to underwrite for all the national carriers but most importantly, you able to walk in and have a chat with your agent during a very stressful time, that is priceless. In most cases, having a local agent will expedite the claim, inspection and settlement process.
We have a wide selection of general contractors on the island for all price categories. However, the subcontractors are limited. Especially in some of the trades such as electrical, plumbing, roofing, and insulation. It is for this reason that we recommend using a local general contractor as they have connections and relationships with the subcontractors to get the job done. Whether it is a small repair or custom construction of a mansion, using a local general contractor, designer and /or architect is essential to the success of your project.
Whether you are a buyer or seller, “shopping” local is important across the board. One should never choose who you rely upon to process your loan, give you expert advice, make repairs, or navigate you through the technical aspects of a real estate transaction based on personal friendships. You should choose a professional that has boots on the ground in the area so that they may refer you to the right service providers for that area.
As always, this article is for information purposes only and these are my opinions only. I may have omitted a service provider on my list as they did not come to mind so I apologize if I did, it was not intentional. If you are looking for a service provider recommendation, please feel free to contact me. With 27 years of experience in real estate on San Juan I have a reliable list.