Home Selling in Seattle>Question Details

Adventurer, Home Seller in Seattle, WA

Should we sell our Wallingford rental house this summer? We bought in 1998. We lived in it until 2000. We now live abroad & are tired of managing

Asked by Adventurer, Seattle, WA Wed Mar 9, 2011

it. Although we don't want the rental headaches, we really don't want to leave a bunch of money on the table.
FYI, we converted it into a duplex so we need to decide whether to convert it back to a Single family (relatively easy to do) or sell it as a duplex. It is not a legal duplex at this time. We could sell any summer, or in 2-3 years when we most likely will move back to Seattle.

What would you advise on whether or when to sell and whether to keep as a duplex - and making it legal. Your thoughts are greatly appreciated!

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Answers

32
- the answer to most every Trulia question can't' be "call an agent and ask them"

I beg to differ. I don't know many professionals who go to public blogs looking for info - I don't go to Yelp looking for restaurant reviews, personally. I sure don't come here to get answers to real estate questions! But for those who ask here, when I have time, I'm willing to give the best answers I can.

The best answer for Adventurer is to have a professional evaluate their property, as-is and with an eye towards restoration as a single-family house. It is what I would do if I was eight time zones away from my property, and it is what I advise.

The Department of Planning and Development has a Client Assistance Memo for people looking to establish an ADU http://www.seattle.gov/DPD/Publications/CAM/cam116a.pdf, the important thing to note is that application must be made by an owner who resides in the property at least half of the year. So the property can be marketed as a "potential ADU" if it meets the requirements.

Big surprise, they also have a CAM for legalizing illegal dwelling units http://www.seattle.gov/DPD/Publications/CAM/cam606.pdf , and much more information on their website.

Seattle is lucky to have an abundance of good and honest real estate agents, and I advise Adventurer or anyone in a similar situation to contact one of them. Us! You know what I mean!

All the best,
2 votes Thank Flag Link Thu Mar 10, 2011
While I do not disagree with you, Patrick, the answer to most every Trulia question can't' be "call an agent and ask them". In the spirit of Trulia Voices, I attempt to answer the question well enough so that WHEN the Questioner calls an agent, they have a list of the potential issues and red flags, so they can address those with the agent they eventually call. In fact in this instance it may require a legal opinion & tax accountant review in addition to agent involvement.

A better informed consumer, is the goal, not only for Adventurer, but for others reading the Q & A stream now and in years to come. This is not a "less is best" type of "forum" IMO. YMMV
2 votes Thank Flag Link Thu Mar 10, 2011
The decision to sell or not depends on your personal needs. You could certainly sell but first I would ask an agent to do a CMA for you to determine current fair market value. Then you can make a more educated decision.

If you would prefer to hang onto it but don't want to be landlords, you may want to consider a property management company. For a fee they will take care of all of the headaches and send you a check each month.

If you do choose to sell, I would recommend converting back to a single family home. There are more buyers looking for single family homes then duplexes, IMO. Doing so should cut down on market time.
2 votes Thank Flag Link Wed Mar 9, 2011
Usually not the case, Patrick. Yelp as example. You count the number of times something has been said, and weigh the volume of that "same" answer to determine it's degree of correctness and relevancy. If 80 people say the same thing and 3 answer something very different, then possibly the answer said 80 times is "correct". Maybe not, but there is value in 80 correct answers for that reason, even when they are "the same".

Your vantage point may be a bit clouded by the why you are personally here answering questions.
1 vote Thank Flag Link Thu Mar 10, 2011
It's great to offer common sense answers to the person who posted the question. Expanding on it is great, and that's something that's been done here. New viewpoints are certainly important and are a great way for everyone to benefit from shared knowledge.

However, there comes a point when the question has been adequately answered, or cannot be accurately answered without a visit to the specific property in question. At this point, many of the answers enter the realm of "Hey look at me, I'm so smart you should hire me! I'm a superstar agent!!!" or blatant solicitations such as "Call me at this number and I can help you." Tacky. Desperate. Not helpful.

Again--This question has been answered. Homeowner would be best served by having his/her agent visit the property and then they can figure out their best course of action.
1 vote Thank Flag Link Thu Mar 10, 2011
Patrick, the thing about all social media (twitter, facebook, Trulia Voices, blogging, etc) is the benefit transcends the person asking the question, in this case Adventurer. Even if Adventurer is done reading, new or valuable info is still "of value".

The person obtaining value and marking the answer as "helpful" to them, is most always NOT the person who asked the question. Proof that it helps others and not just the person who asked the question.

Perhaps the agent who said hire a property manager didn't consider that a property manager may not be legally allowed to post an ad for a duplex rental if the property is not a duplex. That may lead them to check on that for another purpose.

Perhaps the agent who said "call it an ADU" did not consider the ramifications of calling something an ADU in an ad or in the mls when it is not "legally" an ADU. If they have done that in the past, they may change that practice in the future.

The benefit of an answer can be to other people answering the question, or to other people reading the stream and not talking at all.

To view Trulia Voices only in light of benefit to the person asking the question is limited and short sighted. Telling people to call an agent for the REAL answer is almost never appropriate, and said too often. Obviously the real answer lies in the real world. But I think every person asking a question here knows that without having to be told.

Expanding the total base of info available on the internet is the ultimate goal to those who are not primarily here just for the business they may get from it.
1 vote Thank Flag Link Thu Mar 10, 2011
I think the people asking the question like as much info as possible, and don't have to be told to GO TO "the real world". Better to have more info than needed, than not enough. They can always stop reading the answers. I am likely the worst offender of TMI, given I seem to be the only Voices person with way more "helpful" answers than questions asked. LOL!

i.e. Patrick answered 283 Questions; 93 of his answers were "helpful".
Ardell answered 279 questions; 378 of her answers were "helpful".

I noticed I had way more "helpful" answers than questions answered last night, and it cracked me up. As long as they continue to be marked as "helpful", I don't think I'll change my style of responding here. Being "helpful" 378 out of 279 times is OK with me. LOL!
1 vote Thank Flag Link Thu Mar 10, 2011
A couple of issues raised by a few of the comments.

1) Someone said hire a property manager if you keep it, but I'm not sure a professional property management service can be involved in renting the units separately, if it is not a legal duplex. Not sure because I don't do property management, but have heard that to be the case.

2) As to Selling it as a Single Family "with an Accessory Dwelling Unit", I don't think you can do that either, unless it is an approved "ADU". The normal means of selling a house that has a separate but not legal rental component is to call it an MIL (mother in law suite). In most places (like Kirkland) not every separate rental is a legal ADU. I had that once on a listing in Seattle as well, with an apartment above the garage that was legally not a separate entity, or a City of Seattle approved rental unit. There was no way to get approval, as the zoning on that street was SFH only and not zoned for "multi" dwellings.

That brings us back to is it on a busy road or smack in the heart of a Single Family Residential neighborhood. If it is on a busy road or a street or two behind a main arterial, the zoning might allow you to keep it as, and legally identify it as, a duplex or SFH with an approved rental component (ADU). If not, then you might have to list it as a single family, even though it is two units, and note in the remarks "currently used as a duplex". But you would likely get a higher price in that case if you converted it to a single family.

Which way would get you more money for the property depends on the income, as rental properties tend to value based on the net income they provide, vs the value of the structure and land, as a single family home values out. For rental property it almost always values by the cap rate.

Bottom line - If you keep it you may have to continue managing it yourself. If you sell it you will likely be better off by converting it back to single family home first.
1 vote Thank Flag Link Thu Mar 10, 2011
These are all good answers, but we don't have any real info about the house itself, other than the conversion. I would suggest that a CMA might give you some insight into what's best for you.
1 vote Thank Flag Link Wed Mar 9, 2011
Good advice, Adventurer, would be based on an evaluation of the house as is, and an evaluation of how it would be, once restored to single-family life. Off-hand, I agree with Rob Graham; there is much greater demand for single-family homes, especially in Wallingford and especially if it is within the Sanford school boundary.

The future is uncertain, the mood is generally pessimistic, but it's always difficult to see what's around the corner. A local agent can evaluate the property in today's market.

All the best,
1 vote Thank Flag Link Wed Mar 9, 2011
Based on forward projections I would say if you don't want to hold it for at least 5 more years, now would likely be a better time to sell than next year or the following year.

As to whether you should spend money converting it back to a SFH, my gut says maybe, but it depends on the location. If it's on or near a busy road, likely not. If it's in the heart of quiet residential, then likely yes.

If you email me or post the address here, I'd be happy to give that question further consideration. Do you have an estimate for the cost involved in the conversion? It can be a pretty costly undertaking.
1 vote Thank Flag Link Wed Mar 9, 2011
I hope to offer a more honest approach. From a more broad market perspective if you don't HAVE to sell your rental house soon I definitely wouldn't. There is much in the market that has implied that we have finally reached the bottom of low sales activity and that we are truly in recovery. You can expect to see rental rates go up 10%, so you can ask for more and likely get it in rents, hold on to the property and make WAY more in the future than you could now in this buyers market. Home sales did rise in March and are expected to continue to rise- ---> click here for full market stats http://bit.ly/dFlyr0
I am in the middle of selling a non-conforming duplex right now, I haven't had a problem at all but I could get a lot more if it was a legal duplex.
Laying out your options for costs to convert vs. amount you might be leaving on the table are key to making this decision. You would need to make sure city zoning even allows for a duplex on your lot, and if they do have a professional CMA done on your property as a duplex and a single family.
Truly though your best option from a financial standpoint is to sell when the market picks up. Currently 40% of all offers being made on properties are distressed properties, and 35% of those offers are ALL cash offers. The market is flooded with investors wanting to buy property cheap.
Bottom line, its a buyers market- if you can hold on to your house for another few years you'll be glad you did. Best of luck to you!
0 votes Thank Flag Link Fri Apr 22, 2011
I hope to offer a more honest approach. From a more broad market perspective if you don't HAVE to sell your rental house soon I definitely wouldn't. There is much in the market that has implied that we have finally reached the bottom of low sales activity and that we are truly in recovery. You can expect to see rental rates go up 10%, so you can ask for more and likely get it in rents, hold on to the property and make WAY more in the future than you could now in this buyers market. Home sales did rise in March and are expected to continue to rise- ---> click here for full market stats http://bit.ly/dFlyr0
I am in the middle of selling a non-conforming duplex right now, I haven't had a problem at all but I could get a lot more if it was a legal duplex.
Laying out your options for costs to convert vs. amount you might be leaving on the table are key to making this decision. You would need to make sure city zoning even allows for a duplex on your lot, and if they do have a professional CMA done on your property as a duplex and a single family.
Truly though your best option from a financial standpoint is to sell when the market picks up. Currently 40% of all offers being made on properties are distressed properties, and 35% of those offers are ALL cash offers. The market is flooded with investors wanting to buy property cheap.
Bottom line, its a buyers market- if you can hold on to your house for another few years you'll be glad you did. Best of luck to you!
0 votes Thank Flag Link Fri Apr 22, 2011
If you're going to keep it as a duplex, you definetly don't want it be sold as non conforming. As a duplex though, you should have good records of income, operation costs, etc.

If you can hold on for 2-3 years as you suggested, that's what I would do if I were you. Right now you're competing with the massive bank owned low priced homes/properties. I have 2 townhouses and both I would like to sell but I'm holding off for 3-5 years....
0 votes Thank Flag Link Thu Mar 10, 2011
Yes, many questions have more than one answer, but the client has only one bottom line. The best way to reach that can usually be found only after visiting the property so that you know what you're working with. There are so many variables in this question that it's impossible to offer more than generic observations to the person who asked the question. That's been done here--Homeowner needs someone to go out there and figure out what they're dealing with.
0 votes Thank Flag Link Thu Mar 10, 2011
You can hire a managment company a lot of brokers offer this service, in Texas they generally charge a deposit and 10% of rent. They can also run a competive market analysis to see what property is currently being sold, they can list the property for sale. Hope's this helps if so be sure you tell the Realtor you were referred by me. alfreda@alfredaarceneaux.com facebook/alfredaarceneaux twitter/fredasellstx
0 votes Thank Flag Link Thu Mar 10, 2011
Well Ardell, I wasn't actually referring to you in my earlier post, but for the most part I like your answers, and you typically give great advice. Perhaps that's why you have so many more thumbs up's than I do. Kudos to you!

Again--This question has been answered ad nauseum. Homeowners would be best served having a good agent go out to the property.
0 votes Thank Flag Link Thu Mar 10, 2011
Aredell I'm with you 100%. And at some point the question has been answered, yet we keep answering it here over an over again (adding more and more hypotheticals which just confuse the issue) when the next step needs to take place in the real world.
0 votes Thank Flag Link Thu Mar 10, 2011
What this boils down to is do you want to keep it or sell it? Sounds like you want to sell it. Ok, so now how do you get the most money out of it? Have an agent go look at it, do a CMA and tell you what it could sell for. These hypothetical discussions everyone is having about whether or not to convert it are all useless because we don't know what it is or where it is.

Again--This forum is not an appropriate place to find the info you need--You need an agent to physically go to the property and figure out the best options.
0 votes Thank Flag Link Thu Mar 10, 2011
If your home is located in a quiet residential area of Wallingford, I'd convert it back to single family. If it is on a busy street or sandwiched between multifamily or town-homes I'd keep the living quarters separate. You wouldn't be selling it as a "duplex" but you would be selling as a single family with an accessory dwelling unit. That would conform to the spirit of full disclosure. I have a single family rental on 53rd with two living units. There is no question I'd convert it back to single family if I were to sell.

Regarding the market, it depends where you think it will go. I believe we are on our way up but I will be a long road and may take 10 years to get to 2008 levels.

My office is in Greenlake and live nearby give me a call if you want to talk further.

Brett Frosaker
Broker
Columbia Real Estate Group
http://www.columbia-re.com
206-755-7858

Join me on:
Twitter: http://www.twitter.com/frosaker
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Web Reference: http://www.columbia-re.com
0 votes Thank Flag Link Thu Mar 10, 2011
Hi Adventurer,

The first fact to keep in mind is that real estate investments are the absolute best way to build wealth because of all the tax benefits like depreciation and the expense deductions of owning a business. I am assuming you are handling your property as a rental business, and not yet still treating it tax wise as a personal residence on either side of the duplex.

If your property is giving you positive cash flow, that is the ultimate goal - passive income. i would encourage you to hire a good property manager, like many investors do, and let the property manager handle the headaches. I can refer some good property managers to you.

If you are not a legal duplex, you will either have to get your property approved as a duplex, or convert it back to single family before you sell it.

If you plan to move back to Seattle, one of the questions I would ask is would you ever want to move back into the property? If so, why would you pay selling costs unless you just would never want to live there.

Your question is very personal, because the answer depends on you current financial situation, your personal goals, your estate goals and your tax situation.

If your question is based on market appreciation, no one can predict that. What I can tell you is that most research indicates the foreclosure inventory will not be depleted until sometime in 2012 or even 2013. The foreclosure inventory, along with our current absorption rate, is what is keeping prices down, level, or slightly appreciation, depending upon your neighborhood.

Family formation, which drives home purchasing, may not pick up until 2018. Seattle is the number one city for percentage of singles. The job situation in Seattle is improving with Boeing and Amazon hiring. Another key driver of real estate is jobs and we have to get the jobs situation solved before we see real estate healthy again, ie, appreciating, as in a Seller's market.

Interest rates will be going up, for many reasons - one of which is that they are at all time lows. If you will need to buy in 2-3 years, you want to factor into your plans, your current interest rate versus what you will pay in the future for interest. A 1% increase in interest rates nullifies a 10% drop in prices, so as interest rates go up, affordability goes down dramatically.

If you'd like to see some absorption graphs, which are the very best indicator of the appreciation or depreciation of the market, go to my website, http://www.karenmcknight.com and click on the Market Statistics button. Through experience, the graphs have demonstrated that it takes at least three months at 28% absorption rate, to start seeing price increases.

I also specialize in working with investors and have access to research that might be helpful in your decision making. Let me know what other questions you may have.

Warm Regards,
Karen
0 votes Thank Flag Link Wed Mar 9, 2011
I haven't read the previous comments so I'm sorry if I'm being redundant. Although this is a buyer's market, Wallingford is a very popular neighborhood. And, although there is more demand for single family homes, it may not be worth it to spend money to re-convert. There are a lot of variables to consider in trying to get the best price. Even Wallingford has less desirable locations.
Would you want to convert it to live in when you move back to Seattle, hire a property management company to manage until then.
I recommend contacting a few Realtors and gather information that way.
Best of luck and happy travels.
0 votes Thank Flag Link Wed Mar 9, 2011
It is what it is. Ive never seen the property but if it's salable as is don't put more money into it...whatever you do, or don't do to a property, someone will hate it and someone will love it. Find the buyer who loves it.
0 votes Thank Flag Link Wed Mar 9, 2011
Hi Adventurer,

I had this same problem in 2009 when I moved to Amsterdam. I wasn't sure about keeping the house or renting it out. I ended up renting it out and moving back into it this year. I'm actually kind of glad I kept it and had a place to come back to. However, like many of the brokers stated below it's really what works best for you personally.

At this time in Wallingford there is only one duplex for sale and 4 other multi-family homes. My gut says to keep it the way it is and like Jirius said put it in the comments that you might be willing to change it back if buyer wanted it that way.

If you do decide to keep it for a few more years I highly recommend getting a property management company to handle everything legally for you.

Best wishes on your travels!
Saviya Rowland, CIPS
0 votes Thank Flag Link Wed Mar 9, 2011
I would agree with a great deal of the advice you have already received. You need to take several things into consideration. If it does not conform to code and/or zoning, this would be a consideration for conversion back. If you are actually able to rent it easily and it's just the management that is bothersome - do you or would you consider a property management company to take that burden off of you? If you are already using a property management company and they are not working out, then reviewing the property, getting a CMA - and possibly two or three other options should be considered. It's a buyers market right now in most cases, more so than a sellers market. You also have to consider how much you are willing to put into this home to have it ready to go on the market.
0 votes Thank Flag Link Wed Mar 9, 2011
Looking at your tax bliability will be key in your situation. Speaking to an accountant will be needed, but I'll leave you with some basics. Since you purchased in 1998 you likely have a lot of equity in the house. Currently, having not lived in the house since 2000, you'll likely have to pay a large chunk of capital gains on the property if you don't do a 1031 exchange (which will not relieve your issue of managing). If you've been deducting depreciation for the years for when it was not your personal residence, you will have to recapture the depreciation in the sale. Even if you haven't been depreciating the house the IRS could still have issues iwith depreciation recapture at the time of sale.

Depending on zoning, the house may not legally be allowed to be a duplex, which is the case for many "duplexes" in Seattle. A small percentage of properties in Wallingford are zoned L1, L2, or L3, but most are not, especially on non arterial streets. The Wallingford real estate market has seen a lot of increased activty since the new year for single family, but there has been an especially low supply of Duplexes on the market for the past 18 months. Most of the properties that have been listed as duplexes are not legal as well. We're currently seeing an increase in purchases and an improved economy in the area causing me to assume assume you would likely gain appreciation if you held onto the property for 2 or 3 more years, although it doesn't look like we are at the bottom yet.

If you're planning to come back to Seattle, it would greatly benefit you to move back into the property for tax purposes. If you're tired of managing the property, have you considered having a management company take care of it while you're abroad? Managment rates typically are in the range of 25% of each new rental contract and 8-10% per month to manage. There are a lot of bad and good management compnanies out there and I'd be happy to refer one to you.

Every housing situation is different, but if you would like a personal cash flow analysis and/or capital gains worksheet for selling in the current year or later I can put one together for you with some additional property information.

Let me know if I can help further,

Ben Hoefer
Certified Investment Analyst
Web Reference: http://www.benhoefer.com
0 votes Thank Flag Link Wed Mar 9, 2011
Another factor is the condition of the property. If it was in good shape until you left in 2000, there shouldn't be too much other than cosmetic issues.

Common inspection items are the furnace, water heater, and roof
0 votes Thank Flag Link Wed Mar 9, 2011
We have seen a good improvement in the market so far this year. I would make sure the home is in "show
condition" meaning paint, appliances, counters etc that may need replacement. Since it is not a legal duplex,
leave as is (young buyers may want a rental unit even through they cannot count the extra income for
qualification). Most importantly is what will work best for you and your needs.
Mary
0 votes Thank Flag Link Wed Mar 9, 2011
I agree with most of what I read below, so I will not repeat what they have already told you. As a loan officer & a real estate agent, I do want to tell you that this will be appraised as a single family home with an extra kitchen. I would not recommend re-doing it because it will cost money & may not benefit you. If and when you decide to sell it, in the agent comments you can note that you are willing to change it back if it is desired by the buyer. You may actually find some buyers who will pay more for it with that rental there, so then you could do well either way. As to when to sell, that is ultimately up to you. You can contact me on Skype or Facebook if you want to discuss this further. good luck to you whatever you do.
Web Reference: http://www.metromgi.com
0 votes Thank Flag Link Wed Mar 9, 2011
Having a home in Seattle Area and traveling abroad, alot of this will depend on if it a home that is well taken care of meaning monthly maintenance.
Traditonally to list a home in the summer is a better opportunity as there are more buyers in the market at this time looking for homes.
I would convert it back to a Single Family Residence, as this could potentialy be a buyers / appraisal concern.
The next question is does it cash flow - if it in the positive, I feel it is a wise investment to hold onto. Would need to know more of your own situation.
Have fun traveling abroad and be safe.
All My Best,
SeattleMargo
Web Reference: http://www.SeattleMargo.com
0 votes Thank Flag Link Wed Mar 9, 2011
Your decision should include a consultation with an international tax adviser. Will you be taxed, in your current country of residency, on the US sale? In effect, double taxed? Do you need a gain on your current US tax liability, as it will not qualify for the primary residential exemption on gains?
Do you currently own property in country that you are living in? Should you sell it before you return to the US?
And are you sure you don't want to make a 1031 exchange within the US? It is a good time to buy and you might find something that requires less maintenance.
Have you been leasing through a property management firm? Would you be interested in interviewing another firm?
Bottom line: under normal circumstances I would recommend selling at any time that you are ready to move on (remove the hassle of renting). However, in this case, since you've indicated that you will be returning in a couple of years, I'd look at it in a broader context and be aware that living in another country opens you up to another set of guidelines.
You'll note on my profile that I am an International Property Specialist and focus on these issues. If I can be of any more help, please contact me through my profile, directly.
Web Reference: http://www.nwhome.us
0 votes Thank Flag Link Wed Mar 9, 2011
If you do sell this summer please let me know. A client of mine is a UW stuent. She contacted me a few weeks ago and is looking for a duplex in U District or Wallingford that she and her friends can rent or purchase before Fall Quarter.
0 votes Thank Flag Link Wed Mar 9, 2011
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