Ruby Holland had received unsolicited offers for her house in Seattle’s Central District several times before, and they irked her. Worried about zoning changes and development pushing longtime residents out amid the city’s tech boom, she started a group to help other neighbors resist such inquiries and stay.
But the letter that showed up in her mailbox late last month — first reported by Africatown Media — disturbed Holland even more than usual, because the coronavirus pandemic has plunged the entire country into an economic crisis.
“I’m working with a developer that is aggressively purchasing properties in Leschi,” the handwritten note read. “I’m writing offers sight unseen and do not need access to your house.”
Holland recoiled. “This is not a good time to be bothering people,” said the senior, who grew up in the Central District and moved back to her childhood home in 2014. “Somebody might be a little threatened.”
The market has yet to collapse like in 2008, and assistance is available for homeowners, making panic sales less likely. Even so, the current health crisis already is stirring concern in some corners and interest in others.
The pandemic is likely to yield “big opportunities” for some real estate investors, James Dainard, a co-founder of the Bellevue company behind Holland’s letter, said in a video presentation on YouTube last week.
“It really comes down to what is your preference and what is your stomach for investing,” Dainard added, citing advice Warren Buffett once gave. “Be fearful when there is greed and be greedy when there is fear.”
Holland is particularly outspoken, but other homeowners also have received unsolicited offers since the coronavirus hit, community advocates say. Metropolitan King County Councilmember Girmay Zahilay says he wants to inform constituents about their options, in case the crisis encourages volume homebuyers to ramp up their activities.
The worst-case scenario, with record numbers of Washingtonians hit by layoffs, would be a replay of what happened a decade ago, he said. During the Great Recession, foreclosure rates spiked to 30% in some parts of the Seattle area and investors swept into neighborhoods like the Central District to buy from residents who were strapped for cash.
“We just want to get ahead of that,” said Zahilay, who represents the Central District and South Seattle. “During the 2008 recession, gentrification and displacement accelerated.”
In an email to The Seattle Times, Dainard said his video was about deals among investors, not about taking advantage of homeowners. “That is not how we do business,” wrote the co-founder of Heaton Dainard, which specializes in flipping homes. “The real concern is people’s health right now.”
In the video, Dainard said: “This is not us being investors looking for opportunities to kind of jump on [sellers] and beat people up on pricing. This is buying the product that’s available in the current market.”
Seattle’s largest employers can be counted on to thrive despite the pandemic, Dainard added, saying there should be large numbers of tech-worker transplants still willing to pay top dollar for renovated homes.
“Fear drives, you know,” he said. “People freak out and they dump stuff off … They want to just get into cash, to get the peace of mind.”
There’s nothing necessarily illegal about off-market inquiries, and many companies make such inquiries. King County Assessor John Wilson said his office is monitoring such practices, anyway.
Wilson urged homeowners who receive unsolicited offers during the pandemic to contact his office or file a complaint with the state attorney general’s consumer protection division. The assessor is particularly interested in any that are misleading or play on virus anxieties, he said.
Some industry leaders doubt that panic selling is about to pick up. Washington’s residential market remained relatively strong in March. Many people who’ve been laid off are renters, said Matthew Gardner, Windermere’s chief economist.
In response to the coronavirus pandemic, the county has postponed April 30 property tax payments for many homes until June 1, Wilson said. Homeowners who believe the assessed values of their homes are too high can appeal that determination, potentially lowering their bills.
The federal government, meanwhile, has suspended foreclosures through May 17 for homes with federally backed mortgages. Homeowners with federally backed loans can defer payments for up to a year. Even homeowners who don’t hold federal loans may be able to delay mortgage payments by reaching out to their lenders.
“I think somebody would have to be in a very sad situation to sell on what is clearly a lowball offer,” Gardner said.
But Dainard and his business partner, Will Heaton, know the home-flipping market particularly well. Since 2006, Heaton Dainard, its investors and other companies with ties to the founders have bought 570 homes in King County, with concentrations in the Central District, Lake City, Rainier Valley and White Center, primarily through a network of hundreds of shell corporations.
An analysis of 570 sales shows the company and its investors bought properties at an average 22% below assessed values. The Times looked only at King County property sales, though the company also does business in Pierce and Snohomish counties.
Records show the company and its investors are typically able to renovate and resell homes at a markup within eight months. For example, a Heaton Dainard client bought a three-bedroom Delridge home for $300,000 last June and sold it in December for $615,000.
Heaton Dainard’s involvement may not always be clear to potential sellers. In many cases, the company seeks sales through associate wholesalers like NorthWest Home Buyers or Invest Now. Buck Buys Houses, which inquired about Holland’s home, has a cartoon mascot and a website with little trace of its relationship to Heaton Dainard.
In an email to Holland last month before she received a letter, Buck Buys Houses employees wrote they were representing a builder new to the Seattle area. “They’ve already purchase [sic] 45+ homes in the area and are looking to purchase 100+ more,” the employees wrote (Holland doesn’t know where they obtained her email address, she said).
Heaton Dainard and its investor clients did brisk business in the Great Recession, buying nearly 250 homes between 2008 and the end of 2014. “We made all of our wealth in real estate buying in a down market,” Dainard said in his recent video. Since then, the company has become a one-stop shop, providing financing, off-market properties, construction and brokerage services.
Heaton Dainard isn’t alone in sensing opportunities amid the pandemic. Tarl Yarber, founder of Fixated on Real Estate, said he believes smaller investors pressured by challenges like missed rent payments may be willing to sell at cut rates to those with deeper pockets.
Homeowners without robust savings also will likely be interested in selling, said other wholesalers that make unsolicited offers. “People might be interested in having cash in their bank account,” said David Galindo, a co-founder of Sell My House Cash Seattle, who’s noted a spike in online advertising by his competitors. “Everybody is really busy.”
Almost no ads actually mention the pandemic. The wholesalers know they have a bad reputation, they said.
“I don’t think it’s the proper time to do anything like that,” said Mike Qiu, founder of Good As Sold Home Buyers. Qiu recently took down a Facebook ad in which he vowed to donate $2,000 in coronavirus relief for each home he purchased; commenters called him a “vulture.”
At the same time, wholesalers provide an appreciated service, especially during crises, Qiu and Galindo said. “As much as people want to put us down, people who use our service are really happy to sell,” Galindo said.
The investor interest worries some community advocates. When Omari Salisbury, who works with Africatown Media to support the Central District’s historic Black community, saw Holland post on Facebook about Buck Buys Houses, he thought of the phrase “disaster gentrification.”
“This is exactly how we get preyed on,” Salisbury said. “When the economy sneezes, the Black community catches a cold.”
Black people bought in the Central District after World War II because they were barred from buying elsewhere. When the recession hit, investors “showed up at grandma’s house with a bag of cash,” Salisbury said. Some sold low and the deals contributed to displacement, because many sellers moved to South Seattle and beyond, Holland said. Some weren’t able to buy again, slashing intergenerational wealth, she said.
During the 2008 housing crisis, “we started seeing massive growth of the Black population in South King County, and we started seeing a sharp decline in the population in the urban core,” said Tim Thomas, a postdoctoral researcher at the University of California, Berkeley’s Urban Displacement Project who has studied Seattle neighborhoods.
Foreclosure rates in King County neighborhoods with a plurality of people of color were 1.3 times greater, according to a Zillow study. Meanwhile, rising rents made distressed properties attractive to investors, Thomas said. Similar trends could play out in the next few months, he said.
Selling can make sense for some, such as seniors who need to move into nursing homes, said Janice Brown, a real estate agent and Leschi Community Council president. “They shouldn’t be shunned for selling,” Brown said.
Yet Dian Ferguson, who manages the Central Area Senior Center, said multiple clients have been upset by unsolicited inquiries in recent weeks.
The seniors Ferguson knows tend to listen politely, but they don’t always understand, she said. “I do think we’re going to be in a recession for a while, so this is a great concern,” she said. “Certain people just see the transaction. They don’t see the human element.”
Kevin Baldwin’s parents sold their longtime Miller Park home to Heaton Dainard in 2018, records show. They got $750,000 for the six-bedroom house valued that year by the assessor at close to $900,000.
They owed money they’d borrowed to pay property taxes, listing agent Kirk Russell said, adding the home was so dilapidated they couldn’t show buyers inside. Heaton Dainard’s offer was “top dollar,” Russell said.
Dainard said his firm was not aware that Baldwin’s parents were in debt. “We wrote on [sic] offer on a listed property and we were the best offer for the seller,” he said in an email.
Baldwin’s mother died a year after selling the home. “Her surroundings weren’t the same,” he said. “She never wanted to sell the house.”
Dorothy Driver, a real estate agent who lives in Rainier Beach, said she’s received three inquires about her home in the past month. The pressure “is cranking up,” she said, wondering whether investors are targeting seniors with paid-off houses, like her. “People like this who buy in a down market … they count on fear and panic,” Driver said.
Sally Li, another real estate agent who lives in Rainier Beach, said two seniors have contacted her with concerns about recent inquiries. The would-be buyers are “never going to actually mention the coronavirus, but these letters and calls haven’t let up at all,” Li said, who warns her neighbors to consult with an expert before signing paperwork.
She believes Rainier Beach could be a target. “We’ve seen a huge surge in home equity but some people need money now and these unemployment benefits are just not cutting it,” Li said.
Wilson worries those who don’t know all their options could succumb to pressure to sell, the assessor said. “You’re going to see predatory speculators move in and see if they can’t get them to pop the house” before bills come due, he said. “People are scared. Straight up scared.”