Horrible locations, with no access to jobs, schools, shopping, entertainment, transportation.

Still worse, horrible homes, dingy, run-down testaments to the perils of deferred maintenance.

And still worse, many of these homes would be filthy — stained carpets, smudged walls, debris everywhere. In many cases, the carpets had not even been vacuumed, and often the back yards were shoulder-high jungles of weeds.

Would you want to live in a place like that?

Why would you expect that a tenant would?

Here’s a better question: What kind of tenant, do you suppose, would settle for a rental home like that?

Landlords can be penny-wise and pound-foolish. They will buy a dump of a property because it’s cheap, convinced that their salvation will be low rents. But bad properties attract bad tenants — by repelling all of the good tenants.

The wrong rental property is the worst kind of real estate investment: It will rent slowly, with long vacancies between tenants. And the tenants the landlord will be forced by circumstance into accepting may be slow-pay, no-pay eviction candidates who may do damage or steal the appliances on the way out. And, of course, because the house is repellant, it will attract nothing but low-ball offers on resale.

But take heart. There is a better way of doing things.

First, what you want is the right location — a built-out suburb with its own job base, with schools and shopping and entertainment already in place. And don’t buy a dump. Nobody wants to live in a dump. The house you’re looking for should be appealing to tenants, but also to owner-occupants. Why? Because owner-occupants will pay more than investors when it’s time to sell.

But even then we’re not done. We’ve got the right house in the right location, but we also need to refurbish the home to turn-key condition. Why is that? Because tenants — especially premium tenants — have choices. We want for our home to be first on their list of candidates, when they go out shopping. That way, you will have you choice of top-quality applicants: Good jobs, good income, good credit, good payment histories, good real estate references.

A home like this will rent quickly, will stay rented, and — if you continue to maintain it in turn-key condition — will suffer little vacancy between tenants. Moreover, your tenants will treat your home as if it were their own, so your costs between tenants will be lower. And because we chose the property with resale value in mind, it should sell quickly and at a premium price, ideally to owner-occupants.

This is a sound business strategy. Your objective is to make money. This is the way to make money in the suburban-Phoenix rental housing market.

I’ve written a guide on how to make money by investing in rental homes in Metropolitan Phoenix. It covers these issues in more detail, with a video explaining my thoughts on home selection. There are also before and after photos of a real rental home, to illustrate what I think is necessary to make a property appealing to premium tenants.

If you want to discuss Phoenix-area rental home investment in more detail, you can phone me at 602-740-7531 or just shoot me an email.

Being a landlord is not easy, and very often it is decidedly not fun. But it is potentially very lucrative — if you go at it the right way.

We represented the buyers for a million-dollar house, our first, that closed this week. A week from now, we will be listing a million-dollar home, also a first for us. We are carrying two listings at $450,000 right now, with another to come, and we will be listing another home at $800,000 shortly.

But also this week, I sold a property for $65,000. Just a few weeks ago, one of my listings sold for $27,000.

Am I schizophrenic? I hope not. But I am scared to death to say no to anyone right now.

Salespeople like to say yes. It’s not in our nature to turn people down. We like to make people happy if we can.

But I have no idea when this recession is going to end, so I don’t want to pass on any opportunity that might present itself.

Here’s the funny part: We’re living with a foxhole mentality, but 2009 is going to be our second-best year since we came into the real estate business. We’re not rich by any means, but we’re making more money than we have in the past three years.

But here’s the unfunny part: Virtually all of our income for 2009 is coming to us in the second half of the year. Our business was all-but-moribund in the first two quarters, and we came much too close to losing our own home.

So I am not proud, bashful or shy. If you have a real estate problem, I’m ready to talk about it. We’re working sixteen hours a day, at least, seven days a week. We haven’t taken time off in three years, and I don’t know when we will take our next vacation.

The job is survival right now, and I know we’re not alone among Realtors in thinking this way.

I’m nobody’s bear, and I would love to believe all the cheerleading I hear in the news about the real estate market. But my strategy for now is to just say yes to every opportunity I get to earn a living.

With all this activity in the Phoenix real estate market, prices must be going up, right?

Wrong.

Sales prices for bread-and-butter single-family homes in Metropolitan Phoenix were down in June, July and August. They were up in May, and it looks like we’ll finish higher in September. But the net effect is to put average home prices right back where they were in March of 2009.

That’s right. We just worked our way through six very busy months, with the $8,000 first-time home-buyers tax-credit as a huge incentive to buy houses, but sales prices for those homes are virtually unchanged.

How can that be? Haven’t we heard about shortages of homes, about frenzied bidding wars? If you’re trying to sell a home right now, market activity can look like manna from the heavens. But if you’re trying to buy, what you’re seeing may look more like a plague of locusts.

But taking account of the bigger picture, none of that matters. The Phoenix real estate market is over-built, especially at the lower end of the market. The long-term systemic trend of prices is downward, and it will be for quite a while. Incentives like the tax-credit can stimulate activity, but until demand eclipses supply, prices will continue to deflate slowly.

When the tax-credit lapses, the pace of that deflation will quicken. If banks start to reintroduce foreclosed inventory at a faster rate, prices will drop even more. Arguably, we are two or three years away from reselling all of the homes that will have to be repossessed and resold by lenders.

And prices could be low and trending generally lower that whole time. New home builders are not able to compete in this market, so we’re not adding new inventory. But until the supply of foreclosed homes is fully absorbed, prices probably will not go up.

And even then, don’t bet your life savings on dramatic upswings. It took us a long time to dig this hole, and it could take a long time to dig our way out.

When I was a kid, my Uncle Jack, my mother’s oldest brother, told me a story I’ve never forgotten. He was at a little county fair way out in corn country. Nothing special, just beauty contests for hogs, cheesy little rides and sticky, sugared confections.

Late in the day, the ice cream vendor decided to pack it in, announcing that he was giving away what was left of his inventory. People elbowed their way to the front of the crowd, so eager were they to get something for nothing. They walked away with the ice cream piled into their bare hands, rushing off to their cars, leaving a trail of melted drips behind them.

The lesson I took from my uncle’s story was that those folks didn’t really want ice cream. They were willing to get themselves dirty, and to get their vehicles dirty, just to have something for free. Most of them probably didn’t even eat the ice cream, and they certainly couldn’t have enjoyed it. Imagine trying to inhale a glutton’s quantity of chocolate-fudge-swirl before it melts all over your clothes.

Could that be what’s going on right now with the $8,000 first-time home-buyer’s tax credit? I happen to be carrying three listings that are undeniably “investor’s specials” — which means they’re a good buy, but they need a lot of work. Even so, my phone is ringing off the hook with agents trying to sell those houses to owner-occupants — folks with very little cash trying to get an FHA loan so they can buy a house, thus to get $8,000 in “free” money.

Do those buyers really want homes, or do they just want that free money? What will happen to the properties when the $8,000 is spent? Should we dial the clock back to 2006 to see if anything looks familiar?

Meanwhile, the National Association of Realtors is campaigning for even more “free” money to bribe even more otherwise-unmotivated buyers. The only thing that could make the deal sweeter would be a double hand-full of “free” ice cream.

If you live in New York or Boston or Chicago, there will come a day in the Spring when the cold will seem to be in full retreat. The sun will be shining. The icicles on the trees will be melting, and the tickle of the cold drops of water on your hair and neck will make you want to throw your arms out wide and rejoice in your release from the awful prison of Winter.

That happens in Phoenix, too, but it happens six months earlier, on September 15th. Mid-March has its own charms, when the citrus trees open their blossoms and the air is thick with the nectar of heaven perfected. But it’s when the Summer breaks in Phoenix that people come outdoors, knowing that the next ten months will be simply perfect.

Consider: On August 15th, the late-afternoon temperature could be 115 blistering degrees. The sun will be relentless, seeming to hang for hours above the horizon, seeming never to set. The relative humidity will be 40% or more — which doesn’t sound too bad until you remember the temperature. Late in the day, huge storms could come thundering into the Valley of the Sun, flooding the low-lands and even tearing the roofs off of older houses.

That season — we call it “the Monsoon” — lasts from July 15th to September 15th. But when September 15th rolls around… paradise ensues. Daytime high temperatures drop to below 100 and the relative humidity tops off at below 10% — so dry you can smell the dry leaves and pine needles baking in the sunlight.

That might still sound too hot to you, but it’s not. It’s just perfect, an ideal time to be outdoors — all day and all night. There is simply no place like Phoenix, no place on Earth. We suffer, slightly, during the Monsoon, but we are repaid with ten months of the kind of weather that other cities are lucky to see for ten days in any given year.

And Winter — which you are just now beginning to dread — is our most perfect season of them all…

Break out the champagne! Prices for bread-and-butter resale homes in Metropolitan Phoenix were up for the month of August! Hurray!

“Up by how much?” you ask. Well… Not very much, alas.

The average price for a three-bedroom, two-bath, stucco-and-tile American Dream home was $119,666 in July. In August, that number had risen to the lofty sum of — wait for it — $119,872.

In any other business, a difference like that would be written off as noise, but in real estate — hot dang! — it’s a bonanza!

Here’s what’s really happening: Banks are foreclosing on many, many houses, but they’re only dribbling a few at a time into the marketplace. In conjunction with added demand caused by the $8,000 first-time home-buyer’s tax credit, we’re seeing what looks like a shortage of available homes.

And yet, even in these straightened circumstances, prices are essentially flat. As an example, the average price for these homes was $121,898 in March.

One theory has it that the banks are releasing just enough inventory to maintain stable prices. That’s a satisfying explanation — given that it conforms to the observable facts — but who knows if it’s true.

Meanwhile, if the banks are in fact warehousing ever-increasing quantities of homes — foreclosed upon but not listed for sale in the resale market — eventually something will have to give.

Even though the banks might own those homes “free and clear,” there are still carrying costs associated with warehoused homes. Lawns must be mowed — or at least weeds must be chopped back. Roofing tiles will crack and break away, exposing the home to water damage. Pests of all sizes will invade the home, some to eat the wood, some to steal the appliances, the piping, the wiring — whatever is left undefended.

If we assume that this is true — that banks are acquiring foreclosed homes at a faster rate than they are releasing them into the resale market — then sooner or later something has to give. The banks simply cannot warehouse those homes long enough for the market to recover.

Get a load of all that great housing news! Median prices are up! Sales volumes are up! The prognosis for the future? Up, up, up!

Here’s a different take: If it looks, walks and talks like hype, it’s probably hype.

Are houses selling well, compared to a year ago? They are — but the federal government is giving first-time home-buyers $8,000 in free money to buy houses right now. If that tax credit is not extended or replaced with something even more generous, the music will stop on November 30th.

And while median home prices may be up, prices for homes that normal working people actually buy are flat at best — and they have been trending downward since December of 2005.

But what about the shortage of available homes you have read about? What about the multiple offer scenarios, with homes selling for thousands of dollars over list price?

What would you expect to happen when you artificially stimulate demand at the same time that you artificially limit supply? We should be doing what your grandpa used to call “a land-office business.” Instead, even with $8,000 in free money, prices are still trending downward.

And that artificially-limited supply — all of the foreclosed homes that banks are withholding from the marketplace — will flood the market sooner or later.

If you’re in the real estate market right now, what you should do depends on your circumstances.

If you’re a seller, make a deal. Your carrying costs will almost certainly exceed any gain you can hope to realize by waiting out the market.

If you’re a first-time home-buyer, jump. If you’re not under contract by October 15th, you’ll probably miss out on the tax credit — and houses are not easy to get, taking account of the artificially-limited supply.

Buying with a loan? Interest rates are low for now, but they may not stay that way.

Buying all cash? Sit tight. As sweet as prices look right now, it seems likely they’ll get a lot sweeter when the banks finally release all the homes they’ve been hoarding.

Do you have a smart-phone like the iPhone, Blackberry or Palm Pre? How much time do you spend on it? Is it possible that your smart-phone is your primary interface for accessing the internet? If you’re not there already, can you foresee a day when that might be the case?

It’s certainly that way for us, and we see smart-phone surfing as the next big wave in internet use. Because of that, we’re devoting more of our marketing efforts to promoting real estate by smart-phone.

As an example, we just added SMS messaging from a company called Drive-Buy Technologies. If you happen to drive by one of our listings, you can text a short message to a pre-set SMS account number and you will get a return SMS message with a link to a mobile web site featuring property details, photos and a link to that property’s main web site.

Want to see it in action? Text HOUND1 to 88000.

I’ve never been a huge fan of video as a real estate marketing tool. But smart-phone technology is changing my opinion. The integration of YouTube into smart-phones is so seamless that touring a home by video — as you sit outside in your car — is suddenly a viable option.

Another use for real estate video on smart-phones would be a sixty-second neighborhood tour — photos of houses, nearby stores and restaurants, schools and parks. And that video might link back to a Google map of the neighborhood, with each featured landmark shown on the map.

We’ve also just added the SmarterAgent smart-phone MLS client. This is a tiny app that gives you access to the full Phoenix-area MLS database. You can search for homes any way you want — by address, zip code, school district, MLS number. Even cooler, the app will use your smart-phone’s built-in GPS system to show you listings at your current location.

Is the smart-phone the future of real estate search? Maybe not, but when you spot the house of your dreams, won’t it be nice to find out all about it — right there on the spot?

You can download our smart-phone MLS client by clicking on this link, or simply text HOUND to 87778.

We’re wired Realtors, and we always have been. The very first thing I did as a Realtor was to set up a web site to attract clients. We made money on the internet from the very beginning.

Since then, we’ve adopted every new idea that’s come around, along with inventing quite a few of our own. We publish a national real estate weblog — BloodhoundBlog.com — to help other wired Realtors come to grips with technology.

Because I’m working with a lot of buyers right now — and because buying a home has become such an ordeal — I’ve been working to make my technogeek status even more robust. Good enough is not good enough any longer. If I want for my clients to get the home of their dreams, my offers have to be first, fastest and best.

To that end, I just bought a new Apple MacBook Pro, and I’ve been outfitting it with the software I need to do contracts from anywhere, in the fastest possible time.

The Arizona Association of Realtors gives us all a program called ZipForms as part of our dues. In the abstract, ZipForms makes filling out forms fast and painless. It falls somewhat short of that ideal in reality, but it will do for now.

But ZipForms integrates with a web-based service called DocuSign, which permits me to capture signatures on-line, in the form of e-signatures.

So I can whip out a purchase contract in ZipForms while standing in the kitchen of the house we’re buying. Mrs. Buyer might be at her mom’s house in Albuquerque, while Mr. Buyer is in New York on business.

No matter. I can set up DocuSign for each buyer to sign the contract in sequence, then have it come back to me for my own signature, then forward the whole package to the listing agent. We can literally do the whole job in a half-hour or less — a big improvement over printing and faxing and running documents around to get signatures.

There are more new technologies we’re playing with. I’ll talk about some others next week.

“You won’t believe the deal my buddy got on his house. He paid thirty cents on the dollar!”

“You’re right. I don’t believe that.”

“I’m not fooling with you. The house was worth $300,000, and he picked it up for a hundred grand.”

“It was worth $300,000 when?”

“Huh?”

“He got it for $100,000 in what condition?”

“Huh?”

“The house might have been worth $300,000 four years ago. And it might have been in great condition back then, too. What was the list price when your friend put the house under contract?”

“It was listed at $97,500. But the original listing was for $300,000!”

“I don’t doubt it. A lot of homes have been on the market for years. What kind of shape was it in when your friend saw it for the first time?”

“It was great! I mean, there were some holes in the walls, and some of the doors were missing. But it just needed some touch-ups on the paint. And the carpets were hardly stained at all!”

“What was the kitchen like?”

“Cherry! All it needed was a range, an oven, a dishwasher, a microwave and a fridge.”

“In other words everythng but the kitchen sink.”

“No, that was gone, too. But the counters and cabinets were in great shape, just missing a few knobs.”

“So some nice folks bought more home than they could afford during the housing boom. They couldn’t make their payments, so they put the home on the market for more than it was really worth, even back then. It sat on the market for four years, through a normal listing or two, through a short-sale listing, and then it finally sold to your friend as a lender-owned home. Is that about right?”

“You bet! He got a smokin’ deal!”

“Except he didn’t pay thirty cents on the dollar, he paid $2,500 over list.”

“Oh, whatever. Did I tell you about the trout I caught last week at Lake Pleasant? I swear, it was bigger than my arm!”

“Now that I believe.”

This is my take on the issue, quoted from the comments at BloodhoundBlog:

We don’t ask visitors to register for IDX search. We are having our second best year ever, and we should finish the year — having started with five months of near-drought — in the top 1% of income-earners — “the rich.” I have zero data to support my position, because I haven’t collected any, but I believe that much of our recent success owes to the FlexMLS IDX system and our deployment of it. But, even so, we have never insisted upon registration and we never will, for the simple reason that I am not going to treat guests in my home as prey, not now, not ever. Your mileage may vary, and I don’t care, but everything in our lives is philosophy first, and we do not change the way we behave until we have become convinced that our past position was morally wrong. That will not happen in this circumstance.

I would have to go and do the math on self-selected Flex registrants (we register a lot of people who come to us by other means on the site — emails, form responses or phone calls, etc.), but my guess is that we’re skinning cats with one out of three, perhaps more than that. The people we work with tend to repeat, to refer or to become full-blown sneezers, so we know that our overall approach to the people we work with is effective. In any case, I have zero desire to have 24 phone conversations to unearth the one motivated buyer or seller in a double-dozen “leads.” I expect I could do better making random phone calls or handing out business cards at the Circle-K.

I spoke about this at the first BloodhoundBlog Unchained. Everything we do for marketing is devised to get our ideal clients to firmly self-select for us before they ever do anything to make contact. I had a relo form like that today. The form came in at 6:18 am — the prospect is in the midwest. I had a walk-through with an investor, so I didn’t call him until noon. He had found us and stopped shopping. He hadn’t talked to anyone else in the six hours I left available to him. And he thanked me several times, first, for not insisting upon registration, and, second, for not dumbing the IDX system down. In fact, we configured our installation of MLS search to be much more robust than ordinary real estate sites, but we love it — and our clients love it — because we can make it so much more rigorous than ordinary IDX sites.

We target-market for high-Ds and high-Cs — thoughtful, prosperous people who don’t intend to be jerked around. Not jerking them around seems to be a very effective marketing strategy. When we finally add a high-C of our own to our team, we can start to make a stats-based argument. But it won’t make any difference to me. We do business the way we do because we believe it is the right way to do business — in every detail. We have never betrayed our principles for money, and we never will.

When you search the MLS on our site, you are using exactly the same tools we are using, from exactly the same database. We give you the most robust search we can, because if a central vacuum system or a heated pool matter to you, then they matter.

But if you want to search the MLS here and then work with another Realtor, feel free. We know we deliver better value to our clients, but we also know that that value proposition only appeals to people who are actively seeking better value. If any old Realtor will do, in your view, then we’re probably not the Realtors for you. The world runs by itself.

But if you have not yet played with our MLS search, dig in. In forthcoming posts, I’ll talk about how to use the logic of the system to pull out some amazing results. But the FlexMLS software is amazing right out of the box. If you take the time to play with it, you’ll never search anywhere else — no matter who your Realtor is.

And if you should start to wonder why other Realtors provide a clunky, dumbed-down MLS search — and have the nerve to ask you to register for the privilege of slogging through it — give us a call. We do everything better, not just MLS search.

For a Realtor working with home-buyers, there are three times where a transaction has a high likelihood of falling apart.

The first is during the initial contract negotiations, of course. Buyers and sellers can go through a lot of haggling by counter-offers before they reach a meeting of the minds. And with so much competition for low-priced houses right now, it’s very easy for buyers to dicker themselves right out of a deal.

The second opportunity for a deal to fall apart is during the inspection process and the subsequent repair negotiations. My stock argument to sellers is pretty simple: If you don’t fix it before the buyers move in, they will have to fix it before they move out. If we’re paying full price or something close to it, we deserve to buy a property in turn-key condition.

To complicate matters, FHA and VA loans require that homes be in habitable condition. But lender-owned homes are sold “as-is,” as are most short sales. And even sellers with equity may not be able to afford to undertake needed repairs.

Perhaps surprisingly, the third time when a home sale is at risk of falling apart is at the very last minute, when the Realtors, the lender and the title company are all working full-blast to close the transaction.

It is at this final stage of the process that seemingly insuperable obstacles arise: The lender blocks funding over some previously unobjectionable contract language. The seller has turned off the utilities before the final walk-through. One or more parties get cold feet so bad they are frozen stiff.

Add to all this the outrageous emotional stress that goes along with such a huge, life-altering change. The smallest disruption can set people off when they’re this tightly strung.

But as crazy as things might get, the buyers still want to buy and the sellers still want to sell. It is the job of the Realtors to hold the transaction together when it seems as if every force of nature is conspiring to tear things apart.

This house, 2040 West Missouri Avenue in Phoenix, is a rock-solid Phoenix ranch home, block construction. But it needs love — which is why it is priced so aggressively.

This home is offered at $104,995, a smokin’ deal. Call your agent to find out how to make it your own.

This house, 4830 West Cinnabar Avenue in Glendale, is halfway through that process — and, in consequence, it’s selling for half-price.

We all know what makes a good flip: Upside. This is a rock-solid block home in a stable west-side neighborhood. The floorplan is ingenious — but you’ll need to exercise your imagination to see it. But if you’re looking for a fix-and-flip — or a fix-and-rent — or a fix-and-move-in home, you’ve got good bones to start with — and a price to die for.

This home is offered at $84,995 — and turn-key homes in the neighborhood are selling for twice that. Call your agent to find out how to make this home your own. But don’t dally. The property is showing several times a day. This opportunity won’t last long.

When we list a home for sale, two-thirds of everything we will do for the seller will have been done before we hit the MLS.

There is a similar disparity of effort on the buying side: Of all the work your buyer’s agent undertakes in your behalf, two-thirds of it will happen after you have put a home under contract.

That seems counter-intuitive. After all, you depend on your buyer’s agent to shop listings for you, and then to take you around to see them. When the showing is done, the work is done, too, isn’t it?

Far from it. You’ve found the home of your dreams and it’s all you can think about. But your buyer’s agent is busy figuring out how to write exactly the right offer, to make sure you get that home. And once you’re under contract, your agent will start to chip away at a long checklist of tasks that need to be taken care of to successfully close escrow.

There are so many things that can go wrong in the purchase of a home, it’s a wonder anyone ever gets to move. But, more than anyone else in the process, it’s the buyer’s agent who keeps things moving, who organizes all paperwork and gets it where it needs to go, who coordinates the inspectors, who keeps everyone informed and keeps the documents flowing.

And it’s the buyer’s agent who tends to keep the escrow process civil — and civilized. The seller may not want to do repairs or to bring the price down to reflect a low appraisal or to move out in time to permit a thorough final walk-through. It’s the buyer’s agent’s job to smile and sweet-talk the seller and the listing agent, to keep the transaction in motion when it seems always to want to grind to a halt.

You found a home you love, and that’s great. But if you make it all the way to close of escrow, it’s because your buyer’s agent was plugging away behind the scenes, day after day, to make it happen.

That’s what you’ll find at 2425 West Cheery Lynn Road in Phoenix.

The house itself is sweet, and the location could not be more perfect: Minutes from downtown Phoenix, seconds from the I-17 Freeway. But the presence of the tenant means that this home will be cash-flow positive from the day you buy it. No months of frustration waiting for a lease-up. No angry glares from your spouse as an alligator eats up your savings.

This home is offered at $109,995. Call your agent to find out how quickly you can add it to your investment portfolio.

Are home-buyers best served by the vigilant efforts of an experienced buyer’s agent? Consider a transaction we have in play right now.

The buyers are a young couple, about to be married. They have about $10,000 in cash.

With a conventional loan, they could put 20% down on a dismal starter home. Or, with Private Mortgage Insurance, they could put 10% down on a nicer home.

But with an FHA loan, $10,000 is 3.5% down on a $285,000 home. We can argue the wisdom of making so small a down payment, but the FHA loan program is the path to homeownership for millions of Americans.

And $285,000 is too much house for our buyers. They found a nice lender-owned two-story home in the suburbs selling for $169,000. The down payment on that home would be $5,915. But the closing costs would probably run to another $5,000 — which comes to more money than they have.

They qualify for the $8,000 first-time home-buyer tax credit, but they won’t get that until they file their tax return. They also qualify for a state-funded grant program that will contribute up to 22% of the purchase price — but which can’t be used for the down payment or the closing costs.

Here’s the deal we put together. We offered $175,000, $6,000 over list price. In exchange, we asked the seller to contribute 4% of the full purchase price to defray the buyer’s closing costs.

The down payment will be $6,125, leaving the buyers $3,875 in cash to pay for the endless expenses of moving into a new home.

And there will be about $2,000 left over after the closing costs are paid. This will be used to buy down the interest rate. The buyers will end up with just over 25% equity in the property for a cash outlay of $6,125 — all at a very low monthly payment. And they’ll still have their $8,000 tax credit to look forward to.

This is the kind of outcome a skilled buyer’s agent can achieve.

Here’s an intriguing question: Given that it’s so easy to search for homes on the internet, why do you need a buyer’s agent?

Face it, if you use the MLS search tool on my web site, you’re seeing exactly the same listings I see. And you know better than I ever could what you like and what you don’t like.

By now, the home search process is at best a partnership between the agent and the buyer. In some cases the buyer and I will work together to perfect our search criteria. But many buyers simply search the available inventory on their own, emailing me the MLS numbers of the homes they want to see.

So why do those buyers need a buyer’s agent?

Realtors hoarded the MLS data for so long that even they came to believe it was the source of their value to buyers. But this is very far from the truth.

You don’t need me to search for listings, although I’m happy to do that. And you don’t need me to open lock-boxes. You need a buyer’s agent to guide you through what is in fact an arcane and perilous process — potentially a financial disaster. You might not need me to find your next home, but you need me to make sure that you get it — or that you pass on it, if that is what is truly in your best interests.

A skilled buyer’s agent will write the kind of purchase contract that will prove surprising to you at every turn, with every term and condition tailored to achieve your best advantage. Your agent will supervise the inspection process and negotiate the optimal solution to the repair issues. Your agent will be prepared for every pitfall in the escrow process.

If you bought and sold houses every day, you could do all these things yourself. It’s because you don’t — and because the seller and the listing agent are looking to take advantage of your naivete at every turn — that you need a skilled buyer’s agent as your steadfast champion in the home-buying process.

My wife and I have sold all of our four previous homes for more than we paid for them—sometimes a lot more.

We’ve been pretty lucky. We’ve never overpaid much for a house, we’ve always bought in good school districts and decent neighborhoods, we’ve lived in neighborhoods where prices soared during the real-estate bubble, and we’ve been hurt but not decimated by the bursting of that bubble.

When I constructed a very basic cash-flow model for our home-buying history—selling price minus purchase price, renovations and repairs—it showed a roughly 3.5% annualized return on investment, from 1991 through the summer of last year. That’s when we sold our last home and bought our current one.

Then things got ugly. If we were forced to sell our current home, which I estimate has lost 5% or so of its value in our 10 months of ownership—despite the more than $20,000 we’ve made in improvements—our cumulative return over the years sinks to approximately 2% annually. And if prices keep falling in our northern New Jersey neighborhood, as is likely for a while, that return will shrink even further.

So do I regret owning a home? Heck, no. It’s not a get-rich scheme, and Americans never should have viewed it as one. Owning a home has given my family a series of anchors to cling to as we’ve moved around the country for my job. It’s allowed us to live in pleasant neighborhoods where it would have been tough to find a rental house. And paying down a mortgage is a form of forced savings, which should help us in retirement.

Columbia Business School’s Christopher Mayer, who has studied housing markets, says our experience with home-price gains is pretty typical. Home appreciation nationally has run about 1% above inflation over time.

The big price run-ups from the late 1990s through 2006 or 2007 were an aberration. The biggest value you derive from home ownership isn’t appreciation. “It’s being able to live in it,” Prof. Mayer says, and avoiding the rent you would otherwise have to pay.

Once you add in imputed rent and subtract property taxes, Prof. Mayer estimates, my 2% annual home-ownership return looks more like 6%.

Is now the time to buy a home in Metropolitan Phoenix?

It depends.

If you plan to take advantage of the $8,000 first-time home-buyer tax credit, you need to get moving. If your loan hasn’t closed by November 30th, you won’t get the concession.

If you’re afraid of rising interest rates, you’re probably better off acting now. Mortgage rates cannot stay this low forever. When they go up, they’re likely to go up decisively and for a long time.

On the other hand, if your plan is to pay cash, and if you don’t have to move right away — you might be better off sitting tight. The same goes for all-cash rental home investors.

The mini-boom we’ve seen over the past few months was based in an erroneous belief that the supply of homes in the Phoenix area was limited.

This is untrue. The length and depth of our real estate correction is a consequence of our being overbuilt. There is no shortage of homes for sale, nor any shortage of bargain-priced lender-owned homes. And I think it is silly to bid up the prices of properties that are not in short supply.

The market is already flooded with available housing, and there is a three-year tsunami of short sales and lender-owned homes still to come. If there are enough buyers to absorb that supply of homes, prices may not go down further, or at least not by much. But for bread and butter houses, there is no reason to expect values to go up any time soon.

But there’s more. We are headed into a hyper-inflationary economy — which among other things transfers income from creditors to debtors. The money that you’ve managed to save will lose value over time, while the money you owe will be repaid from a progressively higher income.

The bottom line: Whether you take out a mortgage or pay cash, real estate can be a very strong hedge against inflation. Just by itself, that might be a good reason to buy a home sometime soon.

 
Further notice: I recorded an extended podcast about the state of the Phoenix real estate market, which you can find by clicking on that link.

The “cap and trade” bill that passed in the House of Representatives last week contains within it the seeds of a national building code. It rarely rains in Phoenix and it rarely fails to rain in Portland, but both cities will build new structures according to the dictates of some Washington bureaucrat.

Drive along 19th Avenue in Phoenix and you’ll pass block after block of condemned houses. They were taken by the city for the planned light rail expansion, now delayed. The neighbors are left to fight off the kind of vermin vacant homes attract while they worry what that blight is doing to their home values.

In Glendale, the city government is doing everything it can to prevent the Tohono O’Odham tribe from developing its own sovereign land as a casino.

The essence of the freedom we celebrate on Independence Day is the free ownership of the land. The Hoplite Greeks fought and died to protect their own lands. The Roman Legionnaires fought and died because their farms were their own property. A Cincinnatus — or a George Washington — lays down his arms because being a dictator is nothing when you can instead be a freeholder in the land.

The essence of our freedom is the free ownership of the land, and yet everywhere we turn, private property is subjected to one law after another, and everything that is not forbidden is compulsory instead.

This is a grievous error. The men who become Brownshirts or Klansmen or Khmer Rouge — the men who make up murderous mobs — are men without land. It is the husbandry of the land — each man to his own parcel — that most makes husbands of us, that sweeps away our willingness to live as brigands or rapists or thugs.

By robbing the private ownership of the land of its meaning, the state is, by increments, robbing its citizens of their humanity. No one burns down his own home, nor his neighbor’s home. But when the time comes that we all seem to own our homes only by sufferance, none of us will have anything left to defend.

 
Further notice: I posted an audio tweet on this topic, as well.

Here’s a situation that’s all too common in the Phoenix real estate market right now:

You make what you think is a good offer on a home, only to find out that you are one of several bidders. The home can be lender-owned, a short sale or just an ordinary owner-owned home. It’s probably priced pretty aggressively to the market, though. That’s why it attracted multiple offers.

Here’s what happens next: The listing agent sends out Multiple Counter Offer forms. The Multiple Counter Offer can specify some ideal offer, perhaps the best one received so far. Or the lister can simply ask buyers to make their best offer. Or the Multiple Counter Offer can specify different terms to each buyer.

How do you respond?

You don’t know what you’re competing against. And even if you have a fair idea of what the best offer might have been before the lister sent out the Multiple Counter Offer, you have no idea what you might have to beat by now.

But, guess what? It gets worse. Because you don’t even know for sure that there are other buyers, or, if there are, if they are willing to respond to the Multiple Counter Offer.

Do you understand? You could be involved in a brutal bidding war — bidding only against yourself!

What are your alternatives?

First, don’t get caught up in the fever of a silent auction. A property is worth what it’s worth in the current market. It does not gain in value just because people are competing for it. Your offer should reflect the market value of the home. If you lose out, go buy another. Houses are not in short supply.

And because houses are not in short supply, ask yourself why you’re in such a fierce competition to begin with. You might not be able to get the property that’s listed at a very low price but sells at a much higher price. But you may be the only bidder on the home that is priced to the market — and will end up selling for the market price.

The mini-boom we’ve been seeing in the Phoenix real estate market over the last few months may be abating slightly, but, for now at least, snagging a cheap house can take some effort.

Bargain-priced lender-owned homes are generating multiple offers and are selling, ultimately, at above-list prices. Many lenders are handling their short sales as silent auctions, with every offer being forwarded to the bank for evaluation. Buyers are pitted against each other with multiple-counter-offers.

Many of the buyers of lower-priced homes are investors. Some of them are buying homes to fix and flip, but most are newly-minted landlords in search of tenants.

Most of the rest are first-time home-buyers looking to cash in on the $8,000 federal tax credit. These folks are in a tough spot. Without cash for repairs, they can’t compete for the cheapest of the lender-owned homes. And since the homes they buy must appraise for at least the purchase price, they can’t compete against all-cash buyers.

But here’s the irony in this whole scenario: There is no shortage of housing in the Valley. Right now there are about 33,000 residential listings in the MLS system. That’s down from a high of 55,000, but it’s way up from a low of 11,000 at the peak of the boom.

Moreover, there are many thousands of homes in the foreclosure pipeline that have not hit the market yet. For whatever reason, banks are withholding that inventory — perhaps to put a floor under prices. If so, that floor will likely be a durable one, with the steady drip of lender-owned homes keeping prices at around their current levels for years to come.

But moreover yet again, we are still overbuilt. We simply have more kitchens than cooks. If you have to close before November 30th to get your tax credit, you may not see the humor in our situation. But take heart: Investors can only tolerate so much vacancy before they rethink their spending. Rationality will return to the real estate marketplace.

So we started with a $7,500 tax deduction for first-time home-buyers.

But that didn’t juice the real estate market enough, so we bumped the number up to $8,000 and made it a full-blown tax credit. If you owe $8,000 in taxes next April, your slate is wiped clean.

But even that didn’t juice the the real estate market enough, so this week Republicans — the alleged party of fiscal responsibility — proposed bumping the tax credit up to $15,000 and making it available to everyone — including billionaires.

How cool is that? You buy a $150,000 house, you get 10% back when you file your taxes. And you can file an early return to get the money now. And you can even finance the tax credit now and pay it back when you file your return.

You can’t — quite — use the tax credit as your down payment, but that “reform” can’t be more than inches and hours away. And a $15,000 down payment on an FHA loan buys you a $428,500 house.

Unfortunately, that’s more than the FHA limit for metropolitan Phoenix, so that limit will need to be “reformed” as well.

Paying people to buy houses would be insane if we actually had the money to back up our promises. But, since we don’t, these “reforms” are the mark of true statesmanship.

I’m helping an ambitious young couple buy their first home right now. We’re late to close, a common enough situation.

They just had their second child, an event mere bureaucracy cannot delay. Their baby boy — his name is James — is sweet and beautiful, healthy and smart, a perfect specimen of incipient humanity.

They’re taking the $8,000 tax credit, of course, as they should. The government doesn’t become less insane if you shoot yourself in the foot.

But it is sweet little Baby James who will pay for that tax credit, and for millions of others, and possibly for millions more at $15,000 a pop. Our economy runs on theft — and we’re running out of people to steal from.

Are you looking for a bargain in the Phoenix real estate market? Everybody wants to save a buck, but here’s a different way of looking at things: Instead of shopping for a bargain, shop for value.

What’s the difference? A bargain comes about when you get a great price by buying something nobody else wants.

Like this: A grocer puts out a pyramid of apples, selling them at fifty cents each. About half sell at that price, and the grocer marks the others down to twenty-five cents. All but the last six sell, and the grocer accepts your offer of five cents each for the remainder.

That’s a bargain. You got six apples for thirty cents, when they would have cost you three dollars earlier in the day.

The only problem is, your apples are bruised and shopped-over. But that’s why you got them at the bargain price — because no one else wanted them. Tomorrow’s price for fresh, appetizing apples will be the same as today’s price, and you’ll only get the bargain price by bidding low on the shopped-over remainders.

If you’re making a pie, that’s fine. But if you’re having guests over, you’ll pay the higher price.

Apples are not houses, of course. For one thing, every house is unique. If other people are also interested in a home, you cannot expect to pay much less than the asking price.

Even so, when you’re shopping for value in real estate, the purchase price is only one factor in the calculation. What purpose do you have in mind for the property? What are your future financial objectives?

A rental home in a community with no tenants is no bargain no matter how little you pay for it. A residence in a neighborhood where the long term price trend is downward is no bargain no matter how low the purchase price.

Shopping for value means paying as little as you can get away with for a property that actually fulfills your objectives and offers a prospect for future appreciation. Anything less than that is no bargain.