Archive for the 'Buying Your Home' Category

Will this infinite back yard always be this beautiful?

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No. In a few months, when the wildflowers bloom, it will be even more breathtaking…

Live where it snows? Had enough? Isn’t it time to get your Winter back?

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Don’t you love reading all that good news about the the Phoenix real estate market’s recovery? Guess what? You’re being lied to — as always.

This is what’s really happening: FannieMae and FreddieMac are holding foreclosed houses off the market, in anticipation of “selling” them to campaign donors.

Meanwhile, the town is being picked clean, with prices being bid up by buyers convinced that houses are going out of style — a story we’ve heard before, yes?

As an example, my BargainBot search, which is shared with hundreds of investors all over the world, is at less than 5% of it’s peak. A search I use to select premium rental homes produces one listing this morning, where it stood at 45 homes in April of 2011.

If Fannie and Freddie “sell” the homes they own to politically-connected “investors,” the rental market in Phoenix will be slaughtered.

And if they release the homes they have been hoarding into the MLS, Phoenix will hit a third bottom before the market can finally recover.

You can call the news media idiots or you can call them liars. But any news from any official source about Phoenix real estate is dangerously misleading.

Meanwhile, if you need to sell, your house will go for top-dollar at blinding speed.

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It’s 4:15 pm. Do you know where your Realtor is? A consumer’s guide to using social media to supervise your goof-off employee.

Your mortgage lender just called. The appraiser is standing outside the home you’re hoping to buy, but there is no key in the lockbox. The lender called you so that you could call your Realtor. Your Realtor in turn can call the listing agent, and then someone can get over to the house — pronto! — to let the appraiser in.

There’s just one problem: You can’t seem to get your Realtor on the phone.

Stuff happens. Your Realtor could be tied up with another client or stuck in traffic in a cell-phone dead zone. Heaven forbid, he might have been in a car accident.

But… There is another possibility…

Do you remember when you first made contact with your Realtor? Do you recall him telling you all about how hi-tech his business is, detailing his presence on all the biggest social media sites?

So: If you’re not getting your calls to your Realtor returned, where might be a good place to look for him?

How about Twitter, for a start? How about Facebook? Foursquare? Tumblr? Posterous? You might have to look in a few places, but there are only two kinds of hi-tech Realtors: The kind who work a lot and the kind who play a lot.

How can you tell if your Realtor is the kind who plays a lot? It’s easy. He’ll be leaving tracks all over the place, Retweeting jokes and commenting on Facebook photos and writing detailed reviews of burger joints and doing — and documenting — just about any activity on the face of the earth — except attending to your real estate transaction.

Here’s the sad part: Even if you’re seeing dozens of Tweets and Facebook comments from your Realtor, you’re probably just seeing the tip of the iceberg. You’re not seeing the direct Twitter posts or the private conversations being carried out on Facebook or in email.

But: If your Realtor seems to be wasting his entire day on social media sites, there’s a reason for that:

It’s because he’s wasting his entire day on social media sites.

I’ve tried pointing out to Realtors that schmoozing on Twitter or Facebook is bad marketing, so far to no avail:

I say that trying to sell real estate via Twitter/Facebook is a waste of time — and it is anti-marketing even if it seems to produce some results. Why? Because the bulk of your chatter is going to look like… chatter. Your clients might like it when you schmooze with them, but your public schmoozing with every other time-wasting Realtor and vendor in the RE.net is going to look to your clients like just what it is: Time-wasting laziness.

Here’s the good news: You have the power to do something about this. Once you’ve discovered that your Realtor is ignoring your needs in order to goof-off online, put him on notice: “You will either service my transaction or I will fire you with dispatch.” You’re the boss. Act like it.

Even better, when you’re shopping for a Realtor, shop his or her online presence. Is your prospective Realtor a big-time Twitter kibitzer? This will come back to bite you in the butt. Is she an all-day Facebook schmoozer? Be prepared to handle your own transaction; your Realtor has another job she likes better than the one you’re offering her.

Why can’t you get your Realtor on the phone? Why don’t your repair issues get dealt with? Why is your lender calling the title company for you? Why is there an appraiser stranded outside your new home?

Part your problem is that you have a lazy Realtor.

The other part is that you have been a lax supervisor.

Whether your are a home seller or a buyer, you’re paying a lot of money for real estate representation. If you’re not getting it, you must either demand better performance immediately or take your business elsewhere.

The beautiful thing about capitalism is that you can always put the bums out of work. That’ll give them something to chat about online…

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Buying a Phoenix-area rental home? It all comes down to the math.

Phoenix handyman Mark Deermer and I have been prowling potential rental homes in the western suburbs of Phoenix. I’m looking for all of my usual stuff — all the factors that make the Metropolitan Phoenix rental homes we sell rent quickly and stay rented. And Mark is going through the homes to get a quick estimate of the cost to refurbish the homes, bringing them into rent-ready condition.

This is an easy world to live in right now — for buyers, at least. The quantity of available homes is rising, and the quality of those homes seems to be going up, too.

Here are six properties we’ve seen lately.

This all about strategy: We start with homes that might work and that are not insanely overpriced. Working from a projected rent, we know what the maximum entry cost should be. Mark’s refurb cost is subtracted from that gross number, which yields the ideal purchase price. We make the offer on that basis. If we get the house, we get it. If not, we move on. But if we do get the property under contract, we know that it will be profitable from the first tenant.

Ready to make your move? Send me an email or phone me at 602-740-7531 and I’ll help you buy a Phoenix-area rental home like one of these.

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How do new home builders compete when resale homes are selling for less than half of their replacement cost?

KBHomes has an answer: Build cheaper homes. You can get a better home for $90,000, but you can’t get a newer one…

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What’s the real estate price trend for bread-and-butter homes in Metropolitan Phoenix? Prices are up and down — but mostly flat…

That chart illustrates sales prices for the past 13 months, as reflected in BloodhoundRealty’s Market Basket of Homes. What we’re looking at are suburban stucco and tile tract homes, the houses that drive the fat middle of the bell curve in the Metropolitan Phoenix real estate market.

That line looks awful spiky doesn’t it? That’s just the drama of charting software. What you’re really seeing is a market that is essentially flat. Prices go up. Price come back down. A home that would have sold for $122,000 in March of 2009 will have sold in March of 2010 for — wait for it — $121,000.

That’s right. For the past year, the Arizona Republic and half the faculty at ASU has been bellowing that the market has turned. It has. Slightly downward. And now that the home buyer tax credit is about to expire, it seem plausible that the near term trend will be still further downward.

Prices will probably decline gradually, mind you, and investors have clearly thrown a floor under our market. I would be surprised to see dramatic drops in values, but the segment of the chart documenting events from August through December of 2009 illustrates the impact of the tax credit. Without it, I expect this chart to grow even flatter in the months ahead.

Means what? Jump. Interest rates are still low, and cash is still king. Inventories will grow — nudging prices downward — and the quality of the available homes is gradually getting better. If you have the means to buy a home in Phoenix now, this may be the perfect storm. If we’re at the bottom, we’re going to be here for a while. But if you can afford to wait out the market, you can buy a whole lot of home for your money.

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Why are lender-owned homes so much easier to buy than short sales?

An extended answer to a question from a buyer client, the short film linked below goes into the in-house procedures that result in the observed effect: Lender-owned homes are much easier to get under contract and to get through the closing process than are short sales.

We also talk a bit about strategy, particularly for mortgage-financed transactions.

Click on the link below to watch the video.

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Are banks “warehousing” foreclosed homes in the Phoenix real estate market? If so, sooner or later something will have to give

This from my Arizona Republic real estate column (permanent link):

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.

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The buyer’s agent is the unsung hero of the home-buying process

This from my Arizona Republic real estate column (permanent link):

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.

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Getting outbid for houses? Relax. Available homes are not in short supply, so there is no reason to overpay

This from my Arizona Republic real estate column (permanent link):

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.

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Cashing in on your $8,000 first-time home-buyer tax credit may take some effort in the current Phoenix real estate market

This from my Arizona Republic real estate column (permanent link):

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.

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Do you want to save money in the Phoenix real estate market? Stop shopping for bargains and start shopping for value instead.

This from my Arizona Republic real estate column (permanent link):

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.

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The $8,000 first-time home-buyers tax credit gets even juicier

This from my Arizona Republic real estate column (permanent link):

The $8,000 first-time home-buyers tax credit just keeps getting sweeter and sweeter.

First, it’s a true tax credit, not a deduction. In other words, if you would have gotten a $3,000 tax refund next April, with the tax credit you’ll get $11,000.

Even better, a first-time home-buyer is someone who has not owned a home in the past three years.

To get the full $8,000, the purchase price of your home must be at least $80,000. But it turns out that $80,000 is a sweet spot in the Phoenix real estate market right now. In many West Valley communities, $80,000 will buy you a very nice house.

But here’s the icing on the cake: As of this week, The Federal Housing Authority may allow borrowers to use the $8,000 for their down payment.

The lender would offer that money through a second note, and you’ll pay it back when you get your tax refund.

Take a moment to reflect on the implications. That’s right, after nearly five long months of stern fiscal responsibility, we’re right back to doing nothing-down home loans.

The tax credit can be no more than ten percent of the purchase price, but an FHA loan requires only 3.5% down payment. How much house can you buy with $8,000 down? How about $228,500?

The sellers will throw in the closing costs — gleefully — so you could buy a great big Phoenix homestead for no money out-of-pocket.

Make your payments on time and you’ll be living the American Dream — in a home that might have sold for $500,000 in December of 2005.

But don’t dawdle. The $8,000 tax credit ends on November 30th — which means your loan must be completely closed by then. Allowing 45 days for underwriting and another 30 days to find the home of your dreams, you should start your home search no later than mid-September. If you want for the kids to be in their new schools in August, you should probably start looking now.

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Timing the bottom of the market? For home-buyers, the trade-off may be a lower interest rate now versus a lower purchase price later

I won’t be able to rely on the numbers for another few days, but March will turn out to have been a very busy month. Volume of sales will be up substantially over February, and April promises to be even stronger.

The bad news? Prices were down again in March, and I’ll bet April will also be a down month.

The good news? Mortgage interest rates are at historic lows.

The worse news? The foreclosure pipeline is still very full, and 10,000 more homes are being lined up at the entry point.

And that’s the trade-off confronting owner-occupant home-buyers. We’re looking at two more years of foreclosures, which argues that prices will continue to decline, at least for a while. But it’s hard to imagine interest rates going much lower — or staying this low.

About half of those newly-foreclosed properties will end up as lender-owned resale homes, hitting the market in 60-90 days. FannieMae and FreddieMac had a moratorium on foreclosures in the fourth quarter of 2008, so some of these new foreclosures will reflect that delay. Even so, there are plenty of other troubled mortgages still to hit the pipeline.

I see two issues that matter:

  1. Will new foreclosures come onto the market more quickly or more slowly than they are coming off? Right now, overall inventories are declining, which argues that sometime soon prices will stabilize or even increase.
  2. But do we have enough heads for the bedrooms? We’re overbuilt, and if we don’t have enough people to put into these homes, we could see an echo bust as inventory newly absorbed by investors sits vacant.

We know in the long run we will recover, but we don’t know where the long run is. The question for owner-occupant buyers is the one addressed above: Will you save more by paying a higher purchase price now, at a lower interest rate? Or are you better off waiting for better prices, even if you end up paying a higher interest rate?

Is it possible that the home of your dreams could be selling for $10,000 less three months from now? Yes. Is it also possible that, three months from now, interest rates will be high enough that you won’t be able to qualify for that home, even at the lower price? Sadly, yes.

These are all questions for a lender, so let me know if you want me to put you in touch with one.

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Phoenix real estate bargain of the day: “I’m looking for a decent home in the Phoenix area that I can buy as a rental for now, but then use later as a getaway home — or maybe even retire to.”

I hear the request in the headline about twice a month. It’s a doable proposition, and it all really depends on price. Spend enough and you can have golf. Spend more and you can have gated golf. Spend way too much and you can have gated golf on the side of a mountain.

This house, in Ryland at Heritage Point in Tolleson, is the bargain-priced expression of that ideal. No gates, no golf, no mountains, but a nice-sized three-bedroom home with a pool in a near-in suburb of Phoenix.

For the record, I don’t love pools for rental homes. If you’re going to have one, then you simply must carry a liability rider while you’re housing tenants.

Beyond that, this house has a lot going for it. Bedroom number two has a closet, but it doubles as a den, a very practical configuration. The landscaping needs attention, but it was decent to begin with, so it should come back fairly easily. The pool was built by Paddock Pools, a reputable company.

We need appliances, along with flooring and paint, but the home is in pretty good shape overall.

The home is listed at $87,900, which is pretty aggressive. I might start at $80,000 and see who salutes. With $5,000 to whip it into shape, it could be rent-ready (or move-in-ready) for $85,000. It should be able to command $950 a month in rent, maybe even $1,000, very comfortably cash-flow positive.

And then, someday, you can lay on your back on your air mattress in your own backyard pool, watching the silent progress of the jets taking flight from Skyharbor Airport. There’s a beer or a margarita somewhere in this scene, but you’ll have to paddle over to the cool-deck to find it.

In the mean time, email me or phone me at 602-740-7531 and let’s go take a closer look at this property…

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