Short sales, along with foreclosures are a large part of the Phoenix area real estate market. Here are some tips to guide you through the minefield.
The general consensus is that short sales, where the owner owes more than the home is worth and asks for debt forgiveness, are a good deal. I am here to tell you, that while they can be, they are sometimes more trouble than they are worth. Both for the potential buyer, and for real estate agents.
Let me explain. First of all, there has been a growing tendency, which I deplore, here in the Phoenix area, to massively under-price a short-sale property. I understand why they do it. They must attract a qualified buyer in order to go through the process with the bank. To the inexperienced buyer, and indeed agent, the low price fairly leaps off the page. Many times it is priced at 70% of its true value. I feel that this is misleading. It is imperative that the experienced agent explain to the potential buyer that while it is priced at $495,000, for example, the bank will likely require closer to $600,000 to close the deal as that is the home's true value. The trouble is that some first-time buyers just think you are being a "slick" agent and are distrustful. Who can blame them?
The other thing that I find annoying is the banks' constant attempts to take money from my pocket. Understand that commissions are always negotiable, however never in the purchase contract, between seller and listing agent. Many times, however, the bank is taking a bath and tries to get the agent to join in by slashing the commission. By the way, the agent is under no obligation to do so. Sadly, many agents famously will do almost anything for a dollar, or food, so banks often get away with this. Couple that with the fact that a short sale involves a lot of extra work, and steps, so a bank should really pay more in gratitude for someone persevering and ridding them of a most-likely self-imposed bad debt.
And then we have the Realtor® - lemming of the type I encountered today. Before I even write an offer, they require me to sign a disclosure agreeing that whatever the bank decides to pay in commission, I will meekly split it with the listing agent. Bank says $10.00 and a slurpee, I get $5.00 and half a brain freeze.
If you have the range of choices available, as we do in Phoenix, buy the foreclosed home, or the home that is owned by a real live motivated seller. You will thank me for it.
Sunday, April 19, 2009
Wednesday, April 08, 2009
Pending Sales Are Up In Phoenix
A rise in pending transactions bodes well for the future of real estate in the Phoenix metropolitan area.
As we have noted in the past, the free-market, when it is allowed to operate always has and always will re-dress the housing market. You may not like the way in which it is achieved, but it will occur naturally, if left to regular market forces. By this, I mean that well intentioned programs to enable folks to stay in homes they still cannot afford, only delays the inevitable.
Twice in recent memory, November 2008 and March 2009, prices have dropped so drastically, partly due to foreclosures and partly due to the economy, that sales have leapt up. Many people who thought they had missed the boat are now stepping up and finding that there are many bargains to be had.
Analysts use many benchmarks to gauge the health of the real estate market-pending sales is one of them. A pending sale is classified as one that has an executed contract, with an agreed price, has been taken off the "active" market, and is going through the regular processes prior to closing.
The Cromford report compiles such statistics and shows that in March 2009, pendings were up over March 2008 virtually across the board, with the exception of Anthem and Paradise Valley. The latter probably due to the high cost of homes and the tendency for the wealthier to be able to ride out bad economic times and stay put. The former, Anthem was down a little, but from a statistical standpoint of just one month, may merely be a hiccough.
One minor nitpick with the report is the figures for Cave Creek, which show 45 pendings versus 32 for March last year. Anybody with a working knowledge of Cave Creek would know that 45 is an absurdly high number for such a small town, as was the 32. the compiler of the report makes the same mistake that many "analysts" make. By dint of post office fiat, Cave Creek shares a zip code (85331) with a large portion of North Phoenix. This radically distorts the figures. I complained when the number of foreclosures reported in Cave Creek, which is detrimental to the community, were mis-reported; so in the interest of remaining fair, I must complain when it inflates the re-sale activity as well.
Other than that, things are slowly beginning to recover, so long as government doesn't stop by to "help" again.
As we have noted in the past, the free-market, when it is allowed to operate always has and always will re-dress the housing market. You may not like the way in which it is achieved, but it will occur naturally, if left to regular market forces. By this, I mean that well intentioned programs to enable folks to stay in homes they still cannot afford, only delays the inevitable.
Twice in recent memory, November 2008 and March 2009, prices have dropped so drastically, partly due to foreclosures and partly due to the economy, that sales have leapt up. Many people who thought they had missed the boat are now stepping up and finding that there are many bargains to be had.
Analysts use many benchmarks to gauge the health of the real estate market-pending sales is one of them. A pending sale is classified as one that has an executed contract, with an agreed price, has been taken off the "active" market, and is going through the regular processes prior to closing.
The Cromford report compiles such statistics and shows that in March 2009, pendings were up over March 2008 virtually across the board, with the exception of Anthem and Paradise Valley. The latter probably due to the high cost of homes and the tendency for the wealthier to be able to ride out bad economic times and stay put. The former, Anthem was down a little, but from a statistical standpoint of just one month, may merely be a hiccough.
One minor nitpick with the report is the figures for Cave Creek, which show 45 pendings versus 32 for March last year. Anybody with a working knowledge of Cave Creek would know that 45 is an absurdly high number for such a small town, as was the 32. the compiler of the report makes the same mistake that many "analysts" make. By dint of post office fiat, Cave Creek shares a zip code (85331) with a large portion of North Phoenix. This radically distorts the figures. I complained when the number of foreclosures reported in Cave Creek, which is detrimental to the community, were mis-reported; so in the interest of remaining fair, I must complain when it inflates the re-sale activity as well.
Other than that, things are slowly beginning to recover, so long as government doesn't stop by to "help" again.
Thursday, April 02, 2009
Pricing Is Key; Always Was, Still Is.
Pricing your home to sell is always a main factor in marketing your home. The sagging Phoenix real estate market makes it vital.
The old adage in selling real estate was always, "Location, location, location". While that still holds true to a large extent, there are other factors just as crucial, not least of which is - Price.
I was reminded of this again, today, as I was sifting through the MLS. Time after time, the same old frequent flyers kept popping up. Homes that were $550K two years ago when they should have been $500K, now marked down to $400K, when they should be $350K. Always a day late and a dollar short, as the expression goes. You have to price into a falling market, not reflexively reducing to imitate local sales after they have closed. In the above example, had the seller started at a realistic $450-$475K two years ago, it would have sold. Now the selling price will likely be $100K less than that.
It is sometimes too easy to blame the seller, when many times it is the fault of a weak agent. Someone who has not worked through tough times may not have developed the skills needed to persuade a recalcitrant seller to lower their price. Or indeed, may not have developed the confidence to walk away from, or decline in the first place, an over-priced property. All Realtors say they need listings; what they really need are saleable listings. Big difference.
As a home seller you need to speak to your prospective agent in order to satisfy yourself that he/she is capable of getting the job done.
Then we have homes that have been around so long, that the sellers are now upside-down, and owe more than it is worth. Often, this is as a result of re-financing to release equity. In retrospect, not a good idea, at all. These "short sale" homes are often priced temptingly low, in order to hook a buyer with which to begin the process. For a serious buyer, this can be a frustrating experience. Be wary of the short sale that is under-priced, it may disappoint you. Given the choice, I would go for the bank-owned, or real live actual motivated seller, if I were able.
The old adage in selling real estate was always, "Location, location, location". While that still holds true to a large extent, there are other factors just as crucial, not least of which is - Price.
I was reminded of this again, today, as I was sifting through the MLS. Time after time, the same old frequent flyers kept popping up. Homes that were $550K two years ago when they should have been $500K, now marked down to $400K, when they should be $350K. Always a day late and a dollar short, as the expression goes. You have to price into a falling market, not reflexively reducing to imitate local sales after they have closed. In the above example, had the seller started at a realistic $450-$475K two years ago, it would have sold. Now the selling price will likely be $100K less than that.
It is sometimes too easy to blame the seller, when many times it is the fault of a weak agent. Someone who has not worked through tough times may not have developed the skills needed to persuade a recalcitrant seller to lower their price. Or indeed, may not have developed the confidence to walk away from, or decline in the first place, an over-priced property. All Realtors say they need listings; what they really need are saleable listings. Big difference.
As a home seller you need to speak to your prospective agent in order to satisfy yourself that he/she is capable of getting the job done.
Then we have homes that have been around so long, that the sellers are now upside-down, and owe more than it is worth. Often, this is as a result of re-financing to release equity. In retrospect, not a good idea, at all. These "short sale" homes are often priced temptingly low, in order to hook a buyer with which to begin the process. For a serious buyer, this can be a frustrating experience. Be wary of the short sale that is under-priced, it may disappoint you. Given the choice, I would go for the bank-owned, or real live actual motivated seller, if I were able.
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