Foreclosures Are Up In The Greater Phoenix Metropolitan Area

Free market principles at work as sales jump to meet drop in prices.

I have said this before but it bears repeating. When the free market is allowed full rein, it will correct itself. Echoing a national trend reported recently, we discover that as prices tumble, in part due to the increase in foreclosures, buyers in Phoenix are stepping up in larger numbers.

Our misguided government's attempts to cure the market by forestalling foreclosures will only delay the inevitable. The renewed push to lower lending standards, or provide tax credits to first time buyers are merely band-aid fixes. They are just kicking the can down the road.

Anecdotally, we are seeing an uptick in enquiries at our website, which is a welcome development. Hopefully, buyers are being encouraged by lower median prices. As they begin to absorb the aforementioned inventory, swollen by foreclosures, we will begin to see a true market recovery. Not one artificially created by Congress.

North Phoenix Real Estate Market, Healthy or Not?

In response to various inquiries, I delved into the statistics of an anonymous Phoenix area neighborhood to check the pulse of the market.

Around this time of year, whilst attending a never-ending round of cocktail parties that being a busy Realtor entails, one question is posed time after time..."How's the real estate business?" the truth is- not bad! It could be, and has been, far worse.

So I decided to run the numbers on a neighborhood that has homes for sale from the low $200's, up to the one million dollar mark; and here is what I found.

In the last six months there have been 37 genuine sales, not change of ownership by virtue of a property being returned to the bank. Of these sales, 13 (35%) were regular person to person, arms-length transactions. A further 43% (16 homes) were either REO's or short-sales, and the remaining 8 homes (21%) were sold at a loss by their owners. Currently, in the same area, there are 83 homes active on the market. This means that this community has slightly more than a 12 months supply of homes available; or slightly less than 12 months if the 8 homes that are currently "pending", actually close. Not good news for sellers but definetly a buyers market.

Clearly, from the numbers I have cited, two thirds of sales have been a distress sale of some kind, which is not good for sellers. However, buyers are out in force, and taking advantage of lower sales prices. If this trend continues, it will represent a great stride towards the return of a normal and balanced market-place. Once all foreclosed and bank owned properties are absorbed, we will begin to see a return to single-digit annual appreciation.

Strangely enough, we hear some buyers are still being reticent, lest prices fall further. Whilst, no one really knows for sure if they will, it is a lucky man who is able to buy at the absolute bottom, or sell at the absolute top. Most of us just need to ride the general wave of the trend to do well. Interestingly, during the crazed sellers' market of 2005-2006, buyers were falling over themselves to purchase a home in case they missed out to higher prices. My suggestion would be to take advantage of this current buyers' market and remember that, in the long term, a home is still the best investment you can make.

If you were unfortunate enough to have purchased your home at the wrong time, but are able to weather the storm; then do so. It will turn around soon.

Phoenix Real Estate, No more Mr. Nice Guy?

In the extremely competitive real estate market that is gripping the nation, and particularly the greater Phoenix area, should your agent be a nice guy?

Let me explain. First of all, should your real estate agent be a "nice"guy? (or gal, I know!) Well, whether you are selling or buying, what you need most of all, in any market, but especially in tough markets like Phoenix, is an experienced and competent agent. Many tout their longevity as a plus, and it is to an extent, but their competence is much more relevant. Ask yourself, who would be better? A motivated, 4 years experienced, internet savvy, go getter with several closings to his credit? Or a jaded, 25+ years experienced, "inter-web/tube-hating" old crank-pot? Clearly, it is not a simple question. However, let me give you an example of why "nice" sometimes does you no good, at all.
Quite recently the relocation department of my previous company had me visit with a couple who were, of course, selling their home due to a business re-location. One of the problems with the home was that it had an addition, but it was not clear whether it had been permitted or not. Plus, when they initially bought the house, it was implied that the additional footage was not recorded by the assessor, and was therefore "bonus". After due diligence, I was able to show them that it was permitted (the good news), but that there was not "bonus" extra square footage, the city had already included the footage in the assessment (the bad news). I was in competition with two other companies, but the couple chose me to represent them. We agreed to start at $259,000, but to reduce it to $249,000 within 2 weeks if showings, and interest were low.
There were a number of cosmetic items that needed to be addressed, for which we allowed 2 weeks before entering the property in the MLS. Well, the two weeks became 4, and in that interim period I had taken the decision to move to another company. I immediately returned the file to the re-lo department for them to assign it to another agent. Well, they assigned it to a "nice" guy, and this is what he did. He listened to the sellers who "wished" that the extra footage was bonus, even tough they knew it was not. In the MLS he actually wrote that the extra footage "probably" was bonus, despite the assessor's assertion to the contrary. This last act, incidentally, leaving both the sellers and himself open to a lawsuit. At their prodding, and despite having a signed agreement at the lower price of $259,000, the "nice" guy decided that they would at least try $289,000.
So, 60 days later, the price is finally $259,000 but the property is as stale as week-old bread. See, what a "nice" guy gets you?
If the agent will not stand up to his client, how on earth do you think he is going to stand up FOR you in a negotiation.
In a slightly different vein, I sometimes have clients who say (of their neighborhood Realtor) "Oh, you must meet Jim. He's the nicest guy you'll ever meet!" They then proceed to recount all the neighborhood secrets that Jim has gleaned and has happily divulged to all in earshot. Little gems like, "I listed it at $750,000, but it'll go for $650,000!" The fact that such gems are ethical violations do not bother Jim, or the people he tells. I normally respond by saying if he is telling you all your neighbor's business, don't you think he might be revealing yours" That normally gets them thinking.
Let's be honest, nice is a very overused and meaningless word. Should your Realtor be nice? It would be nice, I suppose. Ideally, you really want smart, knowledgeable, honest and diligent. Believe it or not it is out there if you look hard enough.

To Permit, or not to permit; that is the question.

Here in the Valley of the Sun, as in the rest of America, many homeowners decide to remodel rather than move. Often, it is a sound idea. However, many Phoenix residents pose the question "Should I get a permit?"

The simple answer to this conundrum is, of course, yes. If it is required by law for the work you are contemplating, one could argue that you are indeed obligated to obtain a permit. However, this does not make for a very interesting article, so let us dig a little deeper to find out why.

Firstly, is it actually required? Obviously, you do not need to pull a permit for something as simple as changing a washer on a faucet. but in some parts of the country, any alteration to the home that exceeds $500 in cost, may require a permit. Make sure to check with your local authorities before you even start on the project.

Many folks tell me they do not want to obtain a permit because they want to "save" money. The reality, usually, is that such a move would probably prove to be a false economy. Because the permit is only part of the process; the other part being the physical inspection. Many folks regard the inspector as an overbearing busybody, and I suppose one or two are, but the fact is they are extremely knowledgeable professionals who, in essence, act as a buffer between you and your chosen contractor. You could argue all day with your contractor about a detail you think is necessary all to no avail. The inspector says "do it" and it gets done. Therein lies the reason to do the job properly. An inspector checks the plans, and the completed work, to ensure that all areas of work are completed correctly, and most importantly, to the standards required by the building code. (Most municipalities adhere to the International Building Code) It is a health and safety issue, and circumventing the permit process really is, as noted earlier, a false economy.

In a previous life, I was involved in constructing a new garage on my property, which was built on a hillside, which means the code is much more stringent. Special concrete mix is required, extra rebar was necessary as was a substantial retaining wall. The inspector's advice was invaluable as he thwarted the contractor's attempt to save money (cut corners) at every turn. I shudder to think how the project would have evolved without the inspector's participation.

Also, when it comes time to sell an addition to a home constructed without a permit is not just "not a positive". It is not even a wash. It is in fact a negative as any potential buyer will not only ignore the "improvement", they may attach a negative dollar amount to it, as the city, or state, may require its complete removal.

Also, do not fall victim to a contractor telling you, "I will do it all to code, but we will just save the cost of the permit." You will just be wasting your hard earned money if you do.

Finally, if it is not added by permit, and therefore to code, it will not show up on your city/state tax records. That means that any square footage you thought you added will not be recognized by an appraiser, nor the lender who employed him, when valuing your home for a potential buyer. Still glad you "saved" money on a permit?

Phoenix Homeowners and Personal Responsibility

This is a subject about which I have often been tempted to put pen to paper, but have shied away from it for various reasons. However, an article in a prominent Arizona newspaper recently has forced me to re-think that decision.

Once again, we are told how a young couple, trying to get ahead in this world, were duped by some big, bad lender. Apparently, they were approached by a lender who told them that he could move them into a much bigger house and that at close of escrow they would receive $20,000 in cash. The article also stated that they signed loan docs in a parking lot and that they were not notarized at that time. The article then goes on to state that even though they could not afford the payments, the lender “promised” he would help them refinance within a couple of months to obtain a more affordable payment. Well apparently the lender subsequently went missing, and now, boo hoo, they cannot keep up the payments. Well, cry me a river!
There were so many warning signs in the above scenario; what could possibly have caused the buyers to overlook them. Oh right, that perennial standby-greed.

I am reminded, in this case, of the many people who are duped by Nigerian internet scams who end up sending vast sums of cash to those predators. They whine how they were taken advantage of, when in many cases the scammers openly admit that they are taking money that is not theirs, and need your “help”. In both instances the “victims” are overwhelmed by their own greed.

Unfortunately, it is a result of the general sense of entitlement that many people possess today. Do you really “own” a home if you are putting no money down? Do you really “own” a home if you get cash back at closing as legal as that may be and therefore have nothing invested in said home? We make it too easy for people to buy homes they cannot really afford, which makes it too easy for them to walk away when times get tough. This is one of the reasons the real estate market in Phoenix, indeed in the U.S.A., finds itself in the perilous state it is today.

Do not misunderstand me, banks are extremely willing co-conspirators in this whole scheme. Watch how they scream for federal assistance as their greed comes home to roost.

Ultimately, if a deal sound fishy, it probably is. If it seems too good to be true, it probably is. Exercise some restraint and take responsibility seriously.
Unfortunately, for some folks who crave the ultimate American dream of homeownership, their zeal and greed impedes their ability to exercise caution, turning the whole exercise into a nightmare.

Please act carefully and responsibly.