Cancelling A Listing

Over the weekend, a letter was published in the real estate section of the Arizona Republic regarding the cancellation of a listing. The seller, it seems, had reluctantly agreed to a 6 month listing, after the listing broker had verbally agreed to cancel at any time. Right there, you can see the problem. Verbally.

After two months, for whatever reason, the sellers decided they no longer wanted to sell their home, and requested cancellation of the listing agreement. The broker said "Sure"; but requested $1000 compensation for advertising and promotion already completed.

The attorney who responded to the letter surprised me with his answer which was, essentially, try to come to a financial agreement.

First, let me say that if, as a Broker, you are willing to cancel the agreement, and so state at its inception, it is to the benefit of both parties to put the terms, and any financial penalties of such action, in writing at that time.

It seemed to me that the broker decided, retroactively, to charge for services rendered, and held the seller to ransom until he coughed up. Ethically, I find this disturbing and disappointing. We charge a reasonable rate for our services, but never collect a penny until they are completed, i.e. the home is sold. Some we win, and some we lose. It's part of the cost of being in business.

There are some companies who break down each individual service offered, and charge accordingly, sort of "a la carte" pricing. That is fine. In this instance I think the broker should take the high road, forget the charges and move on. If, in the future, that is how he/she wishes to conduct their business, disclose it up front and in writing.

Making Phoenix Home Buying Easier

Freddie and Fannie try to make it easier for you to buy a home, not like it's been that hard in the last few years.

Sometimes, here in Phoenix, and other parts of the nation, you will come across a home for sale in which you will be encouraged to use either "Homepath", or "Homesteps".

Let's look at "Homepath" first. This is a program for homes that are owned by Fannie Mae. Naturally, they need to shift their inventory, so they are trying to make the home-buying process as streamlined as possible. No appraisal is required as they have priced the home right at market, allegedly, although that doesn't mean you have to offer full price: bargain away. A down payment of 3% is usual, although seller's can contribute up to 6% of purchase price towards closing costs. Also, investors can buy 1-2 unit buildings with only 10% down.

"Homesteps" is a similar program offered by Freddie Mac for homes which it owns (REOs). They are trying to combat the notion that foreclosed homes are wrecks (they often suffer damage at the hands of spiteful owners) and will mildly re-hab a property to enhance its chances of selling. Typically, that would include fresh paint, carpet and, in some cases, new appliances.

Finally, you may come across a program, from non-government lenders, called "Express Path". Supposedly, they are pre-inspected, pre-appraised, low closing-cost, ready to buy homes. Of course, all those services are paid for in the asking price, there is no free lunch. This allows a speedy close, but to whose benefit? Some processes need not, and should not, be rushed. Industry fondness for this program seems to be mixed. Remember, one stop shopping rarely benefits the buyer, as the savings are not passed on, but retained, as profit.

Caveat emptor!

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.

Pricing Your Home

A home or any commodity, is only worth what the market will bear. A troubled Phoenix real estate market doesn't change that.

Quite often, we hear from sellers that they need to net X amount of dollars from their home sale, despite its value being considerably less. Well, I'd like a second home in the south of France, but that's not going to happen, either.

The point is, you have to be realistic in your hopes for your home, and be able to adapt your plans accordingly, or you are effectively buying your home back at your inflated asking price.

The other side of the problem, unfortunately, is that weak agents often encourage, and support that behavior which is a waste of everybody's time.

Remember, you have the right to want whatever you want for your home, as much as the market has the right to insist that you keep it.

The Good News, and the Not So Good News in the Housing Resale Market

Today, Bloomberg.com published an informative article by Bob Willis, on November existing home sales. Please click the link to read.
The article speaks for itself and shows the power of the free market to stimulate sales. Yes, prices were down, but it encouraged buyers to step up. I have never understood the rush to artificially prop up prices. What is wrong with lower prices? It allows more folks to become home-owners without the lowering of credit-worthiness standards that have brought us to this current debacle. Note that all government attempts at "rescue" have centered on helping the banks that were encouraged, aided and abetted by Congress and Wall Street, to offer loans to people who could not afford them. Other organizations, like the under-investigated A.C.O.R.N. and various inter-faith groups are slated to receive billions in funding to offer "counselling" to those who are in danger of losing their homes. Counselling? We are witnessing the largest single giveaway of public funds, that we do not have, in the history of this country. Future generations will pay dearly.
Senator Chris Dodds, currently under an ethics investigation due to the preferential terms and conditions of two mortgages from Countrywide, was not only in charge of this tragedy, he remains empowered as someone who is supposed to extricate us from this mess. As I write this, Dodds promised to reveal the details of his sweetheart loan 185 days ago. Click on this link to see how much time has elapsed since his empty promise.
In politics there is no longer any shame. Throughout this entire fiasco, name one politico who has resigned. Remember, Pelosi promised to "drain the swamp" and give us the "most ethical Congress ever". I'm still waiting.

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.

2009 Predictions for the Phoenix Real Estate Market

My annual attempt at the impossible. Trying to guess where real estate markets will trend in the greater Phoenix metropolitan area in the coming year.

Predicting future events is never an easy job, and more often than not, a futile exercise of vanity over reality. However, that has never stopped me from sticking my neck out! Further complicating the issue this year is the fact that we will be installing a new administration on January 20th, 2009. Also, due to the strange peccadilloes of the electorate in general, we have managed to re-elect virtually every member of Congress, (leastwise those who were up for re-election). Please bear in mind, that this was a congress whose popularity rating has never, ever been rated at a lower percentage, since records have been kept. This means that they very same congress-critters who got us into this mess, will be the ones who will be attempting to fix it! Encouraged-I am not!

I believe that the volume of sales will remain steady, or increase slightly, during the course of 2009. Here, in the Valley of the Sun, we have a great deal of affordable housing, which attracts out of state buyers. If the economy remains constant, or improves slightly, there will be a commensurate increase in sales. Notice I said "increase in sales"- not increase in prices. Big distinction. I still believe that the majority of sales will be some kind of distress sale, i.e. REO's, short sales or people losing money personally to close the deal. However, it is absolutely vital for these properties to be absorbed into the market in order for normalcy. Whatever that may be, to eventually return.

In the more affluent neighborhoods, Cave Creek, Carefree or Fountain Hills for example, I think we will see fewer sales. This is because in those areas, many of the homes are owned by retirees or wealthy snowbirders. Often, they do not have to sell, so the decision to stay in the property and ride out the storm is a relatively easy one.

So, is it going to be a good year, or a bad one? Well, it all depends on your perspective. For buyers, I think it will be all good--especially first-time buyers. For homeowners, who purchased in 2005 or later, who have to sell, there will be some degree of pain. For those who don't have to sell, or bought before 2004, it's a wash. Although, the growth they initially experienced has gone away, I think we will return to low single digit appreciation in late 2009, early 2010. Which will mean, as ever, that a home is always a good Long-Term investment.

More importantly than all of the above, however, is to stay healthy and enjoy life.