by Paul Slaybaugh | May 1, 2009 | Home Selling, Scottsdale Real Estate
Shh! Can you hear that?
It’s the sound of hollow vault doors being slammed shut and masking tape being drawn to piece together shattered family piggy banks. Smashing the pink porcelain piglet in cases of emergency is the easy part. It’s putting the starved omnivorous swine back together that requires the patience of Job.
While America has gone for her hammer, we Realtors have been peddling a seemingly contrary message.
Buy. Now.
While it is difficult to fathom spending money at a time when most are diving under the sofa cushions to retrieve every last nickel and Chuck E Cheese coin alike, we are all familiar with the free market tenet that the best time to buy is when everybody else is selling. Or trying to sell, I should say. The worst of times allow for the best of swindles purchases. The majority of the general public recognizes this, laments the scarcity of available funds to capitalize on the current opportunities, and grudgingly returns to the painstaking task of trying to figure out which of the three credit cards to make a payment on this month.
These prices are crazy! If I had any extra money laying around, I’d buy five!
Of course, it goes without saying that values are so low because of the very truth that so few are in a position to buy. As soon as demand catches back up with supply, and more folks are in better places financially, the opportunity for the best values will be gone. This isn’t a sales pitch. This isn’t even a sales post. It’s just the way it is.
Nope, rather I am simply writing to remind you that the same market forces that apply to the current housing market at large apply to your home specifically, even if you are not looking to buy or sell. I am talking about now being an excellent time to renovate.
Blasphemy, I know.
With prices consistently falling for the past year and a half, why on God’s green earth would you invest more money into a depreciating asset? Especially when money is not exactly growing on HELOC trees these days?
Because there are a lot of hemorrhaging material suppliers and minimally employed contractors out there, that’s why. If you haven’t shopped the box stores or general construction supply retailers lately, you might be surprised at some of the prices that can currently buy you a slab of granite or travertine tile.
With starts for new build homes down to a virtual standstill, there is excess material and labor strewn all across the Valley. Don’t believe me? Go post a construction job on Craigslist and don’t blame me when your inbox explodes. Just like winter is the best time to resurface a pool, a slow growth market is ripe for a home renovation bargain.
Whether you are an investor that has adopted a buy and hold strategy for a slow motion flip, a homeowner who plans to sell in several years when the market is more conducive to your goals, or just someone who is simply sick of mauve carpet and laminate cabinets, this just might be the time to take the plunge.
It will be more difficult to finance the rehab, with lines of credit evaporating and home equities diminishing, but again, that’s the rub. That is precisely why there are bargains to be had.
While counting all of the money you are saving as you pick out those cabinets, thanks to the uncanny insight of a certain friendly Scottsdale Real Estate magnate, please bear one thing in mind as a thank you gift:
The magnate likes cherrywood.
by Paul Slaybaugh | May 1, 2009 | Home Selling, Scottsdale Real Estate
Appraisals are typically regarded as the most accurate measure of a home’s value, and for good reason. Licensed to perform one task and one task only, appraisers see and evaluate property all day, every day. While some of us more egocentric Realtors feel that we put more time and effort into our own opinions of value, considering we will ultimately bear the responsibility of bringing the home to market and selling it, that bit of vanity is neither here nor there. Appraisers, though many underwriters these days are loathe to admit it, are still considered the ultimate authority on worth outside of a willing buyer and seller.
Appraisers, however, are often hamstrung by their own guidelines in keeping pace with the current market. This can be beneficial, such as when prices were artificially exploding between 2005-2006. We agents lamented the stodgy appraisers who were too rooted in the past (closed sales) to acknowledge the present (upward trending prices) while values were exploding. You couldn’t attend an office meeting without a colleague or six bemoaning the bozo appraiser who didn’t grasp the current market. If only our industry at large had been so conservative.
Normally the protective ally of the bank and the buyer, I have noticed an interesting shift as of late, however. Appraisers have become a seller’s best friend. Before you toss me out on my heretical ear, hear me out.
Appraisers have begun to view the market in two distinct categories. There is the general non-distressed resale home market, and then there is the foreclosure market. When evaluating a property, most seem to have taken to lumping properties into one grouping or the other. Their subsequent findings are based upon the homogeneous pairings: bank-owned properties are comped against other bank-owned properties and standard resale homes are comped against other standard resale homes.
It sounds great in theory, but the problem with this new pattern is two-fold. First, there is the matter of pure sales volume. The action in our current market is more heavily dominated by foreclosure properties than any point in memory. It’s undeniable. The mini sales boom that has seen a steady increase in total closed and pending sales in each of the last several months here in the greater Phoenix area is due in large part to the allure of these lower priced options. As such, it is just not feasible to ignore this growing segment of the market when trying to determine the value of a home. The data is often quite scarce when trawling for non-distressed sales upon which to base an evaluation. By and large, the higher priced resale homes just aren’t selling with a great enough frequency to provide adequate comparison data.
The other issue is the problematic assumption that a buyer cares. If the home next to your own has been foreclosed upon and is listed at $200,000 less, do you honestly think the buyer will buy yours if all other things are equal? Is a buyer really expected to see anything beyond the price and the condition? The label of “bank-owned” versus “resale” is wholly irrelevant to what a buyer is willing to pay. Shoot, I have seen quite a few remodeled bank-owned or short sale properties that put many dog-eared resale listings to shame. And yet, they are somehow devalued or eliminated from the consideration of value for other homes in the neighborhood simply because of the conjured stigma. Buyers may start their search with one particular market segment in mind (distressed property shoppers looking for a deal, resale shoppers looking for a well maintained home), but they will ultimately look at everything that fits their price and need requirements. Labels be damned.
I sure like it when my appraisal tells me my home is worth more by ignoring completely the last four neighborhood comps, but I know the real score. No buyer will pay me what my current appraisal tells me it’s worth. No way. I know better than to be the ostrich who thinks that the homes that are actually selling right now have no impact on my property value because they are “distressed.” Guess what, buckaroo, those sales are distressing the entire market. There may be microcosms within the market at large, but they are amoebic. The uneven boundaries protruding against each other as they occupy overlapping space.
So while there is still plenty of benefit in having your home evaluated by a neutral authority, just remember not to spend all of that anticipated equity before your buyer signs on the dotted line. You just might be unpleasantly surprised when he doesn’t downgrade the competition or recent sales comps like your appraiser did.
by Paul Slaybaugh | May 1, 2009 | Home Buying, Scottsdale Real Estate
In typical Real Estate marketing, an agent directs efforts towards selling either a product or his/her services. In turn, that is how most professionals gear blogging habits. We post our listings and promote ourselves as buyer and/or seller representatives. One avenue that is lightly explored, however, is the direct marketing of our buyers to sellers.
Given the sheer immensity of active inventory in many markets throughout the country, the art of mating buyer with property is not always as refined as it could be. For example, we have about 40,000 listings currently on the market in the metro Phoenix area. With that raw volume of choice, it is almost incomprehensible that the right property will not be among that throng. As such, common practice would dictate an agent send the prospect the best 10-20 options, show the prospect their favorite 8-12, select the prospect’s top three choices, make an offer on the favorite, move down the line if acceptable terms are not met until you strike a deal. Easy.
While great in theory, I find this method works far better for the investor than the user. There are bargains to be had all over the market, but value is only one part of the puzzle for the person who will use the home as a primary residence. Especially true of someone who does not want to do much, if any, fix up, an agent is often left with far fewer viable options than would ever be conceivably possible in such a strong buyer’s market. There’s just a lot of junk to sift through, quite frankly.
I have several clients who have been looking off and on for that perfect house for well over a year. These aren’t folks who demand to see property every week, but ones who will act if and when the perfect confluence of wants/needs appears. There is absolutely no pressure to buy, and they will essentially move when they are forced to by the manifestation of the perfect home.
For such buyers, trawling the MLS for new listings is the first, and unfortunately, only step that many agents will take. The search will become staler and staler until it vanishes into cyberspace altogether, lost in the apathetic binary code of a decreasingly motivated agent.
There is a more proactive route that an agent can take for such hard-to-place buyers. As enterprising agents have mailed or door-knocked communities in years past to drum up candidates for the discriminating buyer, we can use our blogs to canvas the internet. With our postings reaching into inboxes all across the communities we serve, relying solely on the MLS for inventory is antiquated.
Think about it. What is the first thing a homeowner will do when mulling the notion of putting his home on the market? While we agents would prefer they fetch our calendar or business card and call us immediately, the truth of the matter is that they will sit down at the computer to do a little amateur detective work. In doing such research, they will plug in certain defining aspects of their homes.
If I have already posted a buyer need for a client that wants a 4000 square foot home on an acre in the Chaparral School District in Scottsdale, Arizona for up to $1.2 million, a potential seller of such a property very well might find me before I find him.
Google is a beautiful thing.
So while we continue to place our listings all over the internet for buyers to find, we shouldn’t lose sight of the power of the internet for drawing out the owners of unique properties as well. I would certainly expect a receptive response from the homeowner who is not too keen on a lengthy and uncertain stint on the open market. A one-shot showing to a qualified buyer would have to sound quite appealing to a seller right about now. No accumulation of days on the market, no long-term commitment … it could be just the tonic for the thirsty would-be seller who has been leery of putting a home on the market in the current environment.
Buyer Touts: They’re not just for office meetings anymore!
So about that 4000+ sq ft home on an acre in Scottsdale or Paradise Valley for up to $1.2 million … my clients prefer newer construction. We’ ll be awaiting your call.
And for all of you frustrated buyers out there who can’t find that unique home you are looking for, send me a list of your wants/needs (just please don’t tell me you want to be on Camelback Mountain for $250,000) and I’ll flood Google with your criteria. Who knows? The owner of your next home just might need a little coaxing to come out of his cave and bask in the brilliant glow of a qualified buyer.
Consider me your reverse Scottsdale/Phoenix MLS!
by Paul Slaybaugh | May 1, 2009 | Scottsdale Real Estate
My buyers must think that I am an absolute buzzkill sometimes.
How can an agent possibly find something wrong with 25 straight houses?
Why would a Realtor always harp on the negative instead of getting excited about the positive?
This market is why.
When I am working with buyers, I tend to point out every conceivable flaw with each property we visit. I have literally talked clients out of purchasing homes. Be it a busy street, a vacant lot next door with suspect zoning, goofy architecture, etc, I am ruthless. An anti-salesman if you will. Not only does this give me credibility when I actually do show some excitement about a property that I think is a terrific value, but it protects the buyer’s future interests. Inside every good buyer’s agent is a listing agent. I know that someday I will be called upon to sell the home that my clients are buying today. Out of pure selfishness, I want to make sure I have a saleable listing. That means great location, great condition and great price. This brings my goals in perfect alignment with theirs. An agent who focuses only on today’s sale cannot be trusted to secure the best value and highest possible appreciation schedule. Many agents will spend thousands of dollars soliciting the listings of highly desirable properties. I would rather secure great listings by finding my buyers great houses.
And in a difficult market like today’s, the last thing I want is to tell a client that his/her home will be darn near impossible to sell because of some flaw that we overlooked. Or that there is not much wiggle room on price because we did not secure the best value. While many properties are sitting on the market, the good ones are selling. The lesson to be learned is that the pain many sellers are experiencing right now is not entirely market driven. Some blame must be levied for purchasing with rose colored glasses, and not being nearly critical enough when assessing the property.
So for the foreseeable future, you will see me with a smile on my face most all of the time … except when showing property.
by Paul Slaybaugh | May 1, 2009 | Home Selling, Scottsdale Real Estate
In today’s topsy turvy Real Estate market, many potential players have been scared to the sidelines. Whether it be the buyer who worries that prices will continue to plummet across the boards, or the seller who laments the inability to fetch the same price that was attainable a year ago, there is a lot of market watching going on right now. To be sure, these are unusual times. Before you let the condition of the market at large dictate whether or not you buy or sell Real Estate, though, bear in mind that there is opportunity amidst chaos. Just as the worst investments are often made in the best of times, the best investments are often made in times such as those we are experiencing today.
We all know that buying low and selling high is the name of the game. The difficulty comes in recognizing the apex and the nadir. If it were really doable, we’d all be billionaires. As this determination is only truly made in hindsight, the key is to make the current market work for you, rather than standing around and waiting for the mythical “bottom” as a buyer or “top” as a seller.
So, how does one not only survive, but thrive as a consumer in this tough market? By making purchasing and selling decisions based upon a comprehensive strategy rather than treating each as isolated transactions. Assess your situation, and decide whether the current market will provide enough positives to offset the negatives. Here are a few such strategies that just might make a move feasible after all.
The Move Up Purchase:
The move up buyer is tailor made for this market. Provided that you are looking to stay within the same market, if home values in your area have declined by 10% (purely arbitrary figure), that larger home that you have had your eye on is closer to your reach than ever. If your $300,000 home took a 10% hit, and the $500,000 home of your dreams took a 10% hit, the value difference just shrunk by $20,000 (30k versus 50k in depreciation). Such homeowners need to stop considering themselves as sellers. They are buyers in sellers’ clothing. That too-small home is all that stands between you and the tremendous deals that are available today. Price it right, take your lumps, and you will free yourself to go give somebody a few lumps of their own.
The Downsizing Scenario:
Downsizing to a smaller, less expensive home does not make good financial sense in this market. The factors which work to the consumer’s advantage in the scenario above work to the detriment of the consumer here. But what about the retired couple who doesn’t want to wait for the market to rebound? One way to get on with their lives without taking it in the shorts by selling right now is to consider leasing the home. Assuming that many people in this position will have a substantial amount of equity in their homes, they might even be in a position to draw a positive cash flow by renting out their existing home. They would also be in a position to draw down payment funds for the home they wish to purchase in the form of a home equity line of credit (HELOC). This is about the only scenario in which I would entertain the notion of drawing equity out of a property right now. I have spoken with a few retirees lately who wish to downsize, but don’t want to sell in the current market. I don’t blame them one bit. Putting a tenant in their homes until the market is more conducive to commanding a more attractive sales price may be the way to go.
A More Battered Local Economy (AMBLE):
For the person moving completely out of area, it wouldn’t appear to be a very attractive proposition. You get hammered on the selling end without getting to reap the rewards on the buying side. So what to do? Move somewhere that has gotten hit even harder by the depreciation bug than your community. I admit, this is really more flippant than realistic, but if there are job transfers, family, etc. waiting in hard hit parts of the country, you can conceivably offset the low sales price of your current home with a lucrative buy.
INVEST, INVEST, INVEST!
Along with the move up purchase, this is the biggest no-brainer going. With bank owned property listings, inflated inventory levels and a buyer pool diminished by tightened lending requirements, there has not been a better time to be a buyer since the Gadsden Purchase.
While the resale market at large may have further to fall in value, there is really nowhere left to go for some of the bank property bargains I have encountered lately. There is significant demand for the low end of the price spectrum, with multiple offers, cash buyers and bidding wars in some instances. So when you hear that prices may fall another 10-20% across the board, it’s not going to be on the steals. These properties may pull values down closer to them, but there is too much demand for the low end to keep falling in my humble opinion. There are great values in land right now as builders have basically shut down until they sell off existing inventory. Single family homes are attractive to many as a tenant can largely offset carrying costs. It is a great time to have a few extra bucks in your jeans if Real Estate investment is in your blood.
There are more creative avenues to be explored in this market, but for the purposes of this post, I’ll stick with the basics. The bottom line is that you can benefit from the current market with the right strategy. Money is not only made by tucking more in your jeans, but by taking less of it out as well. There is no such thing as a “BAD” market, nor a “GOOD” market. There is only the market. It’s up to you to bend it to suit your purposes.
