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“Is Now a Good Time to Buy a House?” – Scottsdale Real Estate FAQ

“Is Now a Good Time to Buy a House?” – Scottsdale Real Estate FAQ

You have Scottsdale Real Estate questions.

We have answers.


Q: Is now a good time to buy a house in Scottsdale?

A: Forgive me for answering a question with a question. Do you need a house? The best time to buy a house is when you need one. Conditions are advantageous for buyers who can scrape up the requisite down payments and qualify for financing due to low interest rates and home values, but such external factors are irrelevant if you are not in the market for a new home. It’s probably a great time to buy a car right now, too, but are you going to rush right out and get one if your current vehicle serves your present needs? We agent types like to drum up business by urging consumers to act before a window of opportunity closes forever, but don’t let outside forces push you into a purchase based on fear or avarice. Likewise, don’t let extraneous market “noise” prohibit you from making the right purchase for your current needs. Obsessive market watching tends to lead to the dreaded “analysis paralysis,” which shackles a would-be buyer to indecisiveness. We all want to buy when the market is most conducive to securing a bargain, but such considerations must be in concert with, not mutually exclusive of, present need. Good and bad purchases are made every day.

Q: How much off the listing price should I offer?

A: Seeing that every sale involves a different seller, it’s a losing proposition to think in terms of a standard percentage of offer price to list price. Not only is the financial position of every seller unique, there is little with more emotional attachment than a home. Carve off an unrealistic amount in an initial offering, and you risk alienating the seller. You torpedo the negotiation before it even begins. Even when you remove emotion from the equation, such as with bank-owned property or short sales, the offer should be based upon value, not an arbitrary formula. For instance, if a bank-owned property is 100k undervalued in the list price, you can forget about knocking 10% off an already solid bargain. Consider yourself lucky if multiple suitors don’t show up to bid it up well over asking price. On the other hand, if a home is overpriced by 100k, offering 90% of list price likely means you would be overpaying considerably. Each property and its owner are unique, as should be the consideration that goes into the crafting of your offer.

Q: What’s all the fuss I keep hearing about appraisals?

A: Appraisals, and financing in general, comprise the soft underbelly of our slow-motion Real Estate recovery. The challenges start with the professional who is tasked with performance of the appraisal. New regulations were enacted to prevent fraudulent evaluations from artificially inflating home values, but we’ve traded one set of problems for another. These days the appraiser is essentially picked from a hat to prevent conflicts of interest. Unfortunately, this means that out of area appraisers of varying degrees of competence are often charged with evaluating homes in neighborhoods they have never previously worked. Further, as a designated “declining market,” even the home that closed across the street just last month is subject to a markdown in value to allow for depreciation in that short period of time since it closed escrow. Until we can overcome this stigma, home values will continue to be adjusted downward from the recent sales comps. Factor in the multiple appraisals that are often required for FHA financing on “flipped home” purchases (homes that sold within 90-120 days of the current transaction), and loan underwriters with the authority to review and reject the appraiser’s findings, and you get the minefield we have today.

Q: Should I pay off my credit cards to qualify for a loan?

A: Don’t even break wind without consulting your lender first. While I would hope that it is obvious that major purchases are off limits during loan qualification/processing (can affect debt to income ratios, credit scores, cash reserves, etc), many a home purchase has been derailed by the misguided good samaritanism of the borrower. You may need the good credit associated with the line that you aim to shut down or deplete required cash reserves that are necessary to gain full loan approval. Never assume that paying something down or off is beneficial to your unique financial profile without first consulting your mortgage professional.

Q: Should I bother with an inspection and final walk-through on an “as is” transaction?

A: The nature of an “as is” sale is one of the most fundamentally misunderstood concepts in Real Estate. Assuming that the purchase is made utilizing the standard Arizona Association of Realtors “As Is” addendum and the boiler plate language is not contradicted anywhere in the contract, all you are really agreeing to is the dismissal of seller warranties as to the condition of the property. You maintain full inspection rights with the option to walk away from the sale if condition is unsatisfactory. There is nothing that precludes you from requesting repairs at that point as well, the seller is simply not contractually bound to make any. As to the walk-through, it is important that you verify the property is still in substantially the same condition at closing as it was when the contract was signed. “As is” reflects the condition of the property at the time of the agreement. Any subsequent damage to the property is the responsibility of the seller. If the A/C has stopped working, or a tree fell on the roof, you likely have a case to demand repair or walk away from the sale.

Q: What am I actually looking for in a title report?

A: In short, you want to make sure the seller’s Uncle Willy from Topeka, who hasn’t been seen or heard from in forty years, doesn’t pop up after closing to claim an ownership interest in the property. Tax liens, mechanic’s liens, encroachments, easements, back HOA dues … you are basically looking for anything that can preclude your full rights to ownership and use of the property. I always pay special attention to the “Schedule B” of the preliminary title report that is furnished during the escrow period by the title company as it lists those items that will be exceptions to the title insurance policy. Gremlins that might pop up after closing, and will be outside of the scope of your title insurance coverage, typically hide here. With the abundance of short sales, foreclosures, tax sales, etc in our midst, the transference of clean title to a buyer has never been more rife with potential sabotage. If you are purchasing a bank-owned property, or really any property with recent changes in ownership, you want to make sure all encumbrances on the property have been or will be resolved in advance of settlement. Short sale buyers will need to know that the seller’s lienholders have, in fact, agreed to release the lien(s) on the property at closing. While these are functions of the chosen title company, they are not matters that can be taken for granted in 2010. All of those documents supplied by the title company during the escrow process that nobody used to read? Read them. If you aren’t sure which items are cause for concern, ask your agent. If your agent doesn’t know (or instill confidence in you that he does), contact a Real Estate attorney to review and advise.

Prevailing wisdom may label this a “buyer’s market,” but there are things roaming around out there in the haze. Biting things. Make sure you know what you are doing before stumbling out of the house, armed only with a pre-qual letter.

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Ray and Paul Slaybaugh are NOT attorneys. None of the opinions herein should be construed as legal advice. Should you have specific legal questions regarding the purchase or sale of Real property, contact a Real Estate Attorney.

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The Foreclosure Moratorium: An Opportunity for Mom & Pop Home Sellers?

With the latest scuttlebutt in the housing industry centering around a rising political push for a large scale foreclosure moratorium by leading lending institutions, most are aware that Bank of America became the first to issue a temporary nationwide pause in foreclosures this past week. Though B of A is the first to stay their executions across all fifty states, JP Morgan Chase and GMAC agreed to halt foreclosures in the 23 states where foreclosure is a judicial process. The pressure to do so originated over procedural impropriety in several specific locales, and has snowballed into wholesale questioning of the internal processes of the major banks. Mounting concern over erroneous foreclosures spawned the voluntary cessation (expected to last several weeks). While Wells Fargo has spurned calls to do the same, it would not be surprising to see more institutions yield to the rising pressure and follow suit.

What does this mean? Plenty has already been written about this with homeowners facing foreclosure and prospective buyers in mind, so I won’t belabor those perspectives here. Suffice it to say that while any additional quality control that can prevent people from wrongly losing their homes to foreclosure would be a good thing, the upshot in terms of market reaction is likely to be a collective shrug of the shoulders. Not content to simply halt the actual act of foreclosure, B of A is temporarily taking their inventory off the market while the review is ongoing. It’s been posited that fewer listings will translate to a possible surge in prices, but this is pure mularky. The market simply does not react in a matter of a few weeks to any stimulus, as it takes time for consumers to make heads or tails out of new developments and how they translate to negotiable strength. On the contrary, I think this will make buyers who are already non-harried take even more of a wait and see approach. Rather than buying what is left, those who are not under a time crunch to get into a new house will probably just wait for the moratorium to end and for the withheld inventory to flood the market. In essence, we could be looking at an unintentional buying moratorium as well.

Though it would be foolish to anticipate a surge in values, the one segment of the consumptive spectrum that stands to gain from this turn of events is the non-distressed homeowner. With a small window opening for mom & pop home sellers to compete with significantly fewer bank homes for buyers, I would not be shocked at all to see a percentage gain of resale home sales while overall sales volume remains flat, or even declines slightly, in the coming weeks. I expect many buyers will choose to wait it out, but there are those who do not have the luxury of time. Be it a job relocation, family circumstances, etc, there are always buyers who need to buy now. With fewer distressed properties on the market, and likely buyer uncertainty over how this will translate to the short sale arena (will B of A process short sales while foreclosures are in limbo, or pause all such decisions? Will short sale sellers temporarily remove their homes from the market in anticipation of a reprieve?), this could be the traditional seller’s best opportunity to vie for buyers in quite some time.

Again, don’t misconstrue the knee-jerk hypothesis. The value of your home is not going to spike due to this temporary phenomenon, nor are you suddenly in the catbird’s seat. For those in an equitable position to sell, this window merely represents the best possibility to attract a buyer in months.

No screwing around – price your home right and get it sold while there are fewer alternatives for buyers. As a regular seller, with the tax credit gone as a buyer incentive and microscopically low interest rates and low prices not translating to appreciable gains in sales/values, you have to leverage every conceivable strength in this market to accomplish your goals.

Ready to sell your Scottsdale home? Contact us today to schedule a no-obligation consultation, but do it fast. When the moratorium ends and the holidays are fast approaching, it will be time to hunker down for another long, cold winter.

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