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Welcome Back, REO Agents!

Greetings REO Agent,

As the foreclosure crisis here in Scottsdale is beginning to show signs of easing, if not exactly abating, your fellow Real Estate professionals are eager to welcome you back to the ranks of humanity.

You’ve been missed!

You’ve done what you needed to do to stay afloat during the difficult times of the past few years, but now that your bank business is slowly petering out, we have a few tips to help ease the transition back to regular old resale transactions. By following the advice herein, you should have little trouble re-assimilating with the general population.

  1. Invest in some Supra lockboxes. We don’t fault you for not wanting to spend $70 a pop for an electronic box when you were carrying 50 listings at a time (okay, we do, but we aren’t ones to carry a grudge), but it’s a small sacrifice for the security of your mom and pop clients and ease of access for your fellow agents now that you are down to two overpriced townhouses.
  2. You have to return phone calls again. As a busy professional, we understand that you can’t always field a call. Just bear in mind before letting everything roll to voicemail purgatory that you will need the sales force now that you can’t rely on grossly underpriced homes to do the job for you.
  3. Burn your addenda. Then piss on it. Every last piece of superfluous documentation that your employing banks made we hard-working stiffs submit in advance of a purchase acceptance.
  4. Regarding feedback on your new resale listings … um, yeah, not going to happen until you update us on the status of every unanswered offer we have collectively submitted on your REO listings over the past five years.
  5. Camera phone listing photos … time to rethink this one. We recommend mixing in a shot or two of the interior while you’re at it. Human sellers appreciate marketing.
  6. Be advised that our sellers will respond to all offers you draft in 3-5 business days. Or thereabouts. Your business is important to us, and we thank you in advance for your patience.
  7. We do NOT advise touting your recent success of underselling the neighborhood, or looking equity sellers directly in the eye on your first forays back into the wild. They will charge.
  8. Planning on working with buyers again? They are those vaguely homo sapienish looking creatures you have been studiously ignoring since 2006. We’d be happy to make introductions. They don’t think you really exist.
  9. Time frames matter again.
  10. Send the legion of fresh-faced assistants back for their diplomas. They still have a chance to make something of their young lives.

And most importantly, remember to have fun. Because we’re going to have a bunch of it at your expense in the coming months.

Sincerely,

The Real Estate Community

PS – We may have taken a few of your former clients while you were gone. Our bad. If you can pick any of yours out of a lineup, we will gladly return them. If not … tough titty for you, fishface.

________________________________________________________________________________

Note: This bit of light-hearted fare is purely satire and not intended to impugn the integrity and/or professionalism of my fellow REALTORS.

Much. 

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Is it Time to Sell My House?

As of this morning (2/24/12), there are 16,589 properties actively listed for sale in the Arizona Regional Multiple Listing Service, well below our peak inventory levels in the 50,000+ range at the height of the foreclosure crisis. Moreover, there are currently more homes under contract (19,962) across the Valley than currently available to purchase. 7486 properties closed escrow in the last month. At this rate, our market has just over 2 months of inventory. The supply of quality homes is anemic to the point that multiple offers and bidding wars are erupting across the greater Phoenix area on new listings. By any reasonable measure, we have stumbled into a strong seller’s market early in 2012.

So it’s time to throw your house on the market, right? As in all matters, it depends.

The case for selling

You have been trapped in a home you couldn’t sell for the past several years. Eager to downsize, upsize, relocate, etc, you’ve put your plans on hold while the market languished. Not convinced that this break in the clouds isn’t just a temporary mirage versus a sustainable recovery, you aren’t going to look a gift horse in the mouth. Buyers are buying, and climbing over each other to do so. With the summer coming up, you are going to cash out what’s left of your equity so that you can finally get on with the next phase of your life before the winter/spring visitors leave, gas prices shoot through the roof and the market returns to its regularly scheduled slump.

The Case for Waiting

Yes, the market is changing. The Real Estate signs that once lined your street are disappearing. The last house on the block sold in a day for 10k over list price. It reminds you of the market conditions from 2005 that temporarily shot your value through the stratosphere. Now your house is worth about what you paid for it in 2002. You are tempted to throw your place on the market now that there are buyers for it, but you won’t have much left over for a down payment on another place. Further, you know this is the beginning of the recovery. Why sell at the low point when values should continue to climb for the foreseeable future? You’d like a new home that more closely reflects today’s needs, but aren’t willing to dump the current one at a price that might look low with a year’s hindsight.

The Case for Compromise

Can you cover your current mortgage by renting out your house? If so, and you have the financial means to qualify for another loan without selling, you might consider that route. For those who are optimistic that the current market is a sign of better things to come, this tactic covers two bases: 1) Secures the new property at today’s prices before appreciation takes further hold, and 2) Allows for holding on to the former property for another year or two of market gains before selling for a better price.

Which Road is Right for Me?

There is no one-size fits all equation for the buying or selling of homes. In addition to the financial variables at play, there are personal and emotional considerations that don’t fit neatly into a spreadsheet. The best advice I can offer is to take a close look at your chief objectives before deciding whether this is a “good” or a “bad” time to sell your home. Real Estate sales do not take place in a vacuum. The sale of a home must be considered in tandem with the subsequent purchase and vice versa.

It is a good time for sellers, in general, but that doesn’t mean that there isn’t an even better time coming, or that it’s the “right” time for you.

Don’t hesitate to contact us for a complete review of your unique circumstances to determine if now is the ideal time to take the Real Estate plunge. We pledge objective analysis and honest opinion. Nothing more, nothing less.

Contact Us   |   Our Listing Services   |  What’s My Home Worth?

 

 

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How Long Should It Take to Find the Right Home?

Have you been searching for a home for six months? A year? Longer?

If you have not found the home of your dreams (or, at least, the home of your needs) despite a protracted hunt, it’s time to come to grips with this stark reality: you are dreaming too big.

The home buying process is not a one-size-fits all proposition by any stretch, but there is a core truth that is applicable across the board. If you have been actively searching for a home for longer than 90 days and written nary an offer, you have set your sights too high, and it’s time to start paring back your wish list. While it’s true that you need to give the market a chance to bear that which you covet, it’s simply a pipe dream if a full quarter of a year has elapsed with no sign of your white whale breaching the active inventory.

When the market was in full free-fall, those with time on their hands had the luxury of waiting it out. Sooner or later, the 3000 square foot, 4 bedroom, custom home on an acre in North Scottsdale would dip into their price range. Alas, with the suddenly resurgent market sending prices the other way and the inventory shrinking, the opposite is potentially true. The longer you wait on a ship that is not coming in, the further out to sea the fleet gets.

So what’s a 2012 Scottsdale home buyer to do? Adapt to the market and adjust your criteria. Maybe 2800 square feet will suffice instead of the 3000 upon which you had your heart set. Could you live with 3 bedrooms and a den as opposed to 4 true bedrooms? How about half an acre instead of a full 43,560 sq ft?

Or bump up your price threshold until you break into the kind of inventory that fits the bill. In an ascending market (which, by all appearances, the Scottsdale Real Estate market has entered into after a steep and lengthy decline), time is decidedly not on your side.

Does this mean I advocate rushing out and purchasing the nearest approximation of what you want? Certainly not. The rash of purchases made out of blind fear that prices were running away from buyers forever made for a willing accomplice to the 2005-2006 bubble. It’s never a good idea to make any crucial decision from a position of fear. What I do advocate is approaching your house hunt with a little more urgency than has been necessary these past five years. In a competitive environment which has reintroduced agents and consumers to bidding wars and a limited volume of quality homes from which to choose, the laconic wait-and-see approach will hamper your ultimate chances for success.

We are early enough in our fledgling recovery that prices are still within shouting distance of their low points and 30 year interest rates continue to be reigned in on a short leash. It remains an excellent time to purchase a home for those in the market, it simply has become more difficult than saying “eenie, meanie, miney, mo” to the myriad available options that were once scattered about in abundance.

For years, we’ve counseled sellers to reassess their pricing after “x” days on the market without an offer. Now it’s the buyer’s turn.

If you have been frustrated by the current inventory, or have lost out on multiple properties due to heavy competition, you have likely set your sights too high. Make adjustments to your “must have” list or increase the amount you are willing to spend if you have been actively looking for a house longer than 3 months. You are pining for something you can’t have. In a market on the upswing, the longer you wait to take corrective action, the greater the discrepancy grows between your wish list and the world around you.

You’ve got to be hip to the new rules if you want to be a player in this market.

 

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Agency and the Ascending Market

The role of a Real Estate agent in a transaction is an ever-evolving one. Remember sub-agency? No? That is a testament to how quickly and totally the job description has changed over the past couple of decades, with every passing generation bringing more empowerment to consumers and choices in levels of service.

The relationship between consumer and agent has shifted from the “customer” model to a “client” model in which a fiduciary obligation is owed to each principal in a Real Estate transaction. Unless otherwise agreed, the professional shuttling a buyer around on weekends in the hunt for a new home is no longer an agent of the seller, but is retained by that buyer to represent his/her interests in full in that pursuit. This is the age of buyer agency in which most modern markets currently operate.

While the relationships and allegiances in a transaction are more clearly defined now than ever (aside from the still-murky waters of dual agency, which is another post entirely), the proper representation of a buyer by a buyer’s agent is not as cut and dry as one might think; rather, market forces dictate that said agent be malleable in tactics.

Take the buyer’s appraisal contingency, for instance. It is a widely conceived and unchallenged notion that an appraisal is performed for the benefit of the buyer (more on the appraisal fallacy). After all, if the property does not appraise for the purchase price during the escrow period, the buyer has the ability to walk from the contract or to use the cudgel of a low valuation to re-negotiate with the seller. As such, it follows that a buyer’s agent would do well to simply stand aside and hope for the appraisal to come in low as it provides an opportunity to secure a potentially better deal for the client.

One thing about conventional wisdom? It typically applies to conventional circumstances.

What of an ascending market in which values are on the uptick and competition for properties is fierce? I, for one, posit that the laissez faire approach to the appraisal by a buyer’s agent may actually run contrary to the client’s interest. You see, appraisers are beholden to concrete data rooted in the values of the recent past. That’s all well and good, but there will not be support for current value in an appreciating market in three month old sale comps. There is a very real likelihood that your (as the buyer) appraisal is going to come in low in such circumstances.

So what’s the problem, you ask? Why not use that happy eventuality to your advantage to secure a better price?

Because the seller has four backup offers.

In a market such as the one we are currently experiencing here in Scottsdale, with heavy buyer demand and a drastically reduced supply of homes (down to approximately 17,000 active listings across the greater Phoenix area), bidding wars tend to result. After fighting off ten other buyers for the home of your dreams, a bad appraisal is, in all reality, going to procure one of two outcomes: 1) You bringing additional cash to closing to offset the difference between appraised value and sales price, or 2) The sale tanking.

The seller is NOT going to reduce his price when he has ready and willing backup buyers waiting in the wings to give him his price.

The role of the agent changes in that rather than the listing agent sweating out the appraisal and the buyer’s agent kicking back with his feet up, the inverse is potentially true. In my current representation of buyers, I have taken to meeting appraisers at the property (with the buyer’s permission, of course) with a copy of the contract, tax record, sales comps, pending sales, active competition, market trend reports … blueberry muffins, candy hearts, etc.

Long story long, do not accept representational practices from your agent that line up more with conventional wisdom than current reality. As market dynamics are in constant flux, so too are the tactics employed to reach your goals. Don’t buy into the notion that “x” is “good” and “y” is “bad” in a Real Estate transaction. Most every facet of a purchase is merely a variable, made positive or negative by its interpretation against the broader context of an ever-shifting landscape.

The buying and selling of homes requires a nimble partnership between principal and agent to keep up with the high-paced game of musical chairs that is the Real Estate market.

Save the dogma for your momma.

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Appraisers, Underwriters and the Artificial Suppression of Housing Values

In theory, an appraisal is an independent evaluation of a property by a neutral third party to determine its likely worth in the open market.

In practice, it has become the de facto final word on a property’s worth, overriding the agreement between a willing buyer and seller.

How is it that the guestimation of value has supplanted the actual sale as the ultimate arbiter of worth? That the tail has come to wag the dog? Thank your friendly financial institution.

You see, appraisals are rarely ordered for cash transactions. Why? Because the buyer has already reviewed the recent sales comparables and negotiated the best terms he/she could with the seller before arriving at the final sales price. Appraisals are requirements of (most) financed transactions because they are really not for the benefit of the buyer. They are an added layer of protection for the lender that is putting up the bulk of the purchase money.

Certainly an understandable requirement from an institution that is taking on the risk of lending money against a property that may or may not represent suitable collateral, depending on the drooling-idiocy factor of the buyer. The bank demands an appraisal to validate the purchase price before ponying up the cash; makes perfect sense.

Where things have gotten a bit off-kilter as of late is in the bank’s internal review process of the appraisal. Times were, the appraisal came back at value, and you were good to go. Your shrewd purchase was confirmed by a non-biased review by a licensed professional. After the housing meltdown, however, banks have taken to assigning the bulk of the blame for the whole fiasco to unscrupulous loan originators and appraisers for falsifying loan applications and willfully inflating values, respectively; ignoring their own ridiculous loan products that were offered to people who never should have been candidates for stated income, interest-only financing vehicles, they are determined to stamp out any potential for fraudulent dealings that exposes them to similar risk in the future.

Tightened appraisal standards came to pass, including restrictions placed upon direct selection of appraisers (most orders go to faceless appraisal management companies now, who in turn select the appraiser). Loan originators and Realtors have limited access to appraisers these days, lest we corrupt their sensibilities and bend them to our devious aims.

The appraiser is now free to perform his evaluation in an ivory tower, unencumbered by the incentive-laden hands that would pull at him to bring in a value reflective of the sales price.

Or is he?

While charges of fraud and artificial inflation of value have been heaped upon the working stiffs from up high, I posit that the exact opposite is now occurring.

With the current barriers in place, the banks themselves are the only ones with unfettered access to the appraiser during the course of a transaction. Beholden only to those banks, appraisers have been put in the impossible position of providing fair evaluations of properties for institutions that have a vested interest in suppressing value/risk.

Bluntly, banks are actively pressuring appraisers to devalue properties.

By using the veto power of the underwriter review, they may demand that an appraisal which came in at value be reworked to use different comps or adjustments made to the physical attributes of the house that they dispute (square footage adjustments, etc).  They may demand that adjustments (downgrades) be made for market trends, etc.

In short, some bean counter in an office in South Dakota is using his position to dictate the final version of the appraisal to the licensed professional who has actually physically viewed, measured, photographed and evaluated the property.

This is how appraisals initially come in at $400,000, only to get knocked down to $350,000 upon underwriter review. And when that happens? You get to appeal the appraisal … to the very institution responsible for the final disparity in value.

Akin to taking one’s death sentence appeal to the hangman himself.

Appraisers have little choice but to comply if they want to keep their accounts with the big banks in good standing. Further, until the underwriter signs off on the appraisal, it really doesn’t matter what value is reflected in it. He decides the house isn’t worth what you are paying for it, your loan is scuttled. Unless the seller agrees to sell the property to you at the reduced price (unlikely in a market that is now generating bidding wars) or you have additional cash to plunk down to make up the difference, you are out the cost of the appraisal, inspections and emotional investment in the property.

The big banks are artificially suppressing our values, and they are charging you $350-400 a pop to do it.

What’s the best way to ensure that you are working with an institution that is actually interested in helping you purchase the home of your dreams? Think local. Many small, local banks not only work with select appraisers who actually know the areas they cover (as opposed to trucking them in from Tuba City on the luck of the draw), but are more likely to keep your loan in their portfolio. One of the primary drivers of a big bank’s decision to take on your loan is how sellable it is on the secondary market. Any quirks with the property, such as it being recently “flipped” by an investor, and the loan becomes less attractive to them. Out come the knives.

Add the suppression of value and subsequent hindrance to the market’s recovery to the list of charges I wouldn’t mind seeing in a financial perp-walk. Such manipulation of the market and coercive impact on property values does not merely effect buyers, but it robs sellers at large of what little equity they may have left. Of course, I suppose it is only fitting that the very institutions that spawned the ponzi schemes that led to housing’s demise are the same that would stand in the way of its nascent resurrection.

Such practices are an affront to us all, and must be stopped.

 

 

 

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