“Joe Homebuyer’s results not typical.”

“Always consult a physician before launching an intensive home search program.”

“Stretch thoroughly and lift with your legs before attempting bank-owned property heist.”

For the purposes of this piece, we are going to focus on the first caveat.  Every Valley resident has at least passing knowledge of some fortunate homebuyer who leveraged the current market to score a honey of a bank-owned deal.  As big a nobody-turned-celebrity as the 170 pound guy in a Nutrisystem commercial holding up a pair of orca sized slacks as evidence of his former girth, Bob from accounting is the new gold standard for idolatry after securing the housing buy that set the office abuzz.  Before following in Bob’s considerable footsteps, however, there are a few things you need to keep in mind.  His results may not only prove atypical, but in extreme cases, constitute patently misleading advertising.

The hidden “gotcha” to many bank owned purchases right now are property taxes.  While the institution that owns the property should pay off any back taxes as a condition of conveying clear title to the purchaser, many buyers fail to properly account for the bill they will be saddled with for the next couple of years (at a minimum).  Unlike other parts of the country, where taxes are based solely upon purchase price, Maricopa County taxes are based upon the assessed value of the property.  Many falsely assume that the home they are buying for $350,000 will reflect a tax basis commensurate with that value.  As our budget revolves around 2 year property evaluation schedules, odds are very good that your current tax basis will reflect a value closer to the $1.1 million that the home sold for back in 2006.

*Click here for information about Maricopa County property taxes

*Maricopa County residents are entitled to appeal all new evaluations from the county assessor (typically go out in early Februaruy), but must do so within 60 days of the date they were mailed.  Click to begin the Maricopa County property tax appeal process online.

Another thing to bear in mind is that while the assessed value of the property is likely to decline rather dramatically over the next several evaluation cycles, expect tax rates to rise in contrast.  You should see an overall reduction to your bill in the future, but our strapped municipalities aren’t going to let go of all that revenue without a fight.  Already firmly entrenched in the red, it is an almost foregone conclusion that the tax rates will be fully maxed out to legally allowable levels to offset as much of the lost potential revenue as possible.  Your friendly, cash-strapped local government at work.

Another hidden sniper to these bank-owned bargains are Homeowner Association expenses.  While monthly fees are typically disclosed upfront (or easily determined through a few well placed phone calls), former million dollar neighborhoods are fodder for massive asset preservation and capital improvement fees/impounds.  You might well afford the $120 monthly fee, but the bulbous community enhancement fee that is due at the time of purchase could blow an unsuspecting buyer’s budget right out of the water.  Given the many amenities that some such high end subdivisions boast, it would also be wise to expect and budget for future special assessments involving their maintenance.

There really are some amazing deals floating around the market right now, just make sure you can afford them.  We are looking for a home you can maintain and afford, not a fad purchase that will lead to a lifetime of yo-yo budgeting.

You don’t want to end up back in the fat pants.

Tempting as it may be to utter “No mas,” in the face of a younger, stronger foe, you as a home seller have your own strengths.  Yes, the bank properties have been hammering your rib cage and battering you with low blow after low blow for the last eleven rounds.  Every time you regain your composure, another steel-fisted uppercut in the form of a new REO listing shatters the ineffective ”pride of ownership” cup upon which you have been so dependant.  The referee and the fight doctor are scrutinizing that nasty gash above your eye to determine if you are still able to intelligently defend yourself.

You’re seeing triple, you say?  Buck up, Rock, and hit the guy in the middle.

Now that the free-fall in property values has seemingly arrested (much like the hearts of many homeowners this year) across several segments of the local Scottsdale Real Estate market, would-be sellers can take a deep breath and catch their second wind.  Even if they are still leery of making the price jump from distressed properties to resale properties, buyers are back in the market.  Several straight months of increasing home sales, decreasing inventory and even modest median price increases (really?) indicate this.  That’s the good news.  The bad news is that most of these buyers are still purchasing the goods on the ground floor (sporting goods, evening wear and foreclosed Real Estate) while the typical mom & pop seller continue to be priced on level four.

Before resale homes start selling at a higher rate, their prices still need to drift a little further South.  This is not news.  You’ve been pummeled with this unwelcome assertion for the past year.  My intent is not to rabbit punch you with the obvious on this day.  I’m offering a momentary reprieve from the infernal pessimism (which I have admittedly dispensed with impunity).  No more defeatism from your corner, it’s time to talk strategy.

Yes, the bank-owned property on the far side of the ring is a fearsome opponent, but skill and guile can slay the relentless beast.  You’ve been getting drubbed over the course of this bout because you are not offering your bigger foe any angles.  You’re simply turtling up with that ridiculous price of yours and accepting a merciless beating.  To change the tide in this lopsided affair, yes, you do need to get a bit more competitive with your price.  Until you get inside the freakish reach advantage of the banks, you’re rope-a-dope tactics will just get you roped and doped.

This is not to imply that you need to match the price of the distressed properties, you simply need to vie for the same buyers.  If the banks are on the ground floor, you need to get down to level two.  If you can at least mitigate a portion of the huge price disadvantage you face, you have a puncher’s chance to sell your home.  Here’s why:

• The bank property across the street will convey to the buyer in “as is” condition.  You have maintained your home over the years and will make any necessary repairs, within reason, to appease a buyer.

• The bank property across the street will come with a grand total of zero disclosures.  You will provide a potential buyer with a Seller Property Disclosure Statement, Insurance Loss History Report and any other appropriate documentation to give a certain level of comfort to the new owner.

• The bank property across the street may not be able to be financed by a buyer due to its condition.  Because you have listened to your Realtor and whipped your home into tip-top shape, you will face no such problem.  Right?

• The bank property across the street may require a buyer to order utilities turned on in their name (and pay any applicable deposits for said service) in order to inspect the working components of the home.

• The bank property across the street may ultimately attract multiple offers at its supremely low price.  This can benefit you in several ways.  For starters, the ultimate sales price is often driven higher than the list price in such scenarios, thus making your case for higher neighborhood values.  Secondly, there will be despondent losing bidders for that property that will look, perhaps to you, for alternatives.  Lastly, some buyers will become disenfranchised with bank properties after having gone through this multiple offer scenario several times.  Eager for less competition and an honest negotiation, some just might set their sights on the slightly higher priced property that can be negotiated downwards instead of upwards.

So there you go, champ.  You are far from a hapless tomato can against the oversized Palooka who has been doing the Ali Shuffle all over your face.  He’s a one-trick pony.  Take away the huge price haymaker and the kid is a regular Glass Joe.  If you have the moxie and the wherewithal to get your price just a bit closer to the bank’s, you have the arsenal to pull off a stunning upset and walk out of the joint with the title.  The title of “former homeowner,” that is.

Now put your mouthpiece back in, get off that damn stool and get in there and fight!

But these are the things you already know.  Just like you already know that the credit is not reserved solely for first time buyers, but also those who have not owned Real Estate within the past three calendar years.  This information is so readily available that I haven’t even bothered to write about it before now.  At great risk of being the guy who runs into the empty room to yell “Fire,” I do believe there is one more wrinkle that needs to be discussed.  With the deadline steadfastly approaching (just because it looms closer, doesn’t mean the pace has suddenly morphed to earn “rapidly approaching” designation, now does it?), lost in the prodding for first-timers to buy now is any discussion as to the kinds of homes you should be considering.  I shall rectify this egregious oversight now.

Earlier in the year, the Real Estate world was your oyster.  REOs, short sales, HUD homes, auctions … bring them on.  As long as you wrapped up your purchase prior to December, you were golden.  Thus, you had the ability to trawl every last oceanic trench to scrape up your sunken treasure.  It probably didn’t take long to realize that the biggest finds, those Titanics of the Real Estate deep, were teeming with sharp-elbowed and deep-pocketed prospectors.  Basically, you with more purchasing power.  Every time you made a play for a new bank property, you and your FHA-fueled dingy were left eating the wake of 50 foot conventional vessels and staring into the live canons of the scourge of the first timer’s sea: cash buyer pirates.

Resigned to the fact that your 3.5% down and government-backed loan vehicle is not a fair fight against the types of buyers that the best values attract, you most likely started looking at resale and short sale properties.  Resales have been tricky because most sellers are not in a position to compete with the banks.  Many that you would be interested in continue to be priced out of your affordability.

Now you may be thinking that short sales are the way to go.  The bank wants to offload a property that is in default without incurring the expense of foreclosure.  The seller just wants out and is not motivated by profit, thus creating a tantalizing asking price.  Sure there are only a couple months left to close on a house to secure your credit, but this listing says they are using a “Certified Negotiating Specialist.”  This other one says they have a 95% success rate!  Another even says that they are near bank approval!

Don’t do it.

I know you have gotten your teeth kicked in on the bidding wars that erupt on the bank properties, and the resale market is still too pricey, but short sales are not the way.  Not now.  If you had submitted an offer on one several months ago, you would have a shot, but I am telling you right now that YOU WILL NOT RECEIVE YOUR $8000 TAX CREDIT IF YOU WRITE ON A NON-APPROVED SHORT SALE LISTING at this point.  It is quite typical for the process to take 3-6 months, and the resolution is far from a sure thing.

Keep looking at the bank properties, but reset your sights a little.  Great values are still out there.  You can lock one up that isn’t priced so stupidly low that every buyer and his pet chimpanzee show up to vie for it, driving the price into the stratosphere.  Some of the best buys made right now are actually the ones with list prices that aren’t necessarily the most attractive.  When banks, just like typical sellers, miss that sweet spot, you have a better shot at negotiating the price lower versus bidding the stupid cheap one up.

This is also not a bad time to take another hard look at the resale market.  Sellers of properties that will fit the budgets of first time buyers should be receiving advice from their agents right about now that they really need to get competitive if they are to capitalize on the last minute purchasing rush.  Granted, many sellers simply are not in a financial position to lower their prices, I have noticed more and more resale listings working their way into my searches.

Finally, I would be remiss if I didn’t caution that the tax credit should not be the be all and end all for your purchasing decision.  If you simply cannot find the property you want at a price you can afford, don’t get caught up in the frenzy.  The worst decisions are often made in the face of such artificial pressure.

But if you are ready to take the plunge, find yourself a property in which the seller can give you a thumbs up or thumbs down within days instead of weeks.  Walking the short sale plank with less than 90 days to get it closed will net you an $8000 cold shower.

Of course, I am talking about bank owned property sales.  If the creepy crawlies in the walls don’t get you, the asset managers will.

About a year and a half ago, I, like many of my Real Estate brethren, was forced to take stock of the focus of my career.  Having long relied on the nearly continuous repeat and referral business that I cultivated through years of diligent service, I was forced to ponder the unponderable when the Great Market Implosion of 2008 (c)  threatened to sabotage my business model.  If you could even call it a business model, that is.  I subscribe to the notion that if you do right by the clients that you have now, you will never want for clients in the future.  Good business practice begets good client retention.

And yet, there I was.  Looking around for the vine upon which my new business had died amidst the economic crop dusting that was rendering entire markets fallow.  My hedgerow bustled only with concern.  So what to do?  With credit markets drying up and loans increasingly difficult to come by, the resale market became a stagnant bog.  The only sign of life would be Nessie popping her head above the surface of the foreclosure loch on occasion to swallow another hapless homeowner.  Against this stark backdrop, many of my respected colleagues turned to the very institutions that led us down this path to housing oblivion for their salvation.  Sensing that resale properties could not compete with the dirt cheap foreclosures, and that finding loans for buyers had become vastly more difficult than finding properties, I was tempted to follow suit.

The lure of pursuing bank-owned property listings was … gulp … quite tantalizing.  I saw REO agents handling more properties at a given time than they ordinarily handled over the course of an entire year while I banged my head against the resale wall.  Heeding the siren’s song, I went so far as to solicit lists of banks with whom I could apply to handle their overflowing inventories.  Hat in hand, it struck me that this was the 21st century version of standing in line for hours on end amidst scores of other able-bodied candidates for a factory job circa 1930.  A funny thing happened en route to the head of the line, however.  An epiphany, if you will.

In the current market, we all work for the banks in one manner or another.  You either list their houses, or you bring them buyers.  Only one side of that equation will bring you repeat business down the line, however.  I realized that I could not take on the workload that REO specialists enjoy tolerate without alienating the loyal client base that had propelled me to heights I had never really thought possible in my career.  Knowing there are only so many hours in the day, I made the conscious decision to forgo the possibility of immediate gratification with the banks to continue to serve real people.  It’s not an entirely altruistic choice either, but a pragmatic one.  The foreclosure market will dry up eventually, leaving the few remaining morsels to the established denizens of the deep who have waded through that knee-deep filth for the last two decades.  Those Johnny Come Latelys whose bank-owned property experience extends back a year or two will be in the unenviable position of having to redefine their expertise yet again.  Their neglected mom and pop clients will have moved on.

I do not want to watch my business wash up on the rocks along with the myriad other souls aimlessly following the tide on a makeshift raft of sticks and desperation when the winds finally change.  I’ll continue to take my chances with my own internal compass and weather-battered crew.

So, here you sit.  Spoon in hand, ready to dive into that noxious looking soup.  It may not be the most appetizing dish you have ever seen, but it’s the house special and the price is right.  The maitre d’ has already slipped back into the kitchen, hurriedly gathering the same ladled gruel for the next table.

No fear, your royal tester is still here.  Pass that gnarly bowl on over and I’ll help you determine its edibility.

I was sitting on your side of the table when we were eating steak and lobster, and I’m not looking for the check now that my dinner guests can only afford spam.  It may bring a little indigestion on this particular evening, but there are plenty of four star evenings ahead.

If you are buying or selling a home in Scottsdale, Arizona, and you are not an amorphous, soul crushing financial institution, it would be my great privilege to represent you in your pursuits.

“Raising children is like trying to nail jello to a tree.”

Not the first time I have seen it, but it still draws a chuckle.  Substitute the words “Selling Real Estate” for “Raising Children,” and you have this agent’s description of the arduous world of buying and selling property in 2009.

Case in point, one of my property listings is a short sale.  My lone short sale listing.  Now, and hopefully forever.  Over the four months it has taken our buyer’s offer to gain full approval, only to have a needed extension to the closing date entail another two week period of review and authorization from the banks involved, the twists and turns of this transaction have been nothing short of spectacular.  Fortunately, with a closing now on the horizon, we finally appear to have this bit of transactional jello firmly nailed to the mesquite in my backyard.

Apparently a glutton for punishment, I currently have two buyers with offers accepted by sellers and submitted to their respective banks for approval on short sales.  One of those buyers deploys for Iraq at the end of this month.  We will be lucky to have a loss mitigator assigned to the transaction by the time his boots touch the 130 degree foreign sands.  The other buyer is a first time homeowner who has been looking with me for several months.  In both instances, we’ve only grudgingly included short sale listings recently in our lists of properties to see.  The time factor is brutal, but it is the uncertainty that has been the primary deterrent.  It’s one thing to wait indefinitely for a foregone happy conclusion, but quite another to invest a month or six of your life into a transaction that may be doomed from the start.  As such, for many, short sale properties have really turned into the “just-in-casers.”  Throwing an offer at a bank as a contingency plan, buyers are well advised to continue shopping for a property in which the seller is in a position to provide a quicker response.  If a resale or bank-owned property pops up while the short sale is still in limbo, the buyer is free to cancel that transaction (provided a standard AAR short sale addendum is included with the standard verbiage) with no loss of earnest money and pursue the new candidate.  Lots of additional work for all parties involved, but you’ve got to get your fingers dirty in the current market if your seeds are to take root and grow into an actual sale.

Then there are the bank properties. Foreclosures, REOS or whatever other term you know them by, they differ from short sales in that the bank has already taken the property back from the defaulting homeowner.  No interminable wait while the bank assesses value and the seller’s qualification for a short sale, but there are still a few wiggly characteristics with these properties.  For starters, while infinitely quicker, you can still forget about an immediate response or any loyalty to the author of the first offer.  You can attach a two page cover sheet with your offer outlining your love of the home, how the drapes match your furniture and for the first time in your life, you feel like you have really found “home,” but the asset manager at the bank will still sit on it for 3-5 business days to see if anyone will beat it by twenty five cents.  Even if you offer full price or above.  Trust me … been there, done that.  Further, because everyone wants bank owned pricing, these properties are often highly competitive.  The banks know it.  Given this truth, the very best values that you are holding out for as a buyer are highly competitive.  If you’ve seen 100 properties and think the latest one is a screaming deal, so do the thirty other buyers who have been looking at the very same houses.  That awesome deal you see on a bank-owned price is often just the floor for the higher offers that pile up like clowns in a circus car.

Wiggle, wiggle, wiggle.

Of course, if transactions involving banks are akin to manipulations with an amorphous edible substance, selling a typical resale home at present remains more like nailing a pickup truck to a tree.  By and large, resale properties continue to be drastically overpriced.  Only the savvy sellers who price to compete with the banks stand a chance of actually unloading their homes.  No matter how strong the marketing nail or stout the trunk of seller resolve, gravity continues to win that lopsided struggle.  You can only prop up an unrealistic price for so long before it finally crashes back down to market value or the broken down rig gets towed right off the market.  No buyer is going to shimmy up that tree, get behind the wheel and drive said truck straight into the ground.

Is buying and selling Real Estate in 2009 a tricky business?  Hell yes!  Up is down, down is up, and nobody knows when this crazy ride will end.  But just like raising kids, the process is uniquely rewarding.  So grab a helmet, buckle up and don’t be afraid to enter the scrum.  As long as you know what to expect and bring an experienced chaperon, you’ll eventually get where you want to go.

Even if you end up with a few stains on your shirt along the way.

Congratulations, it’s … a home!

Showing properties 1 - 10 of 500+. See more city of Scottsdale real estate.
(all data current as of 7/31/2010)

1. $300,000 : 10311 E Morning Star Drive, Scottsdale
   
   3 beds, 2 full baths

   Size: 1,548 sq ft

   Lot size: 7,500 sq ft

   Year built: 1995

   Parking spots: 2

   Walk Score™: 43
2. $439,000 : 8708 E San Jacinto Drive, Scottsdale
   
   3 beds, 2 full baths

   Size: 2,123 sq ft

   Lot size: 10,000 sq ft

   Year built: 1979

   Parking spots: 2

   Walk Score™: 52
3. $700,000 : 13470 N 85th Place, Scottsdale
   
   4 beds, 4 full baths

   Size: 4,419 sq ft

   Lot size: 1.90 ac

   Year built: 1986

   Parking spots: 3

   Walk Score™: 38
4. $233,500 : 8338 E Mariposa Drive, Scottsdale
   
   4 beds, 1 full bath

   Size: 2,356 sq ft

   Lot size: 10,000 sq ft

   Year built: 1961

   Parking spots: 2

   Walk Score™: 42
5. $749,900 : 9389 E Maple Drive, Scottsdale
   
   5 beds, 3 full baths

   Size: 3,144 sq ft

   Lot size: 10,000 sq ft

   Year built: 1994

   Parking spots: 3

   Walk Score™: 17
6. $510,000 : 5413 E Shea Boulevard, Scottsdale
   
   4 beds, 2 full baths

   Size: 2,824 sq ft

   Lot size: 12,500 sq ft

   Year built: 1992

   Parking spots: 3

   Walk Score™: 38
7. $369,900 : 10201 E Betony Drive, Scottsdale
   
   3 beds, 2 full baths

   Size: 2,316 sq ft

   Lot size: 7,500 sq ft

   Year built: 1997

   Parking spots: 2

   Walk Score™: 43
8. $799,900 : 21117 N 74th Place, Scottsdale
   
   4 beds, 3 full baths

   Size: 3,841 sq ft

   Lot size: 15,000 sq ft

   Year built: 1997

   Parking spots: 3

   Walk Score™: 51
9. $699,924 : 10275 N 103rd Place, Scottsdale
   
   4 beds, 3 full baths

   Size: 3,234 sq ft

   Lot size: 10,000 sq ft

   Year built: 1999

   Parking spots: 3

   Walk Score™: 54
10. $689,000 : 6629 E Monterosa Street, Scottsdale
    
    4 beds, 3 full baths

    Size: 2,765 sq ft

    Lot size: 12,500 sq ft

    Year built: 1961

    Parking spots: 2

    Walk Score™: 62

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That bears repeating.

Real Estate agents are largely responsible for the massive housing inventories of the past two years.

This is a conclusion that does not please me to reach, but my conclusion nonetheless after continuing to see overpriced home after overpriced home hit the market.  You can blame banks or non-paying homeowners for the glut of foreclosure inventory, but guess what?  Bank owned homes sell.  By and large, they are priced appropriately and adjusted regularly until they sell.  Compare this to the unrealistic seller/listing agent tandem with the home down the street that enters the marketplace grossly overpriced, and just sits there while the days on the market pile up without mercy.

You can blame the banks again for the short sale listings that take forever to work their way off the market because of all the bureaucracy and idiocy involved.  In many instances, I would agree with you, but I find ample fault with the listing agents who do not take the time to learn the process and requirements involved for the institution(s) that hold the lien(s) against the property.  Even though many banks seemingly select the files they will actually review via a no holds barred game of inebriated backgammon on the first of every month, too many agents simply throw a short sale listing on the market at a completely unrealistic price (compared to what the bank will be willing to accept) and hope that they can make it stick.  Buyers get frustrated with the process after several months of inaction and often exit the transaction before getting a response from the bank.  Even if the home eventually sells prior to the looming trustee’s sale, it has contributed to the bloated inventory level for months instead of weeks.  Some banks will not negotiate with a seller at all until an offer is in hand, but that doesn’t mean that the agent can’t have all of the documentation lined up in advance.  Many short sale listing agents that I have encountered have been a bit lacking in the communication department as well.  Buyers are more likely to hang around and wait for a response if they are receiving regular feedback and updates from the seller’s side of the table as to the progress with the bank.  A phone call or an email update every week or two would go a long way to keeping some of these deals together and clearing out these negative equity weeds that are choking out the resale lawn.

Inventory levels have dropped considerably in the last couple of months, but we have a long way to go before we reach a nice healthy balance of buyers and sellers.  While everyone is currently focused on stimulating demand, we professionals bear a large portion of the responsibility for the supply.  Every time an agent in our ranks takes a listing for 100k over the property’s current value, or even 10k for that matter, he/she is contributing to the stasis that has plagued our Valley since the equity and credit bubbles burst in 2007.

We all want your business, and are generally eager to please.  As such, it can be a temptation to tell a prospective client what they want to hear when it comes to the value of their house.  Less charitably, it can also be a temptation to “buy the listing” by quoting an unrealistic price to sway a seller to list the home with us versus the agent quoting a considerably lower asking price.  A good agent will ensure you command a top of market price for your home, but not a one of us has a secret stash of magic beans that will grow the value of your digs above and beyond what a buyer will be willing to pay. We can advise you as to how to make your home more market ready, and how to improve its value, but we can’t fit a $750,000 peg into a $500,000 hole.

Ray and I vow to give it to you straight.  It does neither party, nor the market, any favors to cram yet another overpriced listing into the protesting pair of lycra pants that is the MLS.  Nope, no more glazed doughnuts on our watch.  It’s time for an industry-wide low glycemic carb / high saleability diet.

As I tell my clients when we sit down to review the data, I would rather tick you off with my evaluation up front than 6 months down the line when your home hasn’t sold.  Better to lose business truthfully than be complicit in the further swelling of our hemorrhaging housing market.

A home should be priced accurately, or it should not be priced at all.

We don’t list homes to practice.  We list them to sell.

Is the bloom returning to the rose?

All signs seem pointed towards a market poised for recovery.  Said recovery may, in hindsight, prove to already be well under way.  Of course, bringing supply back in line with demand is the most tangible proof we have of a recovering market, but it doesn’t answer the question we Realtors can’t escape.  We hear it in the line at Starbucks and when cornered by someone three martinis deep at cocktail parties:

“When are prices going to bottom out?”

That, my friends, is the 2 trillion dollar question.  Let me preface my forthcoming opinion with the following.  Anyone who tells you definitively where this elusive “bottom” is probably derived their opinion by studying flow charts, statistics, MADD Magazine and cutting the head off of a live chicken under the cover of midnight prior to the winter solstice.

My voodoo is no better than their voodoo.

That said, when I consult the astrological charts and the Arizona Regional MLS data, I am left with two distinct impressions.  First, it is self evident that the house of Apollo will be foreclosed upon prior to the arrival of the harvest moon.  Secondly, that the cocktail question cannot be properly answered in its current construct.

Here’s the way I see it.  A segment of the market has already bottomed out.  Not just any segment, mind you, but the primary driver of the past year’s Real Estate activity across the greater Phoenix and Scottsdale area.  Of course, bank owned property is to what I am referring.  With a disproportionate number of actual consummated transactions involving foreclosure properties at present, it is my humble opinion that the banks have already crashed their values through the floor.  Attracting multiple offers and bidding situations in many instances, they would be hard pressed to erode pricing further now that demand is lined up around the corner in the form of cash laden investors.

The next part of the equation, though, might be difficult to swallow for Valley homeowners (A + B = oh Crap!).  With foreclosure properties really driving pricing, few traditional sellers have been able to compete.  Foreclosures have sold at record clips while resales have lagged behind their typical share of the market.  As such, a gulf has opened up between the bank properties which are selling and the non-bank owned homes that are collecting dust at non-competitive prices.  For the market at large to officially “bottom out” in my opinion, resale prices still need to fall further to decrease the gap.  Buyers need a reason to start buying resale homes again, and that reason is all wrapped up in pricing.  Most folks would prefer to buy a well maintained home from a mom and pop seller than an abandoned bank owned property, but not if it is priced a couple hundred thousand dollars higher.

Synopsis:  I think the lowest prices that the Valley will see are presently or very nearly at hand because there is a great deal of demand for these homes.  There will be good values still to come as resale prices drift further down, but don’t expect the bank owned bargains you are seeing today to get substantially better in the coming weeks and months.

As the title suggests, I think the summer will tell the tale of our market’s health.  The spring is always our most active season, so I want to see how the market reacts when the seasonal buyers leave town.  Will we retain the momentum from a brisk spring or will we recede back into the doldrums as the mercury rises?  I predict the former, but again, that’s just my voodoo.

It wouldn’t be a Real Estate post without a call to action, so I’ll leave you with this. Wherever prices are next year, interest rates are highly unlikely to be in the 4′s like they are presently.  If you’re asking me, and even if you’re not, I think it’s time to buy.  Last call for bargain shoppers is looming.

Now, about this chicken …

In the current landscape, however, buying a home is not always that simple.  Due to the prevalence of foreclosure properties and upside down sellers in today’s market, a buyer is often in the dark as to the nuances that may vary from one property to the next.  To that end, there are certain rules of thumb that a buyer should keep in mind as he or she navigates the 2009 Scottsdale Real Estate market.

1.  The Short Sale Property

"Upside down, boy you turn me, inside out ..."

You’ve read about them in the paper, heard about them on the news and know somebody who attempted one, but still may not know exactly what a short sale is.  First off, I would be remiss if I didn’t make the requisite quip that short sales are anything but short.  By and large, they are loooooooooooooooooooooong.

The term “short sale” is derived from the seller’s lack of equity in the property.  In fact, the seller is upside down to the point that the market value of the home is less than what is owed on the mortgage(s).  With a short sale, the seller must convince the bank to take a loss by agreeing to the sale.  There are numerous pitfalls, including waiting for weeks or months for the lienholder’s response and low success rates (less than 10% of short sales are successful).  One particular difficulty lies in ascertaining whether a seller even qualifies for a short sale at any price.  Each institution has its own unique standards, but sellers must adequately demonstrate hardship (job loss, etc), provide up to date financial statements and pay stubs, document where all funds for a line of credit have gone (the lender in 2nd position will disallow a short sale if the funds went anywhere except back into the house (kitchen remodel, pool, etc).  The biggest saboteur of a short sale, other than an incompetent listing agent, is the presence of a second loan.  Multiply the difficulty exponentially if the loans are held by different institutions.

If it sounds like a lengthy, treacherous process, that is because it often is.  Short sales, in this agent’s humble opinion, only make sense for the buyer with no real time table.  Investors, specifically, are primed to take a stab at one if the purported price (the price listed in the MLS is really just a moving target when you don’t know what the bank will ultimately deem acceptable) is attractive enough.  If you don’t plan to live in it, and won’t be devastated if it doesn’t pan out, have at it.

2. The Foreclosure Property

I'll take a single-family home and $20 cash back, please

If 2009 could be summed up by initials, they would be “REO.”  Real Estate Owned properties, or foreclosures, are all the rage this season, and for good reason.  Banks are awash in foreclosed homes at present and have effectively set the market.  Eager to rid themselves of bloated inventories, the various institutions have well-earned reputations for bargain basement pricing.  By the time a bank takes a property back from an owner in default via a Trustee’s Sale, I find they are often ready to deal.  If the short sale process can feel like a rudderless vessel as your offer drifts from file to file in the bank’s loss mitigation department, there is actually a captain at the helm by the time the bank ultimately rejects the offer(s) and opts to foreclose instead.  Now an asset manager is responsible for offloading the acquired property.  Just the titles alone speak volumes as to the motivational forces at play:

loss mitigation VS asset management

More often than not, a property that is taken back by the bank will reemerge as an REO property at an even lower price than the listed price of the failed short sale attempt.  Does it make sense?  Not really, but that’s what often happens.  And the price is no longer a moving target.  With the bank now the principal, they set the list price and will negotiate more like a typical seller (albeit at a slightly slower and more aloof pace).  Expect to wait up to a week for a response and the possibility of fighting off multiple offers due to the low pricing, but it sure beats waiting months for an all too often unreasonable response.

The negatives of dealing in bank-owned property are primarily rooted in lack of disclosure about the home and the penchant for selling property “as is.”  You can be sure that something will be missing from the home.  Either vandals have cannibalized the A/C for copper or the former owner yanked all of the appliances and the hall bath towel rack out of the home on the way out, but rest assured, some component of the house is FUBAR.  Complete with heavy handed addenda that favors the seller, the trade off for the great price on a bank property is an often uncared for home with no disclosed history of damage/repair and no one to repair the defects you find during the course of your due diligence period.

Yes, you do get the opportunity to inspect even though the bank will require an “as is” addendum.  If you ever see language in a contract or addendum disallowing your right to inspect the property … run!

3.  The Resale Home

Quick, Marge, get the camera ... real people!

Ah, a home actually owned and sold by a real, unencumbered person.  I must confess, finding such a specimen in the modern Real Estate jungle has been a rarity.  At least finding one that can compete with the pricing of bank-owned homes, that is.  As more and more sellers become realistic about the erosion that has taken place in Valley home values, though, I am starting to see the gap close ever so slightly.  Obviously, anyone who bought a home in 2005 or later is not in a position to competitively price it for today’s market without attempting a short sale due to the subsequent swan dive in prices, but those who have been in their homes for a decade or longer are finally getting the memo and positioning themselves to compete with the banks.  With prices still trending downwards, the smart seller is getting out in front of the curve and pricing his/her home to sell before any further price degradation can occur.  When you find such a home with a seller still capable of maintaining, disclosing and repairing the property’s condition, and priced in line with the foreclosure market … buy it!

So there is a (not so) brief synopsis.  Don’t limit yourselves unnecessarily when shopping for a home.  Allow your agent to explore all available avenues, just be aware of what you might be signing up for with the entanglements that come with each option.

Most importantly, remember this:   A low price in the absence of value is meaningless.

It is an inevitable starting point for many buyers right now. Before I can finish saying hello, I am bombarded with requests to see bank-owned and short sale housing. Frankly, were we to change places, I would most likely do the very same. I am aware enough of the opportunities this market has created in the foreclosure arena to dedicate a more or less weekly post to bank-owned property spotlights, after all.

However, there are values everywhere right now. Resale homes have been dragged inexorably closer to the shallow end of the pool by the bank properties, and builders have been forced to sell off their inventory homes at even deeper discounts than usual. There is no part of the market that isn’t coughing up a bit of water.

Ah, brand new construction at foreclosure pricing … can it be?

In some cases, yes, it can.

Builder spec homes just might provide the alternative to bank-owned property that Phoenix area value hunters seek. A spec home is either one which the builder constructed without a waiting buyer in the wings or one in which the original buyer bailed out on the transaction after construction commenced. These homes make great options for buyers who prefer brand new construction, but don’t want the lengthy wait involved in having their new home built from scratch. A buyer can typically move into a completed spec home within 30 days. Of course, if construction is complete, the new buyer will not be able to make any cosmetic choices in regards to flooring, cabinetry, etc. The big discounts, however, are often very persuasive arguments for that sacrifice.

Eager to dump existing inventory in the best of times, builders are even more anxious to get their specs off the books in this market. As evidenced by the near standstill in new permits being pulled by builders for new projects, it is cut and run time for many. I am seeing completed spec homes with significant levels of upgrading being advertised for sale well below base price. In other words, if you signed a contract to build from scratch, you would pay more for a home with absolutely no upgrades than you would for the completed home with cherry cabinets, slab granite countertops, stainless steel appliances, premium culdesac lot, etc.

Another advantage that a builder can offer a prospective buyer right now is tough to beat in-house financing. Not usually a fan of running my loan through the same guy who is selling me something, any conflict of interest concern tends to melt away when they disclose the cheap rate blocks they have purchased for their customers. In addition to the low sales prices, I have isolated several builders who are paying up to the maximum allowable buyer closing costs. A recent client is getting a fixed rate in the 4’s with an additional buydown for the first two years. At no out of pocket cost. All he has to show up to closing with is a downpayment. Not too shabby. *

You have to be careful, however. As I mentioned in a previous post, there are many struggling builders throughout Maricopa County. While a little financial pinch works in the buyer’s favor, too much can lead to unfinished subdivisions, mechanic’s liens and other fun stuff. You want to do your research (or better yet, work with a knowledgeable Realtor to ensure you are not walking into a doomed project. I recommend national builders with ample working capital and developments that are nearing close-out.

You don’t want to get stuck in a ghost town.

Bear in mind that you may have to venture a bit further from your desired location if brand new construction is your bent. Scottsdale is largely landlocked, with only the valuable land in the North remaining open to development. There is infill construction in central Phoenix, but the majority of new home projects are located in South Phoenix (Baseline corridor), North Phoenix (I-17 corridor) and pushing ever Westward towards LA. For those in the Southeast Valley (Mesa, Gilbert, Chandler, Tempe, Queen Creek), there are still plenty of options.

I spent the last week looking at a fair amount of them, as a matter of fact.

I had one of those purported foreclosure buyers who ended up buying a brand new spec home from a quality home builder instead of any of the bank-owned homes in the same price range that needed work, had no available warranty and disclosure information and no special financing incentives.

The moral of the story is not to rule anything out. Look less at the property label (bank-owned, resale, new) and more at the property itself. You just might be surprised at the unexpected bargains that are available to be had across the full color spectrum of the 2009 Real Estate market.

Give me a call if you want to find just the right shade of perfect.

* I always advise speaking with a reputable outside lender to compare programs/costs