by Paul Slaybaugh | Jun 28, 2010 | Scottsdale Real Estate, This & That
“You mean, it’s ours? It’s really ours?”
They were so excited. Even after I handed them the keys, they were slow to believe that the modest Spanish bungalow was now in their adoptive custody. Over the course of four exasperating months, we must have seen and dismissed close to a hundred homes. This one needed too much work. That one had a poor kitchen layout. Yet another sat on the “t” of a subdivision’s entrance: bad feng shui, or so I was told. Before the market skies parted and yielded the seventeen hundred square foot, clay tile miracle that appeared to have met extinction in their price range, our flagging spirits were all but ready to pack it in. The May 5th, 2005 discovery saved them from another year of apartment living. A challenge, at best, with a ten year old daughter, let alone with a half-baked bun in the oven.
“Can we go in,” the wife asked in a small, cautious voice.
“Of course,” I responded. “It’s your house, Liz, you can do whatever you please.”
She ignored my extended hand and engulfed me in a fierce hug. Her husband clasped my shoulder in a vice grip which betrayed an adolescence spent laboring on the family farm in Iowa. His curt nod spoke volumes.
“You’re welcome, Mel,” I replied.
“Thank you both for hanging in there with me. I know it hasn’t been easy, and I can’t tell you how much I appreciate the patience and trust you’ve shown. It’s been a long, tough slog, but I think we got it right.”
“Yes, we did,” Mel said, breaking his silence for the first and only time that morning.
“We would like to have you and your wife over as soon as we get settled,” Liz added.
“I’d like that,” I told her.
I meant it, too. I like just about every client I take on, but felt a special kinship with this couple for reasons that surpassed the extended time spent in each other’s company. After bidding the happy couple farewell, I glanced in the rearview as I navigated my way down the tree-lined street. Instead of going inside, they remained rooted in place, holding hands and staring at their new home.
I received a phone call from Liz this morning. Turns out that Mel has been out of work for some time now, and they cannot afford to keep the house. Might have to move back to the Midwest and look for a position on the farm. See just what kind of life is left in those gnarled, old leather hands.
I hate this job sometimes.
by Paul Slaybaugh | Jun 22, 2010 | Home Buying, Home Selling, Scottsdale Real Estate
So you have 20% to put down for a single family home in Scottsdale AZ. Your FICO scores are higher than Willie Nelson on Bob Marley Day in Montego Bay. You have been gainfully employed in the same W2 position with the same company for years. The American Express card with a $124 balance and the $112 payment on your 2002 Honda Accord make up the sum total of your earthly debt. Congratulations, you are one of the few buyers in today’s market in a position to call your own shots.
Surely the right play is to go the conventional financing route, right?
No private mortgage insurance, the lowest possible rate, less red tape than government sponsored financing vehicles.
From a strictly cost-based approach, all signs point to a nice, vanilla 30 year fixed conventional loan at a microscopic rate as the biggest no-brainer in the history of money.
Of course, as we have learned all too well, there is more to your choice in financing than today’s consideration. In fact, there is more to your choice in financing than even the total cost to you over the life of the loan. While we may not know where the market and its attendant values are heading, one fact is indisputable:
Interest rates will rise.
Maybe not today, maybe not tomorrow, but soon. Inflationary pressure makes it inevitable that rates will take off at some point. All of the warning signs are there. It will happen. Rather than banging the tired gavel of “buy today, rates on the way up,” let’s steer the discussion in a less self-serving direction.
Q: What is today’s buyer?
A: Tomorrow’s seller.
If you are buying a home in 2010, you need to consider the market forces that may shape 2015 or 2020. When we agents prognosticate, we tend to focus exclusively on home values. This is a fool’s errand. What we really should be thinking about is the buyer pool’s (in)ability to buy.
If interest rates manage to climb into the double digits in several years’ time, the difficulty of selling the property you are buying today may be compounded by a further contraction of able buyers. How does one counteract the specter of such a looming boogeyman? By going back to the future for familiar, but forgotten solutions to a similar problem.
What saved home sellers in the era of 18-20% interest in the ‘70s and ‘80s? Owner financing and assumable loans. For the purpose of this post, I wish to focus on the latter.
With the low to zero down conventional financing options in the market for my first decade in the business, it was a rarity to consummate a transaction with anything other than non-assumable financing. Now that FHA loans have forcefully elbowed their way back into the marketplace, however, assumable financing has returned. Most borrowers are not considering this aspect of the financing in the least, mind you. They simply jump on whatever they can qualify for that provides the least cost and lowest rates. I maintain that the assumable nature of a loan will be incredibly important moving forward.
While a new buyer would have to qualify for the loan to assume it, imagine how much wider your future buyer pool will be with such an option in place. Your 30 year fixed at 4.75% may not look quite as good to you if you find yourself in a position in which you have to sell your home in the midst of 12% interest rates. Not to sound the bell of an alarmist, but it’s not difficult to foresee a future in which many buyers who have migrated to the security of 30 year fixed conventional mortgages in the wake of the mess spawned by more creative financing find themselves imprisoned within those non-assumable safety nets.
Moving forward, your mortgage might not just be your mortgage. It could potentially be your future buyer’s. As such, when shopping for financing, there is more to consider than just the nuts and bolts of your own cost. Your mortgage could eventually prove either an enticement or a hurdle to a sale.
Heady stuff.
I will close with that which should have served as a preface: I am not a mortgage professional. DO NOT rely on my speculation in any manner when making a choice in financing. The nuances and new rules/regulations in the financial world are changing so fast that even those who wade in those murky waters on a daily basis are having a hard time keeping their raft of sanity afloat. For some, the internal debate is academic anyway, as there are qualification constraints on all financing types. Only your lender, with a full view of your financial picture can provide competent advice as to which programs you may ultimately qualify for, and which is the best fit for you. I do, however, want you to add this question to the typical inquiries about rates, fees, penalties, etc when speaking with your chosen loan officer:
“Is this loan assumable?”
I expect it will matter more than the attention it is currently being afforded in most Real Estate circles.
by Paul Slaybaugh | May 20, 2010 | Home Buying, Scottsdale Real Estate
No matter the state of the national economy, political climate, or the price of beans in Uganda, Scottsdale, Arizona remains a coveted relocation address. Official population estimates put our grown-up resort town at 237,000+ residents and climbing (as of 2015). For those of you keeping score back in Delaware, that’s a 10% increase from the year 2000, even with the uneasy Real Estate market that spanned the latter half of that decade. Not too shabby for a town whose 1951 origins boasted a total population of two thousand hardy pioneers!
So what exactly is it that keeps this one-way conveyor belt moving? What intrinsic value of the Arizona lifestyle keeps folks coming in droves to the Valley of the Sun? Why does the city still nostalgically known as “The West’s Most Western Town” continue to add labels, such as the nation‘s “Most Livable City,” and find inclusion amongst various new best-of lists, such as the “Top 100 Cities for Young People,” (1) with each passing year?
Young people? In Arizona? Bet you didn’t see that coming!
Let’s examine why exactly Scottsdale might appeal to people of all walks of life.
Is it the 314 days of deep blue skies and sunshine? A horizon so boundless that the occasional passing cloud is quickly chased away like a stray tumbleweed through the Sonoran Desert? The average high temperatures of 85 degrees, and a scant 7 & a half inches of annual rainfall? Where the only ice you will find in December lies inside a cocktail glass?
Possibly.
Is it the Scottsdale Unified School District, which routinely ranks atop the state in performance and outpaces local and national averages by a wide margin in critical categories such as SAT and ACT scoring? Which boasts an off the charts percentage of schools categorized as “excelling?” With 50% of the adult populace holding a bachelor’s degree or higher (which likewise outdistances the state and national averages by a wide margin), education has always been a top priority to the citizenry of Scottsdale. Surely the robust school system is the reason an out of towner looks to Scottsdale with a longing eye?
Possibly.
Could it be the vibrant nightlife and fine dining that boasts an inordinate amount of upscale eating establishments, wine bars and the like? Where you can’t fall down without landing on the finest Fillet Mignon or Prickly Pear Margarita you have ever tasted? The more than 125 art galleries which make Scottsdale a bastion of high culture? Is it Taliesin West, the former winter home and school of renowned architect Frank Lloyd Wright which lives on as a popular tourist destination?
Possibly.
Is it the golf? The more than 40 courses which can be found within Scottsdale‘s city limits alone? From Par 3 executive courses to PGA venues, there is something for every skill level. You are moving to Scottsdale, Arizona. It simply must be for the golf. Right?
Possibly.
Is it the strong local economy? The one with the ultra low unemployment figures and strong income levels (median family income of $85,000+ per 2009 estimates)? The one powered by tourism (39% of city workforce), convention revenue, 2nd home buyers, strong aviation industry presence centered around the Scottsdale Airpark, medical field stalwarts such as Scottsdale Healthcare (largest private employer with nearly 6700 employees), the Mayo Clinic (2nd largest private employer in Scottsdale with nearly 5000 employees), etc? Notable businesses include the Fortune 500 company, Allied Waste, as well as Rural Metro (private fire protection), Go Daddy, General Dynamics, Dial Corporation, Cold Stone Creamery and TASER International. So, is it the allure of a healthy job market for a highly skilled workforce that makes Scottsdale Real Estate so historically vibrant?
Possibly.
Or how about the shopping? The spender’s paradise which boasts Kierland Commons, Fashion Square Mall, The Promenade, Old Town, Gainey Village and The Borgata, just to name a few? Where you will find that perfect something that you can’t live without in every shop? As synonymous as Scottsdale has become with retail therapy, it has to be the shopping, right?
Possibly.
Perhaps it’s the unbelievable location and access to the rest of the Valley? Minutes from Sky Harbor International Airport, Scottsdale is connected to the rest of the greater Phoenix area by freeway. Bisected by the Loop 101, previously distant reaches of the Valley such as Chandler/Mesa/Gilbert to the south and Glendale/Peoria to the west are now readily accessible. Could the prime central location be the reason for Scottsdale’s popularity?
Possibly.
Wait, it has to be the resorts, right? After all, our well-earned reputation as a resort town is what first put Scottsdale on the national map. With over 70 resorts and hotels, half of the Valley’s resorts are located in Scottsdale. Might the lure of an afternoon at the Hyatt Regency’s pool or the Westin Kierland’s spa be the source of enticement? Maybe afternoon tea and relaxation at The Phoenician, or reaching out to touch the mountains at The Four Seasons in Troon?
Possibly.
How about the immediate access to escape from the daily grind? The ability to trade the heat of a July day for an afternoon in the high mountains with only an hour and a half’s drive north as payment? Or to dip toes in the Pacific Ocean by making the 6 hour drive to San Diego? Heck, less distance than that puts a traveler on a lazy beach in Rocky Point, Mexico. Is it the convenient getaway capacity that attracts all of these new Scottsdale residents?
Possibly.
These are all very strong contenders for the title of most alluring, but I think it boils down to something far more simple, yet somewhat indescribable. Most people move to Scottsdale, Arizona for the very reasons that I have never left. Those reasons are hard to express with words. Less a physical place than a state of mind, Scottsdale is that internal intersection where an unencumbered side street of your soul meets the thoroughfare of refined, modern living. The desert Southwest stirs something ancient and irresistible within the romantic ventricles of even the most hardened heart. Lacking the eloquence to due her justice with my pen (or keyboard, as it were) alone, I yield to pixels. The images below should provide greater insight as to why this native son still calls Scottsdale, Arizona home after all these years.
(1) Phoenix Business Journal (2007)
Statistics courtesy of the City of Scottsdale (2009)
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by Paul Slaybaugh | May 10, 2010 | Scottsdale Real Estate, This & That
Real Estate Investor.
The phrase alone inspires a host of reactions that run the full gamut between antipathy and, well, slightly lesser antipathy, depending on the audience.
As any semi-interested news watcher and industry blog reader can attest, the Real Estate investor is the greatest scourge to befall our fragile ecosystem since polybutylene plumbing. What, with the housing supply lines ill-equipped to handle the artificial demand, our flimsy pipes swell and burst when the pump and dump investment surge strikes a hapless market. Aside from the banks who flooded Wall Street with dubious mortgage backed securities that were chopped and reconstituted in more numerous and indiscernible ways than Joan Rivers’ alleged face, the fount of no-money-down investors is the most vocally derided catalyst of the Great Real Estate Bubble of 2005 ©.
Well, guess what? The investor is back … and that’s a good thing.
Hold your rotten tomatoes and easy with the pitchforks, if you will. How can I possibly opine that the reemergence of the buyer subset that sent values through the roof, only to crash them through the basement when they left a valley of foreclosed “investments” in their wake is a good thing? Is the demand any less artificial now than it was when the previous incarnation of ne’er do wells spiked our collective punchbowl?
In a word, yes.
The 2010 investor is not the fly-by-night operator who purchased the nearest home for sale at the conclusion of a four hour seminar on how to get rich in Real Estate investing with no money down. Shoot, who needed money down when you barely needed a pulse and a job to buy a house back then? No, today’s investor, by and large, is showing up at trustee sales and plunking down cash on a barrel. He has the skin in the game that his counterpart of yesteryear did not. He is investing in a very real sense of the word.
In addition to securing an interest in the property with his own bankroll (thus making the prospects of simply walking away from a property that doesn’t return as hoped less palatable), the other crucial dynamic at play is the return of sanity to the overall investment arena. When investors were driving Scottsdale and Phoenix property values into the stratosphere back in 2005, there was little regard to the initial purchase price. Our entire market temporarily forgot that you make your money on the purchase. Buy a property right, and the return will be there when it’s time to sell. In the throes of insanity, investors were climbing over themselves and each other to purchase property, any property, for 50k over whatever ludicrous price was being sought by an apoplectic seller. Investors were betting on the come. Pay whatever now, and the joint will be worth 100k more in two months whether a hammer is ever swung in renovation or not. With the year long fervor, they got away with it … for awhile.
Today’s investor is not settling for just any property he can get his hands on, but is showing up at the courthouse and robbing the bank blind. Paying pennies on the dollar and rehabbing a previously dismantled home, his margin is large enough to bring the distressed apple of his eye to market at a price actually supported by recent sales comps.
The coup de grace? Today’s investor fills a need that the banks won’t. He is essentially financing the fix-up costs that many banks have abandoned in self-defense. Against a backdrop of tight lending purse strings, consider the difficulty many people have just in coming up with 3.5% or 20% down payments, let alone remodeling capital. With home equity lines all but vanished from the marketplace, that stripped bank-owned home bargain isn’t all that realistic for the buyer who doesn’t have the available cash to put it back together, regardless of how appealing the price tag. When you could tap a line of credit to finance improvements, it wasn’t that big of a deal to throw in some new carpet, counter tops and appliances after closing. Now, you have few options other than reaching into your own pockets. Thus, there is a sizable buyer pool for a move-in ready home. The well heeled investor who assumes the risk and fills that need is not to be derided.
Take the mom & pop homeowners who are unable to price their homes competitively due to high loan balances, mix with the interminable wait of short sales, fold in the distressed condition of much of the bank-owned inventory and bake at four hundred degrees to create a casserole of supreme frustration for many disenchanted home shoppers. A rehabbed home at an affordable price, if not the outright theft that was envisioned at the outset of their house hunt, begins to look more and more appealing to many buyers after getting an up close look at what the reputed bargains actually look like live and in color. In essence, by purchasing a property from an investor, a buyer has found an end-around to financing renovation costs.
If your last nickel is earmarked for your down payment, and you can purchase a renovated home at a fair market value that you can afford, don’t begrudge the man his margin. While the stereotype of the lecherous vulture remains, we would be remiss not to acknowledge the good he can, and does, bring to a market like ours.
Investors: they’re not just for nuclear Real Estate holocausts anymore.
by Paul Slaybaugh | Aug 25, 2009 | Home Buying, Scottsdale Real Estate, This & That
You have a problem. Your family sees it. Your friends see it. At the eye of the storm, only you lack the perspective to clearly recognize the wake of wanton destruction spawned by your vice. Despite your feeble protestations to the contrary, you need help. Your addiction does not end with you. It touches the lives of those around you with dark, restless hands. Probing unsuspecting pockets and vulnerable throats.
The cycle of despair ends today. Your days as a perpetual Real Estate shopper are over.
House hunting can give you a rush like none other. No buyer quickly forgets the first time he steps through the front door to a new potential future. The magic. The exhilaration. The knowledge that one is virtually unfettered to choose his own adventure. Of course, once that initial euphoria grabs a hold of a buyer, he must experience it again. Houses 2-10 still hold some residual magic, but do not hold a candle to that very first experience. Houses 11-20 hold an air of disappointment. Soon enough, each successive property becomes a progressively greater assault on the sensibilities. Your friends and relatives grow weary of your constant trolling of Realtor.Com. Your erstwhile volunteers will no longer join you on the weekly Sunday home tour with your beleaguered Real Estate agent.
You don’t care. Despite all evidence to the contrary, your silver bullet is out there. You don’t need help, you just need more listings. Where are all the new listings, anyway? Everyone knows that banks are giving houses away for pennies on the dollar, so this simply must be the week that the 5000 square foot home on 4 acres hits the market. For $125,000.
Welcome to Detox. My name is Paul. I will be your cold dose of reality for the next 30 days.
The first step to recovery, of course, is admitting you have a problem. Trust me, you have a problem. Further, you must admit that you are powerless to the tug of your addiction. I offer as “Exhibit A” this August 9th, 2009 email sent to your agent regarding a property you found online. Time-stamped at 3:48 AM. “Exhibit B” is your agent’s cell phone records from 3:49 – 4:32 AM of the very same day.
Step two is to understand that a power greater than yourself can restore you to a sane existence. No, it’s not your brother’s mail carrier’s uncle who owns four rental properties. It’s your agent. Listen to him/her.
We’ll just skip step three because we all know that the realm of Real Estate is presided over by a supreme being in the guise of a braying, one-eyed donkey with cataracs. Pin the tail on him and you are as likely to get donkey kicked in the goods as you are to win the investment lotto. See step two for obtaining the services of one who knows how to best manipulate, if not outright tame, the fickle Real Estate beast.
You are now ready to move on to step four. This is where you take full and unflinching stock of your own morality. “Thou Shall Not Steal” is a typical shortcoming of many Real Estate shopping addicts. The thrill of the grift, after all, is one of the primary tarpits into which the saber-toothed buyer has fallen to become bogged down to such an irretrievable degree.
While admitting to yourself the wrongs you have committed is no picnic, neither is admitting those things to the higher power of your choice and a fellow non-home buying human. When you can do so, you have conquered Step five. Don’t even think about omitting the part where you burned 1897 hours and 16,789 gallons of your agent’s time and gasoline.
Step six is opening yourself up to the full removal of the defects in your character from a higher power. Once again, your agent will gladly fill this role in absentia and remove said defects via Paypal and/or rubber mallet.
If you can bring yourself to ask for said absolution, you have mastered step seven.
Step eight requires that you make a list of all those you have harmed and be willing to make amends. You can start with your spouse, co-workers and anyone you have pumped for advice and proceeded to dutifully ignore. Just make sure that your REALTOR is somewhere in the mix. No greater sin than trumping his/her decades of industry experience with the sage advice of your hairdresser and life insurance agent.
Step nine is actually making the aforementioned amends. A little wine and cuddling to soothe frayed nerves and egos is a good start, but cash money absolves all.
Step ten directs that you continue to take stock of your failings and immediately admit subsequent wrongs. You may be on the road to recovery, but that doesn’t mean you are immune to calling a listing agent directly to schedule an appointment after your agent has patiently educated you over the past year and a half. And yes by the way, that does make you a bad person.
Step eleven directs you to establish more direct contact with your agent. Email and the occasional phone call will suffice. He or she is tired of sending smoke signals in the direction of East Jabib to reach you. When the right property comes along, don’t make a search party necessary. Bloodhounds are pricey by the hour.
Step twelve is reserved for those Career Buyers who have had complete spiritual awakenings and will actively work to spread and promote these guiding principles to their brethren in shopping addiction. Praise the lord and pass the turnips, you are now ready to purchase a home! Go forth and proselytize!
Should you experience temptation to return to your former habits or worse, suffer a relapse, it is important that you understand three things:
1) These things happen and you are still loved.
2) Just not by your agent.
3) You are completely and totally screwed.
