By now, even the most procrastinating of first time home buyers understands that the end is nigh. The end of the $8000 first-time homebuyer tax credit, that is. While rumors abound about a possible extension past the current deadline, rumors also persist that man did not actually walk on the moon in 1969 (if you happen to believe the latter, you can moonwalk your way right out of my blog catalog). When it comes to our esteemed legislative bodies, I am not ready to take the leap of assumptive faith that they will do the logical thing. As things stand, you have received sufficient warning from every warm and cold blooded Realtor type in the land that you need to get on the stick immediately. With new appraisal regulations and loans which used to take 30 days now bogged down in underwriting quicksand, it is not a good idea to venture past mid October before pulling the trigger on that home you have been patiently watching for just one more price reduction. With a fleet of fellow procrastinators waiting until the absolute zero hour (closing prior to 12/1/09), there is also the added risk of running into title company soup. Think the end of the month is busy at your friendly title company and subsequently hectic in terms of getting your deal closed? My hunch is that typical happenstance will be a walk along a tranquil beach in comparison to the buyer tsunami that figures to crash upon every escrow office near you between 11/1 and 11/30.
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.
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:
It is not atypical for Real Estate agents to spurn rentals. Much to the chagrin of frustrated prospective renters, that is one voicemail that seldom gets returned. For an agent backlogged with more lucrative opportunities, he/she will often leave the red-headed stepchild of the industry to the property managers. You don’t get rich matching tenants and landlords, especially if it is not the main thrust of your business. Thus the rental stone is not merely left unturned by the high fliers, it is disregarded as a stone altogether. More like a pebble, the likes of which will find its way into your shoe and cause great discomfort to those who would tread too close.
Part of the problem with the rental market is that the compensation is a prohibiting factor. Realtors are hired guns. As independent contractors, we are always performing risk/reward analysis. For many, the potential reward of a rental transaction is not nearly lucrative enough to justify the risk of the effort not successfully culminating in a paycheck. To operate on straight commission, productivity must be maxed and the upside ridiculously high, otherwise, we would all opt for the safety of a salaried position. With compensation for rental properties drifting downwards in recent years, the opportunity cost has simply become too great for many in our ranks. Why shuttle around some schlub for two days in hopes of collecting a $150 paycheck when they might put a $500,000 buyer in the car instead? Of course, you also have a segment of agents who might simply find such menial work beneath their inflated sense of self, but you get those types in every field.
I can’t rightly attest to the motives of those who brush off rental prospects, but I can tell you why I do not. Any agent worth his or her salt looks not only at the present business horizon, but the future skyline as well. In my estimation, today’s tenant is tomorrow’s buyer. Whenever the financial and personal wherewithal comes to make that transition, I want to be the agent they remember that helped them when the others gave them the brush off. If my competitors want to slam the door on these apparently inconsequential house hunters, I will gladly use the opportunity to get my own foot in that very same door.
Anyone can sell someone a house. It takes diligence, empathy and yes, a little luck (hard to compete with Aunt Margaret when she gets bored and gets a Real Estate license) to sell a person every home he or she will ever own. I aspire to the latter. Performing a service that can be tantamount to pro bono work in some cases is one means of achieving that aim. It never ceases to amaze me how many advertising dollars some agents will spend to attract new clients while completely neglecting the opportunities that don’t cost a nickel (a little gas notwithstanding). For the chance to gain the trust of consumers while they are at either the infancy or nadir of their journey towards home ownership, I happily pick up that slack. Working rentals over the years whenever the opportunity has arisen, I have procured some of my very favorite and most loyal clients. They tend to stick with you on the way up when you were there for them at the bottom.
To all of my esteemed colleagues who neglect the rental market, I thank you.
To the frustrated renters out there who can’t get an agent to return a phone call, email or smoke signal, give me a buzz. I will gladly help you find temporary housing in the Scottsdale, NE Phoenix and Paradise Valley area.
And when you’re ready to buy … I wouldn’t be adverse to taking that call, too 😉
If there were six words I could erase from the murky bog of a seller’s mind, it would be these. Within this seemingly innocuous sentence lies a terrible sickness. A Bubonic Real Estate Plague, if you will. The black death of a home sale.
There is something to the thought that a target buyer exists for every property. That the pre-qualified needle in the haystack will know a property is “the one” upon first sight. It is another matter altogether to make the flying leap that said buyer will, in turn, disavow all semblance of self-preservation and dive onto the hand grenade that is an overpriced house.
The underlying root of the weed of denial that infests a stubborn seller’s mental garden is the unflinching notion that “the right person” will come along and “fall in love with the house” just as he or she once did. Of course, when this simplistic rube comes along and falls head over heels in love with the one of kind abode, he won’t be able to reach into his wallet fast enough to pay whatever outlandish premium is required. Never mind that you are competing directly with homes that are 1000 square feet larger. Never mind that your home has a deficiency in location or condition. You have a pantry.
“Priced grossly above recent comparable sales? 1368 days on the market? Where do I sign? I MUST HAVE this house!”
Here is the thing, gang. Yes, someone can always make you an offer. If they see your house. If you are priced so far above and beyond the current market value of your home, however, the “right” buyer will never even see you on that outrageously lofty perch. Oh sure, you may get some traffic, but those suitors will end up buying one of the larger, nicer competing properties. The buyers looking in your size and amenity range are looking at properties thousands below your asking price. Kind of hard to make an offer when they don’t even know you exist.
And you know what? Even if they stumble across your place, why would Mr & Mrs Right make an offer on a home priced at 500k when they can make a more realistic offer on a similar home priced at 400k? It’s more than just counter-intuitive. A buyer would have to have been huffing spray paint in a non-ventilated storage room for the past 72 hours to pursue yours. If the “right” buyer is defined by constant drooling and a complete lack of interest in the alphabet past the letter “j,” you might want to rethink your strategy. The idea is to cast as wide a net as possible to find a keeper, not to dangle the bait 50 yards above the surface of the water and wait for a fish on a pogo stick to jump right into the boat.
The wise seller rolls out the welcome mat for an army of potential suitors. The foolish seller gives the assembled masses the finger as eagle eyes scout for that one, perfect, dumb-as-a-ham sandwich buyer.
Yes, someone can always make you an offer. Here’s mine: Fish or cut bait.
If you are ready to do some serious bill fishing, I’ve got the boat fueled up and ready to go. Plenty of Dramamine, too. We’ll chum the waters with a competitive price and superior product to land the biggest damn shark the ocean will yield.
If that doesn’t sound like your kind of tea party … better to wait at the marina for the seas to change. In another decade or two, the tides will surely rise high enough to deposit the price you covet.
Picture a bowl of primordial soup. No, really picture it. What does it look like? I see a gelatinous, gray gumbo of sorts. The contents within completely impervious to the light of the sun underneath an opaque, spoon-devouring outer layer. I don’t need to make out the individual invertebrates that I sense roiling about the porcelain confines to intuit that a wayward finger would disappear into tiny, prehistoric mandibles within moments of straying into the land of the culinary lost.
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.
