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

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

You have Scottsdale Real Estate questions.

We have answers.


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Have Scottsdale Real Estate questions? Send them to us through the contact form below. We’ll do our best to answer all in a timely fashion, and will use our favorites for future posts.

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You’ve Been Lied To: The Scottsdale Real Estate Market Does Not Favor Buyers

The current Scottsdale Real Estate market does not favor buyers.  I repeat, the current Scottsdale Real Estate market does not favor buyers.

Allow me to explain.  For months, if not years, you have been told that the glut of housing inventory here in the greater Phoenix area makes for a buyer’s market of epic proportions. Why, the ancient Greeks themselves would write songs about the opportunities that abound for any would-be hero with a hankering for a house.  The only problem with this suggestion?  It’s just not true.

What is a buyer’s market?  Most would define it as a preponderance of available supply and an accompanying dearth of demand.  Let’s take a look at both aspects of that equation.

In a perfect financial world, a buyer waits for the market stars to align in just such a manner before swooping in to claim a nest at a fraction of the “normal” cost.  It all works great in theory, but real world application necessitates that the prospective buyer be subjected to the same set of variables that has drawn down the pool of demand at large. It’s a buyer’s market when few have the wherewithal to actually buy.

Appraisal difficulties and tightened lending regulations are contributing to a somewhat artificial suppression of demand. The “want” is present in the market. Consumers want to buy houses. They want to take advantage of the greatly reduced pricing and sublimely low interest rates. Homeowners want to refinance their houses so that they can stay in them, thus contributing to the lowering of the overall supply.

Want has nothing to do with it. Without ability, all of the consumer confidence and desire does not translate to actionable demand.

So to clarify the lead-in to this post, the current Scottsdale Real Estate market does not favor ALL prospective buyers, as the “buyer’s market” connotation suggests.

Further, the favorable conditions for those who are in positions to purchase do not necessarily translate to negotiable strength. Well-heeled cash buyers, W2 employees with verifiable income, solid credit history/scores, etc will find that they do not call the shots to the extent that they were led to believe. The bargain bin of bank-owned foreclosures is incredibly crowded. You are elbow to elbow with competing consumers when a new shipment arrives. The mom & pop resellers, by and large, do not have the equitable flexibility to negotiate the 30-50% off of list price that many buyers envision. The short sale properties with the absurdly low price tags are, more often than not, pie-in-the-sky figments of the listing agent’s imagination. You submit an offer 10% off list price to the bank, which in turn proves to be 40% off the BPO (Broker’s Price Opinion) that is performed three months later. The bank tells you they will gladly approve the sale – for 75k more than you offered.

While the inflated inventory levels in the housing sector are cited often enough, it is not widely reported that the number of unencumbered properties available for purchase is far less.  In a market that is most assuredly not of the “see house, buy house” variety, the redaction of readily purchasable properties (due to competition in the low end, and lien encumbrances across the full pricing spectrum) tilts the negotiation playing field back towards center.  Neither party has a clear cut advantage when facing each other at the negotiating table.

The truth of the matter is that most of the savings that you can expect to uncover have already been factored into the asking price by the time a listing is brought to market. Sure, there will be those that require substantial negotiation, and plenty others still that simply fail to sell. Never underestimate one’s ability to overprice a house. These aren’t the homes you are most likely looking at, though. The ones that buyers are flocking to in droves are those that present the best value opportunities. And why not? Just be prepared for the competition that you did not think existed in this ballyhooed “buyer’s market.”

Trying to cobble “x” percent off the list price in circumstances in which others are offering “x” above the list price will only lead to frustration.  Don’t get greedy.  Do what it takes to lock up the lowest pricing the Valley has seen for seven to eight years (longer in some areas) while interest rates continue to hover around 5%, and you are well ahead of the game.

And lastly … smile.  You are the guy that so many lament not being right now.  You know, the hypothetical guy who spurs such proclamations at office parties and cocktail hours all across Scottsdale:

“If I had two nickels to rub together right now, I’d buy every house on my block for less than I paid for this albatross back in ‘05.”

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Why Is This Scottsdale Home So Cheap?

Why Is This Scottsdale Home So Cheap?

What’s the deal with this house?  Why so cheap?”

I field some derivation of this inquiry on a fairly routine basis from buyer clients. Typically, they have stumbled across a property listing online, or possibly in the ARMLS portal I have set up for them (provides for user log in and review of all homes currently for sale that fit their specific criteria, rating of the available homes, notes, price adjustment tracking, etc), that appears to be just the anomaly for which they have been hunting. That one desperate seller who has become so fed up with the Real Estate market that he is willing to hand over the keys to his castle for little more than a kind word and enough pocket change to cover the U-Haul.

“Paul, we HAVE to go see this house! It’s 2500 square feet, right in the McCormick Ranch area where we’ve been looking, and get this, only $299,000!”

Wow,” I respond, though not I’m not really thinking, “wow.”

Truth of the matter is that my cynical little REALTOR mind is already trying to unravel the scam. You see, that property simply does not exist. Not now, nor even in the foreclosure jungle that was the tail end of the prior decade for that matter. Unless it is a typo, an opening bid at an auction, a money pit of epic proportions that would make Tom Hanks blanch, or …

The name of the subdivision wouldn’t happen to be Briarwood, would it?”

“Yeah! How did you know? Whatever, it doesn’t matter. Can we go see this right now before somebody else snaps it up? I can stop by the house to grab the checkbook.”

Next comes the part where I break the bargain hunter’s heart. Built in the shadows of Gainey Ranch, McCormick Ranch, Palo Viento and Paradise Valley Farms, Briarwood is a picturesque little enclave of tile roof homes. Designed and built by local favorite Malouf, the architecture, front elevations, green lawns and killer location make for an outward appearance of grand larceny at the indescribably low prices they command.

So what’s the deal? Poor construction quality? Lawsuits? Was the community built upon ancient burial ground?

None of the above. Briarwood is nothing shy of Pleasantville on the Scottsdale map. The only element lying beneath the surface of this otherwise pleasing neighborhood that some buyers will find sinister is the unanticipated leasehold ownership. Essentially, Briarwood (there are actually several phases scattered throughout Scottsdale) and the neighboring Santo Tomas subdivisions are single-family residences with legal ownership rights that more closely resemble condominiums. It is a rare bird in these parts. While relatively common in some states where land is limited and owners are reluctant to part with it (Hawaii, for example), land lease subdivisions are uncommon to the greater Phoenix area.

With many land lease subdivisions controlled by local Real Estate magnate, the Herberger family, or smaller trusts, homeowners own the private residence and pay monthly rent for the dirt upon which they stand. The lease terms vary slightly from phase to phase. In Briarwood VI (the phase nearest McCormick Ranch in the 85258 zip code), the monthly land lease fee is 1/10th of 1% of the sales price. So that 400k house comes with a $400/month fee. The dues can run higher in other phases. This in addition to the monthly HOA fees.

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Homes For Sale in Briarwood of Scottsdale

See all briarwood.
(all data current as of 12/17/2018)

Listing information deemed reliable but not guaranteed. Read full disclaimer.

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One thing that may be disconcerting to a potential home buyer is the uncertainty regarding someone else owning the land under his/her home. It can be a very large mental hurdle to overcome, as the premise runs somewhat contrary to what most find attractive in single-family fee-simple home ownership. Some trepidation is to be expected, even if not entirely rational, as to whether the lease will be extended at the time of expiration, or if terms will become untenable upon renegotiation.  The fact that most have decades before such concerns come into play should not be discounted, but buyers don’t need much to fret about when making a decision so critical as the choice of housing.

When looking at properties that sit upon leased land, a buyer will have to weigh the potential cost savings of the home against the additional fees to see if it actually pencils as a bargain. Financial determinations aside, you have to ask yourself if you are truly okay with your lot having a landlord. This is a personal decision that supercedes the advice of your agent. If you are not comfortable with the setup, the financial consideration is moot. Lastly, financing options will be somewhat limited on leasehold properties. As challenging as the mortgage steeplechase has become, expect a few more tar pits and flaming hoops when shopping non-traditional ownership styles.

A property in a leased land subdivision might very well be a good fit for your particular needs, but I find most people only become hip to the presence of the land lease AFTER they have found the home of their dreams. The unwelcome news often pushes the property out of their price range, breaking hearts in the process.

So if you see something online that looks too good to be true, it very likely is. That doesn’t make a property with a land lease evil incarnate. It just means that more dollars are being extracted from your wallet than originally meets the eye.

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Curious if the home you saw online is in a leased land subdivision? Drop me a line. I’d be happy to let you know, whether you are working with me or not. 

(480) 220-2337 | paul@scottsdalepropertyshop.com

 

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An Equitable Life-Line?  What an Improving Rental Market Means to Scottsdale Real Estate Combatants

An Equitable Life-Line? What an Improving Rental Market Means to Scottsdale Real Estate Combatants

Among the interesting turnabouts that abound in the Scottsdale Real Estate market as of late, the rental market has demonstrated surprising new strength.  Where there was formerly a preponderance of housing options for prospective tenants over the last couple of years, what with all the struggling homeowners out there eager to find someone else to pay their mortgage while they shacked up in less costly digs, a noticeable contraction in available properties for lease is occurring.  With more and more people walking away from their upside down homes, whether by necessity or by choice, the credit and financial hits they take in the process renders them radioactive to the purchasing option for years to come (though, some have perfected the “buy and bail” strategy of purchasing a new home before abandoning the current residence).  As such, the rental market has become inundated with demand.

With this surge in demand and a subsequent decrease in supply, rental values have not only held firm, but have noticeably increased in the markets I work.  From a purely anecdotal standpoint, I have been shocked by the level of competition for not only the properties I have had listed for lease recently, but for the tenants I have worked with to secure rental properties as well.  Mind you, I am not simply referring to the low end pricing (sub $1000/month) where heightened competition is always to be expected, but in more expensive price ranges to boot.  In particular, I am seeing a LOT of interest in properties that are renting in the $1400-1800 per month range.

Checking the latest statistics to see if what I have noticed is playing out on a larger scale, I see active Scottsdale rental listings are down to roughly 1800 units (as of ARMLS’s May figures).  This marks a steady decline from an inventory that reached a high point of 2568 in November of 2008 and did not dip under the 2000 unit threshold until January 2010.  The 5.19 months of rental housing supply (as determined by the current rate of absorption) is at its lowest point in years.  Interestingly, the overall average rental rate has not shown a noticeable jump, despite my recent personal observations.  Given the decrease in total inventory and increase in absorption (units leasing per month), however, I fully anticipate next month’s numbers to reflect a higher baseline average.

This shift in the rental market tells me two things:

1)  Before deciding to walk away from a house that appears irretrievably underwater in terms of negative equity, homeowners (and potential future renters) really need to study their options carefully.  If I had a nickel for every misguided homeowner who erroneously believed there was an unmitigated plethora of housing options, at bargain basement prices, waiting for them once they pulled the plug on the Bank of Extortion … er, I mean “America” … I could comfortably retire to my literary tinkerings.  The assumption that lower selling prices go arm in arm with lower rental rates is patently false.  Further, with all of the newfound competition for rental housing, your chewed up credit report will be scrutinized a bit more by potential landlords than most would expect.  Sure, a human landlord may be more understanding of the recent economic woes than some faceless underwriter, but as in any free market, it always comes back to options.  If there are renters out there with fewer credit issues and deeper pockets, you are going to get aced out.  Please consider where your escape pod is heading before abandoning ship and scuttling that home turned financial Death Star.  If there is no soft landing, how have you benefitted?

2.  Our market may have reached (or is close to reaching) that sweet spot in which it makes sense for the homeowner with designs on a move-up purchase to revisit the rental potential of his/her existing home.  While the notion of renting an existing house out (to offset the mortgage) to free oneself up to take advantage of the market conditions and purchase a considerably larger home for a fraction of its prior value is nothing new, the increasing strength in the rental market makes the strategy more feasible at present.  The biggest hurdle to this play, other than deciding whether one is really cut out to become a landlord, remains  the qualification process.  Unless you are one of the fortunate few who maintain at least 25% equity in your home, you will essentially have to qualify to carry both loans (the existing house as well as the new one you would purchase).  Even if you secure a tenant whose rent will cover the payment, you will be qualified for the new loan as if you were qualifying for both properties.  If you have the means to do so, the time could be right to finally leverage the conditions that seemingly everybody and their brother’s mail carrier have already managed to exploit.

Whatever your goals for the Scottsdale Real Estate market, drop us an email or give us a call with your specific needs / questions.  You might not be as trapped as you think.

The House Trap

(480) 220-2337 | paul@scottsdalepropertyshop.com

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Real Estate Agent or Social Media Icon?  Choose Wisely When Selling Your Scottsdale Home.

Real Estate Agent or Social Media Icon? Choose Wisely When Selling Your Scottsdale Home.

The collection of hats in a Scottsdale Real Estate listing agent’s closet grows at an exponential rate.  We alternately don the garb of property evaluator, pitchman, marketing pro, receptionist / showing coordinator, contract prep specialist, home inspection consultant, appraisal jouster, loan oversight committee (of one), repair foreman, closing editor, schedule contortionist, marriage counselor, dime store psychologist, balloon animal fashionista, etc, etc, etc.  With the advent of Internet marketing, you can add a couple more titles to the overflowing job description: Google Engineer and Social Media Cruise Director.

Before you place too much importance on these latest additions, make sure your virtual Captain Stubing has what it takes to avoid the icebergs of an honest to goodness Real Estate transaction.

The great equalizer, the cyber-world provides the blank slate upon which even the most novice agents can paint a colorful picture of expertise.  Years of experience trumped in the search engines by weeks of keyword optimized content.  Those with their hard hats on in this soft medium can easily be mistaken for proven veterans of the Real Estate world.  As such, even the most obstinate curmudgeons have yielded to the inertia of technology and joined the online fray in the ever-expanding global search for the next business prospect.

While we here at the Scottsdale Property Shop are ardent followers of the Internet prophets, we realize that this shiny new(er) medium is only the latest and greatest hat to hang on our business rack.  The fixation with getting to the top of the pagerank heap has distracted many agents and consumers alike from the actual job of selling Real Estate.  Think getting the most online exposure possible for your home is key to the probability of a sale?  Well, you’re right.  That said, raw exposure in the absence of ability is tantamount to brain surgery via an enthusiastic first year med student with a text book, albeit it one with exceptional illustration.

If you are reading this, you already know that we are adept at getting our services and our properties in front of a target audience.  What you may overlook, however, is the fact that this is but one minute portion of the job.  You must fully vet the agent(s) you choose to employ on all facets of the service, not simply the “Cool, my house will be on page 1!” factor.  Click through the articles, peruse our thoughts on the state of the market, review our credentials.  Only then, if you believe we’ve got the chops to handle the full responsibility of listing and selling your Scottsdale home, give us a call to move into stage 2 of the vetting process: a personal consultation.

While the Internet is a valuable tool, there is no magic Real Estate bullet or panacea for an overpriced or under-represented property.  Your agent should know the community, the builders, the amenities, the home sales, the effective means of procuring a buyer, the nuance of negotiation, the ability to close and how to effectively navigate the escrow to the finish line.  Google and Facebook will do none of those things for you (him).  To add another clumsy metaphor, consider the various legs that prop up your home sale. If your agent does not have adequate experience with / knowledge of the product, the integrity is suspect.  If your agent cannot effectively close buyer leads, the integrity is suspect.  If your agent cannot, or does not know how to handle the various hurdles of the escrow process, the integrity is suspect.  And yes, if your agent does not leverage the proper media for attracting suitors for your property, the integrity is suspect. Ask any particular leg to support more than its burden, and watch the entire structure collapse.

While I know a few terrific agents who have been in the industry for relatively brief durations, I am aware of all too many Internet marketing wizards who lack the first clue about the process of selling a home.  It seems that the only thing taught in new agent training these days is how to leverage social media and/or drive traffic to one’s site.  Valuable tools, but am I crazy to posit that learning to actually do the job is every bit (or more) as valuable as tracking hits?

I see such agents in my keyword Google alerts often enough to know that they have the marketing portion of the job wired, but who exactly are they? For all of that search engine juice, I’ve never seen their names on a sign in the communities they target. I applaud the promotional efforts, but cringe for the consumer who hires the Internet warrior out of mistaken belief in his/her expertise. After all, are we Real Estate professionals who market on the Internet, or Internet professionals who occasionally dabble in Real Estate?

I can buy dominant online position for a particular neighborhood for about $20/month, but I can’t buy ability. Even in the 24/7 virtual “what have you done for me lately” world, a track record is always in vogue.

Consumers … choose your weapons wisely.

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*Now, because I am a full-time Real Estate agent who moonlights as on online personality, you may follow me on the social network of your choice via the icons in the footer.  One more Twitter follower and I win a free chicken!

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