North Phoenix Agent Blog

photo credit to MiamiAmia,  via StockExchange

A continuing weekly look at For Sale, Pending and Sold statistics by ZIP code (for the ZIPs in which I primarily work which includes 85020, 85022, 85024, 85028, 85032, and 85050). Check back on Sundays for a drill-down look into the numbers in your ZIP code. Have a North Phoenix area ZIP that doesn’t show up here? Email or call me and I’ll add it for you.

This week shows continued slow & steady improvement over last week. The PENDING numbers in every ZIP code covered are up, which is a great sign. The numbers of SOLD homes are up in all but 1 ZIP code, also a great sign.

However, we’re still nowhere near normal for most ZIPs. Most forecasters & Realtors agree that a 6 months supply of inventory is about “normal”. It’s interesting to note that 85024 is very close to that ideal. Sellers in 85024 - don’t despair! You’re near the bottom. Buyers wanting to get into 85024 - hurry up, it might not be a buyer’s market there for much longer.

This is the 1st in what I hope & plan will be an ongoing series of posts about real estate price bands around North Phoenix. Essentially, I’m trying to answer the question I get from almost every out of towner who’s considering a metro Phoenix area real estate investment - “how much does it cost?”

This blog is focused on North Central Phoenix, where I live, work, and grew up. So the What You Get for the Money series will include only the ZIP code areas of 85020, 85022, 85024, 85028, 85032, and 85050. You can see these on a ZIP code map here http://maps.huge.info/zip.htm and here http://www.dreimaz.com/phoenix-zip-map2.pdf

Price Band $75,000 to $90,000
This is a challenging price band in almost every part of the metro Phoenix area, but especially so in the North Central Phoenix area (the ZIPs noted above).  In these postal codes, your dollar buys a smallish 1 or 2 bedroom condo.

In Phoenix, “condo” typically means it looks and feels like an apartment. These are usually 2-story stucco buildings, often with tile a roof. Usually, there are ground floor units and upstairs units, and about 4 to 16 units per building.

Most buyers and sellers think there’s a value attached to being on the upper floors (”no one above you” or “no one walking on your head” is common phrasing in the online ads). But it’s not a hard and fast rule that upstairs is “better”. I’ve had young singletons tell me they feel safer being upstairs, while buyers in their 40’s, 50’s and 60’s tell me they want something on the ground floor for easy access when they’re older and the old knees might go. Generally, having an end unit is also desirable, because only end units get light from windows on 2 sides of the condo.

Parking is usually a row of covered, assigned spots and you’re usually assigned only 1 spot. If you must have a garage in these ZIP codes, you’ll need to stretch your budget to at least the $175,000 to $200,000 range. Storage space is found in closets and cupbaords under staircases (aka “Harry Potter’s bedroom”). Many condos have balconies and/or patios with closets for additional storage.

Condo owners own space, not land, although in most condo complexes the individual owners jointly own the common area. The common area is where the postal boxes, pool, and any other amenities are located, as well as the streets, sidewalks and any landscaping.

Condo conversions are common in this price range. During the real estate boom of 2005-06 a lot of developers took older apartment buildings and turned them into condos, selling individual units and often making hefty profits. I’m no expert in building codes and so I hesitate to even write this, but I believe (?) that the building process is different for condos vs. apartments, and so the noiseproofing between neighbors is better in condos than in apartments. But everyone has their own limit for tolerating noise from the next door neighbors, so condo conversions aren’t necessarily bad, just different. (Any readers with authority on condo & apartment building codes? Please comment!)

At today’s writing, there are  17 properties for sale between $75,000 and $90,000. It’s important to note that of these 17, only 5 are not lender owned or short sales. They’re on a map and in a list below.

As you can see from the chart above, the spaces are small, 600 hundred to 1,100 square feet. I would normally say this price band buys you only 600 to 900 square feet, but with foreclosures pushing down prices, buyers might get a little more space for their dollar.

Below are some interior & exterior photos of properties typical to this price band.

The most popular financing in this price band is often an FHA loan. These loans allow buyers to put as little as 3% of the purchase price down. For cash strapped buyers, and especially for first time buyers, buying a small condo on an FHA loan can be a great launching pad to building real wealth.

First time buyers often combine an FHA loan with a Down Payment Assistance program. These allow the seller to contribute to the buyer’s down payment. You can read all about options for first time and cash-poor buyers here: http://northphoenixagent.wordpress.com/category/first-time-homebuyer/ and get some up to the minute advice on FHA loan program changes at The Arizona Mortgage Guru’s blog.

Shopping in this price band and want more info? I am happy to help you out! Just call and I’ll set you up with a custom MLS search that will email you whenever new listings hit the market that suit your needs.

This is the 4th in a series about buying metro Phoenix area short sales and lender owned homes.

 Photo credit to I Can Has Cheezburger

Many, many potential buyers in the Phoenix market lately want to look at “short sales”, “foreclosures” or “bank owned homes”. Often they’re not quite sure what these terms mean exactly, but they know the 10 o’clock news (or their brother’s cousin’s baker’s tailor) says short sales are a spanking good deal. 

See here for the differences between REOs, bank owned, short sales, foreclosures and preforeclosures.  Regardless of type, the secret to buying one of these homes is organization combined with an open mind and a lot of patience. 

ORGANIZATION - Getting the Deal Closed
Now you’ve got an accepted offer on the short sale or lender owned home of your dreams, what about closing the deal? Banks usually want you to close within 30 days of their acceptance. Sometimes they take their sweet time sending you the acceptance, thereby eating up some of your 30 days and some of your inspection period.

Get cracking! Are you working with a full time, professional Realtor who’s ‘got people’ and can get a home inspection, roof inspection, A/C inspection and mold inspection done inside of 4 business days if necessary? You’ve got no worries. Working with your sister in law’s cousin who does real estate on the side? Or working without a Realtor? You’ve got a challenge on your hands. Whatever you do, don’t miss the deadline for the end of the inspection period.

Most banks will do no repairs. Even if the pool is green and the front porch is falling off, you’re buying it as is. Over Fourth of July weekend I spoke with a loan processor who told me she had personally done a loan for a Buyer purchasing a short sale from HSBC bank. They’d done a bunch of repairs before the closing, and even did some repairs the Buyer didn’t specifically request. This is exceptionally rare. Inspect it till you drop and expect it to be as-is on closing day.

Most banks also make you sign an addendum that removes most of the Buyer protections in the contract, institutes some additional Seller (bank) protections, and generally tilts the contract heavily in their favor.

If you’re paying cash, you should know that your purchase funds must be immediately available on the closing day. Cashier’s checks are acceptable. Wire transfers in US funds are acceptable. Canadian funds and checks drawn on Canadian banks are not acceptable. We don’t discriminate against Canadians per se, because generally no foreign funds are acceptable.

Be aware that due to the USA Patriot Act and other federal regulations since September 11th, wire transfers take a long time to transit the federal wire system. I’ve seen wires take 8+ hours. Plan on having your wired funds arrive at the title office the day before closing. Expect a wire fee of about $25 to $75. Expect a currency exchange fee of about $15, if you’re using foreign currency. I’ve been told by a very trusted and experienced title officer that she can’t get anyone to tell her who collects that $15 fee and she has never had success at making that fee disappear.

Almost every bank imposes daily late fees if the Buyer holds up the closing. These are usually in the area of $100 per day. Getting a loan to buy the home? Make sure your lender has the loan documents at the title office at least a week or two in advance of the closing date. No sense taking chances and accruing hefty late fees. if you’re out of town when the closing occurs, there will be FedEx shipping transit time to consider, so get loan docs to title early. Also, now is not the time to help your sister’s kid who’s just got in to home mortgages. Send your nephew a gift card and use a mortgage pro.

Buyer Lessons

1. Play by the bank’s rules.
2. Conduct multiple inspections
3. Make sure loan documents arrive early
4. Send wire transfers early

 Related Posts:

• How to Buy Short Sales/Lender Owned Homes, Part 1
• How to Buy Short Sales/Lender Owned Homes, Part 2
• How to Buy Short Sales/Lender Owned Homes, Part 3
• I Got a Notice of Trustee’s Sale. Now What?

Photo credit to I Can Has Cheezburger

This is the 3rd in a series about buying metro Phoenix area short sale and lender owned homes.

Many, many potential buyers in the Phoenix market lately want to look at “short sales”, “foreclosures” or “bank owned homes”. Often they’re not quite sure what these terms mean exactly, but they know the 10 o’clock news (or their brother’s cousin’s baker’s tailor) says short sales are a spanking good deal. 

See here for the differences between REOs, bank owned, short sales, foreclosures and preforeclosures.  Regardless of type, the secret to buying one of these homes is organization combined with an open mind and a lot of patience. 

.

ORGANIZATION - Getting the Offer Accepted
Once a bank answers your offer, things start to happen fast. Very fast. Good organization can literally save a deal.

Just recently on one of my short sale listings, my Seller received multiple offers. After waiting 10 weeks for any answer, the bank gave me several answers all at once. In the space of a couple of hours, the bank’s loss mitigation rep rejected the 1st offer because it was too low, said our short sale was declined and started making keyboard clicking noises while he said, “I’m going to close this file.”

“Wait!” I shouted. “Closing the file” means (1) me and my Seller get at the end of the 10 week waiting line to have the bank’s rep look at another offer, and (2) the lender sends the Seller back to Collections and reinstitutes the threatening phone calls until Seller comes current on the mortgage.

I reminded the loss mitigation rep that we had a backup offer. He checked his file, clicked a few keys on the keyboard, and immediately accepted the 2nd offer since it was high enough to meet his lender guidelines for foreclosure deals. I still don’t know exactly who made the guidelines the loss mitigator clicked around in, but I know my Sellers are now happy campers.

Also, note that I, as Realtor, had absolutely no control over which offer was accepted by the bank. I usually like to counsel my Sellers to look at the entire package of an offer when deciding whether to accept it or not. The highest price isn’t always the best deal. A higher down payment is better than a lower one. A bigger earnest money check is better than a smaller one. Quicker closing date? Better, usually. And so on. But this one was totally out of my and the Seller’s hands.

To make matters more confusing, all this back-and-forth with the lender’s loss mitigation rep happened verbally with nothing but a letter changing hands between me and the lender. There was nothing documented in writing for the 2 waiting Buyers. The AAR Purchase Contract states very clearly that all negotiations between buyers and sellers must be in writing and verbal negotiation hold no legal water. But banks are neither buyer nor seller, strictly speaking, and don’t abide by the AAR Purchase Contract in any case.

A major factor that saved the deal for my seller client on the case noted above is that I had maintained a detailed Communications Log listing date & time, who called who, who said what, the documents exchanged, and the followup and outcome to each phone call and document submission. I knew I had sent the lender a really complete file and had the chutzpah to ask, “But we have a backup, can’t you just look at that now without any more waiting? Please? Pretty please?” His only superpower was organization, indeed!

Another short sale Buyer I encountered made a $75,000 offer on a cute little condo. The bank verbally told me (the listing agent) that they wouldn’t even look at any offers below $92,500. Often, banks won’t reply at all to offers they don’t accept. I told the potential Buyer this, but he insisted the Seller had to reply in writing to his $75,000 offer. Under normal circumstances, that’s true. But we’re still waiting 4 weeks later.

Buyer Lessons

1. Banks abide by The Golden Rule - he who has the gold, makes the rules. Don’t expect them to conform to any contract law you’re used to.

Related Posts:

• How to Buy Short Sales/Lender Owned Homes, Part 1
• How to Buy Short Sales/Lender Owned Homes, Part 2
• How to Buy Short Sales/Lender Owned Homes, Part 4
• I Got a Notice of Trustee’s Sale. Now What?

 photo credit to I Can Has Cheezburger

This is the 2nd in a series of articles about buying metro Phoenix area short sale or lender owned homes.

Many, many potential buyers in the Phoenix market lately want to look at “short sales”, “foreclosures” or “bank owned homes”. Often they’re not quite sure what these terms mean exactly, but they know the 10 o’clock news (or their brother’s cousin’s baker’s tailor) says short sales are a spanking good deal. 

See here for the differences between REOs, bank owned, short sales, foreclosures and preforeclosures.  Regardless of type, the secret to buying one of these homes is organization combined with an open mind and a lot of patience. 

PATIENCE
One of my buyer clients has been waiting a little over 7 weeks for the bank to answer our offer on their short sale property. One of my sellers waited 2 full months for the bank to answer a Buyer’s offer.

This sounds absurd, right? According to the media, banks are drowning in short sales and foreclosures, making write downs and taking losses like the Titanic took on water. Why in the name of all that’s green and holy would the banks take months to answer offers?!

Sadly, this is not unusual. I’ve heard horror stories of waiting 4 to 6 months for a bank to answer an offer, even if it’s a full price offer.  The media’s right - many banks are awash in properties. But they’re simply not equipped to list and sell homes. They’re equipped to make and service loans. I hear banks are scrambling to hire & train people who can handle their backlog.

I recently had a conversation with a local agent who interviewed for a position as a loss mitigator with a lender. Sadly, the loss mitigators are paid about $30,000 a year salary, and are expected to work between 12 and 14 hours days, 5 days a week, work every other weekend, and are given 4 days of training. Almost none of them have any experience in real estate or mortgages whatsoever. Many are fresh out of college and many last no longer than their first week after training.

One of the first loss mitigators I ever spoke with (in late 2007) told me flat-out, “Honey, my desk is piled high with over 400 files just like yours. The computer shows I got your offer yesterday, but I won’t be able to look at it for at least 6 weeks. Call me then.”  She wasn’t being rude, just truthful. We’ve become phone buddies and share polite chit-chat when I call her once a week to ask (ever so politely) if she’s got to our file yet. I think she’s very nice and I think she liked me, but she still didn’t look at our file for 8 weeks.

But the loss mitigator did verify for me on Day 1 that our file was complete and had all the documents she needed including:

• Tthe Listing Agreement,
• The MLS printout,
• The Authorization for me (the Realtor) to speak with the seller’s lender,
• The Seller’s hardship letter, 2 years of tax returns, 3 months of bank statements and 2 months of paystubs,
• The foreclosure notice from local authorities,
• A letter from me to the seller about marketing activities and recent comps in the area,
• The Purchase Offer,
• The HOA Addendum,
• The Short Sale Addendum, and
• The estimated HUD-1 Settlement Statement from the title officer.

If we hadn’t put all those documents together into 1 submission packet to the lender, we’d have gone to the back of the line. The 8-week waiting period was for sellers and Realtors who got it rightthe first time. Miss a form? You’re going to wait longer.

Buyer Lessons

1. Short sales, lender owned and foreclosure properties are not for you if you must move in by a certain date.
2. Shop short sales and lender owned homes only if you are OK with lengthy periods of uncertainty.
3. It pays to hire a Realtor who’s politely persistent.
4. Make sure your document package is complete from the beginning.

 Related Posts:

• How to Buy Short Sales/Lender Owned Homes, Part 1
• How to Buy Short Sales/Lender Owned Homes, Part 3
• How to Buy Short Sales/Lender Owned Homes, Part 4
• I Got a Notice of Trustee’s Sale. Now What?

 photo credit to I Can Has Cheezburger

This is the 1st in a series of articles about buying metro Phoenix area short sale or lender owned homes. Parts 2, 3 and 4 are coming in the next 3 days.

Many, many potential buyers in the Phoenix market lately want to look at “short sales”, “foreclosures” or “bank owned homes”. Often they’re not quite sure what these terms mean exactly, but they know the 10 o’clock news (or their brother’s cousin’s baker’s tailor) says short sales & foreclosures are a spanking good deal. 

See here for the differences between REOs, bank owned, short sales, foreclosures and preforeclosures.  Regardless of type, the secret to buying one of these homes is organization combined with an open mind and a lot of patience. 

.

HAVE AN OPEN MIND
I showed some vacation homes to Canadian investors recently. Like all buyers, they wanted to “be in a nice neighborhood.” Found and showed them a smoking deal on a lender owned home listed at $375,000. It needed serious work. The former owners took bathroom cabinets and countertops, all appliances, and even the bathroom mirrors with them on their way out the door.

Buyers and I reviewed the sold comps together and agreed that - when refurbished - the home was probably worth about $500,000 on the open market. We also ballparked the cost of needed repairs and agreed that it would cost about $40,000 to bring the home to its former standard.

$375,000 plus $40,000 equals well below market value of $500,000.

The Buyers told me they really wanted this home. I explained that bank sales aren’t like regular private sales. We’d be dealing with a bank clerk who’d rely on internal bank regulations and an independent appraisal to determine market value. We’d also be highly unlikely to get a counteroffer. The bank would either accept our offer or never reply at all. I encouraged the Buyers to consider their highest, best offer and call me in the morning so I could draw up their offer.

Next morning, the Buyers told me to offer $341,000 (91% of list) but privately told me they’d “go a little higher.” Again I tried to remind them to give it their best shot right out of the gate. They declined, saying, “we want to see if we can get it for less first.”

Miraculously, we got a counteroffer from the bank about 3 days later. They asked for full list price of $375,000 and intimated they had multiple offers on the way into their offices. Again, the Buyers and I reviewed the recent sold comps and we all agreed the place was worth about $440,000 to $460,000 in current condition and about $500,000 post-rehab.

Buyers instructed me to counter the bank’s counter at $352,000 (or 94% of list price). Within hours, the bank said we lost the bidding war. About a month later the MLS showed the home sold to buyers who paid $363,000 (97% of list price). Ouch.

Buyer Lessons

1. Listen with an open mind.
   Discuss sold comps with your Realtor until they make sense and you agree, then take them as gospel.
2. Don’t play chicken with the bank.
   Offer your highest and best right up front. You may not get the deal but you’ll know you tried. The buyers in this example might very well have secured the home if they’d offered their highest & best of $352,000 right away, before other Buyers had a chance to make offers and the bank had a chance to pit bidding Buyers against each other.
3. Trust your Realtor.
   If s/he has comps that seem trustworthy, and you agree with her estimates of repair costs, and no other red flags about the deal appear, trust your Realtor when she advises you that full list price is still a great deal.

 Related Posts:

• How to Buy Short Sales/Lender Owned Homes, Part 2
• How to Buy Short Sales/Lender Owned Homes, Part 3
• How to Buy Short Sales/Lender Owned Homes, Part 4
• I Got a Notice of Trustee’s Sale. Now What?

I’m noticing an uptick in the number of roadside cardboard signs that have something to do with real estate lately. You know the kind - here in Phoenix they’re usually hand-inked, on cardboard or oak tag, stuck in the ground with a stake.

Surely it’s a function of the bad economy, the looming recession, the credit crisis and the housing ‘bubble’.  Whatever, I figured it would make a good blog post. Here’s today’s Real Estate Road Sign:

Here’s the thing. A ton of people would qualify to buy a home - any home - with $500 down. The amount of the down payment is a function of 2 things - 1) the contract you negotiate with the seller, and 2) what sort of loan program you qualify for.

You don’t need to call somebody who advertises on the roadside to get a $500 down house. In fact, I submit that it’s probably not a good idea to get a home mortgage from somebody who advertises on the roadside with a cardboard sign. To buy a home with $500 down, you just need to speak with a reputable lender, and see if you qualify for a loan program that allows a low down payment.

Veteran? Done. You can buy a house with $500 down - use the VA loan program. eHow tells you how to figure out if you qualify, but I take no responsibility for their sponsored lender links.

First time homebuyer?  Done and done, and then some. You can buy a house with only $500 down - use a standard FHA loan. Or use an AmeriDream loan. Or use Nehemiah Corporation to buy your slice of the American Dream. Go through Maricopa County’s Home In Five program and get your downpaymnet as a gift. Try the Down Payment Guy website, which advertises homes for sale on the regular MLS that are owned by seller who agree up-front to partcipate in a program like these. But note that the DownPaymentGuy steers buyers to their approved stable of lenders, and you can use any lender you choose.

Not a first timer, but still cash-strapped? There are FHA programs you qualify for too. My favorite blogging lender Shailesh Ghimire explains FHA loans.

When you see a road sign like this one, remember 2 things: 1) You can work with any lender you want and still potentially qualify for a $500 Down home purchase.  2) Doing business with a “lender” who advertises on the roadside is probably not a great idea. Buying a “new in plastic, pillow top” mattress off a road sign might be OK. But selecting the single most expensive financial asset you’ll ever own in your life off a road sign is potentially a recipe for disaster.

Related Posts at NorthPhoenixAgent

• How Much Do I Need for a Downpayment
• Earnest Money Defined
• Buyer Beware - Backing Out Can Be Expensive
• Why Your Lender Shouldn’t Be Your Friend
• No Money For a Down Payment?

Related Posts By Other Excellent Bloggers

• FHA Mortgage Insurance Rates Now Higher If Your Credit is Bad (AZ Mortgage Guru)
• How Your FICO Score Determines Your Mortgage Rate (by the XBroker ; not light reading but well worth your time)

photo credit to yongzaho.en.alibaba.com

Sellers who use a Realtor to sell their metro Phoenix area home quickly become familiar with enough acronyms to make the Federal government proud (and confused). ER, SPDS, BINSR, CLUE. It’s enough to make any sane person wonder if their slightly daffy relation ran over a potato farm with the car and needs a ride to the hospital.

(That sentence is mildly smile-inducing inside my head; let me know if it evinces a grin in your neck of the woods.)

So, what’s a SPDS? And is it anything like the edible tuber that’s yummy when served with butter, sour cream and chives next to a big juicy Porterhouse? Read on, intrepid blog browser.

What Are SPDS?
Arizona law requires sellers disclose to buyers all known, material problems about properties they sell. The Seller’s Property Disclosure Statement (SPDS) document created by the Arizona Association of Realtors is a convenient form for doing this. Not working with a Realtor? You’re not exempt from disclosing what you know about the property. You’re just unlikely to have ready access to the nifty form.

Why Do I Need to Do This?
If you sell a property that has a material defect of which you were aware but didn’t tell the future Buyer, you could be liable to a lawsuit. Disclosing everything you know about the property you’re selling can protect you in the future.

What Should I Disclose?
The short answer is everything. The longer answer is that you should disclose everything that could influence a buyer’s decision to buy (or not buy) your property. This includes improvements you’ve made and problems you’ve had, as well as what you did to solve those problems. It also includes anything prior owners did to the property of which you are aware, or even things prior owners did that you suspect or only partially remember.

The bulk of the SPDS questions are phrased, “Are you aware of ….?”  If you aren’t aware, or don’t know the answer, you should answer “no”. Your Realtor is not allowed to fill out the SPDS for you, and is generally not supposed to tell you what to put on the SPDS.

On the last page of the SPDS form, you can add explanations. It’s OK to say things like -

• I think the prior owner replaced some of the PVC plumbing with copper but I only got verbal info on that.
• We had a tub leak in 2003. We repaired the leak and our insurance company replaced the drywall and carpeting.
• We converted the garage into a living room in 1999. We didn’t get permits or HOA permission but we had licensed contractors do the work.

Can I Disclose Too Much?
Don’t worry about ‘killing a deal’ by disclosing what you know about the property. If there’s something that’s so wrong with the property that it’s bad enough to be a potential deal-killer, you should be more worried about getting sued later for not disclosing it now. It’s better to be honest on the SPDS and discuss the property’s condition upfront with your Realtor. Then let your agent make recommendations about marketing the property so that it sells to a buyer who knows all about it and buys it anyway.

How Long Do I Have to do This? 
By contract, Sellers (through their Realtor if they have one) must provide the future Buyer with the completed Disclosure Statement within 5 days of contract acceptance. Buyers, be aware that you should receive this document promptly. Ask questions if you don’t understand the answers! Sellers, remember that honestly and completing filling out the SPDS form will take a little bit of time and some record pulling. So, the sooner you complete the document after listing the home for sale, the better. The last thing you want is to be scrambling to fill out a SPDS form at the 11th hour. It’s kind of like waiting to start your 1040 tax form until April 14.

You Can’t Eat It, But It Can Help You Sell
A complete and honest SPDS will help your property sell. Even if the property has problems, know that every property will sell . . . IF it’s priced right and marketed correctly. There is a buyer for every home. You just need to inform your Realtor and the buying public so the right buyer can find yours.

Related Posts at The North Phoenix Agent

1. Inspection Period
2. Home Inpsections Explained
3. Stuff About Your Neighborhood Your Realtor Can’t Tell People

Related Posts at the Butterhomes Blog - Selling A Home Full of Lizards

Related Posts at The Phoenix Real Estate Guy - Info You Get During the Inspection Period, How to Buy Your First Home and Do I Really Need a Home Inspection?

My mortgage lender friend Shailesh Ghimire posted a great little article recently that includes a chart showing how much extra you’ll pay for a home mortgage at varying credit scores. Having a FICO score below 620 will cost you about $5,500 extra in lender fees. Yikes! The same is true for car loans, credit cards and other consumer debt.

View the entire article on his website the AZ Mortgage Guru.

Updated - As of July 14, 2008, FHA loans have risk-based pricing on their mortgage insurance. Again, it’s more expensive to get a loan if your credit isn’t so good. Click to read the AZ Mortgage Guru’s explanation of risk-based PMI on FHA loans.

Related Posts from Other Bloggers

• The XBroker Explains (once and for all) How Your Credit Score is Calculated, and How it Impacts How Much Your Loans Cost You

HUD’s at it again, trying to ban down payment assistance programs. You can see the history of HUD’s efforts to squelch homebuyers’ efforts to catch hold of the American Dream in my previous blog entries and you can see AmeriDream’s reaction on their website or Nehemiah’s reaction in a Conde Nast online publication called Portfolio.com.

HUD’s contention is that down payment assistance artificially inflates the price of homes. They also point to the higher default rates of homeowners who used down payment assistance to buy their home. I have a lot more to say on this subject but have to run out momentarily - to show a home to a first time homebuyer, by the way, who’s struggling to save a down payment.

I say to HUD, why now? Congress is working it’s way through legislation to add further regulations to the down payment assistance programs. Why not let those efforts play out? If you’ve got a system with a few bugs, fix the bugs. Don’t scrap the system.

Here’s a brief breakdown that should simplify some of the language being tossed around the real estate world these days.

Pre-Foreclosure - In Arizona, this term doesn’t really have a legal meaning. What it usually means in day-to-day practice is that the home owners are trying to sell because they know they have either stopped (or will soon stop) making the mortgage payment. Often, the home owners also know or suspect that they can’t sell for what they owe on the home, and any resulting sale will be a Short Sale.

Short Sale - In this case, the homeowner has usually stopped paying the mortgage. In addition, the home is worth less than what they owe the lender. If they’re able to (1) find a buyer and (2) get the lender’s blessing on the deal, the lender will accept a portion of the total loan payoff amount. The lender is left short, hence the name. My colleague Chris Butterworth has a great series of blog posts about the Short Sale buying process.

Short Sales are sometimes great bargains for buyers, but know that buying a short sale property can take months. The home comes without any disclosures about condition, and is sold As Is. Buyers can inspect the house but Sellers/Lenders won’t do any repairs. Sellers/Lenders will almost certainly not contribute to the Buyers’ costs. Finally, you have to play a waiting game. Lenders are overwhelmed, they were never set up to operate a real estate brokerage in the first place, and will probably take a month or more to even acknowledge receipt of a Buyer offer. To add insult to injury, if you don’t submit a complete package of documents, you’ll be waiting even longer while the lender requests docs one at a time.

Foreclosure - In Arizona, this has a legal meaning. Here, we don’t sign mortgages; we sign Deeds of Trust. It’s the same idea as a Mortgage, just with an extra party inserted into the process. There’s a borrower (homeowner), a lender and a Trustee. The Deed of Trust works just like a mortgage except in the cases of foreclosure. Get 3 or more months behind on your mortgage payments and the lender will issue a Notice of Trustee’s Sale.  The Notice states that the homeowner has 90 days in which to bring the mortgage payments current or the Trustee will auction the home, often on the court house steps. Trustees are often attorneys and sometimes the auction takes place in their offices. A homeowner facing foreclosure may try to sell the house to pay off their lender. If the sale proceeds won’t entirely pay off the mortgage amount, then it’s going to become a Short Sale.

REO - Also known as Lender Owned. One way or another, the lender now owns the home. Maybe the homeowner just mailed in their keys and disappeared. Maybe the lender was stoopid and didn’t approve a short sale Purchase Contract when presented with one. Maybe the home wasn’t bought at auction. In any case, the lender owns it. They’ve already taken a loss against the original loan balance on the property. REO properties carry all the downsides of Short Sales except that you’re more likely to get an answer within days or weeks on REO properties. However, the bank is unlikely to take much below list price. They’re already taken a big loss and usually these properties are usually listed pretty close to the rock bottom of current market value.

Want More Info? See my friend Chris Butterworth’s site for 2 blog posts about the difference between Short Sales and REO properties. Try Steve Belt for advice about why listing your home for sale if you’re facing foreclosure is a good idea.  Or see my friend Dru Bloomfield’s blog post on Tips for Buying a Short Sale.

Related Posts at NorthPhoenixAgent

1. How to Buy REOs, Foreclosures, and Short Sales

The Wall Street Journal says the US housing crisis is over. They actually say we hit the bottom in April.

Of course, all real estate is local. Your neighborhood may be doing worse or better than the national average. Outlying areas like Queen Creek, Surprise and Buckeye are still experiencing severe downward pricing pressure as the foreclosure wave continues. Established neighborhoods close to central Phoenix and central Scottsdale aren’t faring so badly.

You can check out local real estate statistics by ZIP code at Jay Thompson’s Phoenix Real Estate Home. 

The home inpsection process explained, in plain English. Of course, this applies only in metro Phoenix where I work.

During the Due Diligence Period (usually the first 10 days after contract is signed by both parties and delivered to both parties), Buyer may do any and all inspections she wants. A general home inspection by a licensed professional is a great start. This gives the Buyer a once-over of all the home’s working systems: plumbing, electrical, A/C, roof, and so forth.

If the general inspection turns up anything odd, or if the Buyer has concerns about specific items, she can do additional inspections. Sometimes calling in a roofer, A/C contractor, electrician or plumber is a good idea. Please note that general home inspections usually do not include home entertainmnet sound systems, security systems, and the home automation systems that are all the rage in luxury homes these days, whereby you can monitor your home security system over the Internet while you vacation in Cannes.

During the inspection (or Due Diligence) process, the Buyer retains the absolute right to back out of the purchase for any reason and be refunded their Earnest Money.

Buyers, after your inspections are complete, you’ll have 3 options:

1. Accept the home As Is
2. Back out and take your Earnest Money with you
3. Give the Seller a list of repairs you require and give him a chance to fix them all

Sellers, you will now have 3 options:

1. Fix everything – Buyer is now legally bound to complete the purchase
2. Fix nothing – Buyer now decides whether to accept the property As Is or walk away with Earnest Money in hand
3. Fix some things – Buyer now has the choice to accept the property with the repairs Seller’s willing to make, or walk away with Earnest Money in hand

Please note that there is no step in here for re-negotiating the purchase price! The purchase price and the repairs are separate issues, negotiated separately, and are totally unrelated. Sometimes, some Sellers may choose to offer a credit to the Buyer in lieu of making some or all of the requested repairs. The Seller is not bound to offer a credit and Buyer may not ask for a credit in lieu of repairs, regardless of the inspection findings.  If a credit is offered, the amount is negotiable.

Please also note that there are time-sensitive deadlines involved in this process. First, Buyers’ requests for repairs must be submitted by 11:59 PM local time on the last day of the Due Diligence Period. You do this on a form called a BINSR (Buyer’s Inspection Notice and Seller’s Response). Buyer - missed your deadline? You just bought the house As Is.

Second, the Seller has 5 days to respond to the BINSR using the rest of the same form. Upon receipt of the Seller’s response, the Buyer will have 3 days in which to submit her reply about whether she’ll take the house with the repairs the Seller’s willing to make, if any.

What if the Seller doesn’t reply to the Buyer’s BINSR? The Buyer must assume the Seller intends to sell the home As Is. The Buyer has 3 days from the date the Seller’s response to her BINSR was originally due in which to decide whether to complete the purchase (which we now know will not have any repairs done on it) and submit that decision in writing to the Seller using the rest of the rest of the BINSR form.

Confused yet? This is a great example of why it’s SO critical to hire a professional, full-time Realtor. This isn’t rocket science, but it is the sort of situation where mistakes can be so monumentally costly that it’s best to hire someone who’s job it is to do this all day, every day, and carries insurance to protect you and themselves against mistakes. To err is human nature, to buy real estate without a professional Realtor is just silly.

Please see these related posts

1. Backing Out of a Purchase Might Be Costly
2. Due Diligence Period Defined
3. The Phoenix Real Estate Guy on Escrows and Home Inspections

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My good friend Chris Butterworth has a great post about how to paint a razor-sharp straight line when you’re painting with bold colors.

For several years, the interior paint trend has been sliding down the in-store color chips, towards bolder, bright, more saturated hues. Home buyers are demanding more windows, higher ceilings, and “light and bright” has become so overused in MLS ads that it’s almost the sort of trite ‘code’ where buyers have learned to read between the lines. “Charming” means exceptionally small. “Plenty of cupboard space” means galley kitchen. And “light and bright” means you can probably navigate through the house without turning on an industrial strength spotlight.

In any case, if you want to try today’s hipper, bolder colors on your walls, read Chris’ advice post first. Wondering what colors will look good? My favorite painting advisor, Noelle Carpenter at Certa Pro Painters gave me some tips on choosing colors (Noelle’s phone is (480) 962-8180 x125). See below for a list of popular paints chosen often by their customers. Or for the easily overwhelmed, visit their website to see Certa’s expert-recommended color palettes, a collection of 4 different families of hues that mix & match well. (These are all Dunn Edwards brand paints. Click here to locate a DE store near you.)

Want a bold brown? Try Cup of Cocoa (taupe-y), Florentine Clay (reddish), Pumpkin Butter (less orange than the name implies and really pretty). Ready to really get your brown on? Opt for the double bold by choosing Warm Nutmeg (taupe-y), Traditional Leather (almost the color of a Hershey bar), or Cinnamon Spice (a bit on the reddish side and a shade darker than actual cinnamon).

Seeking a soothing blue? Quiet Moment, Provence and China Pattern are popular choices. Quiet Moment is the palest, and a little on the warmish side. Provence is a clear robin’s egg blue and China Pattern is the deepest.

Going for the green? Certa Pro gets a lot of customer requests for Soothing Celadon (a cool pastel) and Lime Juice (a warm pastel). Good mid-range greens include Crisp Celery (a warm yellowish green), Green Tea (coolish mid-range green), and Dried Chervil (a neutral medium green). For bolder greens, choose Herbal Scent (clear green), Sage Green (grayish blue) or Rosemary Sprig (the darkest of the bunch, and what I think of when someone says ‘library green’).

A great way to test paint is to buy a quart of the color you think you’d like. Paint 1 or 2 walls in the chosen room with a swath of that color measuring about 4 feet square. Live with it for a couple of days; check it out in different lights. Like it? Go buy Blue Tape, read Chris’ post again and go for it. Don’t like it? Grab a primer, a new quart of bold colored paint, and try again.