New Tech Toy - Wordle
July 22, 2008
Create a word picture of the content of your blog at Wordle. Like a tag cloud but with colors, and it’s editable. Here’s mine.
What You Get for the Money ($2 Million Plus)
July 22, 2008
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 $2,000,000 Plus
North Central Phoenix isn’t hoity toity. As of this writing, there are a mere 88 properties currently for sale in the entire city of Phoenix that are listed at $2M and higher. Contrast that with Scottsdale where you’ll find 632 homes to choose from in this price range or the geographically small town of Paradise Valley which boasts 292 homes above $2M.
In my ZIPs, 7 homes are listed at $2M or higher. Here, $2,000,000 buys you a big home. Of those for sale today, the average size is 5,800 square feet and most sit on about an acre of land. Pricing runs from $2.1M to $2.5M.
Four of the 7 homes on this For Sale map are located in the gated Tatum Foothills subdivision (numbers 1, 3, 4 & 6 on the map). This is a neighborhood of only 49 custom-built homes dating to the early 1990’s. They have vaulted coffered ceilings, vast kitchens with luxury finishes like cherrywood & slab granite, and often marble or travertine flooring. Backyard pool areas are large and lavish and some homes have truly beautiful mountain views. Don’t miss up the chance to click the link above to the Tatum Foothills HOA. It’s is too much fun to pass up! The HOA website shows a satellite map of the neighborhood with clickable links to multiple exterior photos of each of the 49 homes. Wow! That’s a proud HOA.
Beyond the luxury homes and beautiful views, a real drawing card of Tatum Foothills is that children here attend the “Three C’s” schools - Cherokee Elementary, Cocopah Middle, and Chaparral High - widely viewed as some of the best in the city. They’re actually in the Scottsdale School District, but these homes are situated to take advantage of the best views and the best schools, neatly wrapped up in sumptuous surroundings. You pay big bucks to live this life - between HOA dues ($3600/year, paid quarterly) and property taxes (avg $9000/yr) you’re shelling out $1,000 per month.
The other interesting home in this price band is the former home of Senator John McCain and his wife Cindy. It’s for sale (again!) for a whopping $12,000,000. Yikes! I hear Mike Myer’s Dr. Evil in my head as I type that - Twelve Meeeelllliooon Dollars!
This price seems simply silly. The curent owner bought it in Decmeber 2006 for $3,200,000. So in a 2-year stretch of time in which property values dropped about 10% Valleywide (and much much more in outlying towns like Surprise and Queen Creek), the McCain’s former home appreciated an astounding 400%!? Hmmmmm. Of course there’s the celebrity factor. And it is 14,000 square feet of livable space situated on just over 2 acres at Central & Glendale.
The home has obviously been remodeled extensively since it was built in 1951. But it’s difficult to tell if the current owner did anything more than seal the patio pavers, because when Senator McCain’s Realtor had it listed, there were no interior pictures. The descriptive text used by the current Realtor is a word-for-word copy of that used in 2006 by McCain’s agent. Again, hmmmm.
Finally, it is worth noting that house #2 on this list is being sold for its land value. It’s zoned PAD11 wth a potential for 16 multifamily units, per the listing agent. This is prime infill land located just south of Central & Butler and off the Arizona Canal. Will be interesting to see what goes there when the market recovers and small developers come back to our town. Luxury townhomes, anyone?
All in all though, $2,000,000 buys you a pretty nice pad in Phoenix. And of course it goes without saying that if you need help finding your $2M baby, I’m ready to step up. Call me for references.
Statistics On Sundays, July 20, 2008
July 20, 2008
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.
Real Estate Road Signs - “We Pay Off, You Keep”
July 18, 2008
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 or two. Here’s today’s Real Estate Road Sign:
I didn’t call to find out exactly what scam they’re peddling, but rest assured it isn’t as good as it sounds. No one is going to pay off your mortgage out of the goodness of their heart and not expect something for it. Either they’ll refinance you under their own (probably dubious) terms, or they’ll pay off the mortgage and let you stay in it, as a tenant.
There are some instances where it might be beneficial to let someone buy your home from you and then arrange to stay in it as a tenant. But contact a trusted Realtor or mortgage lender to do it. Placing your single largest financial asset into the hands of someone who advertises on roadsides with hand lettered cardboard signs is not in your best interests.
If this is a refinancing “plan” it probably involves people who look and sound a lot like the Sopranos and there are a lot of other, better options for refinancing if you’re facing foreclosure.
If it’s a plan to buy your home and rent it back to you, be very careful. There are a lot of scams out there now that start out this way, and then whack you with huge penalties if your rent is even an hour late. Worse, some of those rent back to owner schemes allow the company you’re dealing with the evict you from your home without notice if you pay late.
If you’re having financial troubles large enough to even think about calling the number on this sign, you’re probably better off contacting someone about a refinance or a short sale.
Related Posts
-
How Your FICO Score Determines Your Mortgage Interest Rate by the XBroker (not light reading but highly worth your time)
What You Get for the Money ($75,000 to $90,000)
July 15, 2008
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.
Statistics on Sundays
July 13, 2008
photo credit to MiamiAmia, via StockExchange
This Sunday I’m beginning a new & ongoing series - weekly statistics by ZIP code (for the ZIPs in which I primarily work). Check back on Sundays for a drill-down look into the numbers of homes for sale, homes pending and homes recently sold, in your North Phoenix area ZIP code.
Click to enlarge image
FDIC Shuts Down IndyMac Bank
July 11, 2008
Today it was announced that the FDIC (Federal Deposit Insurance Co) shut down IndyMac Bank after an old-fashioned ‘run on the bank’. IndyMac customers withdrew $1.3B from IndyMac branches since a June 26 letter written by Senator Schumer (D-NY) that said the bank posed “significant risks to taxpayers and borrowers” was leaked to the public.
What Happened to the Money?
There’ll be a name change, and a management change. For insured depositors (most average folk), their money isn’t going anywhere. They’ll still have have access to their money through the new name - IndyMac Federal Bank - and the new managment, courtesy of the FDIC.
From an InmanNews story: Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks.
Uninsured depositors will be contacted by the FDIC to meet with their claims people. The FDIC typically insures bank deposits up to $100,000.
The FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3 p.m. to 9 p.m. (PDT), and then daily from 8 a.m. to 8 p.m. thereafter, except Sunday, July 13, when the hours will be 8 a.m. to 6 p.m.
Or visit the FDIC website: http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.
How to Buy Short Sales/Lender Owned Homes, PART 4
July 10, 2008
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
-
Play by the bank’s rules.
-
Make sure loan documents arrive early
-
Send wire transfers early
Related Posts:
Addition to the Blogroll
July 10, 2008
I’d like to extend a warm welcome to Rodney Dunn of RE/MAX in Auckland, New Zealand. Rodney’s blog will be listed on my blogroll shortly.
Rodney found my blog back in June when he searched & found my post about the effectiveness of Open Houses. He’s been back for visits since then, and added several well spoken comments. I’ve added him to my feedreader and zoomed around his blog. He sounds like a great guy! Like our own stateside photography guru, Theresa Boardman, Rodney is a photographer in his off time. Click the link to see some of his beautiful pics.
Rodney reports that the US recession fears have touched the shores of New Zealand as well. You can check out some of Rodney’s comments about the New Zealand housing market on my post about the effectiveness of Open Houses.
Welcome Rodney!
More Woes for Fannie and Freddie
July 10, 2008
Fannie Mae and Freddie Mac stock prices took a serious tumble today, as the market digested fears and rumors that the two mortgage giants are undercapitalized.
photo credit, Duchessa at stock.xchng
Financial Times reports on Fannie & Freddie’s woes. Fed Chairman Ben Bernanke tried to calm everyone’s nerves by stating he feels that F & F are “well capitalized in a regulatory sense” but they should raise more capital. Which is it Bennie? Are F & F fine, or broke?
Ironically it was a politician who spoke most truthfully about the 2 F’s today. Republican Presidential candidate Senator John McCain spoke on the campaign trail, saying the two companies “are vital… they will not fail… we cannot allow them to fail.”
-
Bloomberg Explains How F & F Affect Credit Default Swaps (for financiers only!)
Related Posts at the NorthPhoenixAgent
How to Buy Short Sales/Lender Owned Homes, PART 3
July 9, 2008
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
-
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:
IndyMac Stops Making Home Loans
July 9, 2008
On Monday, Alt-A loan giant IndyMac Bancorp said that it will stop making most types of mortgage home loans, and layoff about 1/2 of its workforce. IndyMac says they’ll fund the loans already in the pipeline. Company execs also said they’ll continue offering their reverse mortgage product, and will continue operating their loan servicing division.
See the conservative take on the story from the Wall Street Journal, or try the perspective from the left at the Washington Post.
Consumer Tips
Have you got a loan approval from IndyMac? If you’re in escrow on a property already, talk to your Realtor and loan processer to make sure the approval is still good. It would probably be wise to get a backup loan approval from another source, just in case IndyMac pulls their approval of your particular loan package during your escrow period. Still shopping and haven’t settled on a home yet? Get your loan pre-approval from somebody other than IndyMac.
Does IndyMac service your current mortgage? All the press releases & media stories I saw said IndyMac intended to continue doing loan servicing, meaning they’ll continue to take and apply your monthly mortgage payments on existing home loans they’d been servicing before this announcement. It wouldn’t hurt to call them and make sure they’ve got your mailing address. Why? If they do sell the servicing of your loan to another company, they must notify you by mail. IndyMac’s website lists their Home Mortgage Customer Care line as 1-800-781-7399.
How to Buy Short Sales/Lender Owned Homes, PART 2
July 8, 2008
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
-
Short sales, lender owned and foreclosure properties are not for you if you must move in by a certain date.
-
Shop short sales and lender owned homes only if you are OK with lengthy periods of uncertainty.
-
It pays to hire a Realtor who’s politely persistent.
-
Make sure your document package is complete from the beginning.
Related Posts:
Buying Short Sale/Lender Owned Homes, PART 1
July 7, 2008
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
-
Listen with an open mind.
Discuss sold comps with your Realtor until they make sense and you agree, then take them as gospel. -
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. -
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:
Real Estate Road Signs - “Buy A House for $500 Down”
July 6, 2008
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)
