Gilbert Real Estate Blog

Short Sales: Reality or Mirage?

August 29, 2009 // 2 Comments »

Those of us that are experienced, professional real estate Brokers, tend to have very strong feelings about them, pro or con, so I decided to share with you some of my personal attitudes toward and feelings about “short sales”.

I remember as a kid when my family would be on a road trip across the hot summer highways of West Texas.  As I would watch the horizon, and the road ahead, I would see what I would always swear was water on the highway.  I knew it HAD to be water, because I could see it with my own eyes.  The reality was that it was hotter than hell, and dry as a bone – and what I was ‘seeing’ was in effect a mirage, an illusion, a distortion of perception created by the heat.  That, my friends is exactly how I feel about short sale listings.  They are nothing more than a mirage.

Lenders do what they want, when they want, if they want ~  and there is no way to predict their behavior or decisions.  I’ve facilitated short sales, consulted with short sale and bankruptcy attorneys about it, dealt with asset managers, loss mitigators and bank negotiators, and otherwise kept informed and abreast of the market and the so-called experts and short-sale-gurus’ claims.  The seller’s lender(s) hold all the power, and control, and their actions have proven time and time again that they do NOT care one iota about the homeowners, agents, brokers or buyers that are involved in the attempted transaction.

The fact is that only about 10% of all short sale listings in the greater Phoenix real estate market ever make it to closing.  Period.  And considering that the processing time on short sale transactions is typically 6-18 months, my question is, “Why would any home buyer or investor want to subject themselves to such an ordeal?”

The answer?  As one of my clients put it this week, “I want to buy a house and get a smoking deal, i.e., make a good investment!”  The unfortunate but realistic truth is that roughly 90% of all short sale properties are ultimately going to end up back on the market as bank owned (foreclosure) properties.  Most short sale listings are unrealistically priced below a price point that the seller’s lender(s) will ever seriously consider accepting – which in my opinion is why most of them fail.

But before a lender will even take a serious look at the purchase contract, they will evaluate and scrutinize the homeowner/seller.  The seller’s lender(s) will, in their sole discretion and timetable, decide:

• if the seller is truly in “financial hardship”;
• if the seller has the capability to pay their mortgage loan(s) in full;
• if the investors behind the mortgage loan(s) will agree to take the short sale loss (and amount) right now;
• if the contracted sales price is a number they will accept;
• if they will agree to the rest of the contract terms and conditions, costs, liens, property taxes, etc.;
• if they would rather just foreclose and sell the property themselves.

Lenders do NOT pre-approve short sales or lay out in advance the sales price that they will accept, so the listing/asking price is nothing but a “phantom” or imaginary price that the listing agent and seller use to attract a prospective buyer and secure a contract.  After the contract is in hand, then and only then is when the submission and negotiations begin with the seller’s lender(s).  I could go on and on, but I’ll stop here for today.  My hope is that all of my readers and clients will see the insanity, futility, false hopes and unrealistic illusions of pursuing short sale properties.

Personally, I would much rather go to Vegas and roll the dice or play the slots.  Odds of success are about the same. 

Posted in arizona market conditions

I’m done… I can’t buy a home in this market…

July 16, 2009 // 2 Comments »

Okay…  I’ll confess…  I’m bummed…  a home buyer I’ve been working with for over 6 months decided to call it quits.  No, he didn’t commit suicide – at least not in the physical sense – but in the metaphysical real estate sense.

His one question?  “Why in hell should I continue to view properties that I have no chance of buying?”

This home buyer has excellent credit and has worked his tail off to save up the 3.5% down payment required for an FHA loan.  His price range is $80K-$100K, and we’ve been looking for a home in the East Valley, primarily Mesa and Phoenix.  He’s been open to a single family detached house, townhome or condo.

I’ve lost count of the total number of properties we’ve viewed, and the  number of aggressive offers (even above comps) that we’ve submitted on nice, decent homes ~ but to no avail…

We’ve gotten our asses kicked on every last one of them – by two types of buyers:

1. Cash
2. Conventional Financing

With a cash buyer, there is typically no appraisal done on the property, and there’s no financing contingency – both of which are HUGE incentives to the seller.

With conventional financing, the buyer is paying 20% down and at least on the surface appears to be a better credit risk than an FHA buyer who is only putting down 3.5%.

My client simply got tired of the fray, and gave up.  And while I very much appreciate and respect this client, I am very disappointed with his decision.  Patience and perseverance will always prevail.  My only regret is that this particular client gave up his dream and allowed defeat to dominate his lifestyle.

Am I deluded?

Posted in arizona market conditions

$8,000 Home Buyer Tax Credit

July 7, 2009 // Comments Off

The “American Recovery and Reinvestment Act of 2009” passed the House and Senate on February 13, 2009, and was signed by President Obama on February 17, 2009.

The bill is a $780 billion package, roughly one-third of which is dedicated to a home buyer credit.

Here are the highlights:

1. 
   

   The tax credit is for first time home buyers, with a “first-time home buyer” defined as a person who has not owned a principal residence during the three-year period prior to the purchase.

2. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000, and does not have to be repaid as long as the home is not sold within 3 years.

3. The tax credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.

4. Single persons with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

5. The credit must be claimed on a federal tax return to reduce the buyer’s income tax liability. Any remaining unused credit will be refunded to the buyer.

Below is a summary chart of the tax credit, along with a side-by-side comparison to the 2008 tax credit.

Inasmuch as this is a tax related issue, and I am neither a tax accountant or a tax attorney, you should consult with a tax professional regarding your specific situation and benefits.

Gilbert Homes ~ Chandler Homes ~ Mesa Homes ~ Queen Creek Homes ~ Phoenix Homes

Posted in tax credit

Phoenix Real Estate – June 2009 vs. June 2008

July 5, 2009 // Comments Off

PHOENIX, ARIZONA

The “Valley of the Sun” continues to be one of the most popular cities (and 5th largest) in the United States!

June 2009 vs. June 2008

2,167 single family detached houses were purchased last month vs. 1,030 last year (June 2008).

The average price paid was $129,165 vs. $244,767 last year.

The median price came in at $85,050 vs. $200,000 last year.

The ratio of purchase price to list price was 102% vs. 96% last year.

The average time on the market was 71 days vs. 97 days last year.

There were 12,966 Active single family listings vs. 13,092 last year.

Click Here for full current Phoenix Market Report

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All data is derived from the Arizona Regional MLS and is deemed reliable but not guaranteed.

photo by Miguel Folch

Posted in phoenix market conditions