Foreclosure...Short Sale...What's the difference?

You might ask, "What is a short sale?" or "Is there a difference between a short sale and a foreclosure?"

In short (no pun intended), a short sale can be more favorable than a foreclosure because it is less harmful to your credit report. However, there are 2 things to keep in mind... 1) your lender must approve a short sale (and may still expect you to pay the difference), and 2) the I.R.S. usually looks at a short sale as a forgiveness of the portion of your mortgage you weren't able to cover. For example if your unpaid mortgage balance is 250,000.00 and you are unable to remain current on your payments, but the market value of your home is only 230,000.00, your lender may accept a short sale. If this happens, and you are able to sell your home for 230,000.00 the I.R.S. may expect you to include the $20,000 forgivness as income. Be sure to ask a Certified Public Accountant for advice. In many cases, a lender would prefer a short sale to a foreclosure because they will recoup more of their money. However, if it makes better financial sense for the lender to foreclose, they probably will.

Read the article Real Estate Short Sales - How to Handle Real Estate Short Sales at about.com

The Foreclosure time bomb - a new fuse...

I've been preaching for over a year that a wave of foreclosures will be the 2nd of a 2-punch combination done on the real estate market, with the exodus of speculating investors being the first. I believe more people took on Adjustable Rate Mortgages than were in a position to make those loans work. Even worse are the ARMs where the minimum payment required does not cover the interest accruing (negative amortization loans). As the introductory, teaser rates expire and increase to today's market rates (plus a margin), people's required payments are rising. Add to that the fact that interest rates are higher today than they were 12-18 months ago, and the ARM needs to increase even more. People who can't afford the higher payments will get stretched thin for awhile, then be forced to give up. At some point, you can't pay what you don't have.

What I didn't realize was the vast differences between the banks' and the mortgage payment servicing companies' tactics in treating these people. I had always assumed the process was the same for everyone: a grace period with no late fee, then a late fee with no impact on credit, then a flurry of activity while the lender tries to collect, then at 90 days past due they will start foreclosure actions.

This article from BusinessWeek states otherwise. It turns out that each company has their own system; the same set of circumstances might cause one family to pay a small late fee and another family to lose their home!

The article also calls for heavier regulation, as there has been too much reported fraud by the companies involved. The moral of the story: 1. pay your bills on time, and 2. know the details of your own mortgage (read your promissory note).

Read the article on BusinessWeek's web site here.
Read a PDF version of the article here.


FSBO Assistance Program

FSBO. For Sale By Owner. It can be a daunting proposition... We can help. Our FSBO Assistance Program is FREE. No Cost. No Obligation. No Commitment. NO STRINGS ATTACHED!

Selling your home by yourself is a viable option, and can be a great way to save a lot of money on real estate commmissions. But it's not for the faint of heart; there is a lot of work involved, as well as some additional risk. For those of you with that special blend of knowledge, confidence, ability, and desire to sell your own home, we offer a great FSBO Assistance Program, the details of which are outlined below. But first, some straight talk about FSBOs.

    Most Need Help: Almost 9 out of 10 people selling their homes For Sale By Owner will eventually enlist the help of a Realtor.

    Buyers Negotiate: Many buyers know that a FSBO isn't paying a commission, so they expect to pay a lower price.

    Most help isn't free: If you use a service to put your home in the MLS, you will also need to pay a commission to the Realtor/Broker who finds the buyer, which eliminates a large portion of the savings you were hoping to keep.

    #1 Reason homes sell: The MLS system allows the 50,000 Realtors (give or take) workinig in the greater Phoenix area to see every home that's available which might suit their potential buyers' needs. This is far and away the number one way homes are sold in Phoenix; there isn't even a close 2nd!

So, if you're still determined to sell your own home, or if you want to give it a try for 30 or 60 days before asking for help, let me introduce you to our FSBO Assistance Program. Here's what we can do to help:

We'll give you expert advice and ideas to make sure you're doing everything possible to maximize your sales price, and minimize the time your house is on the market, including:

    Curb Appeal - You want to grab the buyers' attention from the second they pull up to your home. We'll come to your home to see it first hand & give you our opinion.

    - You want to make the buyers say "Wow!" as they walk through your home. We'll offer advice while we're there for the curb appeal.

    Preparation - things to do behind the scenes to make the buyers' experience better.

    Open Houses - how to market and run the most effective open house possible. We may even be able to provide open house signs for you to use.

    Safety - we'll share our knowledge and experience about safety, letting strangers into your home, and how the for sale sign in the yard can be a target.

    Pricing - a detailed market analysis, so you KNOW what the neighbors have sold for, or are currently asking, and how long they've been on the market.

    Buyer Qualification - let's make sure the buyer can qualify for their loan.

That's a lot of good stuff we're offering, so I'm sure you're asking yourself "What's in it for them?" Well, I'll tell you. Here's what we're looking for from you:

    Refer us. If you come away from the experience with a good opinion of us and how we run our business, please refer our name to your friends, family members, or co-workers who might prefer to work with a Realtor.

    Looky-lous. If someone looks at your home but decides it's not the right home for them (too big, too small, no pool, etc.), please allow us to assist them in finding their dream home.
    That's it. No Strings Attached.

Are the Holidays slow?

Every year the standard mantra is "nothing sells during the holidays." And every year I buy into it, looking forward to taking a few days off & winding down the end of the year with my family. Unfortunately (and fortunately at the same time), it never seems to work out that way!

Last year, the week between Christmas Day and New Year's Day was our busiest week of the entire year! We had new listings go up for sale, existing listings get offers, buyers write contracts on homes, and homes in escrow closed. From a business perspective, we can only hope next week is as good.

Buyers & Sellers - don't let the time of year, or any popular wisdom out there, influence your decision about moving. If the time is right to buy or sell, let's do it! If you're too busy & distracted by the holidays, let's wait. The time to buy or sell is whenever you're ready to buy or sell.

Happy Holidays everyone!


6 E. Glenn Dr. - A North Central Masterpiece!

I have a new listing in the North Central Corridor. This home is located just north of Glendale and Central Ave. on Glenn Drive. The owners have done an amazing job updating a traditional ranch style home to include modern features while maintaining the look and feel of a classic North Central home. The master bedroom and bathroom have been completely remodeled to include a large walk-in closet, tumbled travertine tile throughout the bathroom, dual vanities and a glass block walk-in shower. The majority of the home is tiled with saltillo tile, with carpet in the living room and bedrooms. Take a look at the different media below. For additional information or to schedule an appointment to view this home, please call Steve Nicks at 602-708-7100. Enjoy!

Click here to view the Pdf Flyer
Click here to view the Digital Tour
Click here to view the Property Details


Old Rawhide.....New Development

For those of us who have lived in Phoenix for some time (not too many of us left!), Rawhide was one of those places that we remember going to every few years when we had visitors in from out of town and we wanted to show them what living in Phoenix was all about. You know, gun fighting in the streets outside the saloon, mining for gold, eating dinner in a big mess hall on rickety wooden tables, horse carriage rides, normal life for us living in the wild, wild west. Seriously though, I have great memories of my visits to Rawhide. And now, not that they are gone, but the old Rawhide in it's new location just doesn't seem like it could be the same.
And now, just like most everything else around the Phoenix area, the old Rawhide location that was purchased a couple of years ago is set to be developed into townhomes and condominuims. It sounds like they will be very upscale and amazing places to live, but I will always have the memories of driving out into the middle of nowhere (now not so middle of nowhere) and spending an evening experiencing the old days.

Read a PDF Version of the article here.


Buckeye - Boomtown

Here is another in a long line of articles I've read recently about all the growth that's going to occur in the Valley of the Sun - it's almost like de ja vu from 2004! Basically, the developers and planners are ignoring the slumping housing market and making their plans based on the long-term picture. And if they're right, than our housing market is going to be in good shape once again before too long.

I remember reading a Maricopa County report in 2000 or 2001 which forecasted Buckeye and Surprise to be the 3rd and 4th largest cities in Arizona within 30 years. This article confirms that forecast, highlighting some of the major changes we'll see in Buckeye.

Read the AZCentral.com article here.
Read a PDF version of the article here.


Buyers kicking tires

I've talked with a few buyers lately who seem to share some hesitancy about actually buying a house in today's market. Is the house going to be worth less next month? Is there going to be a better home available if I just wait for it? What else can I do to make sure I'm getting the best possible deal?

These are all valid concerns and should be considered. However, I think that in many cases there is so much talk about housing in the mainstream news, people are becoming more nervous than they need to be - as if they're afraid of making a mistake.

First of all, if you love the house, can afford it, and are looking forward to living there - go ahead & buy it. The current market downturn is a temporary cycle, and if you're planning on living there for a few years it won't make much of a difference. Phoenix is still a destination city, with all forecasts pointing towards long-term growth and price appreciation.

Secondly, a better home may come available if you wait. But you also risk losing the home you're considering. I've seen several occassions this year where a buyer took a few days to think about a home, and it sold to someone else in the meantime. Again, if you love the home, you love the home. If you're not sure about it, then it probably isn't the right home for you.

As for getting a good deal, it is a buyer's market right now and you should feel happy with the deal you're making. That being said, not every seller out there is in a position where they're being forced to sell; many of them will simply refuse low offers, preferring instead to stay put until they receive an offer they like. Some sellers, on the other hand, are in a more desperate situation and will accept lower offers. You probably don't know which type of seller you're dealing with when you write your offer. You may never know which type of seller it was, or whether you could have offered less and still had your offer accepted. But if you are happy with the home, happy with the price, and thinking long-term, then it doesn't matter. Buy the home and don't look back. If you're investing or trying to make a short-term profit, well that's a different story altogether...


Rejuvenated! - 4915 S. 24th Ave.

This listing in the 2yr old KB community of Weston Park is located just minutes from I10 and the bustling downtown Phoenix area. If you don't like the typical closet-size bedrooms lacking in storage space, you'll love this home! Kid bedrooms are 10x14 & 10x15 both with walk-in closets + a loft capable of holding all their toys. It's move-in ready! Give me a call to find out more information.

New Listing - 8527 W Jocelyn Ter

I have a new listing in Tolleson - just off 83rd Ave and a couple miles south of I-10. It's a two year old house; the owners have kept it very clean and have done a great job with the back yard. This would make a good starter home, or would cash flow pretty well as an investment. Please give me a call if you know anyone who might be interested, or if you have any questions about it.

Click here for a Digital Tour.
Click here for a Flyer.
Click here for the Property Details.

Thank you,


Chandler Going Green

Long time readers of my newsletter know that I'm a big proponent of blending the needs of our lifestyle with the needs of the environment - of finding a more eco-friendly way to accomplish the same task. Whether it's via solar or wind-powered energy, bio-diesel fuel, straw bale housing, or even a more fuel efficient car, I appreciate those advocating renewable energy. I also try to give credit where credit is due.

Kudos to Chandler for constucting a municiple building (on the corner of Frye & Elliot) that's totally "green", complete with LEED certification. The building will generate more than enough power to meet its own needs, and will be able to sell the surplus to SRP (imagine that!)

Read the AZCentral.com article here.
Read a PDF version of the article here.


Business Week's 2007 Forecast

Business Week published an article with a forecast for the 2007 real estate market, and it's actually very similar to what I've been forecasting. (It's nice to see people a lot smarter than me agreeing with me. It's also a little unsettleing, since we all know that when too many people predict something to happen, they're usually all wrong!)

It looks like the expectations are for 2007 to be pretty similar to 2006, with a little bit too much supply for the current level of demand. They expect the market to ease back into balance in the 2nd half of the year, and by 2008 we should be in a more balanced market.

Click here to read the article on BusinessWeek's website.
Click here to read the article as a PDF file.


Daily Market Analysis

I thought I might share what I've found over the past few weeks pertaining to the overall condition of the Phoenix market. A few times per week I pull data from our MLS and take a big picture look at the trends in our market. One thing that I've been noticing is the number of listing in our MLS is declining for the first time since about this time last year. Jan '06 we had a total of about 23,000 "Active" homes for sale in our MLS database. We got as high as about 47,500 and are now at about 44,500. In the grand scheme of things our market is still very saturated, and this may just be a seasonal adjustment that we are seeing, but it's certainly good news to see the market get a little bit of a break from the steady increase in inventory we had been seeing all year; even if it's short-lived and Jan '07 brings us more and more inventory.

Is It Really A Formal Dining Room?

We were out looking at homes yesterday and looking at homes that supposedly had "Formal Dining Rooms". Out of the 6 homes that we looked at only one had what my clients defined as a formal dining room. It appears that there might be a couple definitions of a formal dining room, both of which could be considered to be accurate. The one home that suited my clients needs had a great room floor plan combined with a completely separate formal dining room. This area of the home was for nothing other than a dining room. The remainder of the homes that we viewed all had large formal living rooms, with a chandelier hanging from the ceiling at the end of the living room closest to the kitchen. Now technically, I guess you could call that a formal dining room, but it's a stretch, especially for my clients.

SELLERS: Beware that when you are selling your home and you describe your combined formal living/dining room as a "Formal Dining Room" prospective buyers may be looking for something other than what your home is providing.

BUYERS: When you are looking for homes yourself on the internet (at www.ButterHomes.com, of course!!) or with the help of a Realtor, you need to be specific as to the extent of the "Formal Dining Room" that you are looking for. Maybe just a place to put Grandma's antique dining room table suits your needs and the combined living/dining room works, but if you desire a completely specific area of your new home to be used soley for formal dining (maybe for entertaining, or just a place to have a nice family meal and reconnect) then a home with a more traditional floor plan might be what you are in search of.

The trend in new homes seems to be the great room floor plan, where the kitchen layout includes an area for a small dinette set, thus eliminating a "Formal Dining Room". It's becoming more and more difficult to find a traditional formal dining room. However, they are out there, so it may just take some more time and energy to find exactly what you are looking for. As an agent who has seen his fair share of homes, I may be able to tell just by looking at a picture or looking at the square footage if a specific floor plan has what you are looking for.

Which Home Improvements Bring the Most Bang for your Buck when Selling?

We all want to know which home improvement projects are worth putting the money into, whether you're planning on selling your home soon, or further down the road. A kitchen remodel is a HUGE project and can alter the entire feeling of your house, but will it be worth it's own value when you're ready to sell?
In the December issue of Realtor magazine, a list of the current return on home improvement projects is listed for each city, so that you know what holds value in the Phoenix area. Here's a list of a few of the most common projects, their estimated cost and how much of that cost is retained when selling your house.

Bathroom Remodel: $11,673 job cost. This project can up the price of your home by $12,670, which is a 108.5% return! This might be the best value for your remodel money!
Sunroom Addition: $47,184 job cost. Resale value is $31,374 which is a 66.5% return. I guess we all have enough sun here that adding a sunroom isn't necessarily the best project to put your money into!
Minor Kitchen Remodel: $17,487 job cost. This project can up the resale price of your home by $15,164 which is a 86.7% return. Not bad consider all the benefits of a new kitchen!
Window Replacement: $9,862 job cost. Resale value $8,369 which amounts to a 84.9% return.
However, remember that replacing old single-pane windows with double-paned windows can also reduce your electric costs as well as outside noise, which can be two more benefits not considered in the return percentage. (This is my big plan for my house this year!)
One of the lowest returns is on Home Office remodels with a return of 60.9% of your cost. Leave the home office as it is (or do a simple re-paint, re-flooring) and focus your energy on your bathrooms!

More Development around Stadium

Glendale is continuing to grow with upscale commercial & retail development in the area near University of Phoenix Stadium and Jobbing.com Arena. Westgate and the Zanjero projects on one side, and Parkwest on the other have already begun construction &/or announced plans. Now it looks like a real estate development firm based in Paradise Valley just purchased a 110-acre parcel at Glendale and 99th Ave, saying current development plans do not include housing.

Click here to read the article from AZCentral.com.
Click here to read it as a pdf file.


Market Analysis Methodology

Since I refer to "my analysis" or "what I'm seeing in the MLS data" from time to time, I thought I'd take a minute to explain what data I'm collecting and what I'm doing with it.

How is it possible to keep track of everything that's happening in our local real estate market when there are multiple counties in the state, multiple cities in each county, multiple neighborhoods in each city, multiple subdivisions in each neighborhood...?

I pull statistical information from the MLS system each week, then analyze it in an attempt to understand exactly what has happened, and hopefully to predict what will happen. I try to download enough data to draw meaningful conclusions, but not so much that I don't have time to do any analysis (I need to keep time available to service clients!) I decided awhile ago to pull data from 5 cities across the northern part of the Valley: Surprise, Peoria, Glendale, Phoenix, and Scottsdale. This gives me a diverse mix of: west/east, new/old, city/suburb, expensive/inexpensive, growing/stable, etc. I think these 5 cities give a good representation of the overall Valley - there isn't anything going on in Gilbert, Chandler, Tempe, Buckeye, Litchfield Park, or any other suburb that is going to be completely out of line with these cities - rapid growth, new residential & commercial development, older neighborhoods competing with new construction, etc - they're all covered.

Next, I'm careful to pull the same set of information everyweek. It doesn't do me too much good to know there are 7,300 houses actively for sale in Phoenix. I need to know how many there were last week, last month, and last year to give this some relavence. I'd also like to know how the number of Sold houses looks compared to the same time periods, etc.

Then I run all sorts of calculations on the numbers, such as: Avg # of Sales per day, Avg # of Expireds per day, Avg # of Sales per Expired, Days Inventory, Avg # of Days on Market, Avg square footage, List Price vs Sold Price, and more.

Finally, I look at the results of these formulas, in isolation and as a group, both for each city and as a total. It's possible that one number is trending one way for a particular city but the other way in total. It's possible that one number says one thing by itself but says something different when taken with other numbers. For example: last week marked a 6-week trend of Days Inventory going down (albeit by a very small percentage). This would normally be good news; the market demand is soaking up the excess inventory, and balance should ensue. However, further review shows the Days on Market is increasing, the # of Solds per Expired is decreasing, and the Avg Sales Price is flat. This doesn't look like a strengthening market to me; it looks more like some of the sellers have given up (either via canceling or letting their listing expire). They would still like to sell, but have decided to wait until later, which means the long-term supply hasn't really decreased.

I also compare my hard facts, statistical analysis with my more subjective, gut-feeling based on what I'm seeing with and hearing from my clients, just as a double-check. When the smoke clears and the dust settles, I have a pretty good idea of what's going on, and have been able to help my clients act accordingly.


Rental Properties in College Towns

I read an article a few weeks ago regarding a extreme discrepancies between available college housing in comparison to the amount of students attending that college each year. I apologize that I cannot completely cite my source, as I cannot seem to locate the article at the moment. I believe it was in "Money" magazine for November, 2006.
In any case, the article noted that one of the best places to invest in rental properties is the college housing market, and specifically pointed out ASU as one of the worst locations for having enough housing for the students.
What are your thoughts on investing in rental properties in College markets? Can rents be higher in College towns than in the suburbs? Are vacancies lower because there is always a demand? Are you concerned about how college students will take care of (or not) your property?
I have some thoughts on this, and would love to hear yours!

Master Planned Apache Junction?

In yet another indication that our market slow-down is temporary (a builder announced plans to start construction on a 444 unit condo complex in Surprise a couple of days ago), Desert Communities, Inc. won the bidding on a 1,010 acre parcel of state land between Apache Junction and Florence, in the Lost Dutchman Heights area of Superstition Vistas. It sounds like this is the first step towards building a master planned community in the far Southeast Valley, similar to Verrado in Buckeye and Desert Ridge in North Phoenix. They are expecting about 1 million people to live there when the entire project is completed!

Read the article on AZCentral.
Read the article as a PDF File.