Phoenix East Valley real estate 2012: Year of the investor and seller financing

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I sat down with a past client this morning who had recently seen Kristin’s latest Phoenix housing market report. He asked me about what I thought was going to happen in the Phoenix housing market in 2012 and two things came to mind immediately.

Phoenix housing price increases

It is coming. Inventory in the Phoenix East Valley housing market is extremely low. Foreclosures are way down in Arizona, we are no longer one of the top states for foreclosures. With prices flat for the last year and with inventory so low, in my opinion houses will never be this cheap again in Phoenix East Valley.

We also are still seeing a large demand from both first-time home buyers and investors. With a high demand, and low inventory, prices have to eventually go up. We will not see the crazy increases of 2004-2006, but we very likely will get back to moderate 2-3% increase per year.

Year of the investor in Phoenix

2012 is the year of the investor in the Phoenix and East Valley real estate markets. While flipping may be a little harder because of the competition to get a house, anyone looking to stay in a little longer and rent or do seller financing is in the postion to make a good ROI in the right situations.

There are many people who over the last year have done a short sale or have a foreclosure and are current on every other bill they have. These people would make great home owners again, if they could get a loan, but they cannot for a few years. This is a perfect opportunity for those who have some cash reserves to do some seller financing.

Some advantages to seller financing are you get 10-20% down from the buyer so you know they are invested into the deal. And if something goes wrong you have that original investment. The seller who is doing seller financing also does not need to worry about repairs and upkeep like they would with a rental property.

Finally and most important the return on the investment is going to be much better. When you do seller financing you do not need to worry about an appraiser coming in and killing a deal. The home is worth what both the seller and buyer agree the home is worth.

We are working on a new project for investors that we will be announcing soon. Stay tuned for more updates.

*Disclaimer: These are my ideas and my thoughts. In NO WAY are they a guarantee of what will happen. Just like when Terry Bradshaw tells you on Sunday who he think is going to win the game, in no way is this a guarantee, just an informed and educated observation on the Phoenix housing market. 

Filed Under: Investing Tagged With: , ,

Phoenix investment properties – Flip or rentals?

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We have been working with more investors recently looking for some Phoenix investment properties (our investor mailing list). One question seems to come up a lot is what is better right now to do a fix and flip or to hold as a cash flow rental?

While there are different reasons that either of these may be the best scenario for you, we are finding in this Phoenix real estate market more investors are having success if they are willing to hold and rent their Phoenix investment properties than if they are looking to flip them.

A fix and flip is a great deal if you can buy it right. The problem in this Phoenix real estate market is the inventory is so low, and their are so many investors and first-time homebuyers that most of the properties end up having multiple offers and get bid up to a point where once even small improvements are made to the home the real estate investor has a hard time making a good enough return on his investment to make it worth his while.

If you are looking for Phoenix investment properties there are two places that investors have shied away from in recent years that are now looking fairly attractive. First is short sales. More listing agents are experienced with short sales than in the past and the success rate is increasing. Also if you get an offer in on a short sale early enough you may avoid the bidding war that most homes in this real estate market are facing.

The second area to consider for Phoenix investment properties is the Phoenix condo market. One advantage to the condo market is there are less buyers right now than the single family market. The condo market is also great because they cash flow very well. In the Phoenix real estate market condos can be purchased at such a low price, and the rental demand in desired ares remains high, that cash flow is not a problem. One real estate market that this is especially true in is Tempe near the ASU campus.

If you are looking to get involved in the Phoenix real estate market as an investor make sure you join our email list. We will pick out five hot properties each week that we see in the market and email them to you.

As with any investment just remember, your money is made when you buy, not when you sell. So buy smart. The Phoenix real estate market changes quickly so make sure you also are working with an agent who is staying on top of the latest trends.

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Filed Under: Investing

HARP changes: Will the refinance program work

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We recently got an email from a former client of ours who was interested in hearing about people who may benefit from the new HARP program. HARP is the government Home Affordable Refinance Program.

HARP

HARP was originally launched a couple years back and to date has been a complete failure for those looking to refinance their home. The number of families the HARP program has helped is less than 20% of the original projections. And in the Phoenix real estate market, the number is even lower.

So why has this refinance program been such a failure? One of the big reasons is your home could not be more than 125% underwater. So for just about everyone in the Phoenix Real Estate market, they do not qualify. The typical home is Phoenix is more like this. The homeowner purchased the home in 2006, owes $400,000 on the home and the current value is closer to $200,000. So they don’t even come close to qualifying for the HARP refinance program.

HARP Changes

But with the new changes to the HARP program announced last week, those limitations have been removed, but I am still not confident that this program is going to help man people at all. So why am I such a skeptic?

Who Qualifies

Let’s go over a few of the details of the refinance program. First your loan needs to be a Fannie Mae or Freddie Mac loan. If you are not sure if your loan is Freddie Mac or Fannie Mae you can use these loan lookup tools.
Freddie Mac lookup tool
Fannie Mae lookup tool

Now if your name comes up on one of these lists the next question you need to ask yourself is if you have a second mortgage. While a second mortgage does not automatically disqualify you, the chances that the second will agree to the terms of the refinance will hover somewhere around nil.

Next you need to be current on your mortgage payments. You cannot have missed a mortgage payment in the last six months, and no more than one payment in the last year. If this is you, continue reading. If any of the above options rule you out go ahead and just turn around now, it is not going to get any easier.

The next step to this refinance program is to see if you will qualify with your current income. If  you do not meet the current debt-to-income rations, or you are unemployed or most likely if you are self-employed you most likely will not be able to refinance. They are not going to give you a loan if you do not qualify financially, even though the new loan would help you make your payments easier.

Great, Now What?

Sound good so far? If  you are still reading you may be getting excited and ready to refinance right now. Not so fast their cowboy. If you refinance how is that going to help you. Here is the problem with the HARP refinance program. Even though your payment may end up being $50-$100 a month lower, it does not solve the big problem. Your home in the Phoenix real estate market is still worth only half of what you owe on it.

“Wait, but I thought they refinanced, so isn’t my loan now for only $200,000?” you may ask yourself. No, this is not a principle reduction program, this program will only help you lower your interest rate. While there may be a few people that qualify for a principle reduction of some kind, those people are going to be very few and far between.

This is still a good deal right?

Maybe, maybe not. Let’s go back to our typical example. You owe $400,000 on that home that is worth $200,000. So when will that house in the Phoenix real estate market be able to be sold at break even again? Depending on how quick the market goes up, it is most likely going to be 12-15 years before you can break even on that home.

So what happens if you need to sell your home in eight years because your family is larger, or you become and empty nester or even if you get a job transfer. When you go to sell that house, you will still be doing a short sale.

“What’s the difference if I do a short sale now or a short sale in ten years?”

The answer to that question is there is a huge difference between a short sale done in the next year and a short sale done any time after that. Right now if you do a short sale the lender will issue you a 1099-C. So if you sold your house for $200,000 and you owned $400,000 you would get a 1099-c in the amount of $200,000. That is considered $200,000 of income. And I don’t know about you, but for most people that is going to put them in a much higher tax bracket.

2012, is this what they Mayan’s meant?

Let’s assume the Mayan calendar is wrong for a moment and the world does not end in 2012. There is good news for you if you complete a short sale before the end of 2012. Right now there is a Mortgage Debt Forgiveness Act that is in place that allows you to write off the amount of that 1099-C (for most people that is). So you will not need to pay taxes on that $200k. But that Act expires at the end of 2012, so if you complete your short sale in 2013 or in eight years from now when you need to move, you will be writing a big check to Uncle Sam.

As you can see, there is a big advantage to doing a short sale now in the Phoenix real estate market now and not prolonging the agony for later. Is the HARP program good for you? Maybe. Maybe not. Talk to an attorney and find out if this is in your best interest.

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Filed Under: Phoenix Market Conditions

Real world example of why dual agency should be illegal in every state

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Dual agency is legal in Arizona, but not all states. I have long said dual agency should be illegal everywhere. I challenge anyone who supports the dual agency concept to tell me how they would have handled this.

You represent buyer and seller on a short sale. Buyer clearly believes that the seller should be paying to have a piece and landscaping removed and a pool repaired before closing or they will just let it foreclose. They believe they are in their right to ask for these repairs and want the agent to pay for them if the seller cannot.

The seller believes that the items are satisfactory and refuse to make the requested changes, but wants to avoid foreclosure which is less than a week away.

If you represent both, who do you represent here. One of them is NOT going to be happy with you or you are taking a commissionectomy.

Filed Under: East Valley Real Estate Video Tagged With:

Tempe Gardens HOA causes short sale to become foreclosure

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When you do a lot of short sales, every now and then you are going to run into a situation where a foreclosure happens and there is not much more you could have done to prevent that. Luckily that does not happen much, but when it does we like to tell about it here because there is usually a lesson to be learned.

We had Tempe condo we took the listing on earlier this year. When we took the listing, the condo development, Tempe Gardens, was FHA approved. We accepted an offer that was an FHA offer.

When we got the approval the buyer started to go through their loan process and we discovered that the Tempe Gardens had allowed their FHA certification to expire just a couple weeks before we got our approval and we now had an issue where we needed to get it recertified.

Now this is not an impossible task. The lender was working with us and the buyer to get this thing closed and we believed that we could do it. We made the request for paperwork from the HOA board at Tempe Gardens and they told us to talk to their management company. So the lender went to the management company who took forever to respond. Finally after many requests the management company sent over documentation. The problem was, it was only partially the documentation requested and even some of the documents they sent were not complete.

The management company told us they had provided everything they had from the HOA board at Tempe Gardens. So we went back to the HOA board and of course they once again said said talk to the management company. After many weeks of back and forth with both organizations, and calls from the angry homeowner who had paid close to $200/mo to this HOA board over the last few years, the buyer realized it was not going to happen.

We had been informing the servicer all along what was going on, and they had even granted us an extension to allow time to complete the process. But after dozens of hours, there was nothing we could do and the servicer nor the investor would allow us another extension and this condo, even though receiving approval for a short sale, went to foreclosure.

What should be really frustrating to the homeowners in Tempe Gardens is this unit was going to sell for $75,000 as a short sale is going to end up selling for much less than that as an REO property. Shouldn’t the HOA be helping to increase property values?

So I guess the lesson learned is not only check if your condo development is FHA approved when you take a listing, find out when it is expiring and if they are planning on renewing it.

Filed Under: Short Sale Tagged With: , , , , ,

Just for fun: Healthy ketchup

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Every now and then we are going to do a fun video, most likely a food video. Today, healthy ketchup! Not surgar, no high fructose corn syrum, no preservatives, but very good.

Filed Under: Uncategorized

Phoenix East Valley real estate market update

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If you thought buying a house in the Phoenix and East Valley was tough in August, just wait to see what September has in store. Inventory continues to decline – 2.3 months total available with only 1.6 months supply of short sales and 0.9 months supply of bank-owned properties. That’s not a typo! At this moment, there are only 3013 active foreclosure on the market – that’s it.

Based on current foreclosure activity and short sale volume, the market looks to remain a seller’s market for the foreseeable future.

Despite the similarities to the tight 2005 real estate market, prices remain flat. Good luck buyers!

Filed Under: Phoenix Market Conditions

Almost half off Dilly’s Deli in Chandler today thanks to ASU Football

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Dilly’s Deli Celebrating ASU Sun Devil’s impressive home opener

Last night ASU opened up their 2011 football season with a home win over UC Davis by a schore of 48-14. Jeff  Weniger, who owns a few restaurants in the Chandler area including Chandler’s Best Pizza and Dilly’s Deli is offering 48% off any order today at Dilly’s Deli. Just show up at Dilly’s today and say “Fork ‘em” and you will receive 45% off your order in honor of ASU scoring 48 pints last night in their home opener win.

Dilly’s has locations in Tempe, Scottsdale and Chandler. The Chandler location is at 2895 S Alma School Rd on the NE Corner of Alma School and Queen Creek.

Thanks Jeff and we hope to see this promotion a lot more! Fork Em!

Filed Under: Chandler

Short Sale promissory notes: Can I say no?

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What if the bank asks for a promissory note to approve your short sale? Can you say no? No may be the difference between a short sale or foreclosure.Of course there are some cases where a promissory note will be required, but your agent is going to need to feel the bank out and use their experience.

We had an agent Cathie VanWert join us a few months back. Cathie had a listing at her old brokerage that her Broker would now allow to transfer over with Cathie. Instead the Broker assigned the file to another agent at their office. Cathie would find out later from her former client that the deal was not going through because they could not get the bank to agree to the short sale and the brokerage was canceling the listing.

Well the lender on this file calls Cathie a couple of days ago, as she was still a 3rd party authorized agent, and tells Cathie the bank just wants to sell it and they will waive the $25,000 promissory note and won’t require any contribution from the homeowner.

Come to find out, the agent who had the listing told the homeowner the bank was requiring a $25,000 contribution. Did he want to pay it, or allow it to go to foreclosure.

The homeowner made the right decision based on the information he had, but the agent did not. The right move would have been to say no and see what the bank said. At worst they could have most likely negotiated it way down, but as we now know, they would have taken $0.

Make sure you are working with a short sale agent who has been through these scenarios before and remember…. The difference between a short sale and foreclosure can sometimes be as simple as one word… NO.

Filed Under: Short Sale

The magical USDA loan in Arizona

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Thanks to the magic of the USDA Home Loan you can buy a home in Arizona with no money! The qualifications are similar to the FHA Loan, but an FHA Loan has 3.5% down requirement from the buyer where a USDA Loan has no money down.

Just because you don’t need a downpayment does not mean you don’t need any money. You still need to pay for a home inspection and appraisal and traditional closing costs. Although you can try to get the seller to contribute to the traditional closing costs for you.

Not every home in the Phoenix and East Valley area are going to qualify. This is a rural housing loan so the house will need to be in the qualifying locations. One issue is with the new Census data, many areas which now qualify for a USDA loan will not shortly when the areas are reevaluated. The population growth in many of the outlying towns is going to make them ineligible.

So while the USDA loan is an option for some people, changes may make it an endangered species in the Phoenix metro area very soon.

Filed Under: East Valley Real Estate Video
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