The Phoenix Real Estate Blog

Golf may not conjure up any frightful or chilling feelings in you right now, but try taking a trip to Golfland during October Fright Nights this year.  You may never think of golf the same way again…unless your slice looks as bad as mine, and then maybe golf has always been a little scary.

On Sundays through Thursdays from Dusk - 10pm, and on Fridays and Saturdays from Dusk - Midnight, you can play a round of Spooktacular Golf with ghastly glow-in-the-dark golf balls on Golfland’s haunted 18-hole mini-golf course.  For the real thrillseekers, Golfland will open The Gauntlet on Thursdays and Sundays from 7pm - 10pm and on Fridays and Saturdays from 7pm - Midnight.  With 5,000 square feet of heart-pounding terror, The Gauntlet’s multi-level haunted house will transport you back in time to the 1300’s when the air was thick with the stench of the Black Death.  On Friday, October 30th from 7pm - Midnight, Golfland’s last Fright Night will feature a Halloween Party, live DJ, costume contests, and prizes.

Purchase an Unlimited Fear and Fun Package to enjoy unlimited visits to The Gauntlet, miniature golf, race cars, and bumper boats during the month of October.  Or, through October 14th, you can click here to download a special Buy One, Get One Half Off coupon.  Either way, be safe and have a happy Halloween!

What: Spooktacular Golf and The Gauntlet, Where: Golfland, 155 W. Hampton Avenue, Mesa, AZ 85210, When: During October, How: 480-834-8319 or Golfland.com

When H.R. Bill 3221 went into effect on October 1, 2008, seller-funded down payment assistance programs were banned from use. Since then, most home buyers have completely stopped requesting or inquiring about down payment assistance, even though there are many other types of down payment assistance programs still available, despite H.R. Bill 3221. These types include most programs funded by non-profit organizations, churches, employers, family members, and state and local governments.

In this post, I will speak for the state where I practice real estate, Arizona. If you do not live in Arizona, then hopefully this next information will at least give you some ideas of where you should look for down payment assistance programs in your own state. In Arizona, there is a very popular state-sponsored program, named Your Way Home AZ, which is only available to buyers of foreclosed properties. When you go to sell your home, this would not be a program you could suggest to your prospective buyers, but there are others!

Many of the larger cities in Arizona like Phoenix, Mesa, and Tempe offer down payment and closing cost assistance, and forgivable soft second loans for buyers of properties within their city boundaries. Another excellent source of down payment assistance can be a local or national non-profit organization, especially one that was created to help individuals and families become homeowners. In Arizona, there is one named Community Housing Resources of Arizona (CHRA). It has been helping people become homeowners since 1988 by analyzing applicants’ individual circumstances and then advising them on the best program for their needs.

I realize I have provided a lot of information, without many details. That is simply because there are so many wonderful programs from which to choose. To find and research more information, I recommend starting with your state’s association of REALTORS. In my case, I point my clients to the Arizona Association of REALTORS® website. There, you’ll find the phone numbers and websites of many of the largest down payment assistance programs available to Arizonans, along with general information about mortgage loans, and the home buying process. Lastly, don’t forget to ask your Realtor for information. If you decide to list your home with a Realtor, you should ask him/her how to market your home to prospective buyers who may need down payment assistance. He/she may already be planning a marketing strategy that includes information about such programs available in your area.

I read a hilarious article (list, really) in Men’s Health this evening, titled “25 Simple Steps to a More Perfect World.”  While not about real estate in any way, it did make the suggestion that all base runners should score on a ground-rule double. As one of the 15-20% of Americans who still loves baseball, that alone made the article worthy of my praise.  As an homage to this clever list, here below are 25 simple steps to follow for a more perfect home buying experience.  I cannot promise it will be as witty, but it will be useful and poignant, and that’s really what you came here for, right?  A list, by design, is going to raise many points, without going into very much detail.  So, if you have a question about one or more of the steps below (or about ground-rule doubles), just ask!

1. Get pre-approved for a mortgage FIRST.  There are few things worse than finding the home of your dreams, and then finding out it’s priced $60,000 above your threshold.  Also, if you think you’re going to want more than one quote, you’re right.  Try applying with your preferred bank, who may offer you a discount for your continued business, and a local mortgage broker, who has access to a network of lenders and possibly lower interest rates.  Ask for a Good Faith Estimate (GFE) from each, and compare the two.

2. Start saving for your down payment plus closing costs now.  Get an estimated amount to save from your mortgage loan officer, then save 10-20% more for incidentals.

3. Research the crime statistics of the areas in which you are looking.  Research the school districts serving the areas in which you are looking, even if you do not have and do not plan to have children.  You may not care how the local elementary, middle, and high schools rank, but the future buyer of your home might!

4. Don’t change anything relating to your financial or credit record.  Changing jobs, closing credit card accounts, making large purchases, opening new credit accounts, transferring large amounts of money from one account to another, and closing bank accounts can all affect your loan approval.  If you are considering doing anything related to your finances or credit, consult with your mortgage loan officer first.

5. Drive through the areas and neighborhoods in which you are looking.  Sure the photos of the home on REALTOR.com look great, but what’s next to it?  What’s around the corner from it?  How close is the nearest grocery store, gas station, dry cleaners, etc.?

6. Ask your mortgage loan officer if there are any programs that can help you with your down payment or your closing costs.  There are many programs that can, but some take 60-90 days to navigate your way through.  If you start the program now, you may be half-way (or further) through it by the time you find and negotiate a contract on your next home.

7. Ask your mortgage loan officer and your REALTOR if there are any tax credits that would be available to you after you purchase your next home.  Are you going to be a first-time homebuyer?

8. Find and choose an experienced REALTOR whom you trust.  A REALTOR can give you real-time access to your local Multiple Listing Service (MLS).  Most of the other websites out there are days, weeks, or months behind the current supply of inventory.  In this transitioning market, you can’t afford to be hours behind, let alone days!

9. Consult with everyone who is going to have a vested interest in your next home early in the process.  Are your parents going to help you with your down payment?  They’re probably going to want to see any home you make an offer on, too.  Is your husband going to live in this home too?  He should probably be receiving the same emails of listings, too.

10. Meet with a Certified Public Accountant (CPA) or similar advisor to discuss what impacts buying a home will have on your income taxes next year, and subsequent years.

11. Start researching homeowner’s insurance companies now.  You won’t have to choose one until after you’ve negotiated a contract on a home and have begun the loan processing period.  However, it’s an important decision to make, and should be given its due consideration.

12. Start researching home warranty companies now.  The seller of the home you buy may pay for the first year of a home warranty plan, or not.  Either way, not all home warranty plans are created equal.

13. Visit the website of your state’s Association of REALTORS.  The website will likely provide lots of helpful information, specific to buying a home in your state.  Get familiar now with how a real estate transaction works there.  What happens in Maryland does not necessarily happen in Arizona, or in the same order.

14. Take a drive from the area(s) in which you are looking to buy to your place of work/school during the same time of day you would be taking this drive on a typical day.  Is the area a 20-minute drive from work on a Sunday at 4pm?  If so, it may be a 45-minute drive from work on a Monday at 8am.

15. Review a blank copy of the Purchase Contract most commonly used in your state.  Start familiarizing yourself with the terms used in it, and what agreements you will be expected to make.  Also, keep in mind that most builders and banks do not use standard Purchase Contracts.  If you end up buying from them, ask your REALTOR to review the contract, and discuss with you any clauses that are out of the ordinary.  The moral of this is not to sign anything until after you thoroughly understand it.

16. Start gathering your closing funds into one bank account now.  You will be expected to open escrow with an earnest deposit as soon as your offer is accepted by the seller.  This deposit usually must be made with guaranteed funds like a Cashier’s Check or wire transfer.  The amount of your earnest deposit will depend on a variety of factors including: local customs, the purchase price of your home (the higher the price, the higher the earnest deposit is expected to be), the seller’s requirements (builders and banks tend to require a higher earnest deposit from their buyers), etc.  Ask your REALTOR for further guidance on this matter.

17. Start researching home inspection companies now.  Even if you intend to purchase a new construction home, an inspection by an independent third party may reveal oversights the builder thought were taken care of.  Your REALTOR can probably offer you a referral to one or more companies, but make sure you are confident in the inspector you hire, too.  Do you want the inspector to take photos of recommended repairs?  Not all inspection companies offer this service.

18. Decide whether or not you are willing to live in a subdivision managed by a homeowner’s association.  Most homeowner’s associations have a specific list of rules, by which all members are bound.  Some prohibit certain types of pets, while others prohibit boats and RVs from being visible in your back yard.  Most also impose regular (monthly, quarterly, semi-annual, or annual) fees, which are then used to pay for ongoing maintenance and improvements to the neighborhood’s common areas.

19. Compare the annual property taxes of each property you look at, especially if you are looking at more than one type of dwelling (Single Family Dwelling, Condo, etc.) or in more  than one municipality/city/county.  Your annual property taxes will affect your monthly mortgage payment.

20. Ask your mortgage loan officer for a list of the documents he/she is going to need from you before sending your file to be underwritten.  Even if you have outstanding credit, expect to provide a few of your most recent pay stubs, and a few of your most recent tax returns.  The days of “no-doc” loans are long gone.

21. Assess how much work you are willing to put into your new home after purchasing it, and then tell your REALTOR what you decide.  If you decide you don’t want to install any new appliances, your REALTOR can help you avoid homes without appliances (e.g., most bank-owned homes).

22. Start researching moving companies now; most book appointments weeks and months in advance, and therefore require advance notice.  There are many moving companies out there, big and small, national and local.  They offer different levels of service, at different prices.  Once you’ve chosen a company, wait to book your appointment until after you’ve negotiated the contract on your new home.  Then, schedule your move to take place several days after or even a week after your scheduled Close of Escrow date.  If you close escrow late, you may be stuck with a re-scheduling fee from the moving company or, worse, with a truck and two disgruntled men at a house you can’t move into yet.

23. Prepare a “Must-Have” list and a “Must-Not-Have” list for your next home.  Give these lists to your REALTOR, so neither of you waste time looking at a home that you would never buy.

24. Decide whether you want to focus your search on new construction homes or re-sale (previously owned) homes.  Comparing the two is like comparing apples with oranges.

25. Decide how you are going to take title on your new home, especially if you are married and/or are buying a home in a state you have never lived in before.  There are different ways to take title in different states.  You should meet with an attorney or other qualified professional who can advise you on the ramifications of each option.

These questions below will help you decide whether you’re ready for a home that’s larger or in a more desirable location.  If you answer yes to most of the questions, you may be ready to move up.

1. Have you built substantial equity in your current home?  Look at your annual mortgage statement or call your lender to find out.  Usually, you don’t build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you’ve owned your home for five or more years, you may have significant, unrealized gains.

2. Has your income or financial situation improved?  If you’re making more money, you may be able to afford higher mortgage payments and cover the costs of moving.

3. Have you outgrown your neighborhood?  The neighborhood you pick for your first home might not be the same neighborhood you want to settle down in for good.  For example, you may have realized that you’d like to be closer to your job or live in a different school district.

4. Are there reasons why you can’t remodel or add on?  Sometimes you can create a bigger home by adding a new room or building up.  If your lot isn’t large enough to do so, your municipality/HOA doesn’t allow it, or you’re simply not interested in remodeling, then moving to a bigger home may be your best option.

5. Are you comfortable moving in the current housing market?  If your market is hot, your home may sell quickly and for top dollar, but the home you buy also will be more expensive. If your market is slow, finding a buyer may take longer, but you’ll have more selection and better pricing as you seek your new home.

6. Are interest rates attractive?  A low rate not only helps you buy a larger home, but also makes it easier to find a buyer for your current home.

If you’re thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale.  A short sale is one where the net proceeds from the sale won’t cover your total mortgage obligation and closing costs, and you don’t have other sources of money to cover the deficiency.  A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.

1. Consider loan modification first.  If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home.  Your lender may agree to a modification such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a forbearance period if your situation is temporary.  When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if:

• Your property is worth less than the total mortgage you owe on it.
• You have a financial hardship, such as a job loss or major medical bills.
• You have contacted your lender and it is willing to entertain a short sale.

2. Hire a qualified team.  The first step to a short sale is to hire a qualified real estate professional/team and a real estate attorney who specialize in short sales.  Interview at least three candidates for each and look for prior short-sale experience.  Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales.  You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won’t try to take advantage of your situation or pressure you to do something that isn’t in your best interest.  A qualified real estate professional/team can:

• Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
• Help you set an appropriate listing price for your home, market the home, and get it sold.
• Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
• Ease the process of working with your lender or lenders.
• Negotiate the contract with the buyers.
• Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval.  You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.

3. Begin gathering documentation before any offers come in.  Your lender will give you a list of documents it requires to consider a short sale.  The short-sale “package” that accompanies any offer typically must include: 

• A hardship letter detailing your financial situation and why you need the short sale
• A copy of the purchase contract and listing agreement
• Proof of your income and assets
• Copies of your federal income tax returns for the past two years

4. Prepare buyers for a lengthy waiting period.  Even if you’re well organized and have all the documents in place, be prepared for a long process.  Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:

• If you have only one mortgage, the review can take about two months.
• With a first and second mortgage with the same lender, the review can take about three months.
• With two or more mortgages with different lenders, it can take four months or longer.

When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale.  The last two actions can lengthen the process or put you back at square one.  (Your real estate attorney and real estate professional/team, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)

5. Don’t expect a short sale to solve your financial problems.  Even if your lender does approve the short sale, it may not be the end of all your financial woes.  Here are some things to keep in mind:

• You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale.  If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
• Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount.  Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012.  Be sure to consult your real estate attorney and your accountant to see whether you qualify.
• Having a portion of your debt forgiven may have an adverse effect on your credit score.  However, a short sale will impact your credit score less than foreclosure and bankruptcy.

Although our local law enforcement officers, teachers, firefighters, and emergency medical technicians will never receive enough appreciation, the U.S. Department of Housing and Urban Development (HUD) has an extraordinary program designed to help stabilize the national housing market while giving individuals in these professions an exclusive opportunity.  More specifically, individuals meeting the requirements for a law enforcement officers, teachers, firefighters, and emergency medical technicians set forth by HUD may buy HUD-owned single family (one-unit) homes in designated revitalization areas on the Good Neighbor Next Door (GNND) website for 50% of the HUD appraised value.  They must use a real estate agent/broker in the purchase of the home, but they do not need to be first time homebuyers.  Participants may simply not already own any residential real property at the time of their offer or within one year prior to that date.  As long as the GNND participant lives in the home as his/her sole residence for at least a full 36 months, he/she can then sell the property and keep any equity/appreciation paid at close of escrow, without re-paying the 50% discount that the participant received originally.

You may, of course, still have questions about the program.  If so, check out the Good Neighbor Sales Frequently Asked Questions.

As we mentioned in a recent blog entry, real estate is a commodity with market fluctuations that are common to other commodities like stocks.  After years of annual increases, home prices have gone the other way in most areas.  Yet, most homeowners who bought during those years of price appreciation have earned positive equity in their home.  Some homeowners who did not need to sell at the market peak, but need to sell now are remembering those peak prices and feeling that they are losing money by selling at today’s market-influenced prices.

One way to look at this is to compare a similar situation with another commodity.  What if someone bought stock in a blue chip company at $70 per share and then watched it rise to $130 per share and then fall to $100 at the time they needed to sell it.  Did that person lose $30 per share or gain $30?  If they focus on the peak price, they lost an imaginary $30.  However, since they paid only $70 and sold it at $100, they actually gained $30 per share, an excellent return.  Today’s sellers should see their situation in a similar light.

What about those sellers with negative equity owing more than their property is worth?  There are many reasons why sellers have found themselves in this situation: refinancing, taking out a home equity loan on equity valued during the peak, or buying at the peak.  If they don’t need to sell for a while, they know that commodities that go down will come up as real estate always has.  If they do need to sell now, there are multiple ways to get to the settlement table with a buyer depending on the situation.

Sellers and buyers can both benefit from the concept of obvious value.  When sellers offer their property in both price and condition as an obvious value compared to the other homes on the market, their home will sell in any market.  Conversely, when other homes are positioned as obvious values as compared to the seller’s property, the seller’s property will be used as justification for buyers to buy other properties.

If prices are declining, utilizing the obvious value strategy will often net the seller the most money.  If it is not used, sellers will often find them self chasing the market down and ultimately selling for less.

For buyers, acknowledging obvious value is probably the best barometer of whether their decision is a good one or not.  The media will talk about the market, but they will never be able to compete with a buyer’s knowledge after comparing properties.

Buyers sometimes hesitate because they want to be sure their decision is the correct one to make.  The media will talk about the market being up or down versus this month or the same period last year, prices up or down as compared to the same, or increases or decreases in the number of sales.  It’s no wonder a buyer may second guess him/herself or want to wait for better media signals.  The other confusion comes from whether the media is talking about the national numbers, the state’s numbers, or the local housing numbers.  What they are never talking about are the obvious values that exist in every market.

Finally, obvious value applies to not only price and condition, but also terms.  Interest rates, seller concessions, and contract specifics can often be used to sweeten or cause a property to become an obvious value.  For a more detailed analysis, or for help in determining obvious value, consult your local REALTOR.

Winter is officially over and with the arrival of Spring comes the not-so-welcome words ‘It’s time for Spring Cleaning‘.  If you’re ready to put away the holiday doormat, sweep away the cobwebs and make way for a new season, here are some tips that will help you do just that.

*  Doormats:  Go shopping for a new front door mat.  It will freshen up the front of your home and will help to stimulate the economy with the Spring spending.

*  Carpets:  Hire a professional carpet cleaner to clean those carpets you’ve been walking on with your muddy, snowy and wet shoes for the last several months.  It’s always a good idea to give your carpets a good vacuuming before they get cleaned. Remember to move all of the furniture and vacuum beneath it.

*  Windows: Wash all of your windows inside and out.  While you’re at it, clean all of your inside and outdoor light fixtures.

*  Dusting:  Dust your entire home room-by-room.  Remember to get all of those hard to reach places you’ve missed.  Dust your books, windowsills and baseboards.

*  Walls:  Wipe down all of your walls with a soft, damp cloth.

*  Roof:  Inspect your roof for damage.  Call your local licensed roofer and ask if they give free inspections.  Most of them will.

*  Heating & Cooling: Have your heating and cooling system inspected by a licensed HVAC contractor.  Remember to replace your filters.

*  Landscaping:  Now’s the time to clear away dead plants and trees and plant some flowers.  If you live in a homeowner’s association, remember to check with them first on what you are allowed to plant.

*  Paint:  Check the paint on your home.  Scrape, prime and paint where needed.  Remember to properly prepare the surface before painting.

*  Garage Sale:  Now’s a good time to enlist the help of your family members to arrange a garage sale.  It’s a great way to help pay for some of those Spring cleaning expenses.

It’s not always fun to do your Spring Cleaning but just think of how good you’ll feel when you’re finished!  When you’re done, sit back on your freshly cleaned deck and enjoy a cold lemonade while you congratulate yourself on a job well-done.

Valleywide, all dwellings

Actives: 55,937

Unsold: 49,542

Under Contract in the Last 30 Days: 6,395 (11% of actives)

Valleywide, single family dwellings

Actives: 45,872

Unsold: 40,297

Under Contract in the Last 30 Days: 5,575 (12% of actives)

Valleywide, luxury homes

Actives: 3,332

Unsold: 3,173

Under Contract in the Last 30 Days: 159 (5% of actives)

East Valley, all dwellings

Actives: 19,304

Unsold: 16,781

Under Contract in the Last 30 Days: 2,523 (13% of actives)

Analysis

At first glance, this week’s Phoenix real estate market update may look less encouraging than last week’s did.  Afterall, the number of houses for sale across Phoenix and its suburbs rose.  However, upon further evaluation, one should note that the number of houses under contract also rose by 7.5%, which caused the Valleywide supply of houses to fall to 8.7 months.  Those are two far more signficant indicators than the total inventory climbing, which only grew by less than 1%.

Within the micro-markets that we watch, there was more positive news.  The percentage of Phoenix single family homes under contract jumped to 12%, and the percentage of Phoenix East Valley houses under contract jumped to 13%.  The only other micro-market that we track, Phoenix luxury homes, did not fair quite as well.  Among luxury homes, the total inventory grew slightly, and the number of homes under contract slipped.