Pocket Listings

March 22, 2012 By Jon Griffith Leave a Comment

Sometimes a home owner will hire a real estate agent to sell a house as a pocket listing. This means that the home won’t be advertised on the MLS. It happens when an agent may have a buyer for a home before the property needs any marketing, and ultimately saves time and effort which equates to savings.

In a market like today’s market, if I have a buyer who is eager to buy and a seller who hasn’t yet listed their home with me, I might connect them together, take the listing, and then facilitate the transaction, never having to publish the property on the MLS. In some cases, the nature of the pocket listing (it’s called a pocket listing because the brokerage has it in their back pocket, so to speak) is such that it remains off the MLS for a specific period of time before being published. These details are all negotiated at the time that the listing employment contract is created.

Often the house is added to the MLS while there is already interest in it, and sometimes offers have already been written for the property based on the connections that the listing agent had prior to publishing the house for sale.

When this happens the house goes on the market, but can, regardless of the showing instructions (such as 48 hours notice for tenants) already be under contract before anyone gets to see it. Ultimately it’s in the best interest of the seller to expose the property to as many people as possible to generate backup interest.

Today, this can be frustrating, because new listings don’t seem to be all that new.

Filed Under: Buying A Home Tagged With: home, house, MLS, property

Bonkers

March 22, 2012 By Jon Griffith Leave a Comment

Here we go again. The market is going bonkers, today…not 2 months from now, not 2 months ago…today. Right now. It’s bonkers so much that I’m having an extremely difficult time competing against multiple offers for the clients that I have who are looking to buy.

What’s It Going to Take to Buy A Home in Today’s Market?

That’s the billion dollar question, isn’t it. Here are some statistics updated today at 11:13 AM that might give you an idea of the state of the real estate market in Phoenix and surrounding ares.

There are 14,772 homes on the market. That includes ALL listings in ALL areas covered by the Arizona Regional Multiple Listing Service (ARMLS). In 2005, when bananas were falling out of the sky, we had about 5,000 on the market. In 2009 or so, there were 85,000 homes on the market.

If you know anything about supply and demand you’ll easily be able to identify that we are nowhere near a buyers market. We’re in a seller’s market where the seller calls the shots through the negotiation process for price and repairs.

Of those 14,772 homes, only 11,449 are single family detached homes leaving 3325 condos, town homes, apartment style homes, gemini, etc.

Of the 11,449 single family detached homes, 1,250 require short sale approval, 82 are what some people call “pre-approved” short sales, 1,255 are owned by a bank, 71 are HUD owned homes, leaving a grand total of 8,791 homes for sale.

So what IS it going to take to buy a home?

In a market like this, if you’re serious about buying a home, you’re going to have to let go. Let go of your ideal location. Let go of your ideal criteria. Let go of everything you have in your mind that determines what you will or won’t accept in the house of your dreams. Why? Because you simply don’t have much to choose from right now. There are far more than 11,449 buyers out hunting for a property, and word is spreading fast regarding scarcity. When this happens, there’s no longer a need to create urgency…it creates itself. The moment the national media breaks the news that “you’d better get out there and buy” it will be too late.

You’re going to have to be on the computer night and day waiting for new listings to show up, and when they do, you don’t have the luxury of waiting until the weekend. You’ll find yourself taking paid days off, sick days, or simply skipping out for lunch to hopefully see a home that just came on the market. And for those agents who once had a life? Leave it behind for the time being. You’ll be writing contracts and submitting them at 11PM at night or 2AM in the morning…whatever it takes to get your offer in front of the seller before they accept another.

Money!

If you don’t have your financing in order, forget it. You’ll need to come in with a strong offer, a large earnest deposit, down-payment, and a completed Pre-Qualification form. Got cash? Even better! Can you close quickly? Awesome!

If you’re lucky enough to open escrow on a property, don’t expect the sellers to do any repairs. After all, the ball is in their court. They have a line of people just waiting at the chance to purchase the house with cash, as is, waiving the appraisal and the inspection.

Man This Sounds Great, Should I Sell?

Filed Under: Buying A Home Tagged With: buyers, home, market, property

How Soon After a Short Sale Can I Buy a Home Again?

February 29, 2012 By Jon Griffith Leave a Comment

A recent report was released by Scott Modeer, loan officer for Arizona Bank & Trust regarding the timelines involved in purchasing a home after going through financial hardship. The information contained in this report is obviously a snapshot of the market now and may change in the future depending on what our government decides.

If you’ve experienced a foreclosure, short sale, or bankruptcy, the following information may help you determine when you might be able to qualify for a new mortgage so you can be a home owner again.

This is a general guide, and the answers vary depending on the type of program you choose.

FHA Loans

Foreclosure: 3 years.
Deed in Lieu of Foreclosure: 3 years. (Deed in Lieu is foreclosure.)
Short Sale: 3 years (in some cases, if you weren’t delinquent on the original mortgage, this may be waived.)
Chapter 7 Bankruptcy: 2 years.
Chapter 13 Bankruptcy: 1 year.

(Editorial: Isn’t it counterintuitive to think that if you simply blow off your debts and file bankruptcy that someone would be more willing to lend to you again earlier than if you do the right thing? Gross.)

VA Loans

Foreclosure: 2 years.
Deed in Lieu of Foreclosure: 2 years.
Short Sale: 2 years.
Chapter 7 Bankruptcy: 2 years.
Chapter 13 Bankruptcy: 1 year.

USDA Rural Housing Loans

Foreclosure: 2 years.
Deed in Lieu of Foreclosure: 2 years.
Short Sale: 2 years.
Chapter 7 Bankruptcy: 2 years.
Chapter 13 Bankruptcy: 1 year.

Fannie Mae/Freddie Mac Conventional Conforming

(Editorial: Notice how the government programs are convoluted with ridiculous if/then conditions. They never make any of this simple.)

Foreclosure: 7 years.
Deed in Lieu of Foreclosure:
2 years if financing ≤ 80% of the new property’s value; 4 years if financing 81-90% of the new property’s value; 7 years if financing > 90% of the new property’s value.
Short Sale:
2 years if financing ≤ 80% of the new property’s value; 4 years if financing 81-90% of the new property’s value; 7 years if financing > 90% of the new property’s value.
Chapter 7 Bankruptcy: 4 years.
Chapter 13 Bankruptcy: 2 years.

Jumbo Loans

Foreclosure: 7 years.
Deed in Lieu of Foreclosure: 7 years.
Short Sale: 7 years.
Chapter 7 Bankruptcy: 7 years.
Chapter 13 Bankruptcy: 7 years.

Filed Under: Mortgages Tagged With: Jumbo Loans, mortgage, property, value

Why Short Sales Will Be Around for a While

February 15, 2012 By Jon Griffith Leave a Comment

If in fact the reports are correct, and I believe they’re pretty close, then nearly 50% of the home owners in Phoenix and surrounding areas are upside down in their homes, owing more than their homes are worth.

That’s not to say that everyone is grossly under water, but underwater is underwater. The degree to which you’re under water will vastly impact your decisions regarding your future, and affect the outcome of a possible need…the sale of your home.

Life continues to happen, and that means that for who are able to make their monthly payments, a shift in circumstances may mean the need to sell their home and reconfigure their lives. If their house is upside down and they need to sell, they’ll have no choice but to sell the house short of what they owe their lender. If they have to sell, they’ll either need to cover the difference out of pocket, or ask their lender to take a loss.

The answer to the question, “how long will short sales be around” depends on the rate of growth in the real estate market and the rate of appreciation in resale values.

Let’s take a look at an example of one person’s situation in a highly desirable area of Scottsdale. Originally purchased at $115,000, this Scottsdale town-home appraised at $240,000 one year prior to the height of the market. A neighboring property with an identical footprint sold for $319,000. When the market tanked, the values dropped to their current range of $100-120K.

Why was the home appraised when it was? For the purpose of taking out a Home Equity Line of Credit (HELOC) which ultimately raised the amount owed on the property from $115,000 to $200,000.

With a town home valued at $100,000 and a mortgage balance of $200,000, there’s a HUGE gap to bridge before the home has any equity. So let’s look at an example of what happened to this particular condominium. We’ll look at it first from the “What If” angle.

What if the housing bubble had never happened?

The figure above assumes a 4% annual appreciation. The town home, purchased in 2002 for $115,000 gradually increases in value to an approximate value of $169,000 by 2012. Not bad, considering by then the amount owed on the home would be about $88,000.00. The green line represents the balance owed on the property, which should gradually decrease over time. In this illustration, there’s no evidence of a bubble, but the bubble was the only reason a line of credit was available, so the green line should continue to decrease.

But that’s not what happened. In reality, the following illustration shows a more accurate picture of what’s going on. The current value of the property is $100,000, not $169,000. So, by shifting the blue line to the right, we get a more accurate picture of how long it will take to break even on the property.

As in the previous figure, this assumes a 4% annual appreciation, but this time we’ve added the bubble, and shown that the value of the property TODAY is $100,000. Based on this, we can assume that it will be another 7 years before this house is worth what is owed…if 4% is the rate of appreciation and the home owner continues to make payments to the principal balance. Obviously longer if it’s lower, and shorter if it’s higher. Either way, this house is under water for a while. Another factor to consider is the number of interest only loans that cause that green line to remain flat. I haven’t illustrated that, but if you flat line the loan balance, you can imagine how long it will take for the blue line to reach the green line. In fact, the property may cap out at a certain value and never be worth what is owed.

What This Means

This means that if there is ANY reason that this home owner would need to sell the home (and life happens) then the sale will be a short sale. The conclusion drawn from this is that Short Sales will be around for a while.

Filed Under: Short Sales Tagged With: home, housing, property, short sales

What If Your Taxes Aren’t Up To Date On A Short Sale?

February 9, 2012 By Jon Griffith Leave a Comment

Dear visitor 789738098. I just saw that you had posted a question in my online chat and I was away from my keyboard so I wasn’t able to answer you, but I’ll be happy to address this question, as it’s a common concern.

Property taxes always take priority over any other liens. When you took out your loan to purchase the home, most likely your lender set up an impound account to hold a portion of your monthly payment to ensure that your taxes were paid on time. The lender will typically pay that bill for you out of the impound account rather than letting you be responsible for the payment. Why? Because property tax liens are a priority, and if you don’t pay them, whomever does pay them, be it the state, or an investor who has purchased a tax lien, can foreclose on the property. Lenders would be crazy to let you get behind on a few thousand dollars per year to risk losing what you owe them, which is typically hundreds of thousands of dollars.

If you have fallen behind on your mortgage payments, that also means that your impound account isn’t growing either, so when tax time comes, the lender doesn’t have your funds with which to pay the bill. But, knowing that a tax lien could cost them a fortune, they will still pay the tax bill to keep that from happening. You still owe it, unless you negotiate it away through a short sale.

In order for any property to change hands, title must be clear of all clouds. Tax liens are clouds on title. If your lender approves a short sale, that approval will be based on a HUD-1 that includes clearing up your property tax bill. There’s no way around it. The bill must be paid, and if you don’t have the money, the lender will have to pay it. They don’t have a choice. They’ll either pay it through the closing of a short payoff, or they’ll pay it when they sell the property after you lose it. The latter simply costs them more money in the long run (which is why short sales are win win for everyone anyway.)

So, if your taxes aren’t caught up when you bring an offer to the bank, rest assured the net payoff will take into account the past due taxes. In fact, in many cases, during negotiations, the bank pays the most recent tax bill which in affect changes the numbers on the HUD-1 in your favor.

Filed Under: Short Sales Tagged With: payoff, property, taxes, title

Pre-Approved Short Sales, What It Means

February 8, 2012 By Jon Griffith Leave a Comment

Short sale approval letters are settlement agreements written by the home owner’s lender setting forth terms and conditions that the seller must meet through the sale of their home.

Most have an expiration date requiring that the settlement agreed upon be paid by that date. Although it’s of little consequence, in my opinion (as it’s a debt settlement between the seller and seller’s lender), they also stipulate the name of the buyer on the agreement.

This would naturally mean that any settlement agreement would be invalid if the buyer stipulated were to cancel the transaction. However, since the most important factor to the investor who owns the note is the net payoff, an approval tips their hand to the dollar amount they’re willing to accept, regardless of the buyer.

Sometimes a lender will be pro-active about the prospect of a short sale, and will “pre-approve” a sale amount and terms that will be acceptable to a future buyer.

So, a pre-approved short sale is one of the following:

It’s a property that has previously had an offer that met the investor’s payoff requirements but has lost its buyer-OR-
It’s a property that has been given a pre-approved price without an offer.

A house is only worth what someone will pay for it. Period. If the investor has pre-approved a short sale that has not yet had an offer, it’s likely they’re unrealistic about the asking price, so the 2nd example above is less likely to be a success, but still possible.

On the other hand, if the property has already been approved based upon a contract that was previously submitted from a qualified buyer, then the terms of that deal can be used to attract a new buyer.

Buyers who find short sales opportunities in the middle of this scenario are often pleased to find that it takes a fraction of the time to acquire a new settlement agreement from the lender.

Filed Under: Short Sales Tagged With: agreement, buyer, property, short sale

Inspections vs. Appraisals

October 31, 2011 By Jon Griffith Leave a Comment

In response to an article posted on DSNews.com entitled “Zillow: Prospective Home Buyers Overestimate Home Value Appreciation“ where the author writes about buyers being confused about the difference between inspections and appraisals, I thought I’d post a simple explanation should you be one of those prospective home buyers.

Appraisals

An appraisal is a professional opinion of a home’s value. When you purchase a home using a lender, while in escrow, the lender will order an appraisal to ensure that the home is worth at least what you’ve agreed to pay for the home. If an appraiser reports a value lower than the contract price, your lender will not underwrite the deal unless you cover the gap with funds at closing. You could also negotiate a lower price, or simply walk away. Either way, it’s simply an opinion of value used to gauge the agreed upon price. In a cash deal, a buyer might waive the appraisal, but he or she may also want to conduct an appraisal to ensure they’re not over paying for the property.

Inspections

When you and the seller come to an agreement on the price of the home you are considered “under contract.” In the Arizona Purchase Contract there is a section called Due Diligence. This is where your inspection time frame is defined, which is typically 10 days, but always negotiable. During that 10 days, it is your responsibility as a buyer to conduct as many inspections on the property as you feel comfortable with. Usually a single general inspection is enough, but sometimes the general inspector recommends that you find a specialist to confirm potential findings. Inspections have nothing to do with the appraisal, although an experienced appraiser will often identify potential problems that a general inspector would also find. At the end of the inspection period, the buyer writes a notice to the seller (the BINSR) with their findings, asking for repairs, backing out, or accepting the property as it is with no changes.

Both the Inspection and the Appraisal are considered contingencies on the contract that can kill the deal. If the house doesn’t appraise, you won’t get lending, or can walk away or renegotiate the price. If the inspection reveals a plethora of potential problems, you can also walk away or ask the seller to remedy the problems prior to close of escrow.

Both are recommended for cash buyers. The appraisal is required when you get a loan to buy.

Filed Under: Real Estate Basics Tagged With: buyers, contract, home, property

Who Prices a Short Sale?

July 19, 2011 By Jon Griffith Leave a Comment

Inspiration for this article comes from a recent conversation I had with another agent about a short sale listing that hasn’t received any offers because the seller is emotionally attached to the house and won’t lower the price.

Guys, you’ve got to hear me on this one. Just like any other real estate offering, the owner is responsible for setting the price, but it’s our job to advise them. The seller is who prices a short sale. Short sales, like any other property, can be priced wherever you choose.

You could price a $400,000 home for $200,000 and sell it for $200,000. You might neet to spend some time in a padded cell for a while, but the bottom line is, you can ask whatever you wish. You could ask $800,000 for a home worth only $300,000. You’ll never see an offer, but you can do that.

Will you get what you ask? Not necessarily. And furthermore, if you don’t own your home outright, what you ask may be less than what you owe, in which case you would a) need to cover the difference out of pocket, or b) appeal to your lender for a short sale.

Short Sale Pricing

If you can’t cover the spread, you’re a short sale candidate, and you must learn to remove yourself from the emotional attachment to your home and price the property to sell.

Think about it! You’re not going to make more money when you sell it, so why would you resist pricing your home at a market value that will actually draw offers.

Filed Under: Short Sales Tagged With: home, house, property, Short Sale Pricing