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As everyone already knows, there is a lot of uncertainty in the current real estate market nationwide. Not to mention here in Phoenix. This raises questions of all kinds. How much are prices dropping? When are we at the bottom? What are relevant comparables? How much of a discount can I get? And on and on… These questions can only truly be answered by looking at specific homes in specific areas and because a home is the biggest investment that most people will make, everyone seems to come up with there own philosophy on the current market. What all this means is simply that no one wants to overpay for a home (especially in a depreciating market). In this post I am going to touch briefly on a few points that may help potential buyers understand the how to get the right home at the right price.

Everyone wants the “Deal”

When meeting with buyers for the first time, the number one thing I hear is that they want a “deal.” I usually respond by saying something like, “You mean you don’t want to overpay?” Obviously, I am not trying to be rude, but I want them to know that it’s my job to find them a good deal that they can feel good about. I do that by putting real market statistics and numbers in front of them. I focus on the different conditions of homes, areas that have held value, and really let them see market as it really is. It’s basically an education process. Buyers have to understand that you can’t buy a perfectly maintained home at the same price as a dump a block away. A homes condition has a lot to do with value. If a buyer is truly looking for the “best deal” we can just pull up an area by price per square foot and they can buy the lowest price per square foot. That way they are getting the ‘Best Deal.” But that’s not how it works. Almost every buyer that I work with forgets about the emotional aspect of buying a home. In my opinion, what buyers are really looking for is an emotionally appealing home (a home that they can see themselves living in) at a good price.

Making offers based off of “List Price”

Another interesting point to bring up is list price. I have a lot of buyers that base offering prices off of the list price. They say something like, “Well, it’s listed at this so we should come in around here.” I can’t tell you the crazy mathematical equations I have seen at this point. It just goes back to the point that everyone has their own opinion about the current market and prices. What everyone has to realize is that the list price is nothing more than one (or a couple) person’s opinion of what a home should sell for. It can be based on some numbers, but doesn’t have to be. That’s why it is important to look at the stats and comparables. If the buyer is educated, they will know what a good offering price is. It is also worth mentioning that I have had listing agents tell me that they know the list price is high, “just make an offer.” Which tells me the listing agent hasn’t done their job. So, buyers need to understand that in general listing prices can be placed on a broad spectrum. It always comes back to education.

Differences between distressed sales (Foreclosures and Short-Sales) and typical resales

The last thing I wanted to touch on was the differences between distressed sales and typical transactions. “Foreclosure” and “Short-Sale” are buzzwords in the real estate industry and there are definitely some “deals” to be had. But buyers beware! As a buyer, it is important to understand that foreclosures and short sales can be a wild ride. From long response times on offers to unexpected problems with the home, it is important to be educated on the possible differences involved with these transactions. For example, foreclosures (bank owned homes) may require a buyer to get pre-qualified with their bank. Bank owned homes are also typically sold in as-is condition. What you see (and don’t see) is what you get! The approval process can also be longer and banks often include their own addendum. All of these variations can alter timelines and costs associated with the purchase of a home. I generally tell buyers with very strict timelines that we have to walk away from short sales where communication seems to take weeks or even months.

I hope that everyone takes a little something from this post and as always, education is key!

All the Best!

-Eric

With all the short sales currently dominating our market, I thought it would be a good idea to take a minute to break down exactly what a Short Sale is and also cover Arizona’s Short Sale Addendum, an additional document required by the lender to accompany the purchase contract.

What is a Short Sale?  In a nut shell, a short sale is when a lender agrees to sell a property for less than what is still owed on it.  We are seeing a lot of Short Sales in the Phoenix/Scottsdale market.  When a borrower falls behind on their payment(s), I say payments if there was a second mortgage taken out on the property, they have a few options: Let the bank take the house back through Foreclosure, which would negatively affect a person’s credit and cost the bank money to process, or they can try to sell in hopes of getting out from under the monthly payments and avoiding Foreclosure.

But what if they currently owe more than the property is worth?  This is where Short Sales come into play.  For sellers, a short sale could help salvage their credit score and get them away from a high monthly mortgage payment(s).  For buyers, purchasing a property through a short sale could offer a very lucrative deal by getting a property undervalue, however, the purchase process could take a very long time (weeks or even months) and there could be lots of competition from other buyers thus increasing the purchase price.

In part 2, I will cover the first parts to Arizona’s Short Sale Addendum.

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