Phoenix Realty and Reality

Brokers are sales persons...

2010-03-14T11:23:00.002-07:00

Is there a broker out there that will entertain this idea, if nothing more, as an exercise in ideas?

Short sales as we know them should be outlawed! There should be a complete makeover of the current short sale process!

In short, the agreement between a borrower and the lending institution holding the mortgage should be worked out before a real estate agent enters the transaction.

Article 11 of the Code of ethics:

REALTORS® shall not undertake to provide specialized professional
services concerning a type of property or service that is outside their
field of competence unless they engage the assistance of one who is
competent on such types of property or service, or unless the facts are
fully disclosed to the client.

I think that NAR, AAR and brokers throughout the country are violating this standard of practice when assisting with a short sale under the current methods.

There are 3 principles in a short sale transaction and currently, the most important one is conducting business without an agent and mostly without regard to the Code of Ethics.

Realtors are acting as communication conduits between seller, buyer and a financial institution- I feel that is outside our field of competance no matter how many designations or "short sale expert" courses we attend.

The Immoral Short Sale

2010-01-31T11:39:00.007-07:00

University of Arizona Professor Brent White is causing quite a buzz with his defense of the individual who is walking away from a mortgage. To summarize: corporations are expected to walk away from bad debt obligations but individual home owners are made out to be a moral disgrace if they do the same thing.

I agree with the professor and will take it a step further and say that a foreclosure is the moral thing to do as opposed to a short sale- which is being tauted as the only thing that will save the housing market.

I think one thing should be stated right up front- both situations have the very same origination: a homeowner is not going to live up to the mortgage obligation that they originated with a lender. So if that is the sin that makes a foreclosure "immoral," then both situations include it.

A foreclosure is straight forward- the owner defaults and the lender takes back the property. The property is returned to the market place and sold to another owner. There is no ambiguity on behalf of either original party or the next owner.

With a short sale, the borrower composes a hardship letter, the lender decides if it is hardship enough, a random price is placed on the property and, in general, the property is not subjected to market forces. The original borrower and the new buyer spend an undetermined period of time waiting to see if the lender is going to approve the transaction and the real estate professionals wonder if they are going to get paid what was promised.

The most "immoral" part of the short sale is that it is prolonging the recovery of the real estate market and the overall economy in general. However, it is being advocated by real estate brokers, real estate lawyers and real estate escrow companies. Why are these parties such strong advocates? Their own financial requirements. Brokers would rather have 400 agents seeking short sale listings than 5 agents being assigned foreclosure listings. Short sales are legal hotbeds and create millions of dollars in billing fees. Title companies that are not associated with a lender account can conduct normal business with agents and try to get their escrows- which they cannot do with REO properties because they are already assigned.

Short sales are a curse on the real estate market right now. They are a dull rusty butter knife trying to cut a loaf of bread. As bad as it sounds, a foreclosure is a clean serrated knife. The bread has to be cut to be eaten and the serrated knife is a much better tool to do the work. The real estate market is the loaf of bread that will feed our economy and foreclosures are the best method to do the cutting.

On "connecting the dots"

2010-01-08T18:39:00.003-07:00

The war on terror- we are losing it. Let there be no mistake in that assessment. The bad guys are winning and there is no brightness in the near future.

In terms of lives, we may have killed more of them than they have killed but I am not sure of those numbers. I will never minimize one innocent life taken randomly in the name of a God or ideology but it goes beyond that because we are losing lives and money for no gain with our current strategy.

Think of the cost that the bombers and shooters put out in terms of money and then think of the money that is being spent by the American taxpayer chasing these ghosts. Think of the disruptions that we go through in order to be "safe."

I say we choose the path of passive resistance. Withdraw our troops from Iraq and Afghanistan. cut out the airport hassles when flying. Dissolve the money bleeding government agencies created after 9-11.

So what would happen? My theory is that after so many senseless acts of bloodshed in the name of any religion or cause, that religion or cause would soon be on the hit list of every person in the world. In the case of Islam, any person named Mohammad or Abdul would be publicly scrutinized and assumed to be guilty. There would be no place to hide or plot because the hatred and understanding of the hate would be common and not soldiered by the US government. The dislike and mistrust would be pure and with cause. Even the blind and apathetic would see the hate and brutality motivating the enemy.

Meanwhile, our assets would be preserved and held by the people. Our governments would remain solvent.

Is this giving up or in? I don't think so, it is just another way to fight a battle that we are losing on two fronts. People are dying anyway and while we fight a war with 4 years expectations and judgements- in the form of elections- the enemy looks at the timeline as one of centuries or eternity. At our current rate, we will lose from a slow bleeding death.

Live free or die!

2010 Predictions

2010-01-06T09:50:00.002-07:00

Happy New Year!

Home prices will be determined by what buyers earn as opposed to what they can get a loan for. This ratio has already taken a massive correction- which is good.

Home prices- the macro number will indicate that prices are stable or are increasing. This will be the macro "median" price. On a closer inspection I think the numbers will show that homes that are now listed for $500k will be reduced to $399k and below. Homes that are now listed at $350k will drop in price to well below the $300k level. All of these sales will "increase" the median price but the individual sellers and owners will see these numbers as dramatic value depreciation.

The number of real estate agents will continue to decrease. As renewal fees and subscriptions come due, the cost benefit analysis will lead agents to let their license expire and move on to other, less expensive, income searches.

Brokers, lawyers and title companies will continue to push for more short sales. The reason for this is purely economic and has nothing to do with concerns for the market or the economy as a whole. Brokers want more short sales because they can then have 400 agents trying to get listings as opposed to 40 agents with the REO listing accounts. Lawyers want them because they are a legal goldmine and title companies want them if they do not have a REO account from a major defaulted note holder.

The economic recovery will be prolonged by this "short sale fixation." While foreclosure sounds bad, it is actually a good thing for the market. The results are fast and quantifiable. They are generally without prejudice- meaning there is not a "hardship letter" detailing why a person needs relief. Heck, we all need relief but it comes down to whether or not we can pay the bills. If you don't pay your cable bill- they turn off your cable; don't have the money for a Ferrari, you buy a Ford. Utilities are public and have other guidelines- at times. We do not want to have 2,000 home public housing areas scattered across the country.

There is still pain to had but a clean sharp knife is generally faster than a dull, rusty blade that has uncertain results.

ts

The Housing Market Recovery

2009-03-07T23:20:00.002-07:00

The housing market is in full recovery mode. If you need an official start date of the recovery, it was July 24, 2007. That was the day that Countrywide co-founder Angelo Mozilo, announced to the top Wall Street analysts that no one had seen a housing downturn coming. And then to make sure there was no misunderstanding about the situation, he stated that we are experiencing a huge price depression not seen since the Great Depression. Wall Street and the financial world has been reeling ever since, despite an all time high in October of 2007.

While some may say that the price declines we have seen, actually starting in early 2007, are far from a recovery but instead a disaster- I say that is the wrong perspective. The market was very sick from early 2004 until late 2006. Historical income and home price relationships were completely out of balance. Tract housing neighborhoods with 1000 homes were springing up everywhere and people were paying $250,000.00 to live there. If this were one subdivision with 1,000 homes it would have been ok, but they were everywhere. Then there were the subdivisions of only 500 homes but the houses were going for $500,000.00. Say the prices in these terms: “a quarter of a million dollars” and “half a million dollars.” I think when it is said like that, the sickness becomes easier to detect. Of course, the semi custom homes became three quarter million dollar homes and if it was custom then it was a million dollars. Are these prices bad? Not at all, with the right numbers.

How did this happen? It was simply a matter of supply and demand. Not housing supply and demand but instead money supply and demand. Money does not follow most commodity rules. With money, the rule is that with more supply you will have more demand. The supply was from everyone. Individuals were investing, looking for higher returns. Countries were investing, looking for higher returns. Wall Street obliged us all by touting a high return instrument known as Collateralized Debt Obligations. They/we could not get enough of them so money was literally thrown at housing. And since everyone wanted higher returns, the money was thrown at the higher return of sub-prime mortgages. These “Asset Backed Securities” offered 1% to 2% higher yields. With a billion dollars on the line, that is significant. Obviously, things did not work out like everyone wanted.

So now the recovery is in full speed mode. Prices and incomes are getting back to historical norms. Since income curtailment accounts for two thirds of foreclosures, that problem will persist as long as the economy is shedding jobs. But for those that are employed, a good house at a decent price is available. Once the recovery is complete, a person making $11 an hour will be able to buy a nice house for around $100,000.00. Since there are a lot of jobs that pay $11 an hour, there will have to be a lot of homes for $100,000.00. And the numbers go up from there.

What we cannot have is an artificial, government induced, stop to the price recovery. The market must rule! Prices have to recover so that the number of homes at a certain price level matches the number of jobs at the appropriate wage level. The government “cavalry” touted by some, is nothing more than a bunch of Bolsheviks’ on horseback.

The Demise of the Real Estate Agent

2008-08-08T05:44:00.002-07:00

The consumer calls the number given for customer service and expects to get a voice on the other end. However, this is a lost attribute and is one of the most often heard complaints about big companies. “I can get tech support but I will be talking to someone in India,” or maybe “It took me pushing 7 buttons to eventually get a person on the line and then they told me they were not the right person.”

Well, in no other business like the real estate business is a voice expected and needed on the other end of the line. Sadly, this is disappearing because of the development of the supper agent. In a quick disclaimer, yes I am angry and bitter but with reason. The only real estate market occurring right now is the REO market. This market is sourced from lenders or servicing companies that pick agents and then dole out the listings based on a criteria that is unknown to most if not all. It seems that they get infatuated with certain agents and just dump too many listings on them. Of course, as an agent it is almost impossible to say no and even harder to recommend that they be given to another agent. This is creating what I call the “Super Agent.” This is not a good thing. I have called about listings and actually been told by the listing office that I would not get the listing agent on the phone. I was appalled.

Now I will offer that the advent of the cell phone and the blackberry has made communication too easy. But we as agents have to adapt to that. It is a fact of life and if you are too swamped to answer your phone or return messages, maybe, just maybe it is time to say no or to bring more agents into your inner circle. If we cannot receive calls from clients or inquiring agents then what good are we? Our business, in normal times, is about talking with people. These are not normal times, but neither was 2005 and I think some of the same mistakes are going to be made again.

One of the biggest mistakes lurking is the one of greed. These super agents will not pass on listings or bring other agents into the fold because of good old fashioned greed. They do not see that there is enough to go around and what you give is what you get. There are agents that will make a lot of money in this down market and believe they are the best thing to hit Mother Earth.

I just hope the consumer gets a voice on the line before we are replaced by an electronic device. Real estate is a people oriented business by design and we have to cater to that!

Loan Officer Criteria- TRUST

2008-05-16T06:37:00.003-07:00

There are still way too many people that will tell you almost anything you want to hear when it comes to getting a home loan. Be advised, some will say anything to get you as a client.

I am dealing with several loan officers, as I write, that have become deaf and mute as the close of escrow date approaches. I am just trying to get a feel for how things are going in the transaction and can not get a phone call returned or an e-mail answered.

The big picture is that getting a home loan is about as hard as it has ever been. And this is for people with great credit and good income included. While guidlines may not have changed much, they are being enforced as never before. Everything has to be included in the loan package and the underwriters are catching mistakes made by loan officers that are delaying transactions.

So what does this mean to you, the prospective home buyer. Find a loan officer that you trust. If things sound too good to be true, they probably are. Some things to look for and ask:

1.- Are you a mortgage broker or a loan officer?- Brokers are licensed, LO's do not have to be.

2.- How many investors do you have access to?- A Broker will generally have more than one at their disposal.

3.- How long have you been in the business?- Beware of the LO that got into the business in 2005 or 2006. While they may be competant, many got in to make a bunch of money, they did, and now they are hurting. Some are in the wave of people losing their homes right now and are severly distracted by their own life. Some are probably on their way out of the business and are looking to get one last commission before they move on. And guess what, if the commission turns out to be difficult to obtain, they are nowhere to be found.

4.- When will you have loan documents to Escrow for me to sign?- This is almost a trick question because it is almost indeterminate in the best situations. However they answer should be something like, "I will strive to have them to Escrow at least two days before the scheduled close date." Some caveats should follow but that is the goal.

5.- Will you keep me informed of the progress of my loan?- Loan progress is not a mystery. There are steps that should occur in a timely sequence: appraisal, termite, preliminary title report, etc.

Listen to the answers to these questions and any others you have. Better yet, watch the LO while you are asking them, if you see noticable discomfort, beware.

I have a great Mortgage Broker that will answer any and all questions you have. Call me and I can get you his number or you can ask me the question and I will get the answer from him.

Why is he so good?- Because I trust him! He will tell me "no" just as soon as he will say yes.

Always remember, if something sounds too good to be true...it probably is. Money is cheap by historical standards but there are hurdles to getting it. Make sure the person jumping them for you is someone you trust!

Banked owned

2008-02-17T15:31:00.003-07:00

This is my biggest business these days. In fact, if agents are not getting in this part of the market, they are missing the wave. If you are wanting to buy, look for properties that fall under this category. The difference between a bank owned property and a short sale is in the names.

A short sale is a property that is still owned by the individual borrower. The bank in this case owns the mortgage and not the house. The bank has to agree to allow the short sale and then has to agree to the price that has been offered. It is a very cumbersome process. I am sure that there are sales being made that go smoothly but, from what I hear, that is the exception.

A bank owned proerty is just that. The bank owns it and thus is directly involved in the sale and the price and the negotiations. It is a very efficient process and my experience has been that the bank responds to an offer very quickly. If fact, more quickly than an individual seller.

Another thing that makes this type of property attractive is that banks do not want to own properties. They will look at almost any offer and they are allowing agents to price the properties competitively. In fact, when a bank requests a price opinion, I am giving a price that I think will attract buyers in the current market. This is very hard to do with individuals these days. People want to price their home in accordance with prices from 2005 or 2006. That is no longer realistic.

Bottom line is that if you see two properties you like and one is a short sale and the other is bank owned...go for the bank owned one!

Arkansas Coaching Standards

2007-09-30T07:46:00.000-07:00

I received way more responses to my last post than I ever thought possible. I have been having an on going banter with my old college mates about the subject of HDN and Gus and Mustain. Do some math and you might be able to figure out who one of them might be.

Of course, not many of the replies were very flattering. I was told to go "have sex" with myself, that I was the most uniformed person on the planet and that I was probably run out of Arkansas since I do not think HDN should be fired.

All well and good and further proof that when your position is shaky, resort to name calling and cursing.

My post was in response to a blog sent to me by my esteemed classmate that was written by some random dude dogging on the current program. My point was that blogs are like statistics, you can find one that takes the same data and reverses the opinion derived from it.

What I have learned now is that people will focus on certain content of an opinion and ignore other content. No one mentioned in their reply how I closed my post. I want HDN gone also and that I will cheer for the Hogs whoever the new guy is.

I remember the days back in the old Southwest conference when it was us against all of Texas. We always cheered like we were the underdog and celebrated whenever we beat an opponent and were sad when we lost. We hated punting on third down and hated a straight ahead hand off on 3rd and 15. But we still cheered and loved our boys. There were fans in the stands instead of coaches. That seems to have changed.

I watched alot of football this weekend and saw alot of close games and upsets. I also saw alot of fans cheering for their boys. They were just cheering in Oregon, they were just cheering in Gainsville, and they were just cheering in Seattle. The game is full of breaks, good and bad, errors, player and coaches, and excitement. That is what makes it college football. For some reason this seems to be lost on the Arkansas coaches, errr fans.

So with that in mind:

Due to poor coaching, Oregon receiver Cammeron Colvin fumbled at the goal line. Then, the ball rolled through the end zone! The entire staff will be fired on Monday.

A lack of discipline caused Florida to allow Auburn to drive the field and kick a game winning field goal. On the other side, the players performed the "gator chop" to mock the home team. Myer and Turberville are now on the hot seat.

Poor coaching squandered the lead as Colorado kicked a game winning field goal and upset Oklahoma. Stoops is considering his options.

Coaching decisions led to Andre Woodson's (the KY quarterback) first interception in 325 passes. The entire staff will visit Woodson's home and apologize to the family.

Coaching decisions are to blame for hurting the feelings of the N. Texas State team as Arkansas scored too many points. Coach Nutt once again fails to be accountable for his actions.

I am looking for backers for a full page Democrat-Gazzette ad: Wanted- Fans that cheer to replace our fans that coach.

I would like to close with a question for all of you. Is it possible that Hutt had to suffer through two losing seasons because he had to play Matt Jones at quarterback? I find it interesting that Mustains 8-0 record is always touted but Jones two losing seasons are never mentioned but instead blamed on Nutt. Was every Jones defeat due to Nutt and every Mustain victory due to his heroics?

I cannot do the suggested sex act, I stay informed by reading things other than hogville.com and I joined the Air Force and served for 22 years. I proudly tell people, around the world, I am from Arkansas and visit home as much as I can.

HDN will resign at the end of the season. He would go now but he loves his players and he loves coaching the University of Arkansas!

ts

It Didn't Have to be This Way for Arkansas

2007-09-27T10:07:00.000-07:00

My Alma mater, The University of Arkansas lost to Kentucky last week. It was another heartbreaking loss and we could have won the game. The kids played hard but got some bad breaks at the end. Also, Kentucky has a very good football team led by one of the most experienced quarterbacks in college football.

The really sad part, everyone in the stadium expected them to lose. You could feel the negative energy from the TV and the game announcers even commented on it. The problem is the fans think they need a new coach.

Houston Nutt was the SEC coach of the year in 2006 and almost led the Hogs to a BCS bowl game. Unfortunately, they ran into LSU, Florida and Wisconsin at the end of the season. There is no respect for how good these team were, there is only concern for the way Coach Nutt handled a cocky freshman QB and a high school coach in his first year at the college level.

So, instead of having two Heisman Trophy candidate running backs and a very healthy battle for the starting QB job this year, the Hog players not only have to play the other team but they have to battle the negative energy field from their turncoat fans.

Here is how the fans blew what might have been.

1. They decided that high school coach Gus Malzahn was the second coming. When Malzhan quit the team, fans thought Nutt ran him off for no reason. His lack of college experience was not cited and Nutt received no benefit of experience for how he dealt with Gus.

2. The fans believed a 17 year old high school student more than a head coach with 17 years of experience. Mitch Mustain is evidently a cocky, spoiled and brash loner that neither his fellow teammates nor the coaching staff thought very highly of. He was a sought after recruit that did not feel he should have to compete for the QB job. After being pulled from a game, his mood and his attitude worsened.

3. The fans have put players miscues right at the feet of Nutt. While not one to back down from responsibility, Nutt has explained player mistakes but fans hear only what they want to hear. Against KY, two players tried to block a field goal. This was not called by the bench but the players were hustling. Fumbles are credited to coaches and the list goes on. There is no realism in the fans who all think they are coaches.

4. While most of the Hogs fans forgave a Governor for years of personal misconduct and then for lying to a Grand Jury, they seem very hypocritical when it comes to their football coaches. And this is all for alleged activity. A very high profile, very distracting lawsuit was filed and summarily dismissed for lack of merit. But the damage was done. So instead of enjoying a 10 win season and coach of the year honors, Nutt had to spend time and energy explaining things that did not happen. Things that were started by fans are distracting the coach and the team. As with fumbles and missed assignments, the fans are now trying to blame their own idiotic ideas on the coach.

I hope Coach Nutt leaves before the end of the season. These fans will get what they deserve. A "my way or the highway" high school coach and players that don't understand there is no "i" in team.

I will still cheer for my Hogs like there is no tomorrow!

The Walk Off

2007-09-26T14:37:00.001-07:00

Unfortunately this is not a reference to the dramatic end to a baseball game. It is what I think may be the next sad wave of occurrences in the housing market. It is when owners simply walk off from the home that is no longer affordable to them. They leave it empty, turn off the power and water and go on to a rental that is more in line with their current income level and lifestyle. It takes a while for their loan servicing company to figure this out and then the foreclosure process starts. What aids this prcess? The couple walked into the home for nothing. They put no money down and at most paid some earnest money. They only lose credit scores when they leave. Their monthly interest payment is nothing more than a very large rent payment.

Here is the scenario:

A hard working, law abiding couple with 2 kids buy a home back in the day. The day being defined as the market craze of late 2004 to early 2006. This couple pay for the home using an interest only conventional loan for 80% of the price and a Home Equity Line of Credit (HELOC) for the other 20% of the purchase price. This HELOC is an interest only, 3/1 Adjustable Rate Mortgage (ARM). The 3/1 means that the interest rate on that part of the money will reset in 3 years. And generally, this reset is to a higher rate.

The angle for this couple, and many others, was that the home would appreciate and they could refinance both loans into one loan at a better rate and have 20% equity in the home due purely to price appreciation. To put numbers to this, let's say they paid $400,000.00 for the home with $320,000.00 at 6.5% and then $80,000.00 on the HELOC at 8.5%. Since they are interest only, they have paid down zero amount of principal and are still suffering with a $3,000.00 mortgage payment.

The market stops going up and in fact goes down. The hope of a re-finance has disappeared and the looming rate increase begins to weigh on the couple. What to do? They both work. They have no extra money to do anything with the kids and the kids are not getting any younger. Instead of the dream of home ownership, they are living the nightmare of $3,000.00 a month for nothing.

They notice that a rent house is available close to their neighborhood, the kids could stay in the same school. The home is nicer than the one they have, in fact it is a new build bought by an investor and the rent is half the price.

They discuss their current life and both agree that things are not good. All work, no play and the kids are not being raised the way they were. They made a mistake and have to correct it. While outside their model of responsibility, the walk off is the only only option and they still have what little savings existed before this home because they financed everything. They have nothing invested in the home and the only emotions are negative because of the way the market has turned.

Their credit is decent so they apply to rent the home and are accepted. They use one months mortgage note to pay the deposits, rent a Rider truck and one weekend do the move. It will take three months before things become obvious to the loan servicing company and by that time they will have a new home and a new life. It will be years before they can buy again but that is not an issue right now. They may never be homeowners again but they will raise their kids and have a decent life.

The problem for the market is that this home will sit for three months with no power or water and quickly become distressed. This will hurt the other homeowners who are trying to do the right thing. If one or two other walk offs occur, the seed of a declining neighborhood has been planted. It is a weed and spreads fast.

Lets hope the walk off remains a baseball term.

Unindicted co-conspirator= PMI

2007-09-15T20:52:00.000-07:00

One villain in this real estate debacle has to be the mortgage insurance business. If you talk to people or read stories about the adjustable mortgages that are about to reset, one thing that is left out is that most of these loans were initiated to avoid private mortgage insurance. If lenders, or loan officers, would have just said, "let's do a 30 year note on 100% or your home and buy PMI" a lot of the current troubles would not exist. People would have been qualified for, and adjusted to, their mortgage note plus the mortgage insurance premium. If they default, then the insurance would be paying the bill. Admittedly, there might be a number of insurance firms in trouble but at least the trouble would be honest trouble.

The cost of PMI vs the cost of a foreclosure or bankruptcy would be much cheaper. However, to put yourself in front of a loan officer who is telling you that with an 80/20 your note is $3500 a month and a 100% note with PMI is $3800 makes the decision a little tougher. Without hindsight, in 2005 this was a no brainer. Give me the cheaper note and I will re-fi in a year with 20% equity due to price appreciation. Obviously, not so fast. That $3800 note looks like a bargain in many circles these days, especially when your home is worth 10% less than you bought it for.

Do I want blood from these institutions? Certainly not, but there are many villains to go around in this mess we have. I just think they should all be outed and avoided in the future.

ts

Tough market for everyone!

2007-07-08T10:35:00.000-07:00

Well it happened to me also. I was about 10 days out from closing on the sale of my home. The buyer calls up and said that she had decided against moving to Phoenix. Needless to say, I was stunned. The selling agent was equally stunned. The bright side was that she was going to try and keep her marriage together and that was why she was staying where she was. That I can handle. What is a home compared with a life and family?

The news continues to be nothing but negative. I keep looking for something good but it is still about the bottom and when things will pick up. The "experts" now say we are at the bottom and things will improve in 2008. This angle makes one believe that the bottom is a long flat level. I do not subscribe to this. I think it is more like a sine wave and things continue down until they start up. You do not know where the bottom is until it is behind you. The bottom, as well as the top are historical things. "In hindsight, I should have sold two years ago at the top of the market." or "I should have waited to sell because I sold right at the bottom."

There is just not as much money out there right now. Credit has tightened, buyers have expanded their zone of contentment and the sidelines are crowded. I continue to hear and see people that believe they are holding out for more money but end up holding out for less. Prices are not going up!

Karma

2007-06-25T09:01:00.000-07:00

It may mean a lot of things: Cause and effect, consequences, summation of all you have done, what goes around comes around.

The bottom line seems to be that you will reap what you sow and that karma is forever.

If you are selling a home, remember this. Greed is a terrible thing and there is a lot of it right now. I had the standard conversation last night about home values. "Well I have done very good in real estate, my home is worth double what I bought it for." I quickly asked, "Have you sold your home?" and of course the answer was no.

Your home is worth what it sells for when it sells. If you list your home for $900,000.00 and get no lookers, lower the price to $800,000.00 and get no lookers and then lower it again to $750,000.00 and get only a few lookers, the market is saying that your home is not worth $900,000.00. If you then only get offers in the $650,000.00 range and end up taking a contract at $700,000.00, you have now discovered what your home is worth.

And here is where karma comes in. Don't be an asshole with the deal! Do not get/stay angry because your home is not worth what you had hoped it would be worth. Treat your buyers with respect and gratitude for the price they are paying. If you cannot do that, then do not sell the house!! It all adds to the karma of your life and it never, I repeat never, pays to be an asshole!

Instant karma's gonna get you
Gonna knock you right on the head
You better get yourself together
Pretty soon you're gonna be dead
What in the world you thinking of
Laughing in the face of love
What on earth you tryin' to do
Its up to you, yeah you

J.L.

The Starbucks run

2007-05-23T18:03:00.000-07:00

So it was my wife's birthday. Among the many other things I was doing for her, I offered to make a trip to Starbucks and bring her some coffee at work. Well, if only it were that simple. Of course there were 2 or 3 co-workers that she wanted to get one for and then the wild card recipients. Our friend in the front office who has been hinting for months about bringing her coffee and then another friend of ours that works in the same office area. And then...well I guess that is my point, where do you stop? I mean, who can refuse a coffee delivered to them? You have probably heard it, "I'm going to Starbucks, anybody want anything?" Of course I want something! Or the "I wish I had know you were going to Starbucks!" Fortunately, my guilt is minimized by my order, which is simply...a coffee. Which, by the way, is not that expensive. However, some orders are not only impossible to remember and embarrassing to order, but are also high dollar! And then there is that required art of ordering. "I'll have a tapayoca, frap, caramel swirl, double shot vente...skinny!" I know there is no such drink, actually I don't, but it sometimes seems like I am behind a cook telling a recipe instead of a person ordering coffee. And what is really amazing is that the person behind the counter takes it down and does not skip a beat.

So I got 4 grande lattes and a grande coffee, dropped one latte off at the front desk and took the others back to the office where my wife was, kissed her and left. My birthday deed fulfilled!

I'll take a tall coffee, here's 2 bucks. Thanks alot!

Seller mindset- Holding out for less money!

2007-05-16T09:03:00.000-07:00

Well it has been a while...but I won't linger on that.

If you are selling a home, decide on the lowest price you would take for your house and list it at that price. See what happens. If you get a low ball offer, counter at your price. If you get an offer a day after you are on market, counter at your price. However, if you still do not get anyone to look at your house, or you don't get any offers...then welcome to the reality of the real estate market in 2007!

If you want to sell your home, notice I did not say make a bunch of money on your home, then pay attention to the SOLD comparitives in your area. Do not focus on the LISTING prices. Believe it or not, appraisals are a factor these days. If you get an offer on your home and the sales comparitives do not support that price, then you have a problem.

Another exercise for pricing. Take what you bought your house for and calculate a 7% annualized gain over the time that you have owned it. You can use the calculators at interest.com for this. Let us say you bought your home for $200,000.00, 10 years ago. Using the CD interest calculator for $200k, 120 months and 7% you get that, under normal real estate appreciation, your home is worth about $402,000.00. If the sales comparitives are around this figure, then price your home at $399,000.00 and see what happens.

Many people are setting a high price and waiting, believing that they are holding out for more money. I believe that in reality, they are holding out for less money. I have been watching a listing that started out at $900,000.00 two years ago. It is still on the market and listed at $750,000.00. Would it have sold for $750,000.00 two years ago? No one knows but in all likelyhood, yes! So $250,000.00 for two years- to service this debt at 6% is about $1,500.00 per month, the interest that could be earned on this money at 5% is about $1,000.00 per month for a total of about $2,500.00 per month. Over two years time, this has cost this owner about $60,000.00. So if he sold it today at $750k, he would be netting $690k if the lost revenue and debt servicing are figured in. The thing about it, the house is not going to appraise at $750k today so the loss is even going to be greater.

If you want to sell your house, price it correctly to start with and don't hold out for less money.

The price of your home!

2006-12-10T07:40:00.000-07:00

Here is another way to determine the value of your home. Imagine that you are moving and that you are going to buy the house you are in now. Also, you don't have any "profit" from another house to use in buying your house. With this restriction, what could you pay for your house? Now knowing what you could pay, what would you pay?

Also, try this. Take the price that you paid for your home and plug that amount into a financial planner calculator, Use the number of years you have owned the home and use a 7.5% interest rate and compound annually. I went to interest.com and used the CD calculator for this example. I bought at $190,000.00 and have been in my home for 10 years. At 7.5% a year, which is just above the historical average for home appreciation, my home is worth $392,000.00.

For me, these two methods yield about the same result. I could pay more now, due to some good professional fortune, but I would only pay about $425-$450 thousand for this house. So I will use $392,000.00 as my starting point for my house listing price. I will look at the market to see what is selling, not what is listed, and evaluate how bad and how fast I want to sell my home. If I had to move next month, my List price is $399,000.00.

Drop me a note if you want help with your math.

The Buyer- Driving Tips- Because you are Driving

2006-08-17T21:23:00.000-07:00

If I show a client a house, I get a call from the Listing Agent ASAP. All the Sellers want the Buyers. So if you are Buying, be prepared and enjoy this moment in the sun. From the AZ
Republic (edited by me):

1. Get preapproved for your loan. Get your money in order so that when you low ball the Seller that's trying to make $100k in only 6 months, they will know your offer is solid and there will be no finance problems.

2. It is always something! Even though there are plenty of homes out there, the resale market rarely has that perfect house for you. Know what you can do without, and if your married, know what you can put up with that your sig other has to have.

3. Often, the neighborhood is just as important as the house. Decide on area A and then scan that area for your dream home. If it is not there, then go to area B and look. If you still can't find the home of your dreams, reference tip # 2 and be patient, something will come up. Nervous and in a hurry should not be in your vocabulary right now.

4. Hire an Agent!! and hire one that listens to you and tell them what you want!

5. Get to know the value of your neighborhood. Go back a few years and see what the prices were and figure 10% a year from when the home was built. Ignore May 04 to Sep 05.

6. Use strategy. Find out what you can about the seller and their situation. Definitely know what they paid for the home and know why they are moving. If they have two mortgages, they need to sell. Use the sellers desired closing date in your offer if you can.

7. Don't be afraid to low-ball!! Again, the seller is more than likely going to make money, just not a gazillion from little ole you. Make everything good for the seller: the close date, fair in closing costs, home warranty purchase but make the price yours!

8. You have to buy right and not expect more than 3-5% over the next few years. Look at history and realize that the spike of last summer will have to blend in with the overall graph of home prices. In 10 years, homes are going to be more expensive than they are now, but that is pure economics and inflation. Things have to catch up with where they are now. Do I think implosion, no but a person that bought 2 years ago is not going to be able to double his price now. Some have the savvy buyer will not let it happen with a proper offer.

Have fun and be prepared, patient and smart.

Finding a Real Estate Agent

2006-08-06T21:11:00.000-07:00

Interview more than one Agent!!

If you are buying, hire an Agent!!

If nothing else, do these things. Overall, any agent can sell your house. Just because an agent or "Team" has more signs around does not mean they are any smarter at selling. It generally means they hustle for more business than others. In fact, it could be a downfall in service if an agent has numerous listings or buyers demanding their attention. Find someone you like and think you can work with.

Don't let an agent "buy" your listing. What this means is do not go for the agent that comes in and declares that they can get a price way out of line with what the market is doing. They know that if they can get you to hire them, then they have the business and eventually the price will adjust to the market. Make sure the comparative sales are shown to you and are current and applicable to your house.

If you hire a friend or family, discuss the potential negative experiences. What if you don't like working with them after all? Discuss a "no fault" clause. If you decide to go another direction, it is nothing personal. If this is going to be a problem, find someone else. There is an agent on every corner these days.

Discuss how the agent is going to market your home and be realistic about your expectations. There is really only so much an agent can do to sell your home. They will not stand on the corner and wave signs, an Open House is more for the agent than the seller and office tours are more fluff than function. Ask about pictures, virtual tours, realtor.com enhanced listings and print advertising.

Finally, and most importantly, ask about commission. Will the agent pay any closing costs for you? Will the agent buy a home warranty for you if required? Everything is negotiable and should be addressed. If you are selling and buying within the same area, use the same agent and make sure your commissions are reduced. Do not let the agent get the full commission on both ends of the deal. It is your money and you are not asking anyone to perform brain surgery on you. People do this without an agent all of the time. If you do not ask, you will not receive!

Linda Cavanaugh's dilemma

2006-08-02T08:30:00.000-07:00

My fair city has a crisis at hand. It seems our Mayor hired a consultant for the city and then his Realtor wife helped find her a house and earned a $12,000.00 commission.

As always, there is more to the story but that is a nut shell and to me an obvious conflict of interest. Sorry Linda, I am sure you are a good Realtor but in this case you needed to work for free or let someone else help the consultant. There are plenty of Realtors with time on their hands. Ideally, when serving the Public one has to be above it all and in this case, Jim is not and neither are you. Do not be greedy! I am sure you get enough clients, due to your husband's position, with no conflict of interest. Be content with those until his term expires.

Everything is Negotiable!

2006-08-02T08:08:00.000-07:00

I am back from vacation in San Diego. Unfortunately, we were there during the heat wave so instead of 40 degrees cooler we had to suffer through only a 30 degree temperature drop. And it was humid. But it is still a great place to complain about the heat!

On to business. Greg Swann writes in todays Republic that last week he established that a buyer pays for everything in a home purchase transaction. I think this is a matter of perspective and since I did not see last weeks article, I will maintain that stance.

A used car transaction: price is $10,000 and the buyer pays full price. All of the money in the transaction is the buyers which becomes the sellers the second the deal is executed. As part of the deal, the seller stipulated that 3% would be paid to a car dealer if they brought him a buyer, which in this case occurred. So the seller gets 10k the second the deal closes and at second number 2, pays a car dealer $300 for bringing in the buyer. To me that was the sellers money.

If the price had been written, $9,700.00 with no car dealer and $10,000.00 with a dealer then a better case could be made that it is the buyers money paying everything.

I certainly agree that the buyer is bringing all of the money to the transition, but at some point it becomes the sellers and then at some point the money is shared with the Realtors. The seller is bringing product to the table and this has to be acknowledged.

Splitting hairs- yes!!

One thing I do agree with is that everything in a deal is negotiable. If you are buying, request some of the commission be put back in your pocket at escrow. See what the commission split is and go from there. 1% is a good place to start. Work this deal with your Realtor. Just as sellers should interview agents, so should buyers.

Ask for the stars and hope for the moon.

Priced for quick Sale!

2006-07-12T22:46:00.000-07:00

This is the latest Realtor pitch on MLS listings. And yet the listing has been at that price for 8o days. I guess it is in the eye of the beholder as to what is quick. List prices are still being dropped by 30 and 40 thousand dollars. The year over year prices are still higher and thus leading to the news reports of price increases, but they are dropping. If you are buying, be patient. Make offers ahead of the price drop.

Another pitch I am seeing is the Listing Agent offering a chance at $10K if a full price offer is accepted. No kidding!! $10K is nothing when the home is priced $100K over what it is worth! Spare me! This, to me, is a form of steering. Get my clients to like your house and there will be more money in it for me. Not professional or ethical in my humble opinion.

Maricopa city

2006-07-05T23:15:00.000-07:00

Another article in todays AZ Republic about the real estate market. This one focused on Pinal County with emphasis on Maricopa city and the Santan area. The article profiled several sellers and real estate agents. Of course the big question is "what is going to happen in the real estate market?"

The immediate problem for the sellers in the area is that a new build costs less than an existing home. Open houses are getting very little traffic and the price of gas is making these outlying communities less and less attractive. The real estate agent talked about the builders offering higher commissions and the sellers are dropping prices at $10,000 increments.

An investor was also interviewed. His take was that he can live with losing $200 on a rental as long as his equity is going up $10,000. In other words, he still thinks he is getting price appreciation while the people with homes on the market are cutting their price. I think it is a big contradiction. Of course, what investor is going to tell the Republic they are losing money and are about to panic?

I thought I would take a look at the MLS data to see what is really going on. So "just the facts ma'am." According to the MLS (which mainly covers the resale market):

At the present time there are 879 homes for sale in the city of Maricopa.

Jan 06- 95 Solds, Average days on market (DOM) was 47, average $ per foot was $139.89 and the average square footage was 1,888

For analysis:

Jan 06- 95 sales, 47 DOM, $139.89/ft, 1,888 sq ft
Feb 06- 58 sales, 66 DOM, $138.42/ft, 1894 sq ft
Mar 06- 105 sales, 65 DOM, $138.57/ft, 1953 sq ft
Apr 06- 88 sales, 76 DOM, $145.56/ft, 1853 sq ft
May 06- 46 sales, 77 DOM, $135.66/ft, 2019 sq ft
Jun 06- 58 sales, 100 DOM, $128.31/ft, 2013 sq ft

There has been one sale in July- 95 DOM at $115/ft.

April was a good month, there was about a 5% drop in price from May to June and DOM jumped about 30%.

If you are a buyer in Maricopa, make your first offer at around $110/ft.

If you are selling in Maricopa, list your home at around $120/ft.

Generally easy living...however,

2006-07-05T08:07:00.000-07:00

I get asked all of the time if I like living in Phoenix. When I say yes, the next question is why. I always say, because it is easy living. The roads are good, things are easy to find and get to, shopping is good, the people are good and above all, the weather is good. It does get hot but you learn to deal with it. There are no hurricanes, no tornadoes and no snow storms. However, the dust storms are a pain in the rear!

We had one last night. I wake up and the pool is full of leaves and tree buds and the patio has a fine coating of dust. It is the one thing that I don't like about the Phoenix weather. To add to it, I think my house sits just the wrong way. My garage in front gets leaves blown into it and the pool in back suffers the same fate. Of course, I think my neighbors homes remain spotless through it all.

My next home here in the Valley will be shifted about 90 degrees!

For those interested, the front of my house faces southeast and the rear faces northwest, not good!

About me

2006-07-04T08:27:00.000-07:00

I live in Goodyear, AZ which is on the west side of Phoenix. The area has been a boom town for about the last 5 years. In 2003, I decided to get my Real Estate license so that I could partake in the boom, if just on a small scale. I also fly airplanes. I just retired from the Air Force Reserves after being a Fighter Pilot for about 21 years. I still fly for Southwest Airlines.

The hardest thing about Real Estate is the marketing. My background has been very cut and dry: here is the task, go accomplish it. I hate the hard sell in any purchasing situation and refuse to do it.

It is my opinion that the market will sell, or not sell, a house. There is only so much I can do to move a home. I do everything I can, but I will not stand on the corner and wave a sign saying "Come Buy This House!" There are better and more effective ways to market a home. Open House's are more for the Agent than the Seller. Sellers should imagine they are buyers and Buyers should imagine they are Sellers. Realtor's should not imagine anything other than having a satisfied client.

I'm 45, married with 2 kids and 2 dogs. I road bike to stay in shape for mountain biking. I have Cardinals season tickets and firmly believe we will be in the Super Bowl in 2008. I think Jim Rome is the best commentator in any media and America is the middle ground, extremism has no home in my world.