Phoenix area cities have different recovery patterns

The graph to the left shows the the monthly price per square foot of sales for the last 10 years for Gilbert and Chandler.  A good opportunity to see where we are compared to pre-bubble sales activity.   The twin cities of Gibert and Chandler have similar trends for the last 10 years.   Current price per square foot is similar to 1993 levels.  Do other Phoenix area cities have similar patterns?

Comparing Gilbert and Chandler to some west valley cities

Two other west valley cities; Avondale and Goodyear are still at $/sq.ft levels below 2000 levels.  Goodyear showed price appreciation levels similar to Gilbert before the bubble; however, after the peak Goodyear’s prices fell further and have stabilized at a lower level.  Does this mean there is more upside for those cities or is this an indication of the strength or intrinsic value of real estate of each city or town?  Another variable cannot be overlooked is the impact of bank owned and short sales. Especially the newer cities that experienced tremendous growth during the 2003 – 2007 have been more exposed to distressed sales which has caused greater downward pressurre on prices after the peak.  The chart to the left shows percentage of distressed sales; bank owned and short sales, for the month on January 2010.  Active adult / retirement communities such as Sun Lakes, Sun City West and Sun City have experienced fewer distressed sales and at the same time have faired better in the price recovery after the peak.  Of the four cities we compared at the beginning of this post, both Gilbert and Chandler do have lower distressed sales percentages than Avondale and Goodyear, at least for January 2010.

For more information regarding price trends of Phoenix area cities, please e-mail for additional information. For homeowners experiencing hardship  that need information regarding foreclosure options and short sale information, visit Phoenix short sale information.  To receive new and updated  listings of any city in the Phoenix area automatically, click on receive updated listings.

Phoenix Arizona Short Sales and “upside down” homes.

Short sales in Phoenix, Gilbert, Chandler,Queen Creek,  Scottsdale and all across the valley are taking center stage as they have become the topic of any Az real estate discussion. Many a buyer or seller that has been through a short sale transaction will undoubtedly compare it to high drama movie because of the highs and lows, a soap opera because it never ends  or a nightmare due to  all of the above.  These discussions will continue with home prices at current levels.  According to an article in the Phoenix Business Journal, First American CoreLogic Inc., estimates that 51% of the mortgaged properties in Arizona are “upside down”, also described as having negative equity, because the balance on the mortgage is more than the market value of the home.  This is confirmed by the fact that in most Phoenix area towns and communities, distressed sales account for 50 – 75% of the monthly home sales.  Therefore, many homeowners will need to become well informed of the various aspects of a short sale  when a situation arises and they need to sell.  The following are important points  that must be considered:

 Beware of  mortgage modification and prevention scams

 * Beware of anyone that guarantees a mortgage modification, especially if they request money upfront. Mortgage fraud cases are up over 400 percent in the last five years.

* Fraud schemes where the person represents themselves as a government representative or claims to be affiliated with or endorsed by a government agency.  They might use terminology such as “government approved” or refer to programs such as TARP.

* Never be pressured into signing any documents without consulting with an attorney.  Unscrupulous companies will try and convince you that it will save your home.

For additional information regarding avoiding foreclosure rescue scams, visit the Beware of Scam page of the Making Home Affodable goverment website.

Always consult an attorney and CPA regarding legal and tax consequences

In order to become aware of possible deficiency exposure and tax implications, always consult an attorney and CPA.   While there are federal government provisions that cover mortgage debt forgiveness at a national level, each state has different statutes for deficiency forgiveness or the lack thereof.

Briefly, Arizona has anti-deficiency laws that may protect homeowners in a distressed sale such a short sale.  A homeowner’s exposure will also depend on the use of the money that was borrowed.  The anti-deficiency protection applies to loans that are considered “purchase money”.  Home equity lines of credit that were used for other investments or to buy a boat or car are not considered purchase money.

Tax consequences result from the fact that when the money was received by the borrower, it was not taxable because there was an obligation to repay the loan. When the debt associated with this money is forgiven, this could be a taxable event. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.  The good news is found in the Mortgage Forgiveness Debt Relief Act of 2007  that may allow tax payers to exclude forgiven debt as income.  There are qualifications that must be met.  The property must be a principle residence.  If a person is insolvent when the debt is cancelled, the income is not taxable.  For more detailed information, visit the mortgage forgiveness debt relief act and debt cancellation page of IRS.gov.

The Arizona Association or Realtors and the Department of Real Estate recently released the  Short Sale Seller Advisory which is a tool used to educate sellers about the differenct facets of a short sale.  For additional information and a free consultation  on Gilbert, Chandler, Queen Creek, Scottsdale, and Mesa short sales, contact Gordon Baker directly at 480-326-8571, and feel free to visit PhoenixShortSaleInfo.com for free reports regarding short sales.

Related Posts:

Know this before you write a short sale offer

What a buyer must know about a short sale

Short Sale Waterfront Homes

Lot 17 on the west side of the ski lake at Santan Lakeside Estates just came on the market  the last week of February bringing the total lots for sale to 3. The other available lots are 3 and 17.   Many water ski enthusiasts and owners will be watching this specific  transaction as it will aid in determining the current market value of a Phoenix valley water ski lot.  So how did they set the list price for this ski lake lot at $340,000?  My opinon? You have to go back to 2009 when lot 13, previously a bank owned lot was initially listed for $480K.  After periodic price reductions that are consistent with bank owned property, the list price eventually reached $399K,  an offer for $340K was accepted and closed in August 2009.  When that is the only comparable sale, it makes sense to use it!  Getting back to lot 17;  a couple of early offers were received within days of  being listed, but considered too low by the bank.  Time will tell as the ski season approaches and the bank watches the days on market increase , and  periodically considers price reductions.  See sales update further down in article.

Another Way to Determine Market Value?

Can you impute the value of a lot by homes that have sold?  What is the relationship between a developed lot with a home and the price of the land it sits upon.  Obviously the bank did not consider this method when they set the price. The most recent sale of a house in Santan Lakeside Estates was a bank owned 6,875 sq.ft. house on lot 2 that sold for $1,010,000 in November of 2009.   If the cost of the lot as a percentage of the total property value including a house is 25% ( or use your own %),  would a more realistic value of a lot be closer to $250K?    As I mentioned, time will tell as banks are not like traditional sellers and they typically  make price reductions to reach true market value  instead of sitting on the property for an extended amount of time.  Also keep in mind that lots were selling in Santan Lakeside Estates for approximately $215,000 in 2001, and around $280,000 in 2002.  It will be interesting to see what this new bank owned property tells us about the market when it finally sells.  Watch the property listings below to monitor the progress, the address is 7345 E. Tatum Lane. 

Lot 17 in Santan Lakeside Estate under contract in 2 weeks

After multiple offers lot 17 in Santan Lakeside Estate water ski community sold for $312,500. Close of escrow was March 27, 2010.  This recent sale is a good indication of the value of a water ski lot in the Phoenix metro area.  An appraiser recently called me regarding the valuation of a water ski lot in another Gilbert ski community.  Much of our discussion centered around finding recent comparables, which is always a challenge for such a unique type of property.  

Satellite View of Santan Lakeside Estates

Related Phoenix Water Ski Property Posts:

Phoenix water ski property, land, and  community overview

Playa Del Rey Community Profile

One of the most confusing and frustrating types of real estate sales is the short sale transaction.   Having helped  owners that have a financial hardship and negative equity sell their home and also assisted  buyers in the purchase of short sales, I felt it would be beneficial to highlight  some different facets of Phoenix area short sales.  Here are two simple facts that will help a buyer become more prepared and successful when considering a waterfront short sale or any type of short sale purchase.

The  1st Thing to remember about a short sale ……. The Bank/Lender Does NOT set the list  price

Especially when the property is first put on the market, the list price is an arbitrary number  the Realtor has chosen.  The listed  sales price will continue to be reduced until an offer is received and accepted by the owner.  Then the short sale package along with the offer goes to the bank … and the wait begins.  It is very common that when no offer  at the listed price, you’ll see periodic price reductions until a buyer says, “Wow, what a deal” and submits an offer.  When an offer on a short sale property has been submitted and the bank responded but the buyer is long gone, the property will be relisted and now there is better understanding of what the bank will accept.

I must point out that Wachovia Bank is getting way ahead of the curve.  Believe it or not, in the Phoenix area the Wachovia short sale negotiator will start the process once the home is listed.  The negotiator will  meet with the seller, qualify them regarding their hardship, and close in 45 days after receiving an acceptable offer. Hopefully other banks will follow.  If you have a Wachovia loan and need to sell, please call me for details on this great program.

2nd Thing to Remember about a short sale……. The Bank/Lender  does thier own market analysis.

Buyers and their agent should sit down and carefully review the comparable sales in the neighborhood for similar houses.  Nothing is more dangerous than a “type A” personality person seeing an aggresively priced below market short sale and then settling for nothing less than submitting a low ball offer 20% offer below the listed price.  Why? Because  the lender will do their own market analysis through a BPO (Broker Price Opinion) or appraisal.  They don’t really care what the list price is, they didn’t set it.  Once they have determined the market value, they will decide how much of a discount they are willing to accept and that will drive the counter offer to the buyer that has been waiting for 3 months.  If the buyer did their homework and understood that they are likely to receive a 10% discount below market value and are prepared for that price in a counter offer, you are more prepared than most buyers and may endure the Phoenix short sale process.

Phoenix Waterfront Short Sale Searches:

Phoenix Waterfront Short Sales

Gilbert Waterfront Short Sales

Chandler Waterfront Short Sales

Glendale and Peoria Waterfront Short Sales

For more details on the intriguing part of the market called short sales, please call me at 480-326-8571 for more stories information.

Other posts about short sales in Gilbert, Chandler, and the Phoenix area

What a Buyer Must Know About a Short Sale

I heard a saying that accurately describes our current media.   It is credited to Mark Twain,  “If you don’t read the newspaper, you’re uninformed.   If you read the newspaper, you’re mis-informed”. I guess the more things change the more they stay the same! This description also applies to those  5 second sound bites regarding real estate in Arizona.   I feel more comfortable when I can see the data and draw my own conclusions.  It is an oft used phrase but all real estate is local so what applies to the country does not necessarily apply to our corner of the state.   Here’s a local look at two desirable cities in the Phoenix area, Gilbert and Chandler.

A Look At Gilbert And Chandler Home Sales in 2008 & 2009

At the beginning of the year  Gilbert started off with around 1,980 homes for sale  and is currently at 1,700, a 14% drop. Chandler started 2009 with 1,760 homes for sale and will end 2009 around 1,500, a 15% drop.   The distressed sales for November for each city is almost a mirror image; for November 2009, foreclosure/bank owned sales in Gilbert and Chandler were 28%, short sales 26%, and normal sales 46%.

For the greater Phoenix area,  there were 14,000 bank owned REO listings in mid-December 2008 and that has dropped to 5,500 currently.   Short sale listings have gone from 11,500 to 14,800 in the same time period.

Trends for Gilbert and Chandler AZ  Homes Sold during 2009

The chart at the beginning of this post shows a two year history for Chandler represented by two lines.  The upper line shows the average $/sq.ft. for homes sold in Chandler during 2008 with a downward trend, the lower line represents 2009.  Further down is the same chart for Gilbert homes sold during 2008 and then 2009.   It may be difficult to predict the bottom of a market, but these two graphs show a definite stabilization of  home prices in Gilbert and Chandler during 2009 with a  upward trend for Chandler in the last 4 months.

These are averages for large cities so questions about specific neighborhoods or types of homes require a more detailed analysis. For questions about other cities in the Phoenix area, or a more in-depth look at specific areas within these two cities, e-mail me at GordonBaker@remax.net or call me.

Short sales have gone from being a rare and infrequent occurrence a couple of years ago to a significant number of the real estate transactions in Phoenix due to the number of homeowners with negative equity that need to sell.

Simply stated,  a short sale is when the proceeds from the sale are less than the amount owed and the sale is contingent upon an acceptable agreement between the seller and the seller’s creditor(s).

The chart above furnished by The Cromford Report shows the percentage of distressed sales for each city for August 2009.  The blue bars represent the portion of total sales that were short sales.  As banks are increasingly reluctant to foreclose, short sales are on the rise.  For example, short sales accounted for more sales than bank-owned homes during August in Anthem.  And in Fountain Hills, short sales were equal to the number of foreclosure sales.

Wow – Look At That Price!

Banks will not process short sales until they have a contract.  So a typical short sale may go through gradual price reductions until an offer is received.  Once received, the process can begin the cumbersome short sale process of determining the sales price and gaining the required approvals.  It does not have any correlation to the list price! The initial list price you see on the listing has NOT been approved by bank.   Short sales are routinely priced below market in order to receive an offer so the process can be initiated.  During the process, the bank requests an analysis of market value through a BPO (Broker Price Opinion) and then compares the offer price to the market value from the BPO.  If it falls too far out of  range, you can expect a counter offer after waiting for 2 – 3 months.

What Do You Mean It’s Not Available?

Another major point of  frustration can be the mechanics of searching for a short sale.  On Realtor.com it may show as available, but in reality the short sale has an accepted offer that has been signed by the seller and forwarded to the bank for consideration.  Once an offer is received on a short sale, the MLS status should be changed to AWC, Active With Contingency, the contingency being the approval by the bank.  However, many real estate portals do not recognize the AWC status and continue to show the property as Active.  Bottom line: contact a Realtor to help you identify which properties are truly available.  Note: some websites are beginning to identify short sales that have contingent offers.

Do You Qualify As A Short Sale Buyer?

There is no special financing required to purchase a short sale; however, any prospective buyer must understand the delays and frustrations associated with the process. Especially if you have a defined time table for finding a house, a short sale will most likely cause extreme stress, premature gray, potential marital strife,  and frequent trips to Walgreens  for extra Tylenol.  I am not kidding! Yes, you will hear about the short sale that closed in 6 weeks, but don’t count on that.  You must be flexible on the closing and have all the paperwork submitted to the lender since you’ll wait for 3 – 4 months and then all of a sudden the bank will require you to close in 18 – 24 days.

So Why Go Through All That Pain and Suffering?

With all of this said,  you might wonder why anyone would pursue a short sale property.  A good example is a house that closed 2 days ago that a family  relocating from Wisconsin purchased.  After looking at many homes and gaining a good understanding of the area, a short sale in south Gilbert caught their eye that could not be matched.  Their patience paid off and they got the best house on the market in their opinion and mine after waiting over 3 months.  Properly negotiated, short sales can offer significant savings to the patient and flexible buyer.

For those that feel they are up to the task of considering a Phoenix area waterfront short sale, the links below will be helpful.

Phoenix Waterfront Short Sale Searches:

Phoenix Waterfront Short Sales

Gilbert Waterfront Short Sales

Chandler Waterfront Short Sales

Glendale and Peoria Waterfront Short Sales

** The good news is that any short sale with an accepted offer will be noted for the properties in the above links. **

For more details on the intriguing part of the market called short sales, please call me at 480-326-8571 for more stories information.

Distressed Sales as a percentage of total sales by city - June 2009

In the current environment, if you talk about Phoenix real estate,  bank owned and short sale properties must be part of the conversation, and this has obviously impacted waterfront homes and lake community properties throughout the valley.  The differences between these two types of distressed properties are significant, but both represent opportunities for those looking for homes at below market prices.  In the majority of cities in the valley, bank owned (REO) and short sales represent the majority of the sales.   The chart to the left shows the bank owned homes and short sales as a percentage of total sales for the month of June 2009 by city.

Difference between short sales and bank owned homes

Bank owned homes are also known as REO (Real Estate Owned), foreclosures, or corporate owned.  They have been through the foreclosure process and sold “as-is”. Because there is no seller disclosure, it is even more important to perform the due diligence which includes a home inspection. All buyers should become familiar with the Buyer Advisory.   Once you place an offer on a bank owned property, you can expect to hear a response in 3 – 5 business days from the asset manager who communicates with the listing agent.

A short sale or preforeclosure has not been through the foreclosure process and is not bank owned, even though the lien holders will have to approve the short sale.  By definition a short sale is when the proceeds of the sale will not be sufficient to cover the outstanding loans which is why the lien holders need to approve the sale.  The proceeds of the sale are “short” of the total amount owed.  A couple of important considerations for short sales. One, the list price you see advertised has NOT been approved by the bank.  It is typically an amount set which will entice a buyer to submit an offer so the package can be submitted to begin what is commonly a 3 – 4 month process before a response is received.  Secondly, the seller must “qualify” for a short sale and that may not be decided upon until the process is in the second month after the necessary documentation has been submitted.   The seller must demonstrate a financial hardship by supplying documentation similar to when they purchased the home. Reasons for short sales not closing include a seller who cannot qualify for a short sale, lien holders or investors that cannot agree upon the distribution of the proceeds of the sale, or not being able to postpone the auction date of the property. Short sales are also sold in “as-is” condition.

Buying opportunities in lake communities for waterfront homes

Foreclosure or bank owned homes and short sales represent opportunities for buyers wishing to find a property at a discount.  Short sales  involve more risk because of the delay in receiving a response which may be that the seller is not approved for a short sale,  a counter offer from the bank significantly different from the offer price, and the uncertain timing.  Those considering purchasing a short sale or preforeclosure must be extremely patient and flexible in their ability to close once the agreement notice authorizing the sale is received.  A buyer will wait and wait and wait for months and then receive a letter saying they must close within 3 weeks.

If after considering the risks involved in purchasing a distressed waterfront property, you are looking for bank owned or foreclosed waterfront homes in the valley, click on Valleywide Bank Owned Waterfront Homes.

Or click on View Short Sale Waterfront Homes.  One important point when viewing short sales in the attached link or other real estate websites such as Realtor.com is that a short sale listing may show as active, but in reality the seller could have already received an offer, accepted it and forwarded it to the bank. The reason is that when a short sale has an accepted offer that is signed by the seller, the status in the MLS is typically changed from Active to AWC which stands for Active With Contingency, the contingency being the bank/lien holder approvals.  The problem is that the the real estate websites and portals do not distinguish between the Active and AWC, and show both as Active.  This  presents a misleading representation to someone viewing listings seeing low priced short sale listings that appear to never sell when in fact an offer has been accepted and are waiting for the 3 – 4 month process.   This is why it is important to receive listings from a Realtor who can e-mail the MLS listing which properly reflects the status of the property.

For more information or to receive distressed sale home listing by e-mail, don’t hesitate to call or e-mail me.