The Phoenix area real estate market was good to home owners in 2012. It was the first year of appreciation since 2005. Buyers frequently found themselves frustrated by the competion for homes especially those under $200K where there is an abundance of first time home buyers and investor demand. After a robust year in 2012, how is 2013 shaping up?
When you see a short sale or foreclosure, do you think a bargain is coming your way? My advice: slow down and see who owns the note on the property. If the foreclosure is a Fannie Mae owned property, be patient. If it is a short sale and Fannie Mae holds the lien, you should seriously question submitting an offer. You could wait months and then be asked to pay market value or higher. Don’t expect logic or common sense to found anywhere in the transaction.
The year in review of 2012 for homeowners was an encouraging one to be sure. 2011 was essentially a flat line, and there has not been any appreciation in home prices since 2005. Therefore, the 12 – 29% increase experienced in nearly all Phoenix metropolitan cities in 2012 was the perfect present indeed! If you’re interested in why prices finally made a U-turn and the chances of a repeat performance, feel free to read on.
Last year buyers enjoyed a real estate buffet that served a combination of foreclosures/REO’s, short sales, or normal/traditional sales at historically low prices. The inital buyer consultation included an explanation of the in’s and out’s of each. Frustrated sellers knew they were competing with distressed sale pricing as they tried to obtain the highest price for their traditional sale that had seen years of declining value. It was common for most valley cities to have a majority of the sales to be distressed foreclosure or short sale transactions. Distressed sales as a percentage of total sales were above 80% for a couple of Phoenix valley cities! It was the exeception for a city to have less than 50% of total as distressed sales. The chart on the left shows the percentage of sales by each category for May 2011 for each valley city. As you know things change in real estate, so read on to see what has happened since last year.
Congratulations Miami, the 2011 NBA champions! – NOT. Here it is in print from a Florida newspaper. I guess they never got the memo or checked the score board. Just because it gets printed or makes its way onto the internet, does that make it true? That’s the same way I feel about Phoenix area shadow inventory. Some of the confusion lies in the definition of shadow inventory. Obviously, shadow inventory includes properties that have gone back to the lender but are not on the market. Some also consider homes that have received a Notice of Trustee Sale with a scheduled auction date. Some add to those numbers loans that are seriously delinquent which is 90+ days behind. As you can see, the definition will affect the level of shadow inventory cited by the various experts. There’s also the issue that real estate is local and national commentaries cannot be relevant to individual markets? Many have stated that shadow inventory is out of control and will contribute to a foreclosure Tsunami. Now let’s get the facts for the Phoenix area.
Short sales continue to be a significant portion of real estate sales in the Phoenix Az valley. And they affect each city to varying degrees. For example, short sales in Sun Lakes were 12% of the total sales in June 2011, while in El Mirage they accounted for 41% of the sales. Other cities were somewhere in the middle; Gilbert – 35%, Chandler – 35%, and Scottsdale – 23%. During the month of June 2011, there were 91 waterfront properties that were sold as a short sale transaction. Short sales provide a method for homeowners experiencing a financial hardship to sell their home. And lenders see short sales as a way to prevent costly foreclosures. Freddie Mac CEO, Ed Haladman, summed it best when he said, “Freddie Mac is doing everything it can to prevent more foreclosures, and short sales are becoming an ever-popular tool in situations where foreclosure is imminent and modifications have failed.” Properly negotiated short sales also offer homeowners a way to sell their homes without a deficiency judgement and in many cases the opportunity to purchase a home within 2 – 3 years. The above chart provided by The Cromford Report shows the percentage of 2011 June sales with the blue bars.
Will Your Short Sale Last?
Contract acceptance is the honeymoon… everyone anticipates a happy ending, then real life sets in. As in real life not all marriages survive, neither do all accepted short sale offers! Its like dating a beauty queen or the all-star quarterback. It’s love at first sight and WOW that list price is amazing. It may be the nicest Scottsdale, Chandler or Gilbert waterfront property you’ve seen. But with time you find out that this short sale process uncovers some severe flaws that were unforeseen. Here’s real life situations where “flaws” have surfaced and that promising short sale deal falls apart before happily ever after comes!
Short sales, once almost unknown, have become a significant part of the real estate jargon in Phoenix Az. Short sales remain one of the most misunderstood real estate transactions inspite of their increasing numbers. There are many aspects and implications a seller must understand reinforcing the need to seek competent legal and tax advice. First of all, let’s define an Arizona short sale. A short sale is when the lender/investor is willing to authorize the sale when the proceeds do not cover the outstanding loan amount. What are the issues to be considered by Phoenix valley homeowners regarding a short sale?
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:
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.