Beware Boutique and Niche Lenders

The words "boutique" and "niche" have no place in lending for mortgages for a subdivision type of property.  If your loan officer is the  "Owner",  "President", or some other high-powered type of title, beware the consequences!

Two clients of mine have become victim of shoddy and slovenly practices by lenders from "boutique" agencies.  While the name "boutique" conjures up ideas of unique goods and high quality, my experience with these types of lenders engenders the exact opposite.

One story involves two Sellers, and one Buyer, all clients of mine that suffered excruciating delays in their transactions due to the inexperience of the lender.  We (my client and I) were told by the lender that all was fine - until within days of closing we were told that things were not fine.  We could tell that things weren't going well when the other agent stopped taking phone calls or returning emails promptly.

In each case, the lender - who swore up and down that he had all the necessary documentation - needed additional documentation from the Buyer to close the loan.  In one case, the documents were unobtainable because they were in the moving van somewhere between the east coast and Phoenix.  In the other two cases, it was documentation that could have been obtained easily at the beginning of the transaction but wasn't because the loan officer - even thought they were the president of the company - didn't know enough to ask for them until the underwriters asked for it.  The delay here was caused by the lack of follow-up on the lender.  It would take them days to follow up on something when a good lender would have never had the problem.

One lender was the spouse of the agent representing a buyer who wanted to buy my Seller's house - talk about a red flag!  When this was pointed out - my seller ignored the warning and decided to sell anyway.  The lender had assured us that the loan was a slam-dunk and there was nothing standing in the way of a smooth close, until there was that little documentation problem that delayed things a week, which took us into a holiday requiring another week.  Then it was discovered that something was incorrect in the package sent to the underwriter, which took another week.  What a mess!  All of these things should have been handled up front, or within 24 hours of the problem being discovered.  Taking a week to fix a documentation problem is not acceptable!

Most of the Realtors out there have working relationships with lenders based on an expectation that the lender will perform as they have in previous transactions.  Lenders with integrity will turn down loans that they are not experienced with.

However, if the lender recommended by a Realtor happens to be their spouse or relative, find another lender.  Find out how many loan officers are in a given lender's company.  If there are less than 5, be very careful!  Talk to a couple different lenders to get their opinions on how a loan should be done for your circumstances.  You will be surprised that there are lots of loans out there for you!

December is Not for Listing

Even though we have had less than a stellar year for sales of property within the Phoenix Metro area, at least we are following the normal pattern of highs and lows in the numbers of sales per month.   Buyers are likely to wait until after the holidays to make a commitment to own a new home now.  Sales will gradually taper off until about the end of January when people who made offers early in January are completing their transactions.  Following that, there is a bit of a "feeding frenzy" from buyers as they shake off the holiday lethargy and move forward with their plans for the new year.

So, if you are planning on listing a property, the best time to do it would be in mid-January, to take advantage of the surge of buyers coming in the nicest months of the year!

Why "Free" money is not free

There are a number of programs in the Phoenix area that advertise "free money".  The truth of the matter is that the money isn't free at all, there are several hoops to jump through first.  Every program is different, but you can't just go with a hand out and expect someone to plop a bunch of dollars into it.  Here are some of the requirements and restrictions that apply to free money.  Not all of these apply to every free money program.

1) Income limits - you have to be under a certain income limit to qualify for the money.  Usually, everyone in the household is considered.  I once had a client denied because of his daughter's part-time job a a theater put him $45 over the family income limit

2) Education Requirement - Often, you must attend classes to qualify for the free money.  The hourly requirement for classes goes from 8 to 40 hours spread over 5 - 10 weeks.

3) You must occupy the home for a minimum amount of time - Usually, if you sell the home within 5 years, a portion or all of the money must be repaid from the proceeds of the sale.  This includes situations where you must move for a job, or if the neighborhood declines.

4) Participation is not guaranteed - Just because you meet all the qualifications, you may not be allowed to participate because the handouts are overseen by a board.  If the board does not like you, you won't get your money.

5) You may not get all the money offered - for example, there is a program that is supposed to give you 5% of the purchase price towards your down payment.  What they don't explain is that half of that goes towards administration fees, so you only really get 2.5%.  However, that part is still free.

6)  It takes a long time - your seller must be patient, because the review process to be certain that you qualify can take up to a month or more.  This is in addition to the regular escrow process, so you could be looking at 2 - 3 months for the home to become yours.

7)  You can't have any other debt - you may have to pay off credit cards and other loans in order to qualify.

This list of restrictions is not complete, but covers the major hurdles in obtaining free cash for a house purchase.  One good thing is that you can often combine programs in order to get enough cash for a down payment and your closing costs as well.  You can get into a home for $0 out of pocket.

Have  a great day!

Tim


#FreeMoney  #FirstTimeHomeBuyer

Some of the text in the commentary at the end got a little garbled in the conversion to .jpg files, but I think it is obvious from the charts that this is the first month in over 13 months that sales have exceeded last year's numbers, even with the apparent lack of interest on the part of Buyers.  The government is re-working some of its awful lender policies, and trying to make things more affordable for people who work for a living.  It ends with a prediction of a "better" 2015, and predicting that in 2016, the market will "take off"

5 "Truisms" that are No Longer True - 1 of 5

Recently, I had an opportunity to provide counsel for a young friend of mine about possible career goals and expectations.  I talked for an hour or so about being a Realtor, and the various paths you can take within real estate.  As I poured out the information, I also thought back to when I was his age (30-ish) and trying to find my way towards an early retirement and the "Good Life".  I thought about what advice I had received, and how hardly any of the advice had actually worked out, and decided to set my thoughts down for anyone considering "climbing the ladder".

Non-Truism #1 - Work hard and you will be rewarded with promotions, additional income or other material factors.This is number one on the list for many reasons.  It should be re-worded to "work hard and you will not be fired".

There was a time when hard work was a requirement for promotion or bonuses.  When if you out-worked the other guy, you would be chosen for advancement.  This was true when companies had loyalty to their employees, and companies hired from within their own work force.  It is a principle that helped the entire country grow as a result of confidence in one's own future, and caused those who believed in it to plan their lives around a personal conviction that good, hard work will provide for a person and their family.  Companies actually wanted you to stay and work until you retired.  They provided pension plans, family picnics, and other loyalty-building activities for their employees.  Working for a company meant that you had an extended family that you could rely on for help and assistance in times of need.  Chances were the boss knew your name, your spouse's name and at least how many children you had.

What we have now no longer reflects anything of the nurturing company of yore.  Companies provide jobs with no career paths attached to them.  Your job is where they put you and expect you to stay forever.  You can not expect to grow with the company, or expect that your hard work will be rewarded with a promotion or bonuses.  There is no company loyalty, because there is nothing that the company can provide that doesn't cost the shareholders points on their returns.  Your worth to the company is only the work product that you put out today.  If your boss is moving up, retiring or otherwise leaving the position, chances are that the person who fill's the vacant position will come from outside the company.  Working hard allows you to keep your position when a "downsizing" occurs so that you can take on more work than you had before without additional compensation.  Your continued employment is to be considered your reward for putting in long hours and coping with the additional workload.  Companies no longer consider experience an asset, and they don't want to acknowledge that the more experience you have, the more valuable you are.

There was a time when a person would be considered a hiring risk if they had more than 1 job in two years.  This is also a consideration when a person is applying for a mortgage.  I have recently met many people who have held up to 5 jobs in 3 years.  When asked why they changed jobs so frequently, the answer is nearly always the same:  "I couldn't move up in the job that I had, so I took another that either paid more or had better benefits or both".

There is no company loyalty, so why should a person be loyal to a company?  Working hard only gets you a little experience to enable you to change companies for a better job.  This encourages a mindset that is now preventing middle management to change companies instead of looking within a company for opportunities.  Benefits are dwindling and morale is in the toilet.

Without the possibility of a secure future, how is a person supposed to cope?  What are the rules supposed to be now?

Why Normal People Can't Get a Mortgage

This is the best article I've seen that lays out the problems that the Federal Government is causing because of its meddling in the mortgage industry.  Dina ElBoghdady explains why credit requirements have gone up, why the housing market is so sluggish, and why the recovery will be slow.

Click here to read the article

On a separate note, I just dropped a little over $12,000 into a rental property that had been pretty messed-up by some prior renters.  I am now hiring a Private Investigator to check backgrounds of all my potential renters.  Some of the money was for deferred maintenance - exterior house painting for example - and some vandalism that occurred.  But the majority of it was for things that the renter did like swap out a toilet - cram toys down the other toilet so badly it had to be replaced, repaint the entire interior because a little monster had drawn all over it with crayon, replaced the filthy carpets (they could not have vacuumed...) and a host of other things.

So, I am back now, and will hopefully be contributing a bit more frequently to your knowledge and perspective on the valley housing market.

Have a great day!

Tim


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

OK, this ought to be the last post of the exhaustive review of why there is so much documentation required to get a mortgage these days.  We know about the Ability to Repay requirement and why it takes so long to process a mortgage  (Part 1 & 2),  also what the 8 factors are in contributing to Ability to Repay (Part 3) and 4 of the 8 the documents required to prove Ability to Repay (Part 4).  This will finish out the documentation requirement with the final 4 documentation requirements.

5.  Monthly Payment for Mortgage-Related Obligations - What this means is that your mortgage payment is made up of at least 5 different items - and possibly a 6th.  The lender wants to protect themselves against you defaulting on the payment, (see Part 1) so they need to take into account everything that involves the house that would affect the mortgage payment.  These items are:

•      Principle - The amount of principle you are paying back each month
•      Interest - The amount of interest you are paying each month.  Principle and Interest payments usually total the same amount each month.  At the beginning of a loan, not much goes to principle, but as the principle increases, the interest decreases, making the total of the principle and interest the same each month.
•      Taxes - Property taxes are usually placed in escrow.  The amount of yearly taxes are estimated, and 1/12 of the yearly taxes are collected each month.  Then, the mortgage company pays the taxes from the escrow account at the appropriate times of the year.
•      Insurance - Homeowner's insurance is required by all mortgage companies.  They want to be sure that if a calamity strikes the house, the house will be put back in reasonable condition.  Who you get your homeowner's insurance through is up to you.  Once again, 1/12 of the insurance requirement is collected each month.
•      PMI or MIP - This is your Private Mortgage Insurance, also known as a Mortgage Insurance Premium.  1/12 of the annual fee is collected each month.  This fee protects the mortgage company against you defaulting on the first 20% of the mortgage.  Once 20% of your mortgage is paid off, you can have the mortgage company drop the additional insurance.  HOWEVER, they will not do it on their own - you have to ASK for it!
•      HOA fees - Homeowner's association fees generally run between $45 and $70 each month, unless there is something special about your neighborhood.  If your neighborhood is in a gated community or has a swimming pool, chances are that your HOA fees are much higher.  Also, in a townhome or condo community with recreation areas or pools, it could be higher.  Since the HOA can attach a lien to your home as a result of non-payment of HOA fees, these fees will also be considered part of your annual payment, even though they are paid directly by you, and are not placed in escrow.
•      CFD Fees (in certain areas) - In some of the newer communities, the cities actually paid for the installation of sewers and roads, and allowed the builders to just build the homes instead of installing everything.  In these areas, there is typically a Community Facilities District established that essentially taxes each individual residence a certain amount to pay for the roads and sewers. The taxes usually expire after 20 years, although they can be paid off earlier if desired.  These taxes are paid by you to the city, and are not put into escrow, but they still count against the requirements of your mortgage!

6)  Your Current Debt Obligations -  This is essentially anything and everything that you have to pay to anyone.  Alimony, Child Support, judgements, credit cards, RV loans, Car Loans, and anything else that you owe.

7)  Your Debt-to-Income Ratio - This takes into account your income each month, and your debt obligations each month.  The ratio is:  How much money do you owe on a monthly basis divided by the amount of money that you make on a monthly basis.  Generally, the ratio needs to be below 45%.  If you have income from alimony and child support or a judgement, you can probably include it in your monthly income.  Interestingly, Medical Collections are often excluded from this calculation.

8) Your Credit History - This is an entire topic in itself.  Your lender will "pull your credit" from all the the 3 credit reporting agencies.  If you have any recent credit issues, you will be asked to explain them in writing.  Of course, recent bankruptcies and foreclosures will preclude you from obtaining a loan except in certain circumstances that can be documented.  I had a client who had a foreclosure and was able to document the circumstances, and then obtained a mortgage within a year of the foreclosure.

OK, so to sum everything up, documentation is the root of all mortgages!

#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Lender Conundrum - Documentation Requirements - Part 4

After making the decision to own a new home, getting in touch with a mortgage person, finding a Realtor, and maybe even seeing a few homes, it is time to start documenting your current financial situation.  You don't have to decide what is needed for documentation - your lender will provide an initial list for you, but then you might have to provide additional documentation to back up the documentation that you provided for your lender initially.  That's right - you may have to document your documentation!  Here are some thing to look out for so you can be prepared:

1. Bank Statements - This would read better if it said FINANCIAL STATEMENTS.  Plan on giving up all your financial statements - IRAs, 401Ks, Retirement Accounts, Stock Accounts, Savings accounts, and Checking Accounts for everyone who will be involved in the loan.  Also, a statement isn't complete unless you have all the pages - even the pages at the end that you always throw away.  If the pages of your statement say 1 of 5, 2 of 5, etc., you better have 5 pages of statements.
2. Your Current Employment Status - First, let's hope that you have two solid years in with the same employer.  Second, if you have changed employers in the last two years, it needs to be documented.  Did you change for a pay raise?  Did you get a degree and take a better job?  Did your last employer go out of business?  Maybe you changed because this employer was closer to where you live.  Any way you cut it, the reason behind changing jobs should have some positive impact on your life.  If that is the case, you will be ok.  If you changed jobs more than twice, and it wasn't for a promotion, more money or some other convenience, you might have a problem.  This is also where you identify multiple income streams.  For example, if you have child support or alimony and the income from a job.  Both of these incomes can be added together for income.  Of course, you will have to prove that the income from the child support is steady.  Simply providing a divorce decree will not be enough.
3. Your Monthly Payment for the New Mortgage - This is primarily a function for the Lender.  They will check the current taxes, HOA fees, down payment amount, mortgage amount, possible ongoing assessments on the property and the payment for homeowner's insurance to make sure that they have a breakdown of all the items you will be responsible for paying in conjunction with owning the property.  Then, they will come up with a payment that you will be responsible for making.
4. Your Monthly Payment for Any Other Loan or HELOC - Here is where they look at what you are currently paying on your car (if anything), the credit cards, the alimony or child support, the boat loan, the loan for your two ATVs, etc.

We will tackle the other items that your lender checks next time.  Until then, Have a great Day!

#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Lender Conundrum - ATR Factors - Part 3

OK, so you have decided to take the plunge and own a new home.  You have braced yourself for the ordeal of digging through files to find your tax returns from the past two year, pay stubs and auto loan history.  This shouldn't be real bad, right?

And then it starts...

You need bank statements - complete bank statements.  Meaning that the last page full of boilerplate language that you always throw away suddenly becomes important.  What's going on?

Your lender is now liable - both as a company and personally - to make sure that you don't default on this loan, because if you do, then you can sue them!  So here are the items that they have to document to make sure that they can justify their decisions in court:

·         Your current or reasonably expected income or assets, excluding the value of your current house (if you have one)

·         Your current employment status;

·         Your monthly payment for the new mortgage;

·         Your monthly payment for any other loan or HELOC (Home Equity Line Of Credit)

·         Your monthly payment for mortgage-related obligations (such as property taxes and certain insurance premiums);

·         Your current debt obligations, alimony and child support;

·         Your monthly debt-to-income (DTI) ratio or residual income; and

·         Your credit history.

The last one is the kicker!  The first 7 items have to do with what you are currently paying out, and what you are taking in as income - which makes sense.  It is the HISTORY that is the problem.

Your HISTORY on each item also has to be detailed.  It isn't enough to have a great-paying job.  How long have you had it?  What did you do before that?  How secure is it?

It isn't enough to have no late payments on your mortgage - have you ever had a late payment?  When was it?  Why did it happen?

The NICE part about this, is YOU DON'T HAVE TO BE PERFECT - YOU JUST HAVE TO HAVE AN EXPLANATION.

Next Up - What it take to document these things!

#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Lender Conundrum - Part 2 - Documentation Dynasty

OK, so you know that getting a mortgage is going to require that you do some paperwork.  But OMG!  Where does it end?  The answer is "when it ends".

Just like a detective follows clues to find a perpetrator, loan officers are now being forced to "follow the money" back to its source.

In evaluating a borrower’s ability to repay, a lender cannot rely solely on information told to them by the borrower.  To properly validate the consumer’s ability the lender must use reasonably reliable third-party records.  This is the primary cause of Borrower Frustration and Lender Angst.

The lender is compelled by the Ability to Repay (ATR) rule to fully document all sources of income and align that income with assets in to make the ability-to-repay determination.  In effect, the lender has to make a road map of all your income and expenditures so that they can stay in compliance with the rules.  So, the gift that you got to help with the down payment?  It was income to you, so its origin has to be mapped back to the source, just like your pay stub maps back to your employer.

The lenders are doing this because deep within the legislation, it says that a borrower can potentially sue the lender - including every single person who ever touched the loan - if they ever default on it!  Lenders aren't dummies, so they look as far ahead as possible.  If a lender has to defend against a lawsuit like this, they will have to prove that they considered each of eight ATR factors.  As a result, loan files are being documented detail; not only to provide a mortgage, but to the extent that they could stand up to litigation as well.

Next up - the eight ATR Factors

#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Sales Rate Down - Rental Price Up!

Below you will find the Rent Check statistics published by ARMLS, and after that, a comment on sales rates from the Cromford Report.  Both reports have come out within the last 4 days.

Average rents are now over $1,300/month, and the sales rate is down to 2000 levels.

From the Cromford Report:

August 3 - The annual sales rate continues to decline with no sign of any deceleration. Here are some examples for the single family market:

• Phoenix - 14,544 per year, lower than any year since 2000 except 2007-2008
• Mesa - 5,855 per year - lower than any year since 2000 except 2007- 2009
• Scottsdale - 4,471 per year - lower than any year since 2000 except 2007-2010
• Glendale - 3,329 per year - lower than any year since 2000 except 2007-2008
• Chandler - 3,743 per year - lower than any year since 2000 except 2007-2009
• Gilbert - 4,447 per year - higher than 2001-2003 and 2006-2009
• Surprise - 3,053 - higher than 2001-2004 and 2007-2008
• Peoria - 2,762 - higher than 2001-2002 and 2007-2009
• Queen Creek - 3,081 - higher than 2001-2008
• Paradise Valley - 357 - higher than 2006-2010

The annual sales rate will stabilize and then start to rise once demand starts to recover from the slump that started this time last year. The only cities where this may possibly be starting to happen are Cave Creek, Eloy and Florence.


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Lender Conundrum - Part 1 - Lender Circumstances

By and Large, people who buy homes require a mortgage to do so.  Right now, the mortgage business is going through a slack time, so I went to visit a lender to find out what they actually do, why things take so long, and why they are continually asking for more information.

I don't know that I got satisfactory answers to my questions, but I did get some answers.  These answers make sense from the lender's perspective, but some of them leave common sense behind.

The first thing you have to realize is that lenders have come "under the microscope" lately in terms of governmental regulation and public opinion.  The combination of these two things makes the creation of legislation "for the public good" far too tempting for congress to "do something" about.  In this case, the road to lender purgatory was paved with good intentions.

According to the Consumer Protection Financial Bureau, legislation enacted this year "generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.”"

The key phrase in this, and a recurring theme across the legislation, is "ability to repay".  It used to be that ability to repay was left to the lender.  If a person was a risky prospect to make a loan to, and the lender did it anyway, then the lender was left with the problems if the buyer couldn't repay the loan.  That is no longer the case!  It is rare now for a lender to keep the loan that they create.  This will be the topic of an entire blog later in the series.

What "ability to repay" translates to in the real world, is agonizingly minute oversight of lenders that requires them to go over a file - every page - at least 5 times in their process:

1) loan officer reviews docs as they come in
2) loan officer assistant reviews docs as they are placed in file
3) loan processor reviews docs to prepare them for underwriter
4) Underwriter reviews docs
5) Compliance department reviews doc

With all the touching of documents - by the way, these are physical documents - it is no wonder how long it takes to do a loan.  Next up - Reaping of Documents!


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Phoenix Sales Rate Gradually Declining

 From the Cromford Report:  For Greater Phoenix as a whole, the annual sales rate has been in decline since November 2011. The rate for June 2014 is similar to June 2003. However the population of Maricopa County has grown by 22% since then while the population of Pinal County has almost doubled. If we select Maricopa County only, we see an annual sales count of 69,468, similar to May 2003. Pinal's annual sales are at 7,066, which is close to the pre-crash peak in December 2005. Pinal's all time high was back in April 2010at 11,106, when more than half the sales were lender owned or HUD sales.

If we look only at normal non-distressed sales, the Pinal County has been declining since February 2014 while Maricopa has been flat since December 2013. Much of the missing growth is in the price ranges below $200,000. Above that figure the annual sales rate for non-distressed homes is still growing, albeit at a modest rate. However below $200,000 the sales rate has been declining since October 2013.


This chart - normal sales below $200,000 for all of Greater Phoenix - appears to have a predictive quality. It was rising quickly from Jan 2001 to Feb 2005 then collapsed. It recovered starting in 2009 and then hesitated between mid 2010 and mid 2011, only to grow strongly until October 2013 when it started to decline gently. If you had been using it as a market signal between 2001 and 2014 it would have served you very well. This is no guarantee that it will do so in future, but personally I am watching closely to see the direction this chart takes over the next 12 months.

Yes, It Takes Longer to Sell Now

This has been an interesting year, because so many people think I am exaggerating when I say that the average time on market is 90 days!  I usually get a "yeah, sure..." type of look and response.  They think that "just last year, homes here were selling in a couple weeks, and now it will take 3 months?  No way!".  I can't blame them for this line of reasoning, if I were not as "tuned in" to the market as I am, I don't know if I would believe me either.

Here are two graphs that show just how much the market has changed since last year, and how different the patterns are than they used to be.

#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

The Importance of Questions

As a listing agent, I have lots of interesting conversations with Buyer's agents.

Usually, when I receive an offer, all I get is an email.  Sometimes it has an "important" flag, and sometimes it doesn't.  It is rare that I also receive a phone call to let me know that an offer has been sent, on the off chance that it was sent to the wrong email address.

When I get the offer, the first thing I do is call the other agent and ask them lots of questions about their client, the activity they have had, and about the lender.  For some reason, this seems to annoy many agents!

Why would a Buyer's agent be annoyed at getting questions about their client and their history?

I ask questions like:

1)  How long have you been working together
2)  Have you made any offers
3)  Have you ever worked with this lender
4)  Where have you been looking
5)  Why did you choose this house

And depending on the circumstances, I ask other more penetrating questions.  For example, if the Buyer wants huge concessions, I will ask the other agent if their client has any cash, or if the transaction hinges on the Seller providing closing costs.

To me, all these sound reasonable.  I can take the information back to my Seller, and give them a complete picture of the Buyer, and give them a feel for what course the transaction will take.  I can give the Seller a reasonable expectation of the success of a transaction.  I can say "If you accept this offer, your house is going to be tied up in escrow for a month, and you have a 50% chance that it will close", or 75% or 95% or whatever.  However if I didn't ask the questions, I wouldn't be able to say that.

Don't you want your Seller or Buyer to be able to have confidence in their decisions?  That's what the questions are for.  That's why people like my services so much - I actually find information that helps them!


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Canadians and Californians Leaving Arizona Market?

From the Cromford Report:  Demand is down almost everywhere but it is particularly down hard compared with last year for our two biggest out-of-state buyer groups - Californians and Canadians.

• Californians only purchased 295 single family and townhouse/condo homes in Maricopa County during June which is 34% less than in June 2013
• Canadians only purchased 126 homes which is down 33%

The decline is even more dramatic if we go back two years or more.

Overall out-of-state purchases dropped by 16% over the last 12 months so the fall is more than twice as large among our best customer groups. However in-state purchases only declined by 5% so it seems that Arizona's attractiveness to out of state residents has take a significant hit over the past 12 months.

Median Sales Prices in Phoenix a bit Misleading

This graph is misleading.  A quick glance makes it appear that the economic plan is gaining favor.  Yet, a close look reveals that the time frame moves from right-to-left.  Confidence in the plan is actually dropping!

The current median sales prices for the Phoenix area are also misleading - Mike Orr from the Cromford report described it this way:

July 6 - It's all in the mix. If we examine the monthly median sales price for all areas & types we get $196,200 today, which is up 7.2% from this time last year. However the majority of that price improvement is due to a change in the mix, not an increase in home sales prices between July 2013 and now. This is revealed if we look at the individual monthly median sales prices for the 3 major types of transactions across Greater Phoenix:

• Normal sales - $205,000 - up 2.5% from $200,000 last year
• REO sales - $134,045 - down 1.5% from $136,050 last year
• Short sales & pre-foreclosures - $138,000 - down 1.4% from $140,000 last year

Two of the categories are down from last year while the third (and most important) is up a mere 2.5%, not much more than inflation.
The big change is in the share of the market that each transaction type has taken:

• Normal sales - 89.7% - up from 79.5% last year
• REO sales - 6.5% - down from 8.7% last year
• Short sales & pre-foreclosures - 3.8% - down from 11.8% last year

The swing away from distressed sales (which have much lower prices) towards normal sales (which have slightly increased prices) accounts for a much larger increase in the overall median sales price than for any of the 3 individual transaction types.


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Credit Unions are Hassle Incorporated

The US Government has not made life easier on anyone with their meddling in laws governing the creation of mortgages for people buying homes.  The upshot of the laws has been that - as seems to be the case everywhere - mortgage people have to do more, be responsible for more, and be personally liable for more.

Processing of mortgages at credit unions is particularly adversely affected by these laws.  The reason is that credit union loan officers do not work on commission! 

You might think this is a good idea.  You might think "Why should I pay $3000 for a loan at a mortgage bank, when I can pay $650 for a loan at a credit union?"  That's a fair question, let's answer it!

First, consider that over the course of a 30 year loan, the $3000 you pay for a mortgage professional to do your loan is $8.33/month.  The $650 you pay a paper shuffler is $1.80/month.

When you hire someone to work for you, do you check their resume, or check their online ratings, or at least do a comparison of the prices they charge?  Lots of people do all three.  Many people take into consideration the type of job they want done, and find the services that they think will produce the desired outcome for the minimum amount of money.

So to begin with, when you hire someone to do your loan for you, you need to think about what type of person you are hiring to help you with the biggest purchase you are ever likely to make.  The results of this decision will bind you for the next 30 years.  So you should take into account the reputation of the company and the individual that you will entrust with all of your financial information.

Do you really want a $2.70/hour paper shuffler to do your mortgage?  That's what a $650 loan origination fee buys you!  $650 divided by 30 days divided by 8 hours/day.  And you can't call them on the evenings, weekends, or holidays. Files just sit there if they are on vacation, because there is no one else to handle them.  These people can make the same amount flipping burgers with a lot less hassle.  They do not have reviews that are available to the public.  There is a chance that your loan officer was just moved to mortgages from the auto financing department.

Would you rather have a $12.50/hour professional handle your loan?  That is $3000 divided by 30 days divided by 8 hours/day.   With a professional, you will have 24 hour a day access on weekends and holidays.  They have a team of professionals working with them to take up the slack if they are sick or take a vacation.  These people are driven to make your life run as smooth as possible, because your comments on their review will be available on the internet.  Mortgage processing is all these people do.  There is a good chance that mortgage processing is all they have ever done, and they know it backwards and forwards.

If you are one of those people who always take the cheapest way, and don't mind the hassle, lack of communication and lack of concern for your situation, then a credit union mortgage might be for you.

If you want professional care, and appreciate smooth processing and the anticipation of any problems so they can be fixed now instead of being a crisis later, you might want to consider this type of professional for your mortgage.


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

HOAs Are Pretty Nice Now

Not so long ago, Home Owner Associations (HOAs) prevented people from flying the flag, putting solar electric on the roof, parking in the driveway, and a whole host of other rules.   From the beginning, HOAs were a good concept, but seemed to be modeled after some high-rise apartment in New York, not the personal freedom concept that people embrace in Arizona.

HOAs are no longer allowed to fine you for leaving your trash can out too long, or for debris that accumulates as you are trimming trees and shrubs.  The only thing that they can now fine you for, is not paying your HOA dues.

Most HOA dues in the Phoenix for single family subdivisions are between $45 and $65 per month.  The amount of the dues depends on how much the HOA has to maintain, how many households there are in the HOA, and whoever the HOA board decides to hire.

When I bough the house that I am currently living in, HOAs were a new concept.  They regulated just about everything from the number of trees that you must have in your front yard to what colors you could paint your house, and whether you could park on the street over night.  For the most part, the rules didn't bother me, and I would get an occasional nasty-gram telling me about the construction debris left in my yard (I used a brick to prop open a gate, and forgot to put the brick behind the gate when I was done) or that I left a trash can out too long.  No big deal.

Now HOAs are "paper tigers" since the Arizona legislature has taken all their teeth by not allowing them to fine you for anything except not paying dues.

Meanwhile, I live in a community with large park areas where children play ball, nice shaded walking paths, and a nice community where the condition of your home is regulated by the peer pressure from the neighbors, just like in the old days.

I like it!


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Phoenix Market Growing Stonger!

How can I say that the Phoenix market is getting stronger?  After all, Sales are down this year from last, Mortgage rates are creeping up and Obtaining a mortgage is difficult.  The graph above is what gives me hope.

Please note that Q2 in of each of the past 4 years has had the greatest number of sales annually.  Look at how the dark blue bars - representing "Normal" sales - has increased while the number of Foreclosure Sales (represented by the red bars) is practically down to nothing!  This means that our market is now being "powered" by people selling their homes.  It is no longer dependent upon the banks!

This also explains why values are going up, even though total sales are down.

Next is what amounts to a political "sound bite".  It is true information, but taken without a complete understanding of the encompassing environment, it doesn't tell the whole story.

From the Cromford Report - Friday June 20 - The annual sales rate is an interesting measure because using a full year eliminates the seasonal effects and allows us to detect whether demand is growing or declining. For the major types of homes on ARMLS we see the following changes in the annual sales rate comparing Greater Phoenix for June 20, 2014 with June 20, 2013.

• single family detached - down 13% from 73,512 to 64,147
• townhouse - down 8% from 5,789 to 5,312
• apartment style - down 9% from 4,119 to 3,742
• patio home - down 11% from 1,331 to 1,191
• gemini / twin - flat at 608 both years
• mobile home - up 6% from 1,614 to 1,717

We see that attached homes have fallen less than detached homes and that mobile homes are in higher demand than last year.


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Summer Market Outlook - Market Improving!

At the beginning of the year, people were wringing their hands with the sudden influx of homes onto the market, and an apparent lack of buyers.  Fears were that there would be another sudden downturn in the market because of overstock, and that the "buyer's market" would force prices lower as sellers were forced to compete with each other.  Given the information that we had at the time, and after having survived since 2004, it was not an unreasonable prediction.

Luckily (at least so far) those predictions have not come true, and we are getting ever closer to a "Normal Market"!

Here is a quick run-down:

• Home values are still appreciating between 5% and 15% both month-over-month and annually.  The 20% appreciation we saw in 2012 and 2013 is mediating - not crashing.
• The number of foreclosures is down to 2001 levels.  Adjusted for the population increase since then, this actually represents a number 21% below 2001 levels
• The monthly supply of homes is near 3 months from nearly 5 months earlier this year
• The number of sales is currently around 5000 fewer that 2012, and about 2500 fewer than last year.  Not surprising given that you can't buy a house you can live in for pocket change any more.
• Median sales prices are hovering around the $175,000 range.  They were a bit higher at the end of 2013 - inching over $180,000 a couple times, but all-in-all have been stable for the past 9 months.

We shall see what the rest of the summer brings - remembering that summer is a typically slack time in the sales cycle.  If housing values remain in their current range, and we have the continual flow of properties onto the market as in the past couple months, we will hopefully have an even finish to the market this year.

Solar Energy - Not So Sunny - Final Edition

Final part in this series - I wanted to make sure I got it right.

In parts 1 - 4 earlier in this blog, I have revealed pitfalls of owning Solar Electric.  Here is the last one, and maybe the most important one.

First, if you think you really need to have solar, make sure you plan for the future load that it will have to carry, and not the current load.  Remember the people with the teen aged children?

Next, if you think you really need to have solar, check to see what the requirements are to transfer it to another person.  Chances are good you will sell your house in the next 20 years.

Finally - and this is the topic of the new post - if you are leasing a system, make sure you put as little money down as possible.  Why?  Because a leased solar system is like any other leased system in your home.  It adds absolutely no value to the home!

That's right!  You are told that you "invest" in a solar lease, but you get no return!  Solar Companies, and even your friends and neighbors will use the term "invest" with reference to leasing a solar system.  Do you "invest" in a car lease?  An investment has a positive cash flow return - Solar Leases Do Not.  With a solar lease, you spend less money, but you get no return.

Leasing a solar system and pointing to the savings is the same as leasing a hybrid car and pointing to the gas mileage - you spend $30,000 saving 2 cents a mile.


#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Buyer Disclosures - What they don't tell you!

It just isn't right that Buyers don't have to disclose to Sellers items that can materially affect a sales transaction, just like Seller must make disclosures to Buyers.

Sellers deserve some security other than just the Earnest Money deposit and the promise of someone to buy their house.  Sellers put way too much on the line when they agree to sell, and relinquish nearly all control of the transaction to the lender and the buyer.  The Seller has a huge stake in the transaction, especially if they are relying on the proceeds of a transaction to own another home.

Buyers should have to disclose things like:

1. Whether or not they are in the middle of a divorce or annulment
2. Whether their job takes them out of town on a regular basis
3. Whether they have owned a home in the past
4. What their motivation is for buying the home they have made an offer on
5. If they are asking for concessions, how much do they really have in reserve
6. Do they or their spouse or children have any medical problems that can drain the reserve
7. How long they have been looking for a home
8. How long they have been with the current Realtor looking for a home
9. What their current job status is - how long have they been there, who do they work for, what do they do, can they get the time off to sign papers
10. Do they have a decent automobile
11. Do you have the entire set of documents necessary for your lender to complete your loan

These might sound dumb, but I am going to start including them as a document for the buyer to provide answers for in all of my listings.

I am getting mighty tired of hearing bunk from a lender that "everything is fine" in a transaction until the lender is finally forced to admit that they cannot fund the loan!  Or, "we can't find the (almost) ex-wife/husband to sign a quit claim deed".

Sellers have rights too!

#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman

Get the Government out of Lending!

#Government is at it again this year with bizarre regulations about hard-and-fast debt-to-income ratios, and with its legacy regulations about money laundering!!

I have a client who recently decided that instead of using the proceeds from the sale of a house for a down payment on a new house, he was going to use about $20,000 gifted from a member of his family for a portion of the down payment along with his own money.  You wouldn't believe the documentation required to use family funds because of the fear of money laundering!

Here is an excerpt from the letter from the lender on what he had to provide, just because he decided to get his down payment from a family member:

1.     Your signature on the attached letter explaining that your existing home is not yet sold

2.     The attached gift letter needs to be filled in and signed by you and your family member

a.     if the account their money is coming from is a joint account all family members need to sign the gift letter

b.    The line where it is asking the source of the gift funds means the account name and bank – for example:  Wells Fargo, Checking Acct #123456

3.     I am assuming the funds are being wired into your bank account – from this account we will need:

a.   Last Month's statement – all pages please

b.    An account history from the ending date of the last statement to current – we need to see the funds from your parents are now in your account

4.     From your family member we need a 30 day account history showing the gift funds coming out of their account

a.     The account history printout must show their name on it and the account number

b.    If the account history does not include name and account number please include a copy of the most recent statement (all pages) and we can connect the statement to the history.

So this make the lender a jerk - all lenders are jerks, right?   Wrong - this is all required because of government regulations!  The government is afraid of money laundering!

So let's see...  If I were a drug lord, and tried to launder $20,000 at a time through paying a portion of a down payment on a house, I would have to buy 50 houses to launder 1 million dollars.  Then, I couldn't get the money back out until the houses were sold, so then I would have to sell 50 houses to get the money back.  So if the $500 billion dollar drug trade were to use this scheme to launder money, then the drug trade would be buying 25 million homes a year!  How absurd is that?

#RealEstate #Avondale , #Goodyear , #Buckeye , #Glendale,  #Phoenix, #Surprise, #Peoria, #Tolleson, #Laveen, #Waddell , #Wittman